The Meb Faber Show - Better Investing Cole Wilcox on The Power Law of Investing | #584
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May 30, 2025 
In this discussion, Cole Wilcox, CIO of Longboard Asset Management and expert in alternative investment strategies, unpacks the significance of trend-following in today’s market. He emphasizes that being a good loser is essential for successful investing and highlights how power laws govern stock performances. Cole also explores the current implications for trend-following in relation to the dollar, gold, and potential recession indicators, offering a thoughtful perspective on navigating future market challenges.
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Defining Trend Following
- Trend following means not fighting the market direction and having discipline with entry and exit rules.
- Being a good loser is crucial since trend strategies have more losses but bigger winners than losers.
Market Cap Index as Trend Following
- Market cap indexing behaves like a slow-moving trend-following strategy by naturally increasing exposure to winners over time.
- It, however, lacks active stop-loss exits, risking large drawdowns if major companies decline deeply.
Master Being a Good Loser
- Successful trend-followers must accept losing more than half their trades and maintain discipline.
- Being emotionally prepared to lose is essential to stick with the systematic process and capture big winners.