WHAT MAKES MiniMax UNIQUE
The research programme embodied by The MiniMax Review is unique in that it was designed to help subscribers address the following four challenges:
Exploit "Structural Changes" in Better Forecasting the Future
In identifying and analyzing the issues that really matter to investors, MINIMAX places considerable emphasis upon the analysis of ongoing structural changes in the environment (e.g., the rise of China). This is a research topic that most other platforms do not confront at all. The enterprise of analyzing structural changes pays two dividends.
To begin with, it spares subscribers the fate of those who drive into the future via a rear view mirror. For example, most "models" are time series-based models that extrapolate yesteryear's relationships into the future. The research analysts who build them implicitly assume that those relationships that held yesterday will hold tomorrow - that history will throw no curve balls at them. For this is what structural changes really are. Yet this assumption is dangerously wrong.
Indeed, those investors who reaped the greatest alpha in recent years anticipated more than others did such developments as (i) the rise and subsequent fall of OPEC between 1973-2000, (ii) the explosion of US productivity and hence earnings during 2001-2005, and (iii) the impact of ever less powerful labor unions along with the rising supply of cheap Asian labor in driving unit labor costs and hence inflation way down. Each of these developments was a structural change that could not be predicted by data-mining of any kind.
Interestingly, one principal reason why the now discredited "Efficient Market Theory" predicted that no investor can systematically enhance alpha was its assumption that the economic environment is "stationary", and hence that no structural changes occur at all! To the contrary, it has recently been demonstrated in new research from Stanford University that one of the only legitimate strategies for adding alpha is to anticipate structural changes better and sooner than others do. MINIMAX Editor-in-Chief H.W. Brock was involved in this research, and is known world-wide for his work in this field for two decades. (Please see Track Record.)
Resolve Your Information Overload Problem
Rather than merely claim to help you manage this challenge, we attack it at the most fundamental possible level to help you solve it successfully. In doing so, we draw upon an important discovery made by philosophers of science in recent decades as they came to understand what makes a given theory a good theory - whether in finance, or macroeconomics, or in relativity theory, or in game theory.
They have learned that constructing a good theory requires a two-stage process: (1) Identify which types of "information variables" are truly relevant to the problem at hand, and which are irrelevant and should be ignored; and (2) Discover the true inter-relationships between the information variables that do matter. Remarkably, the identification of those variables that are irrelevant during the first stage facilitates the discovery of the true relationships between the variables that are relevant during the second stage. This realization was anything but obvious!
To summarize all this in diagrammatic terms, visualize the information overload problem as a Black Box consisting of thousands of dots, each representing some factoid or bit of "information". Then an analyst armed with a good theory will know which subsets of dots (variables) matter - typically a small subset; and he will understand how to draw the right lines (relationships) between these dots. Paradoxically, good theories often strike people as "surprisingly simple". There is a reason why: Everything that is irrelevant has been discarded during the construction of the theory.
To conclude, an investment manager can successfully manage his information overload problem by availing himself of the right theories at the right time. They provide guidance as to which information matters as well as to how to interpret it. It will be helpful to explain all of this by presenting some real world examples of this logic for resolving the information overload problem. All the examples below are drawn from finance and economics, and each is directly relevant to the forecasting problems of investment managers. Note that a common theme cutting across these examples is that of structural changes and their import:
Example 1: In forecasting inflation, do not focus on the size of the government deficit as most everyone does. For it is usually irrelevant to inflation. Specifically, government deficits only impact inflation when they are "monetized" (printed away). This has been the case in Zimbabwe during the 2002-2007 period where inflation has now reached 1,800 percent annually. But this was not the case in Japan or the US where large deficits have not been monetized, and inflation has remained low or moderate despite the deficits.
Example 2: In forecasting bond yields, do not pay much attention to all of the daily news on your Bloomberg about savings rates, government deficits, and foreign capital inflows. For as Nobel Laureate James Tobin of Yale first taught us, what matters most to interest rates are not these "flow-of-funds" variables that are always in the news, but rather the way in which people who own the total stock of national wealth from time to time choose to redeploy their assets. For example, total household net worth is about $55 trillion. A stock-of-wealth reallocation of some $8 trillion out of housing or equities into bonds will depress bond yields, and in doing so will swamp the upward pressure from a $40 billion in the domestic savings rate, or from a $60 billion reduction in Asian central bank purchases of US Treasuries.
