Michael Covel: News & Info.

One of the most interesting aspects of the Turtles was Jack Schwager’s chapter title of “The Silence of the Turtles” in his classic book “The New Market Wizards” (1992). While there was almost no information in that book on the Turtles (no one would really talk to Schwager in detail) the book did set in motion a Turtle secrecy mantra that for many has stayed in place all the way to this day. My book “The Complete TurtleTrader” took two related efforts to bring the book together: it was a combination of detailed investigative research and first person interviews. To this day some of the Turtles still don’t want the story out there, even though it is one great, educational lesson for everyone.

Someone asked the other day about my podcasts. They are still going strong here.

A brief paper (PDF) aimed at demystifying managed futures from Man Investments.

A recent comment seen:

[I] would like to know what was the top stories in the past few days/months to find out what was the main reason why the market moved that direction on this day…does anyone know which would be the best source online to find this info? I’d like to be able to just select the day and find out exactly what happened on that day instead of searching through a load of mixed events.

Trying to find “news” explanations for historical price movements is an entirely subjective exercise…and pointless.

I caught an interview excerpt the other day:

Dave Goodboy: Do you use technical analysis at all?

Jim Rogers: No, its pretty simple just figuring out what is going on in the world. I try to find things that are cheap and invest in them if I see some positive change coming. I don’t understand the charts. Don’t misunderstand me, I do look at the charts, but I only look at a simple long-term chart to see what has happened over the last 15 years or so, not to tell me what is going to happen in the future. For example, if I am looking at sugar, I want to know the high, the low, when, why, and things like that. I look at the charts to educate me, rather than a predicting tool.

Rogers, who has said that he is not a trend follower to me, sure sounds very similar with his non-prediction stance.

Are free market economies really based on fleecing the consumer? Is the U.S. economy truly just a giant free-for-all that encourages duplicity in our everyday transactions? Is everyone from corporate CEOs to your local car salesman really looking to make a buck at your expense? Watch.

The December 2007 issue of Portfolio magazine has an article titled “The Evolution of an Investor” by Michael Lewis. An excerpt that caught my eye:

Nobody knows what the market as a whole is going to do, not even Warren Buffett. A handful of people with amazing track records isn’t evidence that people can game the market. Nobody knows which company will prove a good long-term investment. Even Buffett’s genius lies more in running businesses than in picking stocks. But in the investing world, that is ignored. Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud. The problem was the entire edifice of modern Wall Street, in which some people—brokers, analysts, mutual fund managers, hedge fund managers—presented themselves as experts and were paid fantastic sums of money for their expertise. But essentially, Ellis argued, there was no such thing as financial expertise. “I read this book,” Blaine says, “and I thought, My whole life is a lie, and everyone around me is facilitating this lie.”

This is the magazine layout version of my recent article in Trader Monthly.

I interviewed Paul Wasicka yesterday in Las Vegas for the film I am producing. The simularities behind Paul’s poker process (resulting in over $7 million in winnings in a few years time) and top traders’ trading process are freakish. Paul’s interview ended a film travel stretch for me that started In Washington, DC on October 30. I went from DC to London to Frankfurt to Hong Kong to Macau to Hong Kong to Tokyo to DC to NYC to DC to San Diego to Las Vegas to DC on Nov 21.

The following review of “The Complete TurtleTrader” by James Pressley appears on Bloomberg today:

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Nov. 21 (Bloomberg) — With the dollar sinking, oil rising and hog futures slumping, this market looks ripe for the Turtles.

I’m not talking about the soda-pop band girls grooved on in the 1960s, “so happy together.” The Turtles I mean are the trend followers trained by trading heavy Richard J. Dennis.

Dennis was the wizard of the Chicago pit in the ’70s and ’80s. By age 37, he had made “hundreds of millions of dollars out of an initial grubstake of a few hundred,” as Michael W. Covel recalls in “The Complete TurtleTrader,” an absorbing inquiry into how Dennis and his partner taught novices to trade.

Dennis maintained that anyone, with the right training, could become a successful trader. His partner, William Eckhardt, disagreed. To settle the debate, they trained apprentices, then handed them $1 million apiece to trade for the firm.

“We are going to grow traders just like they grow turtles in Singapore,” Dennis said after seeing a breeding farm there.

Recruited from classified ads, the Turtles had little in common but smarts. They included a Czechoslovakian-born blackjack master, a fantasy-game designer and an evangelical accountant. A Harvard MBA made the cut, along with a former pianist who had dropped out of med school.

Dennis and Eckhardt put them up in Chicago’s staid Union League Club, with its wood paneling and oriental carpets, and gave them two weeks of training in January 1984. The rules they learned “would have made investors like Warren Buffett cringe,” Covel writes.

Forget about buying low, holding and selling high. The Turtles were taught to buy when a price was rising and to sell when it was falling. This was trading in its purest form.

It mattered not whether they were dealing in soybeans or International Business Machines Corp. All they needed to know about the thing being traded was its current price and usual volatility: If Microsoft Corp. on a typical day bobs between $48 and $52, a Turtle would say its volatility is four.

Beyond that, they needed to track how much money they had after each trade, because they would trade only a set percentage of what was left.

The Turtles entered trades when a market — be it gold, yen or cattle — broke through a recent high or low. They would buy, for example, if the price was the highest in the last 55 days. Then they “pyramided” their trades, adding money to winners until they reached a predetermined exit point.

Because little losses from “false breakouts” could devour capital, Turtles scaled back their bets during losing streaks.

Dennis and Eckhardt resembled “a mass merchandiser who sold 90 percent of their products as loss leaders so they could make a gigantic profit on the remaining 10 percent.”

Though Covel brings the experiment to life, there’s only so much narrative tension to be squeezed from traders sitting at metal desks in a Spartan office, marking charts and making unemotional calculations on loose-leaf paper without even a TV to distract them. If a market wasn’t moving, a Turtle didn’t trade.

Still, Covel excels in explaining how the system works and describing “second-generation” Turtles like Salem Abraham, who built his trading business in rural Texas. Most beat-the-market books aren’t worth my shelf space. This one is.