The Economy, The Stock Market & (More) Recency Bias

The stock market has really thrown everyone for a loop again this year.  An article in the NY Times this weekend highlighted the fact that the global economy is very weak while stocks remain relatively strong.  Unfortunately, the article’s conclusion distorts our reality in another classic case of recency bias by comparing the current stock performance to the current calendar year.  The article states:

“When you buy stocks, you are ultimately buying a share in corporate profits, which are influenced by the overall economy. Nonetheless, the amount of growth in a country’s gross domestic product shouldn’t be confused with the prospects for its stock market, says Simon Hallett, chief investment officer at the asset management firm Harding Loevner. “I cannot emphasize that enough,” he says.

Investors need only look to the current year as an example. The domestic economy has grown at an annual pace only slightly above 2 percent, subpar by historical standards. Overseas, the picture is worse: Japan is teetering on the brink of yet another recession, large parts of Europe’s economy are contracting and China’s pace of growth has slowed uncomfortably.

Yet against this bleak backdrop, United States stocks have returned 15 percent, on average, this year, while those in Europe have gained 18 percent and Asian stocks are up more than 12 percent.”

If viewed in the narrow scope of 2012 this seems to make a lot of sense.  Stocks surely don’t seem to have any correlation to the economy.  But this sort of thinking totally misunderstands the way prices fluctuate and how investors try to price in various movements.

Now, I agree with the general premise that the stock market is not the economy.  There is never a 1:1 relationship and the variables involved in the economy do not always perfectly translate into stock market prices.  But we know from works such as the Kalecki profit equation that there is at least a moderately strong relationship between economic activity, profits and future stock market prices.  The problem is that the irrational participants in any market do not always properly anticipate how these macro variables will filter through to the micro.

For instance, take the last couple of years.  In early 2011 the economy seemed to have gained some relatively solid footing.  Corporate profits were moving higher and recession fears were relatively low.  We had just come off a recession scare in 2010 when it was widely believed that the Euro crisis could throw us back into the meat grinder.  It didn’t happen and when it failed to materialize the stock market correctly accounted for the summer declines that had anticipated far reaching negative effects from Europe.  2011 was very similar.  The year starts off with a nice rally of 7% as the economy appears to have thwarted recession and then the summer rolls around and look what happens:

Everything starts out generally positive and then in the middle of 2011 recession odds surged from a 20% chance to 50%.  And the market melted just as it had the year before.  Remember, the market is not an efficient pricing mechanism that accurately prices in recession or even most things.  The participants in these markets suffer from the worst case of “shoot first, ask questions later” you’ve ever seen in your life.  Only someone with zero real trading experience could theorize that markets are efficient.  I’ll tell you from a decade of experience trading event driven strategies that that’s the biggest load of nonsense you’ll ever read.  I’ve logged thousands of hours in the trenches watching how terribly inefficient these markets are and how quick human beings are to pull the trigger on something they don’t understand or are totally ill-equipped to psychologically adapt to.   I’ve been on the wrong end of many of those decisions.

Anyhow, the current disconnect is actually a relatively unsurprising result.  My research has shown that the worst rolling 12 month declines in the stock market almost always occur in recession (see here for more).  Investors don’t obsess over declines in output for no good reason.   So it’s not surprising that the stock market begins to panic a little bit when there is evidence of recession.  But you have to keep things in perspective and understand the dynamics of pricing.

Back to our example – the January 1, 2012 stock market was priced at exactly the same price as January 1, 2011.   That’s despite 15% growth in operating earnings in 2011 and 9% revenue growth.  On January 1, 2012 the stock market was also beginning to price in a strong probability of a recession.  And then what happened?  The economy started to surprise to the upside.  In the first quarter of this year the odds of recession plummeted as economic prospects improved and fears over Europe proved overdone (once again).  And as the year continued the economy continued to surprise to the upside and profits, while weakening, were certainly not wilting.   In other words, the stock market in 2012 was just making up lost ground because its irrational participants had incorrectly priced in the odds of recession in 2011.