But this is never pointed out, and investment managers waste their time and money attempting to document and understand "foreign capital inflows" and related variables to no avail. This stock/flow distinction is not merely academic. For example, it largely explains the paradox of very low bond yields in recent years widely known as the "Greenspan Conundrum".
Example 3: In forecasting longer-term stock market returns, do not overestimate the importance of earnings and interest rates, as most everyone does. For the truly important variable is the valuation-of-earnings (e.g., the P/E ratio of the market). This tends to move in long cycles from 9 to 25, and back. As investor Warren buffet has correctly pointed out, valuation cycles of this kind are by far the most important determinant of longer-run equity returns. But most investors ignore this critical variable, which is rarely in the news.
To conclude, investors need to know which variables (and hence which information) actually matter, and how such variables are interrelated. and which do not. And they need to know how variables that are relevant are interrelated. Good theories by their very nature answer both of these fundamental questions. A principal contribution of The MiniMax Review in this regard is to identify and apply good theories for its clients. In doing so, we significantly resolve your information overload problem while permitting you to make superior forecasts and thus to earn excess returns.
The remarkable usefulness of good theories in this regard is woefully overlooked in the investment business. But it should not be. For as Albert Einstein deftly reminded us: "Good theories are good because they work better!" With the advent of MINIMAX, subscribers no longer lack guidance with which to know which variables and information matter, much less how. No other research service has ever attempted to achieve all this.
Integrate Economic and Market Commentary with Ongoing Learning and Education so that You Can Achieve Superior Returns
In the process of identifying and utilizing the best theories possible, MINIMAX is unique in a second fundamental way. It integrates economic and market analysis with explanation and education. This is because our identification and utilization of many good theories requires that we explain such theories to clients. As a result, clients come to learn more and more over their careers as to how the economy and the markets really work. Ongoing education on their part is completely intertwined with the analysis and the forecasts contained in The MiniMax Review.
As a dividend, clients also come to understand when and why the consensus forecast is wrong. They get good at detecting specious reasoning and the poor forecasts that result from it - and evidence of specious reasoning in the investment business is abundant. All of this is indispensable to investment managers attempting to "add alpha" and outperform their index.
Communicate Better with Others
And Sound Smarter to Your Clients
All this leads to a third and final way in which The MiniMax Review is unique. A crucially important by-product of this ongoing learning process is that subscribers gain a tremendous competitive edge in communicating better with their own clients. Why does this matter? Because as time goes on, more and more people of every age and wealth level tend to have the same concerns and tend to ask the same questions. Specifically, with the death of traditional retirement plans, and with soaring medical costs, virtually everyone is concerned with building a suitable portfolio of their own - and in understanding how best to do so.
Moreover, economic and financial news now dominates the print and electronic media far more than it used to. And with the increasing globalization of markets and economies, the news is becoming ever more difficult to interpret. This is because the phenomenon of "global interdependence" is rendering many traditional economic and market relationships obsolete, a point emphasized by Professor Richard Cooper of Harvard, amongst others. No wonder confusion is more widespread than ever before!
As a result, an ever growing number of investment management clients are as keen as managers themselves are to be able to better interpret the economic tea leaves. Thus, if you are intermediary who manages money for people other than yourself, you have a new exciting opportunity: You can excel at demystifying the news and making sense of the environment for your clients.
The best way to gain the skills to excel in this endeavor is to subscribe to The MiniMax Review. It has been specifically designed to help you do so. Moreover, no other research service makes this possible.
Postscript: The Driving Force Behind
this Unique Commitment
If what you are reading strikes you as "different", it should. This is because the driving force behind MINIMAX and its unique perspective Editor-in-Chief H.W. Brock. Dr. H.W. Brock is known not only for his ability to explain complex concepts to audiences worldwide, and his love for doing so, but because of the unique depth of his education and his professional life.
In earning five degrees from Harvard and Princeton Universities, Brock studied economics, mathematics, business, political theory, and international relations. He has lectured and published in all these fields. His next project will be to write a book to show how it is now possible to fully integrate politics, economics, and ethics. This unification has been made possible by the work in game theory by the two Nobel Laureates John F. Nash, Jr. and John Harsanyi with whom Dr. H.W. Brock worked closely.
It is Dr. H.W. Brock's invigorating belief that people of all backgrounds and interests are yearning for clarity, understanding and unity in their thinking that propelled him to create The MiniMax Review, and that explains the three ways in which this research programme is unique.
