ReSolve Riffs with David Cervantes of Pinebrook on the Increasing Importance of Political Economy

Our guest this week was David Cervantes, founder of Pine Brook Capital Management. With a rich and diverse background within the investment industry, in the last few years David has dedicated his time to managing his family office and has been developing a macroeconomic framework that considers the objectives and incentives of policymakers as the primary economic drivers. Our conversation included topics such as:

  • Empirical economic analyses and insights from the ‘school of hard knocks’
  • Fundamentally, a process of elimination – determining first what not to do
  • Less theory, more data
  • Where his approach materially diverges from traditional economics
  • Cognitive Perspective – treating models with respect, but never reverence
  • Macroeconomics is basically ‘political economy in drag’
  • A dynamic process of incentives and decisions made by political actors
  • The role of ‘timing luck’ (or misfortune)
  • A stroll down history lane – from WWII and the Great Society to the present
  • A closer look at the gargantuan US federal budget deficit
  • Current backdrop – an ‘inflationary supernova’ fueled by fiscal impulse
  • The Fed’s current reaction function
  • Home prices, OER and how they affect CPI
  • Why interest rate volatility matters significantly more than absolute levels
  • How interest rate vol spills over into the risk premia continuum
  • And much more

This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management Inc.

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David Cervantes
Founder of Pinebrook Capital Management.

David Cervantes is founder and manager of Pinebrook Capital Management. 

Pinebrook is David’s vehicle for managing his family’s assets, as well as those of a few partners. 

At Pinebrook, David focuses his attention on asset allocation and on managing various systematic trading strategies. 

Prior to starting Pinebrook, David was in fixed income sales at Morgan Stanley, covering middle-market financial institutions in Latin America.  Before going to Morgan Stanley, David was in cross-asset sales at UBS and JP Morgan.  

David started his career at Well Fargo Bank, going through their middle-market commercial lending & credit training program. 

David is a graduate of UC Santa Barbara, where he double majored in economics and international relations.  He also has an MBA from the University of Wisconsin, Madison and completed some of his graduate work at National University of Singapore.

*ReSolve Global Inc. refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global Inc. is a registered person with the Cayman Islands Monetary Authority.