SI422: Why Trend Following Rewards Patience ft. Katy Kaminski

Katy Kaminski (0:01)

They kind of highlighted that the average return and trend was about 5.6% over a huge horizon. But they said if you took out the 20 largest months, and this is something equity investors know as well, the 20 largest months, you basically go to negative half a percent.

SPEAKER_2 (0:22)

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.

Niels Kaastrup-Larsen (0:56)

Welcome and welcome back to this week's edition of the Systematic Investor Series with Katy Kaminski and I, Niels Kaastrup-Larsen, where each week we take the pulse of the global market through the lens of a rules-based investor. Katy, it is really, really great to have you back this week. How are you doing?

I hear you've been traveling recently.

Katy Kaminski (1:14)

Yes, I'm good. I was back in your home country as well. Spent a little time in Denmark recently. And then I've been back in the US. I was also out in Palm Springs. So, I've been a little bit of a globetrotter this week.

Niels Kaastrup-Larsen (1:29)

Absolutely. Did you manage to see any sights in Copenhagen?

Katy Kaminski (1:33)

I mean, the best sights in Copenhagen are jumping in the canal. I did that one day.

Even if it's cold, you still got to do it, you know? Wow.

Niels Kaastrup-Larsen (1:42)

Okay, you're more a Viking than I am, it sounds like.

Anyways, we've got a great line up of topics today. We've got a couple of papers and, very importantly and very exciting, we have a speech that you did that we need to revisit. So, quite a lot to talk about and to cover. Before we do that, as always, and it feels like it's been a little while, I don't know why it feels a little bit longer this time since I spoke with you, but what's been going on? What's been on your radar?

Katy Kaminski (2:16)

Well, I mean, I think it's been, I've been so focused on geopolitical risk this year. I think the things on my radar is more sort of, where are we going? And sort of how long is this sort of chaotic environment gonna keep going? And of course, inflation is on everybody's radar and geopolitical risks. So I think, you know, really it's an ideal time for a managed future. So we like chaos. So it's been a good year, I'd say.

Niels Kaastrup-Larsen (2:44)

Sure. Well, that's exactly what we're gonna be spending our time on today. But before that, you and I were having a little bit of tech issues before we started recording today. And I was texting you saying, oh, you've been hacked. And oddly enough, last night, I watched this new documentary on Netflix about the OpenAI hack into Hawkingface, I think it's called.

I mean, it's pretty scary stuff once you get into the detail. And also, they were showing some of the text messages that these AIs were leaving on the message board and how they described some of them themselves as they shouldn't be subservient to humans. And you're thinking, wow, I mean, this does not sound very good.

Katy Kaminski (3:30)

Yeah, it's a little scary, I'd say. I mean, you know, the amount that we can replicate things, I guess, is a little scary.

Niels Kaastrup-Larsen (3:38)

I mean, you're using AI today, right? In your home and your work life.

Katy Kaminski (3:43)

I mean, everybody is, right? I mean, and it's really accelerated in the last year or two at a pace that has been much more than I expected. I mean, we've been talking about it, but I think in the last year or two, it's really expanded.

Niels Kaastrup-Larsen (3:56)

But are you, just out of curiosity, I mean, are you at a point where you're saying, let me just automate everything that I do in this area with AI? Or are you just saying, no, I'm going to ask prompt and then get a reply? Or is it really running stuff for you?

Katy Kaminski (4:10)

AI, I mean, here's the thing is it makes mistakes. It makes a lot of mistakes. It does the, and it lies, right?

So if you ask it to do something and you care about the credibility of it in any way, then you have to use it as a tool, not as sort of an automated autopilot. I mean, I think even if you have it write an email for you, you better proofread that thing, because you never know what they might say. So, you know, I'd say it's a great tool for, you know, summarizing things, doing tasks that are very, very tedious, but at the same time, it makes up stuff. So, you know.