Systematic Relative Strength

Tyler Cowen’s NYT article, discussing the rise of developing nations over the past ten years, includes the following comment:

One lesson from all of this is that steady economic growth is an underreported news story — and to our own detriment. As human beings, we are prone to focus on very dramatic, visible events, such as confrontations with political enemies or the personal qualities of leaders, whether good or bad. We turn information about politics and economics into stories of good guys versus bad guys and identify progress with the triumph of the good guys. In the process, it’s easy to neglect the underlying forces that improve life in small, hard-to-observe ways, culminating in important changes.

The comment is spot on. Without the aid of a systematic process (i.e. computer-driven) human nature will cause investors to miss much of long-term trends until they finally become convinced of the trend’s investment merits by friends, the media, etc. - which is generally very late in the game.