Hubris and Blind Faith in Their Models

From FT.com:

The financial crisis is a direct result of their hubris and blind faith in their models, he says, with noticeable anger. The efficient markets hypothesis is, says Mr. Harding “a religion … Facts are not relevant to these people”.

Harding is featured in my book The Little Book of Trading.

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6 thoughts on “Hubris and Blind Faith in Their Models

  1. David Harding saying markets aren’t efficient is really meaningful. The fact that he controls tens of billions of dollars with 100+ plus researchers does not in any way give him an edge over the retail investor.

  2. That is an ignorant comment. Harding today runs a mammoth fund trading for individuals, firms, pensions, etc. He does the work for them. That’s the business.

    Has Harding always managed that size? Of course not. Does a trend follower need 100s of researchers to trade? Of course not.

  3. Agreed MC. He has an edge over the retail investor because he’s not a sheep who tries to predict the market. He reacts to the market and manages RISK appropriately.

  4. @Jamal, do the prices, moving averages, channel breakouts, BBO, and ATRs appear on Harding’s screens differently than on yours? Of course not.

    Does he get a different price quote than you do? No.

  5. I would argue that someone who does NOT manage billions of dollars has the advantage if they use a systematic trend following system.

    Put yourself in Harding’s shoes…How do you move that kind of cash without some form of predictive analysis? It’s not like he can take a flyer on a stock and pull out if he gets stopped out. We can. He can’t. He has to look ahead and plan his moves accordingly.

    He might be a trend follower, but the PhD’s on staff are probably there more for risk analysis and capital deployment strategies rather than the pure “stock picking” that we can focus on.

    As Jesse Livermore pointed out 90 year ago, when you swing a big line, you have to be selling when everyone else is buying. You cannot wait to be stopped out, otherwise it’s too late, as your selling will drive down the very prices you are trying to receive.

    For his ability to manage such large numbers as a trend follower, I truly respect David Harding.

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