Giving Up Liquidity in Exchange for Yield

The video discusses the Greater Fool Theory and its application in fixed income markets, highlighting the risks associated with bonds, such as duration, credit, and liquidity risks. It emphasizes the limitations of relying solely on interest rate risk for diversification and suggests rethinking investment strategies by exploring illiquid markets and global opportunities. The video encourages investors to diversify beyond traditional methods and consider both long and short positions in diverse markets.

What does the Greater Fool Theory suggest about buying overvalued assets?

• They should be avoided at all costs.

• They are a safe investment.

• Someone more foolish will buy them at a higher price.

• They will always increase in value.

Which of the following is NOT a risk associated with purchasing bonds?

• Liquidity risk

• Credit risk

• Inflation risk

• Duration risk

What is the main limitation of interest rate risk as a diversifying force?

• It is highly unpredictable.

• It is extremely limited in its ability to bail out portfolios.

• It is not affected by central banks.

• It always results in negative returns.

What does the speaker suggest about redefining risk in investment strategies?

• Risk is irrelevant in modern markets.

• Risk should be redefined to focus on undervalued assets.

• Risk should be avoided at all costs.

• Risk should only be considered in long-term investments.

Which investment opportunity is NOT mentioned as a way to diversify?

• Direct lending in private credit

• Commercial real estate lending

• Cryptocurrency trading

• Short market positions