Althucher guesses: trend funds to disappear within the next 10 years...

Quote from fliesch:

I am developing trading systems since 6 years - my experience (very much shortened):

.......
This does not mean trendfollowing won 't work anymore, but I think returns will be smaller than 10-20 years ago.
Despite that I have to add that through globalisation the correlation of assets has a tendency to increase. Trendfollowing profits from asset diversification - this benefit will decrease.

=> So as you can see I do agree with Altucher concerning his statement about trendfollowing in stockmarkets to a big part. Concerning other assets - Altucher has the right direction, but trendfollowing will not die.

Just my opinion...
More...


thank you for the research, fliecsh. your conclusion seem well reasoned.

best wishes,

surfer
 
Quote from fliesch:

I am developing trading systems since 6 years - my experience (very much shortened):

By the way: Trendfollowing defined as:
- entry +/- setup: procyclic
- exit: trailingstops or procyclic (e.g. x-period low) - no targets
- comments concern trading without t-bill returns

1. Trendfollowing of mature stock indices DOES NOT WORK!
2. Trendfollowing does work for fundamentally chosen stocks.
3. Trendfollowing does work for commodities, bonds, currencies

Inheritent to all trendfollowing strategies are:
1. If the return should be quite big, so are the drawdowns. 50% is not unusual.
2. If returns should somehow be quite stable (e.g. DD <=15%) then they are miniscule.
3. The longer the time frame the bigger the probability for trends (with some bounderies: very very shortterm autocorrelation is higher - trading very very longterm especially in commodities is often not a good idea).

Now to the more philosophic part:
Over time the number of marketplayers increased, as transactioncosts decreased and markets got more efficient => NOISE IS INCREASING.
This does not mean trendfollowing won 't work anymore, but I think returns will be smaller than 10-20 years ago.
Despite that I have to add that through globalisation the correlation of assets has a tendency to increase. Trendfollowing profits from asset diversification - this benefit will decrease.

=> So as you can see I do agree with Altucher concerning his statement about trendfollowing in stockmarkets to a big part. Concerning other assets - Altucher has the right direction, but trendfollowing will not die.

Just my opinion...
More...
Excellent post!
 
Quote from bubbrubb:

i still find it interesting that no one seems to realize that over half of the returns from trendfollowing come from the cash sitting in T-Bills. . .and then another 25% from rebalancing gains. . .

only about 25% comes from the actual trendfollowing. . .

**the reason this strategy has done so well since the late 70's is due to the best bull market in bonds of all time. . .**
More...

I have been doing my best to avoid this discussion, I have participated in another of surfers threads deriding trend following and see no sense in wasting my time defending it further. But this post was too good...

Over half of trendfollowers returns come from t-bills? DUNN, who is in the worst drawdown in his history (which is adding fuel to the fire that "trendfollowing is dead") is averaging a 14.89 annualized return in his WMA program since late 1984 (http://www.iasg.com/mainframe.asp)
T bills maybe averaged a 5% return over that time and DUNN could have had at most 80% of the cash on hand in t bills. (so 4% of the return came from t-bills) That isn't half and that is from one of the worst trendfollowers.

Eckhardt is earning 25.37 annualized return from 91 to now in his higher leverage fund and he uses 40% margin to equity, meaning only 3% of his return could have come from t-bills (assuming 5% average return on tbills over that time) so where did the other 22% return come from?

Please clarify what you mean by rebalancing gains, I don't know what that is.

Also please look at some charts from the 70's (Sugar, Soybeans, Oil, gold, silver, debt instruments) then you will find the reason trendfollowing works so well. Markets have been somewhat stagnent in recent years (20-25), we are going to see markets like the 70s again. JWH and DUNN are going to have 100% - 200%+ years.

Oh and by the way many trend followers do trade stock indicies, and it works really well. Just look at the various TFers website I would say it is about 60/40 (those who trade stocks and those who don't). Check out european stocks and NIkkei/topix, those seem to be trending well over the past year, I will bet that some TFers made money on those. :D

5yr
 
Quote from 5yrtrader:



Also please look at some charts from the 70's (Sugar, Soybeans, Oil, gold, silver, debt instruments) then you will find the reason trendfollowing works so well. Markets have been somewhat stagnent in recent years (20-25), we are going to see markets like the 70s again. JWH and DUNN are going to have 100% - 200%+ years.


5yr
More...


if redemptions don't kill 'em first, perhaps. remember, we are talking about trend following applied to equities.

:D
 
Quote from 5yrtrader:

Please check my previous responses:

http://www.elitetrader.com/vb/showthread.php?s=&postid=911083#post911083
http://www.elitetrader.com/vb/showthread.php?s=&postid=710409#post710409
More...


the links dont seem to work, but thanks, i'll check it out.

ofcourse some trend followers will thrive--- this is suriviorship bias and you are not accounting for the effects of randomness if i recall your earlier posts correctly. since several trend following funds/traders do well, does not make it a viable strategy--PARTICULLARLY not for the average trader with limited funds.

surfer
 
There's an expression in Burton Biggs's book Hedgehogging that I think perfectly summarizes many people's attitude:

Mindless Trendfollowing

Biggs and others are (mindful) Value Investors; they have distilled their scorn for trend followers quite nicely into two concise words. Well done.
 
Quote from uncertain:

There's an expression in Burton Biggs's book Hedgehogging that I think perfectly summarizes many people's attitude:

Mindless Trendfollowing

Biggs and others are (mindful) Value Investors; they have distilled their scorn for trend followers quite nicely into two concise words. Well done.
More...


actually, that is very accurate. bravo to barton!

the public, by default, are trend followers--- we all know what happens to most of the public in the markets.....

surfer:)
 
You must log in or register to reply here.
Back
Top