For those who followed our monthly letters and conference call, you’ll recall the theme for both was “correlation.” In recent months, we’ve noticed increasing correlations between and among the constituents of various markets. In the products we manage, all of which are meant to be non-correlated, correlations have doubled in the past year or so. While we have taken action to drive down correlations within our portfolios, the question still remained… “What is causing this dangerous correlation trend?”
While I typically consider CNBC to be fast food financial news (ie. the USA Today of investing), their stock correspondent, Herb Greenberg, posted a timely article considering what we’ve been observing here at Altair. Rather than summarizing it, I’ll just attach the link. Suffice it to say, we agree with Herb. The elimination of leveraged ETF’s and the robots that trade them would bring some sanity back into the marketplace.