The reason trend followers blow up when they get big is because CTA investors are so afraid of blowups.


So, when they invest, the primary thing they're looking for is, like, a whole decade without a big drawdown. They think that, well, if it didn't blow out last year, it is has a better chance of probably not blowing out this year. But it's precisely because it has had such a good stretch that it has become precarious.


Now, every style can make money. And when a particular style is going to blow up is anybody's guess. But when a particular program goes for a protracted period without a big hit, it is just luck.


And the result is these huge, unbalanced concentrations of money in styles which, for no particular reason, have gotten lucky.


And it's just a simple product of the longer a run a particular thing has had, and therefore the more people you have chasing after it, the worse the blowup is going to be when it does come.


It's like, any old forest can support deer. But if one partuclar forest happens to be extra bountiful for a few seasons, so that every deer on Earth walks away from a perfectly habitable forest to move there, of course the first drought or whatever and ther're going to be carcasses everywhere.


If only managers could tell clients where to put their money, and had the heart, they'd clue them in that you have to be contrarian. Good is bad. You want to live in a forest where the weak dear are constantly being shaken out, never a paradise.


Paradises are too hard to conceal. Drawdowns in a track record are good.


leroy