SI405: Why Most Trend Following Improvements Should Fail ft. Rob Carver

Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict. In each episode, we go deep with some of the world's most thoughtful minds in investing, economics and beyond to understand how they think, how they prepare and how they decide, and the experiences that shaped how they see the world. No noise, no shortcuts, just real conversations to help you think better and invest with confidence.
Welcome or welcome back to this week's edition of the Systematic Investors Series with Rob Carver and I, Niels Kaastrup-Larsen, where each week we take the pulse of the global market through the lens of a rules-based investor. Rob, it is wonderful to have you back this week. Hope you're doing well. How are things in the UK? Is summer finally there? Summer is finally here. The sun is shining. England won their first football game last night. I'm not an especially big follower of the football or a huge football fan, but it's the World Cup. So I guess I should really pretend to take an interest. So yeah, there's a general mood of optimism in the country at the moment. You know, having lived in the UK for many years, I always remember every time there was like some kind of European Cup or World Cup, it's always this strong belief that this time it's coming home, right?
We're still waiting 60 years in. I do statistical analysis for a living and I'd say the odds are not great, to be honest. We'll see. I have a feeling we might talk a little bit more about this in a second. But anyways, I just wanted to say we've got a wonderful lineup of topics today, probably more than we expected because I didn't see all of the ones you had sent me. We also have a question that we'll be tackling today.
So, strap in and hopefully it will be a fun and educational one. Anyways, before we get into all of that, as usual, I will ask you, what's been keeping you busy, necessarily, but what's come across your desk that you found interesting?
I mean, there's been a lot going on the last couple of weeks. Obviously, we hopefully have some kind of peace deal in the Middle East, which the terms and conditions of which are being debated as to whether it's a good deal on both sides, or very weighted towards one side, whether it's better than the deal that they had before, but we'll leave that to one side. That does mean, I guess, that hopefully, there'll be some crude flowing out the straights of almost and that will then have an impact on markets. Although, it does feel like markets have been pricing that optimistic scenario for a while yet, so we'll see.
I guess, the other thing in markets that's kind of interesting has been SpaceX. Oh, yeah. And in particular, there's been some debate about whether SpaceX should be allowed into the index club, because these indices have quite strict rules and we'll touch on that actually later in the talk today, because I think we're going to have a talk about indexing in the CTA space. But in the olden days, you couldn't get into an index unless you were profitable, and they made adjustments for things like the free float of your shares. So for example, Tesla wasn't in the S&P for quite a while, even though it was a big enough company, because it just wasn't profitable. But in their desperate urge to get SpaceX into their indices, most index companies, apart from S&P in fact, who have held out, have torn up the rules and are like, open the door and please come in. And yeah, I'm not sure it's an entirely responsible move. I'm not a fan of SpaceX, not a fan of the man that runs it. And we shall see how that works out. And then I guess finally, the other thing we must mention, I suppose, is that the change at the top of the Fed has finally happened. And there is now a new chairman. But with the current inflation environment, there doesn't seem to be much appetite for cutting rates. So maybe we won't see the true colors of that gentleman just yet. So, yeah, been busy. Actually, I mean, all of those points could have been on my list, and they probably were until I realized they were on your list. I'm sorry, I'm sorry, Niels. No, no, that's fine. But just maybe to add a few comments to it. So, yeah, actually, you know, let's start in reverse. Kevin Walsh is now, you know, had his first meeting as FOMC chair. And you're absolutely right, kind of interesting that the tone was a lot more hawkish than what he has been, you know, saying before getting the job, so to speak. No surprise in terms of some of the things he had mentioned in the press conference about shrinking the balance sheet and so on and so forth. But maybe something I was thinking of, he does mention that he wants to kind of revamp the way the Fed communicates. And for example, forward guidance is not a business that the Fed should be in, according to him. But then there was something else, and that was this thing about reworking kind of the data, the central bank releases as far as I can tell, and maybe getting rid of some of the old fashioned survey methods.