The stock market might not be the economy, but that’s mainly because its irrational participants generally fail to anticipate how the two actually impact one another.

 

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Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • InvestorX

    A good one, thanks for the “look-back”.

  • Andrea Malagoli

    “and fears over Europe proved overdone” — if one calls the ECB charade a ‘fear calming’ measure, that is one hell of a green shoot hope, and the markets are definitely overly optimistic by now. What exactly has happened concretely to make us less fearful of the European situation? A bunch of jawboning by ECB bankers and prime ministers? The answer is … not much, especially on the fiscal side.

    The markets have reacted in the most superficial way to recent news. It is no wonder that they would drop significantly only during recessions. The reason is that the markets are not in the business of seeing things before they happen, so they always get caught with their hands in the cookie jar when it is too late.

    I’d say that it is very dangerous to think that the risks in Europe have significantly abated.

  • VII

    “On January 1, 2012 the stock market was also beginning to price in a strong probability of a recession. And then what happened? The economy started to surprise to the upside. In the first quarter of this year the odds of recession plummeted as economic prospects improved and fears over Europe proved overdone (once again”

    “…irrational participants fail to..”

    If the two statements are true..and the title of this piece relates to recency bias I would disagree. If this were true than someone other than me would remember and point out that while your speaking as though 2012 was so obvious…you were short in the first part of 2012. You Shorted the SPX around January- March because your algo said to short. So how do you lecture investors about being irrational when you went short the market right at the point it would then rip higher?
    You basically shorted..the move to the top? Then your algo called to buy later at around the same price it had you shorting. Then had you go to cash around 1370…which then missed the next move up from 1370 to 1465.

    I remember this…because I myself was short!. I felt it..and remember you asking me in march or something if I was still short the SPX. I was very bearish From November- Feb. In fact my top call in 2011 and the 20% decline was perfect in 2011 BUT i negated almost all of that with digggin my heels in in 2011 to short the SPX. I started off 2012 terrible! and not because of recency bias. It’s so easy to play historian from the ivory tower after the fact but at the time I failed. I am not afraid to admit that. But I don’t let on or make others think that was not the case. I was very honest and open about how tough it was. On your site in fact. I’ve had a great 2012! made up for all those sins of my past. Am I bullish or bearish or what ever? NO..I just keep getting better. But I don’t do it by not being forthright. How do you expect investors to believe in you Cullen if you write what you just did, when anyone who read you remembers you were short during this period? I was forced to challenge my process and grow as an investor. That turned out to be a small price to pay for what would occur next.
    But…I NEVER acted like or wrote as you just did. Cullen, you just wrote a piece and made it sound like you nailed 2012. When you did the exact opposite of what your claiming. You were short in 2012 right when the market ripped up.
    And I know this..because I was too. My call was much worse in 2011..I actually had work that showed the market should head much lower off the initial 20% decline. It was all Wrong.

    Be real. You don’t have to act like you got everything figured out.(which your next line will be..I always admit I’m wrong) Your big picture stuff is Excellent. Your MMR work is beyond ground breaking. You don’t have to appear to always have the answers. MMR Can not, and does not hold those people accountable for messing up the economy. It only helps fix it. But none of the Monetary work I read ever makes sure those children who do wrong learn from their mistakes. It only rewards them with more money..because that’s how the system works and as you said to me once, “it is barbaric and wrong” to allow the people to suffer.(reference to Iceland convo. That conversation changed how I viewed MMR and any monetary theory) It is why it keeps occuring. And remember..Iceland is doing great. For those of us who have been with you can remember the different times your Algo was wrong. Those same people will remember my incorect market calls. I had a lot in the 4th qtr of 2011. I was TOO bearish. At least be honest about that.

    You algo had you short around 1320 to the top of 1419. True story.
    It then had you go Long at around 1290-1320 around May…(basically the same level you shorted) it then had you out at 1370..missing the move up to 1465.
    True or false?
    Maybe there are several small % you picked up in there..I don’t know. What do I care…right? Well if your going to sound like you had it nailed back then…then you beter back it up. Investing is hard..at least share your experience with them rather than talk down to “irrational investors”. How do you educate invstors if you can’t connect with them….or arn’t real with them.
    But when you put out all the stuff about how little investors know…it seems as though these investors have a thing to say about you as well.

