Strange! The world's largest asset management CIO warns: the market has become a "casino," and reverse trading is the only way to make money, but retail investors always get wiped out at the "right" time?

Market observers recently shared a viewpoint from the chief investment officer of the fixed income division at the world’s largest asset management firm. He was once on the shortlist for Federal Reserve Chair, named Rick Reeder. In an interview, he bluntly stated that the current market environment is increasingly resembling a large casino.

When crowds collectively rush in the same direction, he often sees opportunities for contrarian trading. Especially during periods of intense news bombardment, this strategy of betting against consensus can often capture profits from market reversals. However, another economist involved in the discussion, Seth Carpenter, offered a different perspective, believing that when market expectations are highly aligned, prices may have already fully digested all information, and at this point, the profit potential for contrarian investments narrows.

Reeder’s core view is very clear: in investing, the key is not to pursue “rightness.” The most important lesson he has learned over many years is that the essence of business is not making precise judgments, but genuinely creating returns for clients. He further pointed out that market misconceptions can persist for a long time, even outright stating that the efficient market hypothesis “deviates too far from reality,” and that markets can be wrong most of the time.

But he also issued a stern warning: investors must first ensure their survival. Because before the market proves you are “correct,” your capital may already be exhausted. Therefore, his strategy is to “do his best to stay at the table,” rather than blindly increasing bets when facing headwinds. He admits he’s not good at doubling down when others oppose him, as confidence can waver, and he prefers to stick with existing positions and deepen research.

Reflecting on the most painful lessons in his career, Reeder ranks the 2008 financial crisis at the top. A few months before the crisis erupted, he had just founded his hedge fund, expecting market volatility to bring opportunities, but he did not anticipate the systemic collapse that followed. He candidly admits those days were extremely stressful; he would do mental preparation in the hallway before walking into the office, but the reality after opening the door was still brutal.

This experience made him extremely cautious about managing liquidity, leverage, and tail risks. He emphasizes the importance of planning exit strategies in advance for every asset, every position, and every portfolio. Knowing where the escape routes are helps you calmly execute a B plan when necessary.

Another profound lesson came from his investment in Peloton. The company’s stock soared early in the pandemic due to surging demand for home fitness, and Reeder, as an early holder, continued to add to his position after the rise. But as the pandemic eased and the company’s own missteps occurred, demand plummeted, and the stock experienced a sharp decline. He summarized that this experience made him realize that “setting stop-loss levels is very healthy,” and warned that in this industry, a single extreme event can be devastating.

Despite enduring the pressures of the financial crisis, Reeder says he still “enjoys the pressure.” He believes that those in investment must adapt to stress, much like he enjoys rushing to catch the last flight at the airport, admitting that in that state he performs even better. He even said that if you’ve never missed a flight in your life, you might not be taking enough risks.

But he quickly shifted tone, emphasizing that investing is ultimately a risk business, and valuations are largely driven by emotions. The market usually falls five times faster than it rises; people make money slowly, but lose it very quickly. Therefore, investors must always be prepared for extreme situations, constantly asking themselves: if an extremely unexpected event happens, how will I survive? We must engage in investing, create returns, and manage risks.

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