Michael Green, Chief Strategist, Logica Capital Advisers

Managing portfolios over the course of two decades, Mike Green has developed a unique framework for assessing risk and opportunity.  Trained in his early days to perform equity valuation, Mike came on the scene just as the tech bubble was imploding and the massive discrepancy between growth and value was coming undone.  In a great seat to ride the small cap value wave during the post internet bubble, but pre-crisis period, Mike began to appreciate the force of market prices and their impact on behavior, narratives and how they become entangled in feedback loops.  Our conversation is a retrospective on these situations of co-dependency – between profits, psychology and the economy.  In this context we discuss left and right tail events – in valuations, in housing price appreciate and in events of extreme high and low implied and realized volatility. Mike’s insights on market structure bring to life the motivations and market frictions that ultimately give rise to a transaction.  Price, in his rendering, is less about valuation and more about the conditions that give rise to a trade to occur.  The result can be option prices that clear the market considerably higher than what one would think possible and Mike references the near 100% bid to implied correlation in 2012 as an example. Today, Mike is Chief Strategist for Logica Capital Advisers and, as usual, he has a lot on his mind.  We talk a good deal about passive investing, a strategy increasingly embraced as simply a better way.  For Mike, passive indexation is plenty active - there’s a  specific decision being made to buy stocks in proportion to their market caps.  At a time when both the SPX and NDX have become substantially top heavy, investors ought to question the efficacy of such a valuation agnostic approach. Please enjoy this episode of the Alpha Exchange, my conversation with Mike Green.