    BTW-…if beating the “market” can’t be done…then why pay you for research? Why not just buy the SPY and go surf? Beating the market is the point. And IT CAN be DONE! It’s not as hard as all the guys who want your money let on. It’s remarkable how much time Wall St., GMO, Vanguard etc. want to spend on how beating the market can’t be done. And afterwards they offer you there address to send money. Why? Why pay these guys to do something they just said they can’t.

    You can beat the market….just do the opposite of what these market underperfomers do!

    I doubt I have many guys here who like me as much as they did when I wasn’t so critical of you….but I call it as it is.

    Why did I even have to write this long epistle? How come none of you called Cullen on this? He calls everyone else out in Wall St. You don’t have the balls to, You don’t want to be confrontational, or you figured with all the good stuff he offers…you’ll just look the other way? WTF guys?

  • http://www.orcamgroup.com Cullen Roche

    VII,

    I have no idea where this came from. You haven’t commented here for 6 months and now all of the sudden you’re jumping to all sorts of conclusions and pretending to know everything about my strategies and my calls. First, I didn’t ever imply that I knew what was going to happen in 2012. I simply explained why I thought the NY Times article was lacking in its explanation. It’s a purely hindsight article. I thought that was clear.

    And your assumptions about my algo are all over the place. Some links to actual content might have been nice since it does appear you’ve blatantly misconstrued my actual commentary. I’ve described in no detail how I actually implement the algo. In fact, In January when I said I was shorting I said I was “dipping my toe” in the water. Upon review, I talked to you in the comments about how the trade wasn’t going well several times. I never claimed it was a good trade. In fact, several times I said it was the cause of underperformance to start the year. I was an open book about that. But you are misconstruing the actual events as though I claimed I crushed the market at the time. I did absolutely no such thing.

    I have no idea why you think you know so much about my strategies or my approach. I have never actually disclosed my multi-strategy approach. I know you know that I use a multi-pronged approach because we’ve discussed this in detail. I repeatedly tell people that the reason I do that is because I know that not all approaches will work. You seem to think the algo is some sort of holy grail, but I am intentionally vague about it and hesitant to discuss it because people like you jump to conclusions based on it. It’s a simple risk metric more than anything else. And even if you followed that simple risk off call in late January you could have gone 6 months without losing any money to the S&P since the market was flat to down almost the entire summer.

    I’d disclose my annual returns on a risk adjusted basis, but you’d probably attack me for that. This is why I don’t discuss trading details on the website. It’s impossible not to have everyone jump to conclusions.

  • Garibian2

    well I guess we have been just sulking in the corner waiting for someone else to do the heavy lifting. We were hoping that at the end of the summer when you said you WERE BACK that you would be the one. Welcome back. I have missed you

  • http://www.orcamgroup.com Cullen Roche

    In fact, upon review, I am doubly confused by your comment because I talked to YOU about how badly the trade was performing in March. I said:

    I’m in a bit of a rut here to start the year. My algo based portfolio is up 3.2% for the year which is garbage when compared to the market. But that happens. We win some, we lose some. It gets frustrating at times, but you stick to a program and stay true to your goals and that’s how it works.

    Thanks for your honesty. I try to do the same here, but you one up me often.

    I disclosed that I later covered the trade at a marginal gain, but a substantial relative loss. Here’s the short trade’s end date and comment just so you recall….

    http://pragcap.com/the-3-forces-behind-the-slow-recovery/comment-page-1#comment-105878

    And while you were gone there was this call which pretty much nailed the summer bottom AND the macro call:

    I’m in the no recession and bull camp. Algo went bullish on Thursday/Friday. So I guess I am pretty universally optimistic right now….At least more so than others….

    http://pragcap.com/the-second-half-of-the-primary-bear-market/comment-page-1#comment-108876

    Actually, you weren’t gone because I disclosed my bullishness into the May collapse….TO YOU! But you conveniently left that call out since it doesn’t mesh with the rest of your “criticism”. Not surprising since you responded to that comment saying your guys thought the market was “staring over a cliff”. So you remained bearish throughout the year and now you’re mad at me because you listened to one of my calls (and applied the approach incorrectly) and then ignored the other call that nailed the bottom???? Is that really fair? That’s you “calling it like it is”???

