Excerpt from Faber’s “Learning to Love Investment Bubbles: What if Sir Isasc Newton Had Been a Trendfollower”
“From a behavioral and psychological standpoint [a trend following investment strategy] is often the most difficult to deploy when it is most useful. Strong discipline would have been required to sell technology stocks in 2000, REITs in 2007, or South Sea stock in 1720, especially when one’s colleagues, friends and neighbors were making money hand over fist. In the end, for those who imposed such discipline, it was the prudent choice.”
Seems relevant for what we’re seeing in today’s recovery.
If you want to read more about how trend following works during investment bubbles, read this paper (especially the summary at the end):