By |Published On: November 26th, 2013|Categories: Uncategorized|

I was at Grant’s Interest Rate Observer a couple years ago listening to the end of the world.

Seriously, EVERYONE was ultra bearish. And EVERYONE was extremely compelling.

I was completely sold, and yet, I was protected because I’ve devoted myself to “following the model” and disregarding anything my pea-brain has to say about anything.

Trends rule markets. Expect the unexpected. Avoid highly confident predictions. Follow the model.

Hugh Hendry was the most compelling speaker at the conference. He gave a fabulous pitch for shorting JGBs; shorting the world; and buying a lot of gold.

And now Hugh is tapping out:

“I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends.”

I’ve made a new rule: listen to really smart people, since it is entertaining, makes me feel more intelligent, and gives me overconfidence for multiple predictions; however, avoid trading based on the projections of highly confident smart people.

Note: Bill Ackman and Herbalife/JCP is another interesting case study.

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About the Author: Wesley Gray, PhD

Wesley Gray, PhD
After serving as a Captain in the United States Marine Corps, Dr. Gray earned an MBA and a PhD in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Next, Wes took an academic job in his wife’s hometown of Philadelphia and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. He is a contributor to multiple industry publications and regularly speaks to professional investor groups across the country. Wes has published multiple academic papers and four books, including Embedded (Naval Institute Press, 2009), Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016). Dr. Gray currently resides in Palmas Del Mar Puerto Rico with his wife and three children. He recently finished the Leadville 100 ultramarathon race and promises to make better life decisions in the future.

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