When I trained brokers for PaineWebber, we used to have mutual fund wholesalers come in almost every week and buy us lunch and tell us about their best performing mutual funds.  After a couple of yeas of sandbagging my clients with the best performing funds, I began immediately interrupting their presentation and asked them about their worst performing funds.  ”  Every year  you tell us about your best performing funds, and we sell them to our clients and then they turn into your worst performing funds after we buy them,” I interrupted once I was assure lunch was served.  “How about you tell us about your worst performing funds, now, and hopefully, they can follow the pattern and turn into winners next year.”

Although this sounds silly and sarcastic, there is some truth to this.  Reversion to the mean is a common physical phenomenon and applies to the theoretical financial world as well.  Pursuing that logic, the two best sectors this year are Long Term Treasuries and Gold.  Could they turn into the worst performing funds next year or beyond?  The fundamentals certainly seem to indicate that possibility.  This is the contrary trade. Rates are near zero and Gold has gone through the roof.  Beware- these could be big losers if history holds out.