    I said I was buying and what was your response? You said:

    I didn’t want to admit this but I loaded up 30% SPY and we couldn’t get it in at the close. I was on calls all day with people having them play devils advocate and i took too long. They didnt think that trade was worth the risk. They have the SPX staring over a cliff or long steady decline.

    http://pragcap.com/the-market-is-starting-to-recognize-the-economic-reality/comment-page-1#comment-108667

    So the timeline on this is all pretty cut and dry. The algo strat turned bearish in late January, shorted up to April, turned a 3% profit on that trade and then moved to cash. Then it generated a buy in late May not far from the summer bottom and you ignored it because you were still bearish. So your timeline is not only wrong, but your flipping around and me “missing” this and that move totally misconstrue what really happened. Overall, the strategy is up about 11% YTD despite being in cash for half the year. Not bad for an absolute return strategy that spends a lot of time on the sideline. And as you know, it’s performed pretty well in recent years as well. But your comment doesn’t say anything that remotely resembles this reality.

    If your criticism of me is “calling it like it is” then why have you blatantly misrepresented conversations that you and I had? You haven’t called it even remotely close to “like it is”. I’ve got the actual quotes and time stamped comments. I presume you didn’t mention the May conversation because you remained bearish as the market was giving you a chance to make up all the underperfmance. All your comment amounts to is an unjustified attack that misrepresents what actually happened. You’ve misconstrued every conversation we had about the algo….And people wonder why I am hesitant to disclose details. Even the guys you think you can trust end up jumping to conclusions about everything and attacking you for no good reason. Lesson learned.

    So your “heavy lifting” is a total betrayal of our own discussions which disclosed how things were actually unfolding. I’ve been an open book with you and you’ve totally misconstrued what actually happened in a vague attempt to connect this article (which doesn’t even come close to mentioning my personal performance) with something that happened 9 months ago. I’ve been open and honest with you and this is what I get in return? You calling me a liar based on your own misrepresentations and failure to remember how things actually occurred?

    I don’t know what prompted you to write this, but I am a little surprised that you lash out at me for one trade idea during the year. You know damn well that I haven’t been in the recession camp and that I haven’t been a big bear this year. Still, I didn’t imply I was super bullish in this article nor did I mention my actual performance. But you felt it necessary to attack me based on what is obviously a blatant misrepresentation of the facts. It’s ironic, that, in one of my comments to you I thanked you for your honesty (as I was disclosing how awful that trade had been). I wish I could say that going forward. Instead, this is the second time you’ve jumped down my throat in comments for something that you misinterpreted. What gives?

  • LVG

    Anyone who thinks they’re getting investment advice here is an idiot. Serves him right. How many times have you told people they’re idiots if they listen to random people on the internet?

  • SS

    VII – WTF guy? Cullen writes so much free and educational content and you attack him for disclosing one bad trade? It also looks like you forgot to mention some of his good calls also in your tirade.

    Cullen – I personally hope this doesn’t cause you to become more reserved. This website is a great service and a great help to many people. Thanks for all you do.

  • http://www.orcamgroup.com Cullen Roche

    I appreciate the sentiment, but there’s a reason why I have a disclaimer in huge bold letters and why I never write about specific investment advice. Even my algo calls are incredibly vague macro ideas that don’t ever mention specific securities or markets. I should be abundantly clear that my comments regarding any of my trading strategies are not investment advice and should not be misconstrued as such. They also shouldn’t be misconstrued or misrepresented in the way that VII has done here. It’s disheartening because he’s been a regular for a long time. He’s seen all the great macro and micro calls I’ve made over the years and as is clear in the above comments he was on the receiving end of all the comments that he then decided to misconstrue. I could’t have been much more of an open book with him. And here he is essentially calling me a liar based on his vague and incorrect recollection of things that happened 9 months ago (while conveniently forgetting other good calls that were only disclosed because HE asked!). I expect that from strangers. Not from someone who has been reading the website for 3 years and soaked up all the FREE information that’s been provided…..

