Thoughts from the Frontline

The Trend is Your Friend

By John Mauldin

May 24, 2003

The Trend is Your Friend, (Until It Isn’t)
Investing By Committee
Take a Risk, You Get Fired
Cooking the Data Books
How to Spot a Market Cheerleader
Living on Tulsa Time

This week we look at trends and how to make them your friend. Whether its stocks, the dollar or interest rates, getting the trend right is a cornerstone of successful investing.

I finish up this week's letter while flying back from DC. On Monday, I was invited to testify before the Congressional sub-committee which is looking into hedge funds and the role they play in the markets. My testimony centered upon my belief that hedge funds should be made available to all investors and my proposal for a new type of investment company which would allow (not require) hedge funds to register with the SEC (or CFTC) in a manner similar to the way mutual funds (which are investment companies) do today. This new type of regulated fund could then offer their fund to the public, with some very specific suitability limitations for a period of time to allow investors to become familiar with the different set of risks involved in hedge funds.

All investments have risk, even (or especially) government bonds. It is not a matter of risk or no risk. Why should 95% of Americans, simply because they have less than $1,000,000 in net worth, be precluded from the same choices as the rich? Why do we assume those with less than $1,000,000 to be sophisticated enough to understand the risks in stocks (which have lost trillions of investor dollars), stock options (the vast majority…

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