Michael Covel: News & Info.

Roger Lowenstein, who wrote the must read book When Genius Failed: The Rise and Fall of Long-Term Capital Management, offers some recent insight:

“In limiting risk, people also limit the opportunity for gain. It is common, today, for investors to own six or eight mutual funds, each of which is likely to be invested in hundreds of stocks. This will, they hope, assure that no little bump, no little meltdown, overly upsets their portfolios. But since when was investing about avoiding the bumps? Anyone investing for the longer term can safely ignore them.”
The Way We Live Now See a Bubble?
Roger Lowenstein
June 5, 2005

Avoiding the bumps is exactly what trend followers do NOT do. They accept the bumps. Lowenstein continues:

(more…)

Success and Motivation - You only have to be right once!

Excerpt:

“With every effort, I learned a lot. With every mistake and failure, not only mine, but of those around me, I learned what not to do. I also got to study the success of those I did business with as well. I had more than a healthy dose of fear, and an unlimited amount of hope, and more importantly, no limit on time and effort…The point of all this is that it doesn’t matter how many times you fail. It doesn’t matter how many times you almost get it right. No one is going to know or care about your failures, and either should you. All you have to do is learn from them and those around you because…All that matters in business is that you get it right once. Then everyone can tell you how lucky you are.”
Mark Cuban

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…)