39: Ned Davis Research - Rules of Research and the Inevitable Mistakes

MarketFox columnist Daniel Grioli speaks with Tim Hayes, Chief Global Investment Strategist, Joe Kalish, Chief Global Macro Strategist and Ed Clissold, Chief US Strategist of Ned Davis Research about multi-asset portfolios, asset allocation, the rules of research and the inevitability of making mistakes. Ned Davis Research is one of the largest independent institutional investment research providers in the US market. It combines both fundamental and technical research disciplines, and adheres to the adage: 'making money is more important than being right'. Overview Ned Davis Research 2:00 What are some of the lessons you've learned the hard way? 3:30 Joe: Ned always said: 'Everyone makes mistakes. But the difference between the winners and the losers is that the winners make small mistakes'. 9:30 Ned's nine rules for interpreting markets 15:00 The importance of being open to new techniques and datasets. 17:00 Joe adds on a 10th rule 20:50 A lot of people said they called the housing market in 2007, but I'm actually quite proud that we called when it was time to get back in 2009. 27:00 Pay attention to correlations. Sometimes things are changing. 28:30 How do you use base rates? 30:00 Sometimes we are known as myth busters, because we blow up some common [held believes]. One of them is about the yield-curve inversion. 34:00 Really good earnings growth is usually priced in when it gets announced and so is not good for price levels. 36:40 We looked at 25 different value indicators to see which ones have done better over the years 41:00 This has probably been the biggest divergence in the last 10 years of what happens in the US and what happens in the global markets. 45:30 Ed: If you look at the US right now, it actually doesn't look that bad. 45:49 Joe: I start with a top down view 47:37 You can't just look at change anymore, you have to look at the second derivative: the change of change 51:20 This is not the most exciting time in the bond market 52:00 What is the difference between trend and market timing? 54:45 You need to pay attention to the trend 58:00 The value of asset allocation 1:06:00 Make sure you've got that disciplined process in place to make trend decisions 1:08:00 We only forecast for fun, but we pay attention to the indicators 1:12:00 What is a mistake? It can be different things to different people 1:15:00 Has your analysis been impacted by current market conditions of central bank policy and algorithmic trading? 1:22:00 What are you working on at the moment? 1:28:00 Tips to make better investment decisions