Matt Levine’s Money Stuff: All Public Companies Are Alike

Worse than Marxism

The thing investors want is uncorrelated returns. What you worry about, as a big institutional investor, is all of your stocks going down at the same time. If you could buy some stuff — private equity or catastrophe bonds or gold — that doesn’t go down when all the stocks go down, that would be good for you, and you would pay a premium for it. This is true within stocks, too: Some stocks don’t go down when all the other stocks do, and those stocks are in theory more valuable. Investors should pay more for those uncorrelated stocks ...