Trend Following: The Best Tonic for Uncertainty

From WSJ.com:

“The bailouts have transferred a lot of private-sector debt to the public sector. But that’s just moving the problem around. The debt leaves a terrible drag on the economy as people try to save. And it is putting some countries’ financial stability in question. Inflation may yet come in due course. But Van Hoisington, a veteran bond manager from Austin, Texas, recently warned that the more imminent danger might be deflation — falling wages and falling prices. This is what has hammered Japan all these years. It’s what turned the Crash of 1929 into the Great Depression. Deflation makes debts bigger in real, purchasing-power terms. Where does that leave the regular investor? Take a hard look at what you own, and what sort of downturn you think you could handle. Too many investors — and too many financial advisers — are still running with the bull-market playbook: Take on risk; stay fully invested; buy the dips; equities always outperform. Maybe it will work again — if we have another bull market. Are you really willing to bet your stack on that happening now?”

Trend following is the best tonic for uncertainty, but to pull that off you can’t be looking over your shoulder constantly worried about what your neighbor is doing with his or her portfolio. Here’s some insight: most likely your neighbor has no clue.

6 thoughts on “Trend Following: The Best Tonic for Uncertainty

  1. Your neighbor’s opinion should have zero impact on what you do in your own portfolio. Your portfolio should reflect your personality. Whats good in your neighbor’s portfolio is not nesscesarly good for you.

  2. The U.S. & EU cannot escape the same fate as Japan. It is a demographic spending cycle. Our aging Baby Boomers caused both the rising and now the receding tide.

    Baby boomers are aging. They have turned their sights to retirement saving. They are not buying bigger homes and bigger TVs. etc

    Anyone talking inflation right now doesn’t understand what is happening. They haven’t put all the pieces together and are focusing on just a few moving parts and jumping to conclusions on the more recent U.S. past.

    Deflation, Deflation, that’s what you need to think for the next 10 years. That is the enemy…

    Cycles are analogous to trends. All the data is out there…

    This is not psychological, this is a physical change in the economy. It’s like kicking out a leg on a table, the Government is piling money on the opposite end of the table to try and keep it from falling…

    One of the only ways to counter this would be to open immigration to already educated, 30ish aged people who are Entrepreneurs, or Professionals who are in short supply. This way, we get already educated productive people, without incurring the typical expense of that education to our society.

    I won’t go into the consequences of an aging populist here, but just look at Japan…

  3. Flight-

    Do you even understand what causes inflation?

    Please take an economics course (or at least learn about how the money supply works) before posting long winded idiocy about Boomers and spending.

  4. If you do not know when the trend of the stock market changes direction, you are operating at a distinct disadvantage. I have been identifying changes in the trend, mathematically for over 40 years. We are currently in a downtrend that started, according to my RIX Index, on 5-5-10.

  5. Unfortunately, your next door neighbor has no clue, and odds are neither do your parents or friends. So many people have been brainwashed into buy-and-hold plan which is really no plan at all. You absolutely must have a way to protect your money. Defense is essential. What winning team do you know of that plays only offense?

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