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Black Swan Events: How Rare Are They Really?

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Mike, I had to send this to you. I snapped this photo near my property at my neighbor’s farm. TWO black swans!

Enjoy!
[Name]

Thanks!


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How the Markets Tempt Us Into Making Mistakes

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Hi Michael,

Saw this article and immediately thought about trend following. There are the obvious aspects like being systematic, following the trend lines and thinking for the longer term. The interesting part was the discussion of the retiree and the temptation of the markets to derail his disciplined approach. I see the temptation of the markets being the greatest enemy to the discipline required to be a trend-following trader. Please enjoy.

Thanks,
[Name]

PS. Thanks for you all your work. It’s really appreciated.

Thanks.


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Trend Following Is Dead…Opps…Alive Again

From FT.com “Hedge fund nightmare turns into a dream” by Miles Johnson:

Do computers that trade financial markets ever have nightmares about losing money? It is a question investors have asked in recent years of the hedge funds that use automated algorithms and models to buy and sell billions of dollars of assets. Having almost consistently made money in the decade leading up to the financial crisis, these so-called trend following hedge funds appeared to have been scrambled by the high correlation across markets caused by ultra-low interest rates and central bank intervention. While the money being lost was just another data entry for the computers buying and selling assets ranging from pork belly futures to Japanese government bonds, their creators faced the very human stress of investors losing faith in their investment strategy. As the funds came under huge pressure to remodel their apparently malfunctioning computer programs, some investors even began to argue that trend following systems were permanently broken – that the mathematicians and scientists should close down their spread sheets for good. “No matter how much we have a statistical, disciplined and scientific approach to investing, that doesn’t mean that as a human you don’t watch your returns going down in periods of poorer performance and experience all the negative emotions that losses entail,” says Ewan Kirk, chief investment officer of UK-based hedge fund manager Cantab. But the managers, who go as far as sending researchers to the British National Archives to extract grain prices from the Domesday Book to construct trend following models, remained convinced the strategy would recover. “When people doubted trend following, it reminded me of people giving up on value investing before the technology bubble burst, at exactly the wrong time,” says Sandy Rattray, chief executive of Man Group’s AHL, one of the largest and oldest of this type of hedge fund. “Studies have shown that momentum has worked well over long periods. It was a brave person who said that momentum was permanently broken, but many did at the beginning of 2014.” Having begun the year as the most hated hedge fund strategy, many of these trend following funds have emerged as the best performing funds of 2014, outpacing their stock picking rivals who rely on mere human intuition to make money. Helped by large moves in commodities, energy prices and interest rates, as well as the ongoing devaluation of the Japanese yen, funds like AHL, as well as rivals such as Cantab, and Isam, have all reported double digit returns for their investors this year. In contrast, many well known funds following other strategies, most notably global macro traders, have lost money this year. Their managers argue it was their ability to withstand the short-term pressure of radically overhauling their core principles that meant they were ready to profit when the right market conditions returned. “Have we changed things on the basis of what happened? The answer is no. We did not lose the faith. We are always grounded in research, and coming up with new ideas,” says Mr Kirk of Cantab, which has $3.2bn under management. “If a model is losing money, but is within the statistical expectation, you can’t just chop and change everything because you have a period of poorer performance.” Investors in these funds, who were beginning to lose patience, now appear to be back on side. “They really needed this,” says an executive from a multibillion-dollar hedge fund investor. “If they had suffered another year of bad performance it was possible some of the smaller ones could have gone out of business entirely.” Part of the problem for trend following funds has been their perceived complexity, with terms such as “black box” frequently used to describe an investment strategy that many hedge fund investors find difficult to analyse compared with more traditional stock picking techniques. Mr Rattray argues that in fact the machines, which are constantly monitored by humans to check for abnormal market moves, are far more transparent than traditional fund managers. “If you tell me what Japanese government bonds will do tomorrow I can tell you exactly what we will do in response,” he says. He believes people will gradually get more comfortable with computers making decisions about investing their money. “Sometimes people can be suspicious of the idea of using models or computers to make decisions. It reminds me of Nissan at first finding people didn’t want to buy the cars they built using robots in factories. It took time for consumers to trust cars that were not put together by humans on an assembly line”.

Trend following is dead…is dead.


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Something to Pondor: Baseball’s Behavioral Experiment

Great article from Brian Costa of the WSJ:

Take a peek inside the frazzled mind of a major-league hitter these days. It isn’t a pretty sight.

