Can you program a machine to be contrarian? And if you could, and we all moved to machine-based investing, then we would eventually have to program the machines to be anti-contrarians.
@MarsC
But who, apart from the occasional eccentric like you and I, really wants to be a contrarian nowadays?
Why bother (and risk screwing up), when being mainstream (or anti-contrarian, if you prefer) consistently pays you multiples of the inflation rate in exchange for doing literally nothing?
That has been the mantra for at least the past five years, and it’s hard to blame, in a way: just buy an index fund and enjoy the free ride…
…until it ends, of course.
On this topic, I appreciate your brief history of modern bubble-like behaviour; and I must say that I myself find it quite hard to envisage when and how the particular bubble-like phase we’re in right now will deflate.
Well, one intuitively obvious way would be a rather cathartic collapse in global government bond prices (i.e. yields up to the moon), followed by a collapse in all other financial securities (from IG credit all the way down to equities, etc.) and by a run into cash.
But, as you may remember from my TCL posts, when I think about it in some detail I just cannot see how something like that could really happen in practice.
Anyway, back to the main topic, it does seem rather inevitable to me that the current drive toward AI and algos will end up being a flop just like all previous bubble-like frenzies. If anything because, as you say, being machines programmed and utilised by humans they cannot possibly escape from human biases and flaws, in the end.
By the way, the irony of having this value-bent conversation on a thread related to IOOF, which is basically just a leveraged market tracker, is not lost on me for a moment.
Cheers
(20min delay)