Trend Following Manifesto

From FINalternatives:

Although Bernard Madoff is so far the only man convicted in the $65 billion Ponzi scheme he ran for decades, one hedge fund manager says he had accomplices: his investors. Hugh Hendry of London-based Eclectica Asset Management, in an interview with CNBC today, called Madoff investors greedy and said they should have known that the ultra-consistent returns they received was simply too good to be true. “I’m sympathetic for people losing money, but I think this pejorative term of being greedy still applies,” he said. “There was an implicit greed in not questioning and just accepting unnatural returns.” Hendry, chief investment officer at Eclectica, is not alone in calling out Madoff investors; Joe Nocera, business columnist for The New York Times, has done so repeatedly, and did so again yesterday after hearing the Madoff victims addressing his sentencing hearing blame everyone but themselves. “Shouldn’t the Madoff victims have to bear at least some responsibility for their own gullibility? Mr. Madoff’s supposed results - those steady, positive returns quarter after blessed quarter - is a classic example of the old saw, ‘when something looks too good to be true, it probably is,’” Nocera wrote on his blog yesterday. What’s more, most of the people investing with Mr. Madoff thought they had gotten in on something really special; there was a certain smugness that came with thinking they had a special, secret deal not available to everyone else. Of course, it turned they were right “they did have a special deal. It just wasn’t what they expected.” Hendry seconded those notions. “They didn’t show the requisite amount of fear that would have generated the curiosity to investigate,” he said. Madoff pleaded guilty to running a $65 billion Ponzi scheme in March and yesterday was sentenced to 150 years in prison. And while he may feel sympathy for Madoff’s victims, he can garner no such emotion for the funds of hedge funds and investment advisers that steered their clients, unknowingly, into Madoff’s web. “Shame on their advisers,” Hendry said, adding that those who did invest with Madoff are getting something of a comeuppance. The first question investors ask today is, “Did you invest with Madoff?” Hendry said. And if the answer is ‘yes,’ those advisers are finding themselves increasingly blacklisted.

A reader posted today:

At one point I worked with a former Goldman [Sachs] employee. He summed up what went on there with this quote a managing director once told him, “Don’t you understand our business model? We sell time bombs and move them around from customer to customer. The trick to is to make sure we’re not the ones holding them when they go boom!”

That sums it up.

Rolling Stone story drills GS between the eyes.

Nice job fellas!

I am speaking at a BM&FBOVESPA event in Brazil in August. If looking to catch up drop me a line early as I will not be there long unfortunately.

Barry Ritholtz asked me (among many others) sometime back for my opinion on how to fix the current economic mess. Not born of any great economic background, I gave it my best shot. Well, surpringly it turns out my pearls of wisdom grace the pages of his new book “Bailout Nation” on page 289. My film “Broke” also gets a shout out.

Obama To Hold Job Performance Review With Every American Worker

Turtle Tom Shanks presented the other day in Chicago too. His track record alone provides some fantastic food for thought.

Turtle Jerry Parker noted the other day in Chicago that his trading is 100% systematic. Not news to me or the many others familiar with trend trading, but I suspect for people not familiar with trend following that fact takes time to digest. Parker also noted how bad of a thing it was for the Turtles to make money the wrong way. He said that if they made money the wrong way they were in trouble [with Dennis].

A great line from P.J. O’Rourke:

“If you think health care is expensive now, wait until you see what it costs when it’s free.”

I watched the President last night on Nightline defend the idea of giving everyone a “public” choice of healthcare insurance. I also watched the CEO of insurance giant Aetna debate him. What a mess this will become if government gets involved. How in the world does anyone think politicians in DC have the experience to run an insurance firm? It is unreal that right at the time a player like Warren Buffett calls the economy a “shambles” now and for the forseeable future, we are going to take healthcare apart. Maybe Americans should just stop eating too much! Being fat, along with all of its side effects, is the main reason for all of the healthcare spending.

All that said, maybe I am wrong that eating bad is bad. This commercial seems to say bad food is good:

Barry Ritholtz forward me a copy of his new book Bailout Nation. I will post a review soon! If it is anything like his appearance in my film ‘Broke’ I am sure it will be a smart and quick witted read.

From the wires today:

LOS ANGELES/NEW YORK (Reuters) - California’s controller said on Wednesday that he would have to issue IOUs in a week if lawmakers can’t quickly solve a $24 billion budget deficit, and the state’s treasurer plans to tap a reserve fund to meet debt service costs. The measures came as a budget crisis deepened in the most populous U.S. state and the gridlocked legislature failed to pass a proposed $11 billion in cuts. “Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression,” Controller John Chiang said in a statement announcing that he would be forced to use IOUs to pay the state’s bills beginning on July 2.

Are we in the eye of the storm where all is calm?

At the panel yesterday with the Turtles and Richard Dennis all I heard was “trend following”. They all talked of trend following. I did not hear the term “managed futures”. But very few professional traders use the term “trend following” in their marketing and descriptions. To me focusing on an instrument (managed futures) over the strategy (trend following) doesn’t make much sense if a goal is to get people to understand this type of trading.