Pitchers are throwing harder than ever. Batters are striking out more often than ever. And their judgment is getting shakier: Hitters are chasing more pitches outside the strike zone.

It is enough to make some teams wonder: What if we could just rewire hitters’ brains to react to pitches better? As it turns out, at least three major-league teams are engaged in a covert science experiment to find out.

Several years ago, the Boston Red Sox began working with a Massachusetts neuroscience company called NeuroScouting. The objective was to develop software that could improve hitters’ ability to recognize pitch types and decide, with greater speed and accuracy, whether they should swing. The result was a series of no-frills video games that became a required part of hitters’ pregame routines in the minor leagues.

When Theo Epstein left his job as general manager of the Red Sox to become president of baseball operations for the Chicago Cubs in 2011, he brought the same methods to Chicago’s farm system. And last year, the Tampa Bay Rays made the neurological training games mandatory for minor leaguers—threatening to fine those that didn’t complete their assignments.

Now, a startup company with a near-identical name says it is in talks with four other major-league teams about providing tests to evaluate the neurological strengths and weaknesses of their minor-league hitters. The company, Neuroscout, would put electrode caps on players to measure their relevant brain activity during computer simulations of pitches coming at them.

Red Sox general manager Ben Cherington said the idea is to improve the connection in hitters’ brains between the visual stimulus of a pitch and the decision of whether to swing. “There’s a connection there,” he said. “And if you’re trying to hit a baseball moving at 90 miles per hour and moving in different directions, it probably helps for that connection to be strong.”

Though NeuroScouting’s games vary, most of them depict a ball coming from the pitcher’s mound toward the hitter. Using a laptop or tablet, players are given instructions such as, “Hit the space bar when you see the seams on the ball spinning vertically,” and are scored based on their reaction time and accuracy. The Rays have a leaderboard that shows players which of their teammates fared best on a given drill, like the high-scores screen at the end of an arcade game.

NeuroScouting executives declined to go into detail about their methods or their clients, citing teams’ demand for confidentiality. But Wesley Clapp, one of the company’s co-founders, said their software can identify how well each player’s brain reacts to specific pitch types—an outside curveball or a low fastball, for instance—and tailor their training to the areas where they need to improve the most.

“The best players have the best neural skills,” Clapp said. “It’s like a dimmer switch. The more you turn that dimmer up, you see more and more impact on the field.”

The need for hitters to react faster is clear. The average major-league fastball this year is 91.8 mph, according to the statistics website FanGraphs, a figure that has steadily increased from 89.9 in 2002. Hitters’ decision-making is slumping, too. They have swung at 30% of pitches outside the strike zone this season, according to pitch-tracking data, up from 27.9% in 2009.

But players are divided on the benefits of brain games that, for many, feel more like homework than baseball.

“For the most part, guys just seem like, every other day, ‘Ugh, I have to do this again,’ ” Rays outfielder Kevin Kiermaier said. “You try to get in a routine, and it’s like, ‘Oh, you have to do neuroscience or you’re going to get fined.’ ” He said that fines for players who skipped their assigned videogames were in the $25 to $50 range. Rays general manager Andrew Friedman declined to comment.

In the majors, where players have more autonomy, few choose to continue with the games. “People didn’t have that stuff 10 years ago. People could still hit,” Rays outfielder Wil Myers said. “Don’t try to reinvent the game.”

Nonetheless, teams’ interest in the neuroscience of hitting is only growing. What began as a training tool for the Red Sox has also become a scouting device. Before each amateur draft, the Red Sox assess hitting prospects in part based on how well they score on the NeuroScouting games.

Mookie Betts, Boston’s fifth-round draft pick in 2011, recalled meeting with a Red Sox scout in an empty classroom one day during his lunch period at a Tennessee high school. At the scout’s request, he completed a series of games on a laptop. “I was thinking, ‘What does this have to do with baseball?’ ” Betts said. “I guess I did pretty well, since he kept on pursuing me.”

Betts, 21, said the daily NeuroScouting drills he did in the minors helped put him on a fast track to the majors. “It gets your brain going,” he said. In 43 games through Thursday, his .363 on-base percentage ranked second among major-league rookies behind Chicago White Sox star Jose Abreu.

Teams still aren’t sure if any of this will boost their offense. The Red Sox have seen hitters such as Betts rate well on the neuro tests and blossom into productive players. But Cherington said other prospects have scored well and not panned out.

