Nicholas Mitsakos - Integrates Typical Financial and Economic Analysis

Nicholas Mitsakos has extensive experience within the international investment industry ecosystem, building management teams, developing and addressing strategic and operating issues, and focusing on new opportunities through technological innovation. Nicholas Mitsakos has been the Chairman and CEO of his investment firm, as well as the managing director of investment partnerships with leading international financial institutions.

INVESTMENT PRINCIPLES - Assume No Knowledge By Nicholas Mitsakos

 

Nicholas Mitsakos's new book, “Investment Principles: Strategies for an Irrational World” Investment Principles: Strategies for an Irrational World understands that thoughtful observation of complex factors and understanding their interrelation or necessary but not sufficient for successful investing. Investment success is accurately predicting the future. That requires a greater breadth and depth of understanding. His book discusses this.

Nicholas Mitsakos's New Book Is Not a “How to Pick Stocks” Book

 

Nicholas Mitsakos not only discusses investment principles and strategies, he also analyzes disruptive innovation and the importance of effective leadership along with other critical factors for successful investing.

 

Nicholas Mitsakos's new book is not a “how to pick stocks” book. Along with useless platitudes, there are no simple formulas, heuristic, or any other effortless way to outperform the market. Deep thinking about the factors that matter is complex, challenging, unique to each situation, and escapes simple formulas.  

 

Simple formulas are intended, more than anything, to make the reader feel good without giving him or her any useful information to think more deeply about analysis and conclusions that matter. Understanding what really influences the value of any given investment, how that value may change overtime, and the convergence of many factors that can accelerate either the increase or decrease in value goes well beyond simple statements. Deep thinking about the factors that matter is complex, challenging, unique to each situation, and requires deep thinking.

 

there is a full range of factors that matter. Understanding those factors is the other challenge. Since it is unique to each situation, there is no straightforward and simple algorithm that applies in all areas.

 

Nicholas mitsakos understands this complexity and the challenge is to think deeply about a full range of factors. Those factors are not just economic, but also include human behavior and emotions, as well as, as described by Mr. Mitsakos in his book, “The X Factor” which is effective leadership.

 

Leadership is not a single person, even though the popular press wants to personify success as a single person, whether that person is Steve Jobs, Elon Musk, Jeff Bezos, or someone else. Real success comes from a team of people.

 

Nicholas Mitsakos believes the successful companies are led by teams that work well together, are creative, but also have commercial discipline. There is only so much capital available to do innovative and disruptive things. Not all actions create value, but without commercial discipline combined with creativity (no small trick), it’s Essentially impossible to create real value that is sustainable.

 

Nicholas mitsakos new book is not organized as a straightforward narrative, but in sections addressing different topics the book can be a reference source, as well as a descriptive analysis.

 

Nicholas mitsakos used a 40-lecture series that he developed over the course of several years as the foundation for this book. Since he has been an entrepreneur, investor, and educator for over 30 years, there are many topics that Nicholas mitsakos has found essential to understanding the value of an investment and essential for any investment decision.

 

Since Nicholas mitsakos has served on over 35 boards of directors and been involved with over 50 startups, he has an acute and personal understanding of the factors that can create or destroy value. He has initially combined these experiences into his lecture series and also a series of articles on entrepreneurship, leadership, innovation, disruption, and rational approaches to investing. It is these many experiences in business and academia which has formed the foundation for his new book. His academic experience includes lecturing and researching at Harvard University, the Massachusetts Institute of technology, and UCLA.

Nicholas Mitsakos Discusses the Complexity of Successful Investing. There Is No Simple Formula.

 

Straightforward analysis and simple formulas are inadequate. In Nicholas Mitsakos's new book, “Investment Principles: Strategies for an Irrational World” (Investment Principles: Strategies for an Irrational World), he discusses a variety of disciplines that require a depth of understanding and analysis. Each one of these areas, ranging from economic analysis to globalization, to human behavior, would each require study and understanding. Interconnecting these and other areas is the key to investment success, so says Nicholas Mitsakos.

