Last week there was a lot of concern about bonds issued by the government of Greece. Prices fell as the government unveiled a plan to reduce debt that observers deemed unlikely to work. This Bloomberg story, Greek Bonds Slide on Concern Investors May Shun New Debt Sales, was pretty typical coverage.
This week the Greek government issued its new debt. Investors Flock to Greek Bond Issue is today’s headline in the Financial Times. Ouch! Apparently investment factors did a 180-degree turn in the last few days.
The fact is that prediction is hazardous and difficult to get right. This type of foiled prediction is a daily occurrence. Trying to make money through predicting what might happen next is just not going to work on a consistent basis. Sure, you might get lucky once or twice, but your odds of getting the next prediction right are probably still a coin flip.
Instead of guessing, why not just look at what is actually happening in the market? That is the approach of our systematic relative strength process. We simply measure the relative performance of different assets and try to keep the portfolio concentrated in the ones that are strongest. No prediction is required—and we like it that way.