Likewise, Rays catcher Curt Casali said his hitting improved after the team introduced NeuroScouting while he was still in the minors last year, but has no idea if one had anything to do with the other. “You could just be a really good hitter,” Casali said.

The only thing teams know for sure is offense continues to fall. The major-league batting average is .251, which would be the lowest for a single season since 1972, the year before the American League introduced the designated hitter. The leaguewide strikeout total is on pace to reach an all-time high for the seventh consecutive year.

At this point, they don’t need to know an experiment will work. The fact that it might is enough. “Intuitively, it would make sense that this would be a helpful tool,” Cherington said, “but I just don’t know if anyone yet can prove that it’s predictive. The hope is maybe it can be.”

This type of “psych” article is exactly why I pursue so many behavioral experts for my podcast.

Further related Podcasts and Articles from the Trend Following Blog:

Shane Snow Podcast

Thinking to make a living

PhD not required to win at trading

John W Henry

Trend Trading without Charts

Pro Football vs Pro Baseball


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Central Banks, What Have they Become? Ben Hunt’s View

A recent piece from Ben Hunt (see my Trend Following Radio Podcasts with Ben Hunt: ep 252, and ep. 447:

In every important respect, the Fed and the ECB and their brethren are no longer central banks at all. They are Ministries of Markets, no different from a Ministry of Industry or – even more eerily similar – the Ministry of Culture you would find in most European governments.

I spent the past week in Switzerland, meeting with old friends and making some new ones, and just like my recent travels in the US there was one overwhelming sentiment. No one doubts the omnipotence of central banks. No one doubts that market outcomes are fully determined by central bank policy. No one doubts that central banks are large and in charge. No one doubts that central banks can and will inflate financial asset prices. And everyone hates it.

Among those investors and allocators with the freedom to flee public markets, the interest in private market opportunities has never been greater. Among those investors and allocators trapped by mandate diktat in the Alice in Wonderland world of public markets, the resigned desperation has never been worse. It’s a quiet desperation in Zurich – a Teutonic stare at the floor and a wrinkling of the mouth – more obvious in Geneva with a Gallic shrug and a full-faced grimace. But’s it’s all the same emotional response to the Bizarro markets in this, the Golden Age of the Central Banker.

At this point the Narrative hegemony is complete. There’s no longer even a cursory bow to the idea that fundamentals matter. Earnings seasons come and go in the financial press with hardly a murmur. Over the past six months I can count on the fingers of one hand the financial press headlines that recapped the market day by saying that stocks went up or down “because” of company fundamentals. Six months ago I was writing in insurgent fashion about the “New Goldilocks Economy” constructed not on actual fundamental data but on how that data was interpreted through the lens of central bank policy. Today it’s a so-what-else-is-new article in the WSJ. A year ago I would meet with the occasional true believer in the power of central bank Narratives and the poverty of fundamental analysis in an environment of profound political uncertainty, but it was always against a dominant backdrop of “synchronized global growth” or “stock-picking is going to work again, just you wait and see”. Now everyone is a convert to the Narrative of Central Bank Omnipotence. Wherever I go, anywhere in the world, I am preaching to the choir when I deliver my sermon.

So I’m calling a top. Not a top in markets, because I honestly have no idea what’s going to happen next. But I’m calling a top in the Narrative of Central Bank Omnipotence because it has, in fact, reached its asymptotic limit of influence and belief.

It’s a top because the cracks are starting to show and widen. A Narrative architecture can sustain amazing structures, much like the flying buttress allows Gothic cathedrals to soar, but ultimately it can only bear so much weight. Draghi’s language last Thursday was sloppy. His pitch was uncharacteristically poor as he sang his lullaby to the Red King. I think he’s bitten off waaaay more than even he can chew, a point I’ll review at length next week. As for the US, the Central Bank Omnipotence Narrative is actually counterproductive for equity market price levels at this point. Because we are such well-trained monkeys, we act by reflex today to buy-buy-buy whenever a headline of Central Bank activism surfaces, but the training starts to work the other way when the tightening starts in earnest and the Fed reserves hang out there unresolved, like the mother of all lead balloons draped around the long end of the curve. Remember what an inverted yield curve looks like? Ain’t a pretty sight. But draining the reserves could look even worse. Damned if you do. Damned if you don’t. And the equity market caught in the middle.

