Improv Investing

Everyone knows the first rule of improv is the concept of “and then”. Simply put, the idea is never to stop the dialogue between characters by introducing qualifiers into the conversation. Free flow of ideas and association is the name of the game and if so we are all living in a Second City world. The great thing about improv, and free association, is that it unlocks creativity and allows performers to think outside of their normal patterns of thought. The problem with carrying this concept into the investment realm is that pure free association purposely loses the anchor of reality. Lets get up on stage: Performer 1: Tax cut.. Performer 2: good, more money in everyones pockets Performer 1: good for business and wages Performer 2: good for business good for stocks Performer 1: good for stocks, good for everyone. That was fun lets try again: Performer 1: Fed Increases rates Performer 2: rate increases are bad, will hurt everyone Performer 1: pain will lead to recession Performer 2: recession will be painful Performer 1: Fed will need to fix. This type of anti-analysis lends itself perfectly to the algo-driven world we have lived in over the past 6-8 years. We suspect however that a more nuanced strategy involving more second and third level thinking will ultimately prove more profitable. Actions have consequences, however in an algo driven world consequences are mere noise.