An example of the type of charts I will be using more of soon:

Michael Mauboussin recently wrote Explaining the Wisdom of Crowds: Applying the Logic of Diversity (PDF).

Sad situation at Virginia Tech today. Only a few hours from my home. I have many relatives who are graduates of Tech. It is the State University specializing in engineering, but now the school will forever be remembered for something horrific.

Richard Bookstaber has a new book called A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. Bookstaber also recently wrote this article for TheStreet.com titled Financial Disasters Will Keep Coming. The article:

While I didn’t cause the two great financial crises of the late 20th century — the 1987 stock market crash and the Long Term Capital Management hedge fund debacle 11 years later — let’s just say I was in the vicinity. My actions, which seemed insignificant at the time and their consequences unintended, did help get the ball rolling.

(more…)

An interesting hedge fund overview (PDF) sent in by a reader.

The Globe and Mail ran an article today. The end of the article:

Michael Covel, author of a book about trading called Trend Following, said some skeptics believe successful trading is in the end all about luck, but he added, “To some degree, I think that’s somewhat disingenuous, specifically when you have some traders in business for 20 years.” In terms of how it’s done, it’s all about volatility, and there are few markets as wild as natural gas, which gyrates daily, often because of the weather. Among Mr. Arnold’s employees is a full-time meteorologist. “The good traders don’t really care if it’s natural gas or corn or some obscure Chinese stock. All they care about is if there’s enough movement and enough liquidity,” Mr. Covel said. “I’m sure Mr. Arnold is agnostic to the market. He just wants to find the opportunity. And if Mr. Arnold has the golden touch, all props to him.”

As a quick clarification, I was not referring to Arnold being in business for 20 years. He is after all only in his early thirties.

Last fall I met with Boone Pickens in his Dallas office and posted this. This feedback came into me last fall after my post:

Perhaps a good question would be to ask how much Mr. Pickens is down year to date some say over forty percent.

I responded last fall:

I was told numbers that differ greatly than yours. All positive.

My happy friend responded:

If he is actually doing well this year, I’m glad for him, but I feel holding him up as as example is misleading….there’s no proof he’s not just a black swan event in and of himself. I notice you don’t spend much time talking about the thousands of managers / CTAs who perished….you are making the mistake of being fooled by the survivorship bias…and anyone who knows statistics knows Boone Pickens is likely an example…

Well, to update the situation, Boone’s 2006 earnings are in:

From Trader Daily this week:

T. Boone Pickens
City: Dallas
Firm: BP Capital
Age: 78

The world’s biggest oil bull may have gotten gored in late 2006 and early 2007 as crude prices slipped, but that slide didn’t last long. Besides, his prudent bearish play on natural gas in the fall of ’06 was more than enough to fuel his energy-futures and derivatives fund to a startling 98 percent return.

“Most of our money came from shorting natural-gas futures,” says Dick Grant, BP’s CFO. The firm’s total assets, across two main funds, are around $3.6 billion, 45 percent of it Pickens’s own money. Grant wouldn’t confirm Pickens’s take, but if our estimate isn’t pretty close, we’ll build Oklahoma State a new football stadium.

Estimated Income: $1 billion–$1.5 billion

From Trader Daily (full article):

NEW YORK (Reuters) — The wealthiest U.S. hedge fund managers and traders became a lot richer last year when five of them took home $1 billion or more each.

Simons, Lampert and Pickens have ranked among the top three earners since magazines such as Alpha and others started tracking their paychecks.

A fun read.

I found this list of 25 questions (PDF) to “ask your private banker” interesting. My question: when someone gives you these answers, have you not just received glorified stock tips?

I was forwarded this trading brief on a firm called Altis (PDF).

More: www.altispartners.com.

I have had my share of critics. There are those who don’t like trend following trading. There are those who don’t like the fact that TurtleTrader.com was even started and has become a great resource for thousands. I have met and talked with many of these people. Some are stand up people with differing opinions, some live in a world of deception. A few of the latter are somewhat well known.

That world of deception is something I have come to know more about in the last 6 months. Specifically, the deception of email and chat forum posts. Consider that last fall on the same day I received (2) emails. One was from a supporter and a considered friend of mine for years. The other email was an anonymous attack email telling me how dumb I was. Fair enough. One good email, one bad! That’s life. Ah, but here is where it gets interesting. Those (2) emails, both sent from Yahoo email accounts, had the same IP address. It was the same person.

Then in the last few months, unrelated to the case above, I started noticing chat forum posts offering agenda type criticism. There seemed to be (2) people leading the charge. One of critics was from a “name” known in some small Wall Street circles, the other was an anonymous alias. The named critic heaped on the negatives from his perspective and so did the anonymous critic. However, the anonymous critic with the alias was VERY praiseworthy of the other critic who was using his real name. It all struck me as odd since they sounded like the same person. The two chat forum posters were one in the same. They were posting under the same IP address.

In a past life I was a baseball catcher. On the baseball field we had a way for dealing with people like these. It was called a fast ball high and tight, and if they got hit, well, that was the point.

One of the best quotes about internet chat forums comes from David Silverman in an issue of Stock, Futures and Options Magazine:

Just as they did in the pits, traders continue to trash-talk, deceive, manipulate, confuse and lie. What I was told so many years ago remains fresh today, and anyone who does not understand this and totally relies on the information they read in chat rooms may get eaten alive. That the Internet is being used to pass misleading information about the markets – and thousands of other things – comes as no great shock, but what I realized as I read one bogus posting after another, is that the anonymity the medium provides can make chat room lies far more insidious than any ever told in the pit. On the trading floor, market professionals, fully aware of the rules of the game, aware of the stakes involved, and able to look any trader in the eye to help determine the degree to which the truth might be shaded, needed protection only from the egregious lie. In chat rooms, by contrast, where the naive and uninitiated congregate with the potential hustlers and con men, it is no fair fight. Anonymity fuels the liar’s sense of invincibility, and often statements are so bold and outrageous it’s amazing anyone takes this nonsense seriously.