It’s a top because – like a Ministry of Industry or a Ministry of Culture – a Ministry of Markets and its dirigiste control of the human animal’s social behavior ultimately fails. Maybe not a failure in the sense of apocalypse and ruin (although sometimes), but a failure in the sense that The Next Big Thing never comes out of a Ministry. They have their successes, sure, some grand program or triumphant announcement, but they’re only successes because we are TOLD they are successes. Since when has a Ministry of Culture sparked great art? Since when has a Ministry of Industry sparked great commercial advancement? Ministries are well-meaning. Ministries are the darlings of the professional intelligentsia that controls the organs of the State and Media. Ministries are wonderfully effective instruments of social control. But neither art nor commerce nor investment comes well from on high. It just doesn’t stick. The most powerful ideas in human history always come from below, not from above, and markets (and elections and revolutions) are the transmission mechanism of the idea engine. Watch out above!w

An inflection point in the market Narrative doesn’t alter market price levels directly. It alters the informational structure of markets (for a refresher course on what I mean, see “Through the Looking Glass”). It alters the market’s response pattern to future signals and events. That’s why I think it’s silly to predict end of year S&P 500 levels or engage in any such crystal ball gazing, because I have no idea what will happen next. But whatever pops out of the woods next (and somehow I doubt the global economy is walking down a primrose path), I think that using an Epsilon Theory perspective based on information theory and strategic behavior can help me react quickly and appropriately, which is what I mean by Adaptive Investing.

I don’t know what the catalyst for The Next Big Thing will be, although I have my suspicions. Maybe it’s a realignment election in Italy or the US. Maybe it’s China saying whatever the Mandarin equivalent of no mas might be. Maybe it’s a liquidity seizure in the repo market or some other unanticipated structural market failure. But whatever it is, we’re no longer at a point where additional State intervention can claim additional Narrative firepower. It’s like buying a stock that has no short interest and where all the sell-side analysts are rabidly positive. No thanks! Just as a short seller today is the marginal buyer of your stock tomorrow, so is the skeptic today the convert tomorrow. There are no more skeptics. To update Milton Friedman’s famous quote, we are all Bernankians now. Or rather, we all have to profess our Bernankian faith through our market behaviors even as we privately yearn for the Old Gods of greed and fear and the Old Languages of value and growth. And that’s the inflection point. From here on out I’m a seller of the Central Bank Narrative of Omnipotence and Control, and I’ll be writing about what that means for portfolio construction and risk management here at Epsilon Theory.

All the best,
Ben Hunt, Ph.D.
Chief Risk Officer

Nice. He is not a pure trend follower, but makes a great case for it.

Related Discussions: Embracing Failure, Calm Down, Technicals Matter, and Cullen Roche Podcast.


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$669 Million Judgement against Refco: Christopher Sugrue, Phillip Bennett, & Thomas Hackl

Refco Phillip Bennett
Phillip Bennett REFCO

Informative read:

New York (May 02, 2014, 6:27 PM ET) — The special master in the Refco Inc. securities fraud multidistrict litigation on Friday recommended that a New York federal judge enter a $669 million judgment against five defendants, for their roles in the scheme that brought down the massive commodity brokerage.

Under Ronald Hedges’ proposal, ex-Refco Group Ltd. President Tone Grant, former Refco CEO Phillip R. Bennett, former Refco Vice President Thomas Hackl [see: Acies Asset Management, S.A.], PlusFunds Group Inc. Founder and Chairman Christopher Sugrue, and Refco Group Holdings Inc. would pay $669,370,9991, plus $78,430 in interest for each day after April 29 until the judgments are entered.

While the defendants had already been judged years earlier to be liable by default, Hedges’ report focused on the damages the group owed stemming from the massive losses Sphinx and PlusFunds investors incurred.

The special master indicated that the group should be held “jointly and severally liable” for the mutlimillion- dollar judgment, leaving the individuals’ portion of the damages owed unclear.

The recommendation will now head to U.S. District Judge Jed S. Rakoff, who is overseeing proceedings for the consolidated suits.

The five defendants are all named in the sprawling litigation brought by liquidators and trustees for Sphinx Ltd., which was induced into depositing hundreds of millions of dollars into accounts that were exposed in the $1.5 billion Refco scheme.

Sphinx and PlusFunds, which helped manage its investments, lost approximately $263 million when Refco collapsed in 2005. Sphinx has since entered liquidation proceedings, and PlusFunds filed for Chapter 11 bankruptcy protection in 2006.

