Trend Following Manifesto

A new paperback edition of The Complete TurtleTrader came out late February 2009. Except for a new Afterword it is the same book (except less expensive as a paperback!). That said, the new Afterword offers a new take on all that is “Turtle”. For example, here are some excerpts:

Once final drafts of The Complete TurtleTrader started making the rounds feedback from one individual in particular struck a chord. Bob Pardo is a seasoned trader…During an ensuing phone conversation I told him that many of his questions and concerns were part of an unpublished Afterword, but that my publisher had elected to leave it out saying essentially that it was ‘inside baseball.’ Upon reflection that was a mistake and perhaps a harder fight should have been fought to include more of the behind-the-scenes drama, especially when to this day some Turtles spin a story contrary to the truth. However, more behind-the-curtain glimpses into the research and writing and research process had definite pros and cons. Would more drama be perceived as petty and inconsequential? Or would these insights reveal missing details of human frailty that further clarified the dividing line between Turtle winners and losers? In my opinion, especially given the mythical Turtle legend that existed for over two decades, opening up the blinds and letting sunshine in could only help investors without Turtle-like access and success to realize that the Turtles were human. If the original Turtles could learn, the ones chosen off the street, anyone could. Yes, the trading rules they were taught were critical, and yes, some were very intelligent, but the human element can’t be ignored when analyzing the experiment’s results from 1983 to 2008.

On the Turtle name:

Mike Shannon contradicted the legend that Dennis named his students after seeing a turtle-breeding farm in Singapore: “Our original name, in the first year of our existence, was the Disciples. Because it was the name, at the time, of a prominent street gang on Chicago’s West Side, we agreed to go with the ‘Turtle’ idea.” Accurate? No one else told me that story, but then again Shannon had told me many other things that I later confirmed as true that no one else had told me. On the other hand, Lucy Wyatt Mattinen, one of the two female Turtles, said the name actually traced back to Richard Dennis’s fondness for the music of the ’60s pop group The Turtles.

On Turtle paranoia 25 years later:

“It is my belief that my confidentiality agreement with Richard Dennis is still in force. Therefore I do not give interviews.” [Turtle Phillip] Lu is an intelligent man (graduate of Brown). He apparently made millions as a Turtle and is well respected by many other Turtles, but what was with the ludicrous confidentiality assertion? Another Turtle responded bluntly to an interview request saying he was ‘not interested.’ Months later that same Turtle appeared to warm up when his assistant asked for a list of those who had agreed to cooperate. When I sent him a detailed list of everyone who had participated, his response was, ‘no.’ Unknown to me at the time, the exact list I handed over was then used to contact Turtles who had completed their interviews to persuade them to not talk. That tactic did not work and in fact irked Turtle Michael Cavallo (one of several pressured not to talk after already talking) who told me he thought the story should be out there.

On visiting Jerry Parker’s offices at Chesapeake Capital:

The furnishings of his sparse conference room gave no indication of what Chesapeake Capital did except for a huge Swiss alphorn leaning against the wall. Its ‘thank you’ engraving to Parker and Chesapeake Capital from a Swiss ‘concern’ spoke volumes about