They All Want A Story!

Feedback in today:

Dear Michael, As you know by an email from me some months ago I am a fund manager trying to start my own Asset Management firm ruled by short-term trend following strategies. A hard job when you remember my location: Madrid, Spain. Here, anything different from buy and hold sounds like if you were trying to sell a new Madoff. Today I was in a meeting with a colleague, a long-only manager of about Euro 300M, who started his own management company a few years ago in Switzerland and he said something I found very interesting. I wanted to share with you and maybe your blog readers (feel free to correct my horrible English, please). He told me we, the systematic managers, cannot sell our management because people needs ‘stories’ or ‘tales’ to [sell people], not just ‘profitable management’. I was in shock. What did he mean? He explained me that when he argues why he is buying this stock or this other stock for his funds, he can be right or wrong, he can win or lose a lot of money, it doesn’t matter. The important thing is what remains in the head of the client, because the client still thinking the same old fashioned way: “At the end, I have a share of something real, like a house, like a stock, that always can recover and rise again because is real and fits my way of thinking about how the world works.” So at the end, long-only managers are selling ‘stories’ about the ‘real material world’ that make sense in the mind of people/clients. So they still buying long only funds again and again regardless their performance. We, systematic managers, we are selling ‘positive expectation’, ‘absolute returns’ based in immaterial models that are ‘too abstract’ for the mainstream. Regardless if our approach provides positive returns and can be understood by any 6 years old child, people still preferring to buy the old movies that ‘make sense’ in their heads. Maybe we have too many enemies to fight at the same time…Thank you for your educational effort, again. Best regards, Marcos

4 thoughts on “They All Want A Story!

  1. People just don’t get the idea of Trend Following easily. I tried to convince my friends, even my parents to not buy and hold, or not buying the dips, they don’t and won’t listen, even thought they had lost a lot of money in this financial crisis(some of them lost more than 50% of their porfolio). The only thing they firmly believe: the market will come back again….. But my question is: will they?

    Best regards,
    Jerry Chen

  2. I am not an advocate of government, by the way. If they are the highest bidder for my service, that is called a day job. I do no evil and work vigorously to prevent its application. I will never work as a testi-lier (called FBI). I will never do evil. My work is open and public AND I am conscious of that every moment it is under production. Some of the content is protected by statute, but that goes to the confidentiality of specific property incomes, not what I do with that. SEEKING ONLY THE TRUTH>I AM YOURS in fact. Thanks Michael. Your works will be measured in 30 years. So will all of ours.

  3. Jerry: Don’t feel bad. I speak at Major Money Shows and at first I was disappointed that the people who really need to embrace Trend Following are the people who reject it. So I keep trying and move on without being personally disappointed.

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