I attended a hedge fund event put on by a top MBA program recently. The event had no trend following traders, but did have several fundamentally based hedge funds as speakers.
One man who spoke was obviously a very bright guy. An economist by training, he currently runs a long/short hedge fund. He spoke for over an hour working through chart after chart of various economic indicators. I felt like I was back in my MBA program!
He mapped out a scenario that left me feeling like that 10 years from now the Nasdaq chart could look like the Nikkei has looked like for the last 15 years. He laid out the case for interest rates, housing bubbles, consumer demand, over-capacity, etc. Given his grasp of the subjects, he will probably be on target with his various economic projections.
When he finished he left me with the strong feeling that his economic view might be right, but his trading plan (whatever it might be exactly), might lag. Meaning markets often move contrary to the fundamentals. They overshoot. They go down when the fundamentals are positive. They go up when the fundamentals are negative. How was this extremely bright guy connecting his strong economic view to the basics of when to buy and when to sell? What was his entry and exit plan? His money management plan?
I left his presentation with blanks.