The book “Trend Following” continues to strike a chord with traders, investors and funds across the globe. Some recent feedback from a fund managing over $1B USD:

“Michael thought you would like to know we are ordering 20 copies of the book today and sending it out to all our management team around the world.”

Another fund based in the UK, managing over $2B USD, told me the book Trend Following is mandatory reading for all staff.

Yet another firm managing over $300M USD wrote to say:

“Nice work with the book. I [have] purchased about 40 copies [for clients and friends] so far.”

Watch free video excerpt from Trillion Dollar Bet (16M).

Order video from Amazon.

An excerpt from recent SFO magazine article on trend following:

“The objective for any investor who wants to be active in the markets is quite simple. How does one make effective decisions in an uncertain and dynamic world? The problem is finding a generalized approach that will work effectively across a broad set of fast-paced asset markets. A realistic approach to decision-making should involve a methodology that reflects a functional world view or philosophy of how markets operate. This approach also should be replicable and tied closely to a system of management which can be structured in a variety of ways to fit a wide set of opportunities. Trend following is an efficient means of decision-making under conditions of uncertainty that reflects the peculiarities of asset markets that can be tailored to different time frames and risk profiles.”

Read full article.

Cole Wilcox is the Managing Partner for a fund called the Blackstar Fund, LP. I always find that performance reports and firm overviews provide useful educational insights.

View Blackstar May 2005 Monthly Performance Report

View Blackstar Fund Stats

Read PDF article about hedging against a housing bubble.

A simple, yet classic piece of writing. Take a read of Ed Seykota’s bet sizing article.

Ok I get it. Hedge funds are fun to write about. Every journalist seems to have some story out about hedge funds. The Economist just ran a piece called “Dead, or just resting?” It says nothing essentially, but it must have felt like another great opportunity to use the phrase ‘hedge fund’.

What’s my gripe? Hedge fund can mean anything. There are untold numbers of different hedge fund trading strategies. So what purpose does it serve to group all speculative trading pools under one umbrella? It doesn’t serve a purpose. It confuses the issue even more.

If the style of trading is not discussed and separations are not drawn across trading styles — stop reading — you are wasting your time.

Michael J. Clarke is the president and founder of Clarke Capital Management, Inc. (“CCM”). He has offered the following public comments about his trend following firm:

“In 1989, I decided that I would investigate whether I could apply my computer software development knowledge and previous trading experience in generating computerized systems with which I could make a living trading futures. The development of my current trading philosophy has derived from the research into methods and strategies as well as my actual trading experiences since that investigation began.”

(more…)

Consider the following excerpt raising the ‘odious hedge fund fear’:

“Long Term Capital Management wasn’t the first hedge fund to get itself into serious strife but it’s the one that is always recalled whenever the market turns choppy. A choppy market is one that doesn’t seem to make sense and is hungry for direction. The uncertainty it produces invariably causes traders, investors, analysts and everyone else in the money game to start worrying about a downturn. When that happens, people want a bad guy to blame for the doom that might be ahead. Nowadays, when there’s no obvious candidate, suspicion tends to fall on hedge funds. Run by outrageously paid managers, these vast pools of exclusive private capital are used for highly leveraged investments and are a major component of today’s market. But because hedge funds are largely unregulated and not subject to disclosure rules that apply in other sectors of the market, much of what they do remains a mystery. In unsettled times this makes people nervous.”
The Australian
Hedge Funds ‘To Blame’
David Nason. May 30, 2005

Keep in mind, great traders (the ones that make the big money) don’t sit around during so-called choppy periods looking for someone to “blame”. Great traders accept responsibility and aim to control what they can control. For example, you can’t control the timing of choppy or trending markets, but you better know how to handle either situation. You can’t eliminate uncertainty, but you better have an idea of how you will deal with it. Very little of what hedge funds “do” is a mystery, but if you accept blindly the constant sound bites and “blame the other guy” language of the Wall Street press core, I can imagine it might be very hard to get “it”.

The European Union could have us all headed toward some big trends. Read PDF.

From the Winton Capital commentary for May 2005:

“The Winton Futures Fund gained 6.4% in May to bring the year to date performance to 7.55% and the compound annual average rate of return in 92 months of trading to 20.86%. Solid gains were recorded in equities and bonds this month. Financial futures moved higher as solid US employment and retail sales data confirmed continued growth in the US while stable inflation data and lower oil prices soothed concerns about the pace of Fed rate hikes ahead. Commodity returns were modestly lower with energies posting the largest loss as oil prices slumped to three month lows on the back of rising inventory data. Currency returns were mixed as the dollar regained some of the ground it lost earlier in the year as strong US economic data and France’s rejection of the EU constitution supported the greenback.”
David Harding
Winton Capital

Of course while David offers the fundamental backdrop, his trading is rooted in non-fundamental trading models.