  • LVG

    I am still waiting for the day when Pragcap just stops updating. I know it’s coming. Personally, I have no idea how you put up with the same comments over and over again and the attacks from people. You should probably get used to it though. You’re reaching a moderate level of fame and as your reputation grows you’re bound to run into people who are going to hate your opinions or criticize your work.

  • HankB

    I agree with VII’s comment to some degree. Cullen does a lot of amazing work and he has made some really great calls over the years. But he also doesn’t get criticized enough. I almost never see any reader call him out for anything. I think if Cullen is true to his word he’d embrace this sort of constructive criticism.

  • Pierce Inverarity

    I always figured that if Cullen were going to share all his macro calls that were actionable, I’d pay him money. That’s typically how it works.

  • http://www.orcamgroup.com Cullen Roche

    I’d agree with you if I thought VII’s comment was a fair critique of the actual occurrences. But it’s not even close. He left out the fact that he and I talked about the bad trade at the time (a trade so bad I made 3% on it!). He also left out the fact that I made money on the trade because I actually position sized the trade correctly. I have discussed this at time regarding shorting. Anyone who thinks they can time the market perfectly from the short side is wrong. Shorting is all about position sizing and protecting your position from getting squeezed. And I disclosed that the trade was substantially underperforming. I told him this explicitly. We even discussed position sizing at one point during this trade.

    Then he left out the fact that I had moved to cash after that and didn’t implement an algo trade until we talked again in May when the market was close to its bottom. He then left out the fact that he said the market was “staring over a cliff” (at the summer lows) when I said I was bullish. He asked me how I was positioned, I told him I was bullish and not in the recession camp. But he didn’t mention any of this because he doesn’t understand how the approach works (nor should he) and it didn’t mesh with his overall premise. Which was based on a totally misconstrued point to the begin with – that I was somehow gloating about my performance in 2012 despite the fact that this article doesn’t even mention my performance or imply that I outperformed.

    I am all for constructive criticism. I am all for fair criticism. VII’s comment is neither. It is a long rant based on a misconstrued premise that then intentionally misconstrues our own conversations. The difference between his comments and mine is that he’s just speaking from vague recollection whereas I actually have the quotes and the links to show exactly what happened.

  • http://www.orcamgroup.com Cullen Roche

    In fact, this is a pretty good teachable moment on position sizing. I am actually going back and looking at the trade confirms on those trades and they actually tell a pretty good story. I initiated this position in a fund at 94.26 for 500 shares. In the ensuing weeks I rounded out the initial leg in with another 500 @ 98.10 for a total of 1000 @ 96.18. The second leg of the trade kicked in at 98.84 for 1,000 more. And the final leg kicked in for 500 shares at 99.50 giving a total position of 2500 at a basis of 97.97. I covered the position at 95.16 for a total gain of 2.9% just as I stated in the comments. The market at this time was up about 9% so even with absolute returns I was down on a relative basis as I had clearly stated several times. And as the record shows, this strategy was in cash until later in May sidestepping the losses and becoming bullish near the lows.

    And bear in mind this is a portion of a multi-strategy approach so that short trade was segmented in its own specific portion of the portfolio in a larger approach. But it goes to show the power of good position sizing. Even in the face of a nasty rally a good short seller can generate absolute returns. Unfortunately, VII decided to use this forum to lash out at me without knowing the facts or even attempting to accurately portray what really happened here. Maybe some good will come out of this unfortunate exchange since I was able to provide a small lesson here on position sizing.

    THIS IS NOT INVESTMENT ADVICE. IT IS MERELY A DESCRIPTION OF HOW POSITION SIZING CAN WORK!