Many were found guilty of criminal charges related to the con, including Bennett, who is serving a 16-year sentence, and Grant, who received a 10-year term of his own.

The suits arose from revelations that Refco executives had concealed $430 million in debt through complex trading and lending schemes and shell companies, in an effort to bolster the company’s financial reports.

Refco sought Chapter 11 protection in October 2005, two months after a $583 million initial public offering, and about a year after it was purchased for $1.9 billion in a leveraged buyout by Thomas H. Lee Partners LP.

Five days before Refco sought protection, more than $312 million was transferred from the Sphinx accounts at Refco to unprotected offshore accounts. The hedge fund group ultimately settled with Refco creditors, agreeing to turn over $263 million.

Meanwhile, federal investigators believe Refco had been covering up customer trading losses by transferring securities to appear as debts owed by Refco Group Holdings Inc., a holding company controlled by former directors. Directors later hid RGHI’s receivables from auditors by transferring funds to make the debt appear to be from an entity not related to RGHI, prosecutors alleged.

The plaintiffs are represented by Lee M. Andelin, Leo R. Beus and Dennis K. Blackhurst of Beus Gilbert PLLC; and David J. Molton, Andrew S. Dash and Mason C. Simpson of Brown Rudnick LLP.

Counsel information for the defendants named in the recommendation was not immediately available Friday.

The case is In re: Refco Securities Litigation, case number 1:07-md-01902, in the U.S. District Court for the Southern District of New York.

Another article from Bloomberg, “Ex-Refco Executives Hit With $672 Million Court Judgment”:

Refco Inc.’s former Chief Executive Officer Phillip Bennett and two of his ex-colleagues were ordered to pay $671.7 million to Sphinx Providence Ltd. and its hedge funds for losses stemming from a $2.4 billion fraud at Refco.

U.S. District Judge Jed Rakoff assessed the damages, including interest, against Bennett, former senior vice president Christopher Sugrue, former executive vice president Thomas Hackl [Acies Asset Management, S.A.] and Refco Group Holdings Inc., an entity Bennett owned and used to hide more than $1 billion of debt.

Once the biggest independent U.S. futures trader, New York-based Refco collapsed in 2005, two months after raising $670 million in an initial public offering. Refco Inc., as it was known after the IPO, filed one of the biggest bankruptcies in U.S. history, after having revealed Bennett’s holding company owed it hundreds of millions of dollars.

In the ruling, which was made public today in Manhattan federal court, Rakoff followed last month’s recommendation of a special master assigned to the case. Rakoff didn’t address the special master’s conclusion that former Refco Group Ltd. President Tone Grant should also be held responsible for the damages.

Bennett is serving a 16-year prison sentence. Grant is serving 10 years.

Sugrue was chairman of PlusFunds, which filed for bankruptcy in March 2006 after the disclosure of its relationship with Refco helped spur investor withdrawals.

The details are not pretty.

Thomas Hackl
Thomas Hackl (more)

Also read the whitepaper from Edward Pekarek (Pace Law School) titled “The Due Diligence Defense and the Refco IPO”: here.


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Trend Following, Momentum, Systematic Quant? Avoid the Mental Masturbation of the “Name” of the Game!

Article seen by Francois Sicart titled “Don’t Get Sidetracked by Momentum Chasing”:

