Risk Parity seems to have (temporarily?) lost its place near the top of the institutional asset allocation wish list, no doubt because it proved vulnerable to policy shocks during last year’s central bank equivocation. Nevertheless we continue to believe the concept is valuable if thoughtfully applied.

Today's note, "Don't Fear the Reaper", takes an Adaptive Investing crack at what I believe is the most pressing issue in portfolio construction - the identification of truly diversifying positions. The crucial evolutionary distinction between phenotype (outward appearance) and genotype (fundamental genetic code) shows why it is important to focus on the "market DNA" of a security or strategy, not just its obvious external characteristics.

My palate is simpler than it used to be. A young chef adds and adds and adds to the plate. As you get older, you start to take away. - Jacques Pépin, famous French chef

Today's note, "American Bandstand", looks at recent market-roiling events (ECB meeting, December jobs report) through a game theory lens. So much of what happens in markets today seems illogical from a traditional economic theory perspective, but makes sense when understood as a strategic interaction stemming from our biological foundations as a social animal.