- March 2010
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- March 2009
Fake It Until You Make It (in a Bull Market)
Recently, several members asked why I read institutional “market letters”, especially since they post no track record, a typical statistic demanded by retail. Let me start by saying that there is a formula in the investment industry: the trick is in knowing that a winning streak happened because you were luckier than smart when you bet big and won. Next, hire talent to run the shop as you cloak yourself in mystery and collect expensive art as the rainmaker.
State Street Sentiment Alert
During yesterday’s Trader Workshop, I brought up the idea that demographics could be the driver of certain social phenomena currently dominating the news. Add that to the fact that people are prone to take chances in order to avoid/recoup losses — increasing their propensity to gamble — investors face a toxic combination.
Putting a Price Tag on Revaluation
When China will revalue the Yuan has become daily speculation, but there is a problem. And it’s a big one.
John Paulson’s Secret
This is the last of the backlogged articles in the queue, and it might be one of the more interesting ones.
Emerging Markets: a Sentiment Indicator?
I asked if the silent bell was tolling for China the other day, because you know, there was a time when U.S. investors behaved quite differently that they do today. When it came to emerging markets, they had to overcome something called home bias.
At this point, I can’t think if anyone who actually wants developed world equities, Treasuries or Dollars. Perhaps it is time to ask if this generational loss of faith in Western capitalism is a sign of a sentiment extreme.
Power vs. Self Interest
There is a lot of finger-pointing going on around the world, yet, when I think about it, the motivation for all of it is singular.
Beta dressed in Alpha Clothing, Part 2
Following the first article, member John M observed, “I am not sure how the CTA’s and ex-Turtles, etc. are marketing themselves, but if you read Trend Following by M. Covel, it is clear that your friend is right about the approach – they play the market risk across a wide range of markets and take regular small losses waiting for the BIG TREND in one of their markets.”
To which I replied, “The key there is *diversification*, and that’s the irony. Retail traders refuse to diversify their investment portfolios while they worship CTAs who sell diversification as alpha.”
Is the Silent Bell Tolling for China?
Back in the day when Japan ruled the world, Americans were told to bow properly, practice kaizen and do business the Japanese way. My, how times have changed.
Market Timing Your Portfolio
I can’t think of a single person who actually believes that diversification (instead of market timing) is the key to good investing even though this would have gotten the average investor through the 2008/2009 Apocalype/Phoenix Rising episode in fine shape. I guess investment managers must justify their existence by convincing clients they have built a better mouse trap.
Lost Decade for the Undiversified
They keep writing things like 10 Years Later, a Much Less Expensive Dow 10,000, but investors continue making big bets on one asset class (currently investment grade corporate bonds and emerging markets) instead of diversifying.
Beta dressed in Alpha Clothing
A while back, a member wrote in response Market Timing vs. Dynamic Weighting, saying, “I think you’re wrong about this because systematic trend-following funds are the best performing trading strategy in history, being uncorrelated to the stock market. The ones that mix in multiple time frame trend trading and mean reversion trading have really low volatility in returns as well. Thoughts?”
And now, the negatives
It’s time to invoke former Russian prime minister Viktor Chernomyrdin’s famous catchphrase, “We hoped for the best, but it turned out as always.”
When he said, “It has never been like this and now it is exactly the same again,” about the situation in the Ukraine, he might have described the Greeks.
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