Not Even Close

From CNBC recently:

“Such [trend following] funds use computer models to predict trends in the prices of stocks, bonds, currency, commodities and other markets, betting that valuations tend to revert to a mean following swings up or down.”

On the basic description of trend following strategy how does he get it so wrong? Not even close. Predictions? Valuations? Mean reversion?

Note: My email exchange with the author:

Me: In your piece you say this: “Such funds use computer models to predict trends in the prices of stocks, bonds, currency, commodities and other markets, betting that valuations tend to revert to a mean following swings up or down.” On the basic description of the strategy how do you get it so wrong? Like not even close. Curious.

CNBC: Thanks for the feedback. What about it do you think is off?

Me: When did trend following become about predictions, mean reversion and value? If you did not know and got it wrong, ok. But should correct it.

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4 thoughts on “Not Even Close

  1. I agree that CNBCs description of trendfollowing is terrible but the part of “trendfollowers making predictions” is correct. I am a trendfollower since 30 years myself and hearing or reading that trendfollowers do not predict only shows that the presenter or author is clueless. The prediction that trendfollowers make is that the trend will continue until proved false. This is a prediction like any other.
    Not predicting is not having a strategy and doing random trades which certainly is not a valid description for trendfollowers.

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