Forced Retirement Selling May Disrupt Santa Rally | Zed Francis

Forward Guidance

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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Timestamps:

(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

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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.