VOL09: The Magical Properties of Money ft. David Orrell
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 712 Ratings
🗓️ 26 January 2022
⏱️ 65 minutes
🧾️ Download transcript
Summary
Hari Krishnan is joined today by David Orrell, to discuss the problems with using physics analogies on financial markets, the cause and effects of price impacts, David’s new book: ‘Money, Magic, and How to Dismantle a Financial Bomb’, the magical properties of money, how sentiment drives price although it is so unpredictable in nature, the similarities between weather forecasting and economics, the sustainability of money creation by central banks, and some thoughts on cognitive interference.
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In this episode, we discuss:
- How quantum physics relates to financial markets
- The mechanics behind price impacts
- David’s new book, coming out soon
- The magical characteristics of money
- The power and unpredictability of sentiment
- Weather and how it relates to financial markets
- Central bank money creation and how effective it can be
- Cognitive interference
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Episode TimeStamps:
00:00 - Intro
02:54 - Can you give us some conclusions from the research you’ve done on weather forecasting?
04:33 - Is the notion of the economic system as being something that’s mechanistic and can be controlled flawed, and if so, how?
07:12 - Do you look at different economic models and aggregate the data?
12:46 - Is there a way to limit the momentum effects of passive investing on the markets?
17:41 - Can you explain how quantum physics relates to financial markets?
23:15 - Can you give a couple of examples of cognitive interference?
28:00 - Regarding the biggest stocks in the S&P 500, is it true that if one stock is 10 times bigger than another stock, and it gets 10 times the dollar allocation, that the price impacts will be the same?
42:28 - Can you talk about your new book, and what the title means?
45:24 -Does Modern Monetary Theory relate to the quantum physics analogy of something being created from nothing?
52:30 - Do you believe that money creation by central banks is unsustainable?
57:28 - Would you say that your work implies that minor tweaks to the framework are inadequate when it comes to the economy and investing?
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Transcript
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| 0:00.0 | There's sort of two problems for me. One is that this idea of creating money, we put more money out there. |
| 0:13.1 | We can kind of forget that it's a claim on stuff like energy. It doesn't look real, maybe. |
| 0:18.7 | You know, it's this piece of paper, but it's a claim on something |
| 0:21.2 | real. So if you go and take a mortgage out on a house and you get some hundreds of thousands |
| 0:26.5 | of dollars that new money is created, that money is real in the sense that it can be exchanged |
| 0:31.6 | for barrels of oil or something. So this is important because, you know, we live on a finite planet. |
| 0:37.0 | But then the other thing is that it's the idea that, okay, yes, the danger is inflation, but we can control inflation. Because as soon as inflation kicks in, you know, we'll just do steps A, B, and C, and that will get it under control quickly. But inflation is not something that you can kind of turn on and off easily. People |
| 0:56.0 | have faith in the money supply up until they don't. For me, the best part of my podcasting |
| 1:03.9 | journey has been the opportunity to speak to a huge range of extraordinary investors from all |
| 1:08.5 | around the world. In this series, I've invited one of them, |
| 1:11.6 | who also happens to be a long-time friend, namely Harry Chryslin, |
| 1:15.1 | to host a series of in-depth conversation on the topics of volatility, risk, and portfolio protection. |
| 1:22.1 | In today's world, portfolio construction is fast moving to the top of the agenda |
| 1:26.6 | of many investors as they try to analyze and understand the riskiness of their portfolio. |
| 1:32.3 | With ever increasing uncertainty around the globe, knowing if you are essentially long or short volatility in your portfolio, |
| 1:38.3 | can mean the difference between ruin and survival when the next crisis emerge. |
| 1:44.4 | The aim of these conversations is to try and understand the experiences that have influenced |
| 1:49.1 | these highly specialized market participants and the processes they follow to harness their |
| 1:54.6 | returns so that we can all become better informed investors. |
| 1:58.9 | And with that, please welcome Harry Christen. |
| 2:02.2 | Thanks very much, Neels, for this introduction. |
| 2:05.3 | My guest today is David Arrell, author and applied mathematician. |
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