Pursuing a ‘driverless strategy’ – be it automobiles, hedge funds or individual investing – is counterfactual thinking, in my opinion. The new BMW iVision car has knob-less gesture controls, 3D displays and an auto function that switches the car into driverless mode. Perhaps this will work on highways of the future, but don’t bring that sort of thinking to the stock market.
You’ll recall all those hedge funds that flamed out because they believed PhDs had uncovered new algorithms and derivatives that created virtual driverless portfolios. For all my years in the markets, I have yet to meet an investor who has ever made money for a significant period of time by pursuing a similar driverless strategy using some third party’s black box. Inevitably, investors doing that get sucker punched. I refer to these efforts as the pursuit of dark money. It’s always been with us, and it will continue to be with us. But successful investing is 180 degrees from there.