Asset Rotation: The Demise of Modern Portfolio Theory and the Birth of an Investment Renaissance

PROLOGUE

David and Goliath

For 40 days and 40 nights the Philistine champion Goliath stood before the Israelite army, mocking them. He challenged them to send forth one man to face him in a battle to the death. To the victor would go the war.

By biblical accounts, Goliath was a giant, standing just shy of seven feet tall. The mere sound of his thunderous voice made the men of Israel tremble in fear. No one dared to take up arms against him.

David was a young man in his early teens. He was a peasant, sent to the front lines to bring food and carry back news of the battle. When he arrived at camp, David heard Goliath’s daily provocation and he was astounded by the Israelites’ fear. Without hesitation, wearing no armor and with a sling as his only weapon, David volunteered to fight Goliath; to put an end to the war and preserve the lives of his compatriots.

David charged out to face Goliath, arming his sling with a single rock. As he approached, he hurled the stone at Goliath, striking him square in the forehead and killing him instantly. The Philistine army stood in disbelief as David decapitated the giant and held up his head for all to see. The Philistine army retreated, and the Israelites won the war. Born a peasant, David went on to become the king of Israel.

We are but one small voice, drowned out in a sea of many. In an investment world driven by large-scale institutions and corporate war chests, one might think we are ill-equipped for battle. But like David, the oft unassuming ...