I have some sympathy for Bill Gross, who erred by selling, and even going net short Treasuries when they were about to go on one of their biggest runs ever.? He also went long credit risk at the wrong time.

But what to do as a manager when you realize your ideas are wrong? My answer is to first ask how long will the present trend likely continue, and what will likely happen after that?? If your view is that the trend will reverse soon, just wait.? But if you conclude that the trend has a long way to go, then make adjustments as rapidly as possible.

Some reading this will say, “Duh. If I only knew how long the trend would last I could make a ton of money.”?? You are right, but those who are immersed in the market and its cycles typically do have a sharp opinion of how long the cycle will last.?? That opinion is right more often than it is wrong, but is wrong often enough that it is not an easy path to riches.

So when wrong, analyze what is the best decision out to the intermediate horizon, and make the appropriate adjustments.