ep. 138


Forced Retirement Selling May Disrupt Santa Rally | Zed Francis

Zed Francis, chief investment officer at Convexitas, joins Jack to talk about interest rate risk, what really happened to the British pension system, and tail risk as a portfolio diversifier. Francis argues that December 2022 will see a wave of mandatory liquidations by the U.S. retirees forced to take mandatory distributions on their retirement accounts. These forced sales will be larger as a percentage of the typical 60/40 portfolio than they normally are, due to the drawdown in stocks and bonds that have already occurred this year. Filmed on November 8, 2022.


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About Convexitas: https://www.convexitas.com/

Convexitas’ piece on Liability-Driven Investment (LDI): https://www.convexitas.com/insights/liability-driven-investment-de-risking-if/

Convexitas’ piece on duration risk: https://www.convexitas.com/insights/rates-free-risk-duration-duration-everywhere/


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(00:00) Intro

(00:33) The Financialization Of Everything

(10:27) Private Markets

(17:01) Duration (Interest Rate Risk) Explained

(19:35) The Losses From Rising Rates Are Immense

(26:26) The U.K. Pensions Crisis - Explained In Great Detail

(38:41) Stocks and Volatility

(41:53) "Ignore The VIX"

(45:19) Tail Risk

(50:47) Are Active Investment Managers Underweight Stocks?

(01:00:07) The Different Phases of A Bear Market

(01:07:46) The Credit Markets Are Frozen

(01:10:21) A "Waterfall of Liquidations" Is Coming From Forced Selling From Retirement Accounts

(01:19:45) The Value Of Portfolio Overlays

(01:26:00) Basis Risk


Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

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