My guest today is Alexander Ineichen, the founder of Ineichen Research and Management AG, an independent research firm established in October 2009 focusing on investment themes related to nowcasting and risk management. Alexander started his financial career in derivatives brokerage and origination of risk management products at Swiss Bank Corporation in 1988.
The topics are his books Absolute Returns: The Risk and Opportunities of Hedge Fund Investing and Asymmetric Returns: The Future of Active Asset Management.
In this episode of Trend Following Radio we discuss:
Seeing through the market forecasting flash
The importance of “check box” methodology
Simplification as sophistication
The concept of nowcasting
Understanding the whole, so you know what can be eliminated
Learning to watch for trend reversals
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” – George Soros
Those are the words of someone likely to lose big–soon. Authority is not a wise foundation for speculative moneymaking decisions. Consider:
Appeal to authority is bad, but appeal to tradition is even worse. Experts aren’t infallible, but at least expertise is usually hard-won and retains some applicability over time. By contrast, tradition is often totally arbitrary or based on reasons that retain no relevance whatsoever. Also, an expert can issue a correction but tradition remains immutable and sacred (source: Jeff Darcy).
I would argue that almost all fundamental style investing falls into a category of tradition. Very few look for an alternative such as trend following. They figure that since it appears that everyone has invested or traded a certain way–that it must be the only way. They forget to dig deeper and forget to look for the truth behind why investing/trading works. Always searching for the “why?” is part of my February 25th presentation in Tokyo.
“…being a systematic trend follower also induces some pain from time to time, but overall results move slowly in the right direction. Trend followers need to learn to sit on their hands from time to time, and other times endure the pain from what seems like a never-ending string of whipsaw trades. That just comes with the style.”