Ep. 336: David Dredge on Sharpe Ratio Fallacy, Capturing Upside and Managing Uncertainty

In this episode of Macro Hive Conversations, Bilal Hafeez interviews David Dredge, CIO of Convex Strategies, about his views on modern portfolio theory, risk management, and market dynamics. Dredge critiques the Sharpe Ratio and the focus on expected value, advocating for a shift towards geometric compounding and positive convexity. He emphasizes the importance of initial conditions, leverage, and correlation in assessing market risk, and discusses strategies for portfolio construction that prioritize downside risk mitigation and upside participation. The conversation also touches on structural trends like demographics and fiscal dominance, and concludes with book recommendations and ways to follow Dredge's work.