Ep. 382: Dissecting Duplicity with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
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The Problem With Predicting Ears
The reason Cape bought to work to predict the market is that earnings have always been constructed by accountants as some measure it to indicate fundamental value of a company. And so price is high relative to earnings. That's a bad sign. But we're clearing out the significant problem of earnings is that they're volatile from year to year. So let's average them over some years. That gives a better indicator of fundamental value. It substantially predicts returns over the next decade, if not tomorrow, but at least over the longer term.
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