A recent Bloomberg article made the case that since 2009 “sell signals” are useless during “mania” markets. To wit:

“If you bailed because of Bollinger Bands, ran away from relative strength or took direction from the directional market indicator in 2021, you paid for it.

It’s testament to the straight-up trajectory of stocks that virtually all signals that told investors to do anything but buy have done them a disservice this year. In fact, when applied to the S&P 500, 15 of 22 chart-based indicators tracked by Bloomberg have actually lost money, back-testing data show. And all are doing worse than a simple buy-and-hold strategy, which is up 11%.” – Bloomberg

Note: “Bloomberg’s back-testing model purchases the S&P 500 when an indicator signals a ‘buy’ and holds it until the system generates a ‘sell.’ The index gets sold, and a short position established, until a buy is triggered.”

See, you should “buy and hold” invest, right?

Investing Based On Hindsight

Bloomberg goes on the clarify essential points.

“Of course, few investors employ technical studies in isolation, and even when they do, they rarely rely on a single charting technique to inform decisions. But if anything, the exercise is a reminder of the futility of calling a market top in a year when the journey has basically been a one-way trip.” – Bloomberg

In the short term, which can even include a 12-year bull market cycle, there are periods where “buy and hold” investing outperforms any other form of asset management. The problem is that you only know for sure that “buy and hold” was the proper strategy in hindsight.

Most only have a limited amount of time to invest for retirement for investors, so “getting it right” largely depends on two factors.

1. When you start your investing process; and
2. Avoiding major drawdowns

With the vast amount of individuals already vastly under-saved, the current “bear market” cycle will reveal the full extent of the “retirement crisis” silently lurking in the shadows. The Fed, Government bailouts, and low interest rates can’t fix this problem.

Stanley Druckenmiller is widely considered one of the greatest investors ever.

Born in Pittsburgh in 1953, he studied English at Bowdoin College before starting work towards an Economics PhD at the University of Michigan. In 1977, he dropped out of the PhD program and joined the Pittsburgh National Bank as a retail investment analyst.

After learning the ropes, Druckenmiller founded his own investment firm in 1981 — Duquesne Capital Management. He established such a strong track record that hedge fund legend George Soros recruited him to work at the Quantum Fund, which he did from 1988 to 2000.

As the Quantum Fund’s lead portfolio manager, Druckenmiller helped Soros pull off one of the single greatest trades: In 1992, the pair “Broke the Bank of England” with a bet against the British Pound that netted a $1B pay day.

Following his long partnership with Soros, Druckenmiller built Duquesne Capital to a peak of $12B of assets under management. In 2010, he returned all of his investors’ money and converted Duquesne into a family office.

Why?

Druckenmiller no longer wanted to deal with the “stress” of maintaining such an exceptional trading record.

And the record is almost peerless: over more than 4 decades of investing, Druckenmiller has never recorded a down year (his fund even notched a return of +11% in 2008).  During one stretch, he compounded assets at 30%+ a year for 30 straight years. Today, he has a net worth of $5B+.

To find out more, The Hustle recently spoke with the trading legend. The conversation was set up by Toggle AI, an investing AI startup that Druckenmiller counts among his investments.

Druckenmiller tells us:

• What makes a great investor
• How he makes an investment decision
• Whether we are in another tech bubble
• What career advice Druckenmiller has for 20-year olds
• What he thinks of crypto (Bitcoin, Ethereum and Dogecoin)
• Which Big Tech firm will be the first to reach a $5T valuation

And a whole lot more. Enjoy. 

Bonds aren’t working as a safe haven like they used to.

On a day when risk aversion swept across everything from stocks and commodities to crypto currencies, Treasuries barely budged. In fact, the S&P 500 and 10-year Treasury futures haven’t been so positively correlated since 1999, with the 60-day metric reaching 0.5 on Wednesday. In contrast, the average correlation over the past two decades was negative 0.3, meaning a decline in stocks was often accompanied by a rally in bonds.

The relationship flip signals that the role of Treasuries as a shock-absorber has been eroded as the fear of inflation becomes a common denominator for both stock and bond investors. If it persists, it would mark a sea change as strategies such as risk-parity and 60/40 are likely to become more volatile.

“Long bonds as your hedge worked in a Goldilocks era” of stable growth and inflation, said Charlie McElligott, a cross-asset strategist at Nomura Securities. “But now, due to the pandemic response, that old dynamic simply no longer applies. Inflation is a volatility catalyst.”

The stock-down-bond-up scenario that investors have grown accustomed to has only been a staple since 2000. Earlier, a positive correlation had been more common as inflation was more volatile.

While the core U.S. consumer price index increased in April at the fastest pace since 1982, the Federal Reserve has insisted the surge is “transitory” and the central bank will be patient in removing monetary stimulus. If the Fed is right, the bond-stock correlation could normalize, said McElligott.

“Only in the case of an extreme inflation overshoot would the Fed’s hands be tied,” forcing it to raise rates more quickly and crash both bonds and stocks, he said.