In an early philosophy course, to introduce the concept (and danger) of extrapolation, our professor used the example of an Englishman landing in France for the first time. Seeing two red-headed women on the dock, he immediately calls his friends in London to report that all French women are red heads. The title of a recent Casey Research paper, “Extrapolation Fever”, recently reminded me of this example and its title seemed particularly timely. Extrapolation is the assumption that you can generalize from limited samples and/or that current trends will continue forever. Sadly, we all have a tendency to extrapolate and I have long believed that this is one of the worst biases of investing, responsible for the destruction of innumerable portfolios. This was the reason for my early adoption of a contrarian investment approach. Possibly the second worst investment bias is our need to believe a good story. As a trend matures, its causes become obvious to the average investor. He or she comes to assume that this is the way the world always works, forgetting that by the time a story is obvious to a majority, it is already reflected in the price of a stock or of the market. My view, and that of many contrarian investors, is that the world is cyclical. Economic indicators, for example, tend to fluctuate around either a long-term trend or a historical average, periodically “reverting to the mean”, as statisticians say. Financial markets, which are importantly influenced by the excesses of crowd psychology, do not only revert to the mean, but usually go through it, toward a more “exuberant” high or low. In financial markets, the most common use of extrapolation is called momentum investing, which consists of buying what has been going up on the assumption that it will continue to go up. Numerous studies have documented that momentum investing works most of the time: stocks and markets tend to do as they have been recently doing. The only problem is that many studies also show that (almost by definition) momentum does not work when it counts most, i.e. at major market turning points. And as I have pointed out before, in investments it is not how often you are right that counts; it is how much money you make when you are right. There is no need to revive an old argument about momentum versus value. Let me just say that I personally don’t know any rich momentum investors – at least not any that made and kept a fortune in the stock market. I do know a few rich and successful value contrarian investors, however. There also are some that I have mentioned in the past, whom I do not know but enjoy watching and reading: besides Warren Buffett and Charlie Munger, they include Jeremy Grantham, at GMO.; Howard Marks at Oaktree; and William Browne, of Tweedy, Browne. We not only have a commonality of views, but also similar experiences and career paths. All three gentlemen can also claim superior long-term investment records—and by long-term, I do not mean five year; I mean more than thirty years…There is no lack of successful investors besides those I mentioned above, and my requirement for a thirty-year-plus record may seem self-serving, since only an older investor can have such a record. For example, 56-year-old Seth Klarman, founder of the Baupost Group, has a stellar 25-year record and writes highly stimulating shareholders’ letters, BUT… I will respond like famous Chinese leader Zhou Enlai who, when asked what he thought was the significance of the French Revolution of 1789, reportedly answered: “It is too soon to say”. Today, there is one trend that has been in effect for a very long time and whose causes are well understood and routinely enunciated by even the financially less-literate: declining and low interest rates. Interest rates approached 14% in 1984 and, although recently doubling, have remained under 3% since mid-2011. And, while interest rates declined by 80% almost without interruption for 30 years, the Standard & Poor’s 500 Index gained a remarkable 1041%. Interestingly, I am finding the investor consensus is now overwhelmingly anticipating that interest rates will eventually rise again. So, expecting them to do so is not exactly contrarian. But my concern goes beyond just the stock and bond markets. Thirty years of “suppressed” interest rates, as economists say to describe the central banks’ aggressive role in reducing and almost eliminating financing costs in the economy, must have been addictive. All our instincts and economic reflexes are now unconsciously geared to this misleading environment and, for investors who have no experience pre-dating the early 1980s, it would take an exceptional imagination to picture what it was like to invest in an environment of high and rising inflation, high and rising interest rates. Some of the successful “old guard” may provide some guidance: Jeremy Grantham, in a Barron’s interview in March, believes the stock market may go higher, but for the wrong reasons: We do think the market is going to go higher because the Fed hasn’t ended its game, and it won’t stop playing until we are in old-fashioned bubble territory and it bursts … But to invest our clients’ money on the basis of speculation being driven by the Fed’s misguided policies doesn’t seem like the best thing to do with our clients’ money… We invest our clients’ money based on our seven-year prediction. And over the next seven years, we think the market will have negative returns. Howard Marks, in a lecture at Wharton (March 17, 2014), remembered his early career experiences, which taught him that with its Nifty 50 policy [early 1970s], Citibank had invested in the best companies in America and lost a lot of money; then it invested in the worst companies in America [junk bonds] and made a lot of money. He noted that “it shouldn’t take you too long to figure out that success in investing is not a function of what you buy. It’s a function of what you pay.” An asset of high quality can be overpriced and be a bad investment; an asset of low quality can be bought cheaply and be a good investment. Then focusing on the present, he warned that the current low return on credit instruments, due to low interest rates, has spawned some risky behavior in the market. “If the market is pro-risk, then risky securities can be issued. We have to make sure that it’s not we who buy them.” It would be hard to find a better conclusion than these two quotes, from investors who, over the years, have learned to let wisdom and prudence prevail over greed and short-term competition.

That disproved trend following?

You may also enjoy some of my other Trend Following Podcasts and Articles:

I walk the Line

Vineer Bhansali Podcast

Striving for Excellence

Knowing Your Financial Edge

A Solution to negative interest rates


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

Trend Following Podcast Guests
Frequently Asked Questions
Performance
Research
Markets to Trade
Crisis Times
Trading Technology
About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.