 

His book is organized in such a way that it can be read as a narrative on investing success, as well as be a reference book with distinct sections. Investment Principles: Strategies for an Irrational World is broken into several topics and subtopics meant to stand on their own. The book is as much a reference book, with distinct sections intended to deal with independent topics in greater depth and understanding. The book is organized this way, as Nicholas Mitsakos states, because he proposes that thoughtful observation of complex factors and understanding their interrelation are necessary but not sufficient for successful investing.

 

Investment success, according to Mr. Mitsakos, is accurately predicting the future. That requires a greater breadth and depth of understanding of many seemingly unrelated topics. Nicholas Mitsakos discusses this at length in his book and describes it as creating a context for understanding - a way to think about how to think. Nicholas Mitsakos believes approaching investment decisions with this methodology is more important than any simple formula or narrow analytical approach.

 

Those looking for a simple formula and they “how to pick stocks” book will be disappointed. Those who want their intelligence respected and given a methodology and foundation to think more thoroughly and successfully will be rewarded. In Nicholas Mitsakos's new book there is no simple formula. Complex factors, understanding their interrelation, and predicting the outcome of these interactions require “slow thinking.” This is demanding work, as Daniel Kahneman explained in his book “Thinking, Fast and Slow.” That is why the book does not contain a series of numerical models and algorithms. These tools are a simplified sideshow intended to turn numerous and dynamic factors into a simple, and typically misleading, analysis.

 

Nicholas Mitsakos believes reducing complex analysis to simple numerical models and algorithms delivers misleading and inaccurate results far too often. For the most part, he believes this approach is nonsense. Often, numerical models and algorithms are a simplified sideshow intended to turn numerous and dynamic factors into an easy-to-understand, typically misleading analysis, and ultimately worthless exercise.

 

Nicholas mitsakos believes it is important to consider a wide range of factors when looking at investment possibilities and developing a successful investment strategy. Many topics, including disruptive innovation, new technologies, globalization, leadership, fiscal and monetary policy, and other topics, usually relegated to economics or behavioral textbooks, play an outsized role in influencing investments and their ultimate value. Inferior performance comes from not understanding that all these elements, as well as human behavior and irrational choices, influence investments disproportionately. Reducing this to a formula is not effective and for the most part, wasted energy.  

Nicholas Mitsakos has published a new book, “Investment Principles: Strategies for an Irrational World.”

Nicholas Mitsakos has recently published his new book, “Investment Principles: Strategies for an Irrational World” (here is the Amazon link:  Investment Principles: Strategies for an Irrational World.) The book is unique in its description of what's really required for successful investing. While most authors try to give quick and easy tips, Nicholas Mitsakos believes that a disciplined and methodical approach to investing is essential for true success. This means that Mr. Mitsakos is advocating analytical work and an understanding that goes far beyond a simple summary description. 

Nicholas Mitsakos

He advocates that successful investing requires understanding global economics, competitive, corporate, and micro-level analysis, game theory, and human emotions and behavior. That's a lot to understand all at once, but Nicholas Mitsakos’s approach segments each of these complex topics, gives sufficient depth to understand what is fundamentally going on in each area, and then, most valuably, shows how these areas interact, enabling much more effective investment decision making, according to Mr. Mitsakos. 

Essentially, Nicholas Mitsakos's goal is to share an informed and distinctive way to think, predict the future with that combined information, and then make choices. In his new book, he states quite clearly that real investment success combines predicting the future, the confidence to make bold choices, and the fortitude to stay with those choices. There is a lot to unpack there because, essentially, this is an accurate summary of the challenges and the qualities for investment success. 

Looking at the first component, analyzing data ranging from economic analysis, global statistics on finance and trade, along with elements of human behavior and, quite bluntly, irrationality, form the combination that ultimately gives an understanding about what is going to happen. 

Next, understanding that difficult choices need to be made and that diversification is essentially equivalent to owning an index fund (so why bother going any further if that is really your goal), knowing that focused investment choices require bold commitments. But, once these bold choices are made, the real challenge begins. 

