Michael Covel: News & Info.

Food for thought:

“Technical trading is not glamorous. It will rarely tell that you bought at the lows and sold at the highs. But trading should be a business, and a systematic program is a plan to profit over time, rather then from a single trade. High expectations are essential to success, but unrealistic ones just waste time. Computers do not tell the user how to make profits in the market; they can only verify our own ideas. We consider using a computer to develop trading programs to be a sensible, conservative approach.”
Cognitrend GMBH

This email arrived just about one year ago today from someone named “Joe Blow”:

“What do you know about trading?…You have written regurgitated fluff on the facts that long terms exist. Bravo. Your book reminds me of how Kiyosaki writes on money to the masses - totally useless. I would not read anything you have to say and I am sure to see your book at a discount in Borders selling $4 - like so many.”

As Ed Seykota might say, perhaps it is time this reader look into himself and analyze the root of his anger. In terms of the price of my book, I would like to see Amazon drop the price some, but it doesn’t appear $4 a book will be here any time soon!

I just received an email obviously not meant for me. A Senior Vice President in Futures and a Senior Metals Specialist from XXX (very large investment bank) emailed me thinking I was someone else:

“I have clients with XXX Fund (which you manage at XXX), and wonder if you could either give me a call or email me with a comment about the…weakness of the fund. I’d also like to know if you might be planning to implement any changes in risk management strategy to cope with a market that is currently non-friendly to trend-following systems, as well as any thoughts you might have as to when market conditions might turn more favorable towards systematic traders such as XXX. I would really appreciate it if you could address each of these questions.”

Why would an individual who has placed client money with a trend following trader be asking these questions? The clients of this broker are being poorly served to say the least.

The May 2005 issue of SFO Magazine is dedicated to trend following.

I have an article in this issue titled “The Reports Of My Death Have Been Greatly Exaggerated”.

Good overview of Hedgestreet service and concept.

How should one look at trend following performance? Winton Capital, David Harding’s successful trend following shop, offers insights from their recent white paper PDF.

I attended a recent conference that exposed investors to various hedge fund opportunities. Many of the opportunities were of the trend following variety or were well known opportunities from legendary global macro traders.

There were, however, several what I call “visionaries”.

These were very bright men, understanding of history and loaded with visions of where our future will be in 10, 20, and 30 years. But at the end of the day should you make a “bet” on the fundamental vision of one man looking out 20 years or should you make a “bet” on traders that have specific risk management philosophies, entry & exit approaches and portfolio selections that deal with the here and now?

It is an interesting choice.

Hedge fund roundtable put on by SEC. Just another perspective.

“…an example of laziness is not dumping the losers. I recall that when I was a young sprig, I read about the Dow Theory of investing or maybe a commentary about it. The simple rules included the admonition to cut losses and let your gains run. I used to do that scrupulously, but as old age and superstition have overtaken me I often leave losers and carcasses on my statements. Maybe part of the reason is the few minutes of work it would take to learn the cost basis and then the shattering realization of how huge my capital losses were. (Yes, I was suckered into buying Internet stocks, too. Luckily, in fairly small numbers, or I would be writing this from a padded cell.) When a stock has been a loser for a long time, say sayonara, in the words of Marlon Brando, even if it takes a bit of work to do it.”
Ben Stein
New York Times

Is fraud enough to claim you suffered damages? Consider:

“A unanimous U.S. Supreme Court refused on Tuesday to make it easier for disgruntled investors to sue companies and seek damages in certain securities fraud cases…The high court overturned a ruling that companies can be sued for misleading statements that inflate their stock, even if the stock’s subsequent decline is not directly tied to the company’s later “corrective” disclosure of the fraudulent misrepresentation…”A private plaintiff who claims securities fraud must prove that the defendant’s fraud caused an economic loss,” Justice Stephen Breyer said in the court’s opinion…Dura investors said they should recover for losses from a precipitous stock drop, arguing that the company knowingly made false statements about the device’s prospects…”We consider a Ninth Circuit holding that a plaintiff can satisfy this requirement simply by alleging in the complaint and subsequently establishing that the price of the security on the date of purchase was inflated,” Breyer wrote. “In our view, the Ninth Circuit is wrong.”
AP Wire

It seems to me the Supreme Court is essentially saying that even though Enron, for example, might have been a sham, you still bear responsibility if you did not exit as the share price dropped from $90 to pennies.