  • LVG

    That actually is a good story. Got any more reading on position sizing?

  • http://www.orcamgroup.com Cullen Roche
  • Frederick

    1. It’s a free website for educational and entertainment purposes. If you’re trying to copy Cullen’s strategies based on one sentence comments he makes once every 3 months then you’re an idiot.

    2. Learn the difference between your and you’re. You sound like an imbecile when you come here attacking our host who provides one of the best free financial websites around and you include 800 grammatical errors in the process.

  • http://www.orcamgroup.com Cullen Roche

    No need to get nasty here. I can defend myself on these matters just fine, thanks.

  • Frederick

    Sure thing C. Just remember – haters hate.

  • JanVer

    I subscribe to Orcam’s research and I think some defense of Cullen is appropriate here. I’ve been in the financial services industry for 20 years now and I have never seen a research product that was affordable and of this quality. He recently analyzed the fiscal cliff and the election in great detail and perfectly connected the dots between the recent downturn in stocks and the subsequent rally. He’s been very bullish into the recent downturn saying that stocks would rally into the end of the year. I am not that familiar with his other calls, but I can tell you that two months of subscribing to this research has more than paid for itself.

    I think Cullen is doing a great service by making this sort of analysis accessible to just about anyone. I for one am appreciative of the research and his macro analysis. As far as I am concerned, his market calls are just icing on the cake because his macro analysis has been invaluable to me and my business over the years. I’ve consumed a lot more than $500 from Cullen over the years.

    JV

  • http://www.orcamgroup.com Cullen Roche

    Thanks JV. It’s very frustrating to get attacked for what I am doing. I could have decided to stay with a big firm, work for a hedge fund or continue running my own. Instead, I start an investment firm designed around helping the small investor and focused on education and actually adding value and still I get attacked by some people. I never claimed to be perfect. I’ve never said I don’t make mistakes. I don’t pretend to run some charity, but I do think my new firm is a huge value add over what I was previously doing. So is it really justified to attack my business or the way I go about doing things on the website? I provide the site free of charge and I don’t force anyone to pay for anything. I don’t provide political rants or stupid gimmicky page view generating articles. I provide what I believe are insightful and useful articles and a huge amount of educational content. All for free. Yet people attack that. I don’t get it.

  • VII

    Cullen-

    I’ll say this is all about positive experiences…I don’t really see this here. I see you lecture “irrational Participants” about failing to understand X. Then you go on to explain to them about why you know about X. When the truth is during the time your talking about from Jan 27 to March 27 you were short. So why lecture them. Why the big Ego of how MR is this…Orcam is that..knowing the Macro is all you need. If you just understand the Macro you will have the holy grail of investing? If that’s true then why were you painfully short? Why did it have you out at 1370?
    Time Stamp…my posts? Shucks..save your time. I don’t have an ego. I don’t need everyone to know how smart I think I am. I’m NOT. There is so much I don’t know..your site is great. Your content, and help is appreciated. I came off like a bitter old Curmedgeon.
    I appreciate your work. I don’t agree with some things..but you don’t need to time stamp my posts..I can tellyou all the wrong calls I’ve made. You won’t see me lecture other investors during a period I myself was wrong. NOR will I ever lecture them during the peiord I was right. Actually, having just wrote that…I can say I just lied. When I read guys like Bond Vigilante, Dr. Hussman etc. who feel the need to be smart and lay out why there wrong thesis is right. Yeah, I go write at them. Why do I. Mostly because…I know when I’m wrong and I call myself on it. So I guess reading your post about why investors failed in 2012 I wonder why write that….if you did the same.
    I’d post my trades but you’d think I was making up the numbers. As bad as I was then..well it’s been a great year.
    Last post from me. You dont’ have to be right all the time Cullen. Your work is good enough..to where if you just keep doing what your doing…your going to do great things. And while I may have burned a bridge here…If you do less of showing your readers how smart you are…they will rightly see it. I never needed you to tell me how valuable your work was all the time. Or why all you need is the Macro. It is one part of it..and you do it very well.
    Your recession calls and other stuff helped me a lot. Thank You!
    Good Luck..

  • http://www.orcamgroup.com Cullen Roche

    This is the thing VII. You don’t have the faintest clue how I did in 2012 because you don’t even begin to understand my approach. Nor could you understand it because I’ve never disclosed it!

    First of all, I didn’t “lecture” anyone about anything here. I was simply pointing out that the market’s performance this year was probably more rational than most expected. And yes, I did predict that there would be no recession this year despite your claims that I’ve made some horrible prediction about something and been this huge bear (which is just complete nonsense). Nonetheless, I didn’t even mention my own performance in this piece. I was simply pointing out, IN HINDSIGHT, that the market’s response made more sense than the NY Times article claimed. Of course it’s 20/20 hindsight. That’s the point. It was an attempt to teach something about recency bias. I am sorry you found it to be a waste.

    And for your information, my personal portfolio is up 15.2% YTD. On a risk adjusted basis I’ve beat the market. That’s not true every year. I underperformed in 2009/10. I’ve mentioned that before. In fact, a little google caching will help you find my track record from my partnership which was where my personal money was invested. That also shows a track record of steady performance (no negative years) with some years underperforming and other outperforming. But all in all, my performance has been fairly steady and very good from the perspective of risk adjusted returns. So I really have no idea how you came to all these conclusions. Of course, past performance is not indicative of future returns, but I am not exactly incompetent when it comes to all of this stuff and I am certainly not running some strategy using a single ruled based algorithm as you imply….

    Lastly, I never claimed to be right “all the time”. I very clearly stated that the algo trade in Q1 was a poor trade and underperformed. I told YOU in March that I was in a “rut” because of that trade and that it was dragging my portfolio down on a relative basis. But you just conveniently ignored that….Did you even read the quotes? Or are you just making things up again? The reason I time stamp things and keep comments in the database is because people like you like to come back with some revisionist history about how things actually went down. Clearly, if you look at the above comments you’d have realized that you made a mistake and that your recollection was totally off base.

    I expect this from people who don’t know me. But I am surprised that it would come from someone like you who at least knows how honest and open I am about things.

  • http://www.orcamgroup.com Cullen Roche

    And one more thing….I have never said macro was an investing “holy grail”. In fact, in articles explaining the importance of macro I’ve said EXACTLY the opposite:

    Regular readers will know that I believe there is no such thing as a one size fits all investment strategy or a holy grail approach.

    http://pragcap.com/the-importance-of-understanding-macro

    I hate to be critical of you, but it sounds like you’re not nearly as familiar with my work as you think you are. I also don’t know why you think I am being egotistical with my new company. I do mostly consulting work and a lot of educational work with people. I enjoy helping people understand all of this better. If I was purely self serving I’d be doing something VERY different than running this kind of financial services firm.

    Yes, I also have the research product which people pay $500 for. That’s compared to most Wall Street research products which will charge you 10 times that. Some of my institutional buddies literally laugh at the price point. But it’s not geared towards them. It’s geared towards the retail investor. In fact, the whole idea behind the firm is to service the retail guy. So you seem to want to demonize what I’ve started. I have no idea why. I could have gone into the shadows working at some bigger firm or working at a different type of firm on my own. Instead, I post my thoughts publicly, post huge amounts of educational content and answer THOUSANDS of questions. For no charge. I give HUGE amounts of my time to this website and its audience and the ROI on that time is not great. Not even close to what I’d be earning at a different type of Wall Street firm. And somehow I am the bad guy on Wall Street?

  • Portia

    Just write a post one time and link to that when the haters comment. Do not waste time on these long answers over and over when it is not even fair critique. Love this site. Read every post for the last couple of years. Helped me more than you can imagine. Thanks!

    /HF manager in Sweden

  • http://www.trifidresearch.com stock tips

    Hello. I’d just like to say:D what a interesting post:D i’m just doing a bit of research for my website but i had issues reading this post due to the text sticking out on to the side menu:):)