Nicholas Mitsakos quite accurately defines the most important component of this whole process as having the fortitude to stick with your choices. Most bad investment decisions are made when an investor sells. He points this out with examples of both Amazon and Apple. At what point should an investor have sold these? Essentially, they continue to be fantastic investments outperforming the market. So, even if an investor chalks up an impressive return, selling that investment and putting performance on the books is actually a bad and inefficient investment decision. He makes this quite clear.

The best decisions come from complex analysis, difficult choices, and then fortitude to stick with those choices. There is no better way to summarize an effective investment strategy. 

In this new book, Investment Principles: Strategies for an Irrational World Nicholas Mitsakos understands that financial and economic analysis is insufficient to understand the potential value of an investment. Human behavior and emotions play just as important a role. An informed and distinctive approach that integrates typical financial and economic analysis with understanding human behavior as well as game theory. Essentially, thoughtful observation of complex factors, understanding their interrelation, and predicting the outcome of those interactions cannot be reduced to a simple formula Human behavior and emotions are at the core of this understanding. After all, what else can explain the appeal of social media and other superficial analyses that, while extremely popular and can have temporary impacts on the market in specific securities, are almost always misguided nonsense. 

It is within this world of nonsense that Nicholas Mitsakos's new book, Investment Principles: Strategies for an Irrational World describes the depth and complexity that requires investment success. This success depends not only on discipline but also on understanding that human behavior and emotions play a critical role. 

Digital Assets, Today's Technology of Freedom

 

Register for May 2022, Global Investor Conference: https://bit.ly/3pwTyCs

PANELIST: Chris Lee (Senior Partner, Farron Augustine & Alexander Investments and Private Equity), Chloe White (Managing Director, Genesis Block), Chris Berg (Co-Founder and Co-Director, RMIT University), Nicholas Mitsakos (Chairman and CEO, Arcadia Capital Group)

Technology such as digital assets presents an unprecedented opportunity to recapture individual freedoms in this digital age - to expand individual rights, protect property, and defend our privacy and personal data. How are governments planning on working with crypto? What industries are making the most of this technology? We sit down with Chloe White, Australia’s leading expert in digital asset policy, and Chris Berg, leading authority in regulation, technological change, and civil liberties, cofounder of RMIT Blockchain Innovation Hub and author of 11 books.

Remembrance of Things Past – Liquidity, Stability, and Predictability

This article was written by Nicholas Mitsakos: Chairman and CEO at Arcadia Capital Group.

Financial markets are imbalanced and lack liquidity in crucial sectors, even historically stable and predictable markets such as the global bond and currency markets. Investments are slanted in one direction more frequently and the markets are vulnerable to big price swings as a result. These large global markets are not immune to ever more lopsided trades creating extreme volatility. This occurs even when a small change occurs in positions, sentiment, or news.

Even the world’s most liquid markets, US dollar currency trades and US Treasuries, are seeing skewed positioning resulting in surprisingly large shifts in prices and Treasury bond yields.

What’s Happening?

Using the most liquid trades available from the currency markets, we can see how a market that trades $5 trillion worth of currency daily can become suddenly illiquid, dramatically impacting prices and making any long-term prediction challenging.

These large markets hide a fundamental shift toward illiquidity. Using the most popular currency trade illustrates the role liquidity plays in price volatility and sudden market swings.

If We All Run for the Door at Once

Suppose you want to position a trade based on recent news where you conclude that the US economy will grow faster than the European economy. Therefore, you conclude that interest rates will rise in the US relative to Europe. If that’s the case, the US dollar will rise relative to the euro. This prediction is based on news regarding a new outbreak in Covid infections. Additionally, you predict increasing partial lockdowns in Europe are likely, and the Euro-wide economy will be impacted negatively. In the meantime, America seems to be faring better. Its economy is picking up, inflation seems less transitory, and lockdowns are off the table (for now). Therefore, a reasonable trade would be to bet on the Federal Reserve raising interest rates and the European Central Bank keeping rates the same (or even lowering). One way to profit from this prediction is to short the euro against the dollar.

