Some risks and market conditions are more rewarding than others. My objectives for this week’s comment are very specific. First, to demonstrate – using a very simple model – that investment returns do indeed vary systematically with market conditions. Second, to demonstrate that overvalued, overbought, overbullish conditions have historically dominated trend-following measures when they have emerged. Third, to demonstrate the impact of accepting investment exposure in proportion to the return/risk profile (technically the “Sharpe ratio”) that is associated with a given set of market conditions.