Up Coming Trades & Themes
We are in a very interesting situation. It seems to me as usual the crowd will be wrong and hurt. So many have thrown money into emerging markets and have bashed the US Dollar. When ever the crowd leans to one side of the boat, I have seen all too many times the boat tips over and the crowd gets soaked. The US dollar index has bounced off support all the while too many of the crowd forgot about all of Europe’s severe financial issues.
The following are obvious signs of danger:
1.Long term decrease in available credit
2 High and extended unemployment
3 China’s implementation of price controls to curb inflation
4 The Federal Reserve’s QE2 program of releasing more liquidity in the world’s markets.
The above mentioned should cause worry for investors without a plan. Trend followers however should benefit from the potentially up coming financial chaos. The key to trend following is having no opinion. Just a well thought out plan that puts the investor in a position to be available.
The idea that Trend following is a life time strategy was further confirmed from a conversation with my accountant since 1983. He has a client ( who I knew of) that has been investing with Commodity trading advisors as well as running his own trend following systems since the early 1980s. He has compounded his money over the years. He used to be a dentist. Now he is beyond wealthy all through the concept of trend following. This person gets it! He knows there will be ugly periods such as last week when there were huge selloffs and many of the trend that many trend followers have invested in came into question as well as periods where you look at the chart and say…” Wow ..can you believe that” with an equity curve hitting new highs. He has done his homework.
He knows that trend following is not retirement in a box!
He knows he must be disciplined and patient!
The dentist has installed this in his children and grandchildren the concept and has trading accounts for them setup as well. These accounts have gone from initial funding of approx $150,000 to $600,000 over an 8 or 9 year period. These accounts did exactly what was expected… ugly draw downs…only to followed by new equity peaks somewhere down the line.
Trend following is a way to compound your way to wealth!
Futures trading involves risk. People can and do lose money