This email was circulated from Salem Abraham today:

Dear Investors and Friends, Over the past several weeks many people have called our offices to inquire about our recent performance. Through this volatile period we have done very well. From September 1st through this past Friday the S&P 500 is -31.6% while we have made a gross return of +13.7% (net of fees, this puts us +23.3% YTD). It is also important to note that we have achieved this rate of return with very low volatility. On the attached PDF you can see the daily gross performance of Abraham Trading versus the S&P 500. The benefits of an investment with Abraham Trading Co. have been, and still are, that we are not correlated with traditional investments, including equities. Over the past 21 years our track records shows that we can make money regardless of the direction of the stock market or the overall economy. Despite our recent good performance, we realize we must stay vigilant in avoiding excessive risk while trying to capitalize on the opportunities that come along. That has always been our goal in the past and will continue to be our goal in the future.

I have a feeling Abraham will not be the only trend follower with such a message. Of course, and this is self-serving, Abraham is featured in chapter 13 of my second book for those looking to learn more.

I just received an email that one of Turtles passed away at the age of 53. Once I know more I will post more.

I bet trend followers wish October ended now…cause they are making bloody fortunes during October 2008 (See John W. Henry article). While the rest of the world sinks like a stone, trend followers with their “boring ole” stratgies are kicking major ass. Sure, whenever trend trading performance is high, a drawdown usually follows, but this time might be different. Why? With many of the “fast-money-long-only-leveraged-like-morons” hedge fund managers headed back to graduate school (or going back to live with their parents), we might just see an extended revival of trend following performance. Volatility is gold to trend followers and we have a lot of it now.

Note: In the John Henry article above it states:

“John W. Henry & Co. also has a lot more work to do before it recoups the nearly $2.7 billion in assets it lost this decade. Its total assets now stand at about $330 million.”

That doesn’t mean Henry lost $2.4 billion. It means clients left his strategy of trend following for the safety of real estate and long only the Dow.

Note 2: A look back to an angry reader circa summer 2007.

Lehman Brothers 52 week range is 0.02 – 67.73. No grand statement with that, but rather it is just a simple reminder that whenever a market collapses there are always opportunities to exit with more than nothing.

A good comment in from a reader:

“I am wondering why people spend tens of thousands of dollars and thousands of hours gaining designations like CFA, CIMA, and CMT? They all look nice on a CV or job application but none of them help you to accurately predict where markets are headed or how much they will move. There should be a Trend Following designation. I think that’s the only useful money management strategy. Reactive technical analysis, NOT predictive is really the only sensible way to make money unless you win the lottery or get lucky on a penny stocks or deep out-of-the-money calls.”

An interesting flash graphic showing areas hit hard by the S&L debacle over a decade ago and now the subprime disaster.

My post here brought in this comment:

You’re stubborn [sic] stuck on the faulty idea that investors who buy and hold don’t sell when they see problems ahead or brewing. Buy and hold is as valid an investment/trading strategy as trend following or reading tea leaves. The losses or drawdowns of some of your so called “great traders” are staggering; why aren’t they smart enough to get out when the trend goes against their position; they seem to buy and hold come hell or high water. As you so often say, “they just don’t get it”.  Neither do you. John Hudson.

There were legions of buy and holders “smart” enough to time the market to get out? Interesting. In terms of trend following, this post reveals no understanding of what trend following is, how it works, or why it behaves as it does. I am sure others out there will do a better job of correcting John than I. Please make responses, if any, educational not attacking. John does sound like someone caught in the last few weeks of a buy and hold down turn.

Mr. Greenspan sure had much to say. Perhaps it is a little unfair to find statements like that and assemble them with commentary, but then again what was he thinking?

This excerpt from Yahoo Finance offers sobering numbers for the millions upon millions who bought into buy and hold over the last two decades:

The Dow is down 39.4 percent from its Oct. 9, 2007 closing high of 14,164.53. The S&P is down 42 percent from its high at the same time of 1,565.15. The Nasdaq’s record high was 5,048.62, during the dot-com boom that swelled the index to levels it has not come close to regaining after the high-tech bubble burst. U.S. stock market paper losses came to $1.1 trillion Wednesday, according to the Dow Jones Wilshire 5000 Composite Index, which represents nearly all stocks traded in America.

How can anyone who has paid any money (read: fees) to any mutual fund manager over the last twenty years be happy about those expenses?