The 'masters of the universe' are starting to panic

Brendan McDermid/Reuters

Last week, three of the world’s best investors sent a clear warning signal: There’s danger ahead…

At the “Delivering Alpha” conference in New York, billionaire investor Carl Icahn gave his opinion on our precarious markets:

“You look at the environment, and I think it’s very dangerous. You’re walking on a ledge and you might make it to the end, but you fall of that ledge and you’re really going to see trouble.”

Icahn believes the Fed’s in a trap. It needs to raise interest rates but risks causing a market meltdown by doing so.

And Icahn’s not the only one who sees trouble ahead…

Ray Dalio of Bridgewater Associates runs the world’s largest hedge fund. He used the same “D-word” at the conference as he identified a “dangerous situation” due to central banks still screwing around with loose monetary policy.

And Paul Singer of Elliott Management spoke about the massive risk created by these same low interest rates:

“I think it’s a very dangerous time in the global economy and global financial markets.”

None of these guys has the ability to accurately predict what’s going to happen in the future. But with so much smart money sending out such clear warning signals, it’s a good idea to take stock of your investment strategy—now.

As trend followers, we’re prepared for any “danger” that comes our way. We always have a plan for the unexpected.

Trend following has delivered strong positive returns each decade for more than a century — all because there is always a plan of attack in advance of market movement.

That includes remarkably consistent performance over such an extensive time horizon that includes life-changing events such as the Great Depression, multiple recessions and expansions, multiple wars, the Global Financial Crisis, and periods of rising and falling interest rates.

The bottom line is trend following works extremely well when crisis hits because it seeks to capture the majority of a market trend, up or down, across all major asset classes.

It’s this diversified strategy of investing in anything that’s working that has consistently delivered substantial abnormal returns for trend followers for more than 100 years.

And portfolio diversification doesn’t only work in trend following. It’s also been a core philosophy of investing titans like Icahn, Dalio, Singer and many others.

In fact, as Chris Mayer, Chief Investment Strategist at Bonner & Partners, explains below, it’s one of two critical factors that the world’s most successful investors regularly use to get superior returns.

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