But, wait a minute. The Commodity Futures Trading Commission publishes positions of traders in currency futures and options. Upon checking the CFTC data, this position is already crowded. Therefore, there are fewer potential sellers to drive down the value of the euro against the dollar, and this lack of balance in the trade – illiquidity – poses several significant risks. One, if sentiment improves for the euro, there will likely be a short squeeze, driving losses as traders buy euros to cover their short positions.

Another, if sentiment changes in general, even without a short squeeze, as news continues to be uncertain and speculative, prices will move dramatically and erratically because the market now has an imbalance of sellers and buyers. Prices are a function of supply and demand, and if supply is increasing dramatically while demand remains low, price shifts are magnified. This news creates a vicious cycle where those magnified price movements trigger additional supply and demand driving even greater price movements. It is now a global phenomenon for all securities.

Immune No Longer

While this example shows the impact of a currency trade, we are seeing the same impact from illiquidity in Treasuries – another supposedly large, liquid, and global market allegedly immune from illiquidity. But it is not. A smooth liquid bond market has become unpredictable, volatile, and less liquid. Essentially, the hidden driver to this volatility is also illiquidity. As surprising as it now seems, it is increasingly challenging to move in and out of bond positions quickly, and prices become more extreme.

When the Fed is Gone

Excessive liquidity created the opposite effect in March 2020 and February 2021, according to a report from the Treasury Department and Federal Reserve. It showed that the Fed providing excessive liquidity enabled bond prices to stabilize after dramatic jumps in bond yields resulting from extreme negative news regarding the pandemic. Now that liquidity from the Fed is being withdrawn as it tapers its bond buying despite increasingly bad news and quick-changing investor sentiment.

The market is experiencing more frequent and extreme price movements and it does not look like the Fed is coming to the rescue anytime soon. Uncertainty and less liquidity are increasingly extreme in what would otherwise be considered a liquid and more stable market with transparent price discovery.

I’m the Government and I’m Here to Help

Today’s circumstances can be connected back to regulations enacted after the global financial crisis of 2008. These made it much more expensive for banks to hold large inventories of bonds to facilitate trading. This lack of inventory available to supplement proprietary and client trades has greatly reduced market liquidity, especially in treasury bonds. Now, a small group of electronic high-frequency traders has filled the void created by these new regulations.

The high-frequency traders keep the market liquid most of the time – except when it matters most. They are thinly capitalized and therefore cannot hold bonds in inventory. In volatile markets, these firms are forced to take less risk because of their thin capitalization. The bulwark against short-term illiquidity and volatility is gone.

Stability and Predictability?

So, when liquidity is most needed in the bond market, it vanishes. This is not a good formula for stability, long-term predictability, and price discovery, and is driving even more extreme volatility because there is no prospect of additional liquidity being provided to the market anytime soon.

These changes in market structure make positions more extreme. In addition, bond buyers are a relatively homogeneous group. Funds are bigger. Information flows quickly and is available to all. Momentum trading is far more prevalent in bond markets and algorithmic trading magnifies the imbalance, buying recent winners and selling recent losers, driving these price differences further.

The Madness of Crowds

Before the financial crisis of 2008, market-makers were willing and able to defend against momentum and take a long-term view based more on fundamentals than immediate market sentiment. Large banks could hold inventories of bonds and be patient as volatile forces pressured the market, acting as an effective counterbalance.

Not anymore. Positions are crowded, and when sentiment goes against a popular trade, price movements are sudden and dramatic. Any semblance of rationality to the market is an increasingly distant memory.

The market now leans too far one way or the other, and that imbalance will be forced to reverse more powerfully and unpredictably.

The Road Ahead

Even in the world’s most liquid market, trades are increasingly imbalanced, and liquidity is drying up. Large positions that cannot be held for days (or even seconds) combined with illiquidity will cause more extreme and frequent volatility in the global bond market, and that will impact all other markets, from currencies to equities more dramatically.

Don’t expect stable or smooth markets anytime soon.