The further into the future you want to see the further into the past you must look
Winston Churchill
Who is Tulloch Research?
Tulloch Research is a hedge fund advisor and provides bespoke advice to a select number of clients on macro opportunities in financial markets. We also trade this same output for our own account.
Tulloch Research was originally founded in 1985. We use our knowledge of financial and economic history to provide investment insights as well as predictive algorithms developed and refined by operational experience.
What does Tulloch Research do that’s different from everyone else?
We use a multi-disciplinary approach to forecasting. These disciplines are primarily mathematics, Austrian economics, Keynesian economics, Breudelian history and psychology. While traditional predictive tools have been useful in the past, they are now less reliable as social and political variables create conditions of what Mervyn King calls “radical uncertainty”.
By radical uncertainty, he means situations where outcomes cannot be assessed by the application of probability. We deal with these conditions using decision scenarios as designed by the French theoretician Pierre Wack.
The focus here is to understand the forces that drive events, highlighting the “golden nuggets” for investors (the uncertainties that might generate discontinuities.) It is at these points the greatest financial returns are achieved.
In this process, it is critical to distinguish between what is uncertain and what is predetermined. Predetermined facts are less intellectually exciting but no less important (by themselves, they generate the greatest returns.) To use a metaphor, we know that a river flows downhill but we might not know in what volume or in what exact direction it will flow.
To deal with these uncertainties we develop scenarios, decision scenarios based on outcome distributions. As Wack described them, scenarios are as like cameras – you focus on the particular depending on the client need. But, as he pointed out, while focus is critical, one must also be aware of the larger environment where the micro scenario operates.
Overlaying this process is intuitive insight. Intuition is based on experience and knowledge. It acknowledges an important element in the human mind called Polanyi’s Paradox. Simply stated, we know more than we can say. We will never be able to program this into “Artificial Intelligence” because we cannot fully articulate what we know. Therefore, computers and their robotic cousins will always need human oversight to be effective.
This is the case today but we are not complacent it won’t change in a flash. Peter Domingas explained this in his delightful monograph, “The Master Algorithm.” Bottom line, we remain cognizant of Andy Grove’s advice that “only the paranoid survive”.
While market participants and commentators like to say that uncertainty is greater than ever, we are confident that most probabilities will be assessed in using a multi-factor determination. Tail risks have grown and the bell curve prediction of the future is flatter than it has been in the past thirty years.
It is not easy to invest with uncertainty. Tulloch Research’s mission is to reduce uncertainty using the matrix of methods outlined above to clarify probabilities. We assess outcomes in terms of market dynamics, player positioning and liquidity in the context of time frame to maximize increasingly positive results.