In a 7/22/09 post titled Failure to Adapt, I made reference to a piece by James Montier about the Efficient Markets Hypothesis and Modern Portfolio Theory. It looks like John Mauldin has now picked up on it, so here is the link to the complete article. The article is clever and very insightful—it points out that many problems in the industry are caused by investors’ belief that they must forecast to be successful. As you know, we take the opposite view. We believe that forecasting is not fruitful and that the best returns will be earned by using an adaptive approach that will continue to adjust to market conditions no matter what they may be. Montier’s discussion of ongoing bubbles supports our thesis that trends to follow will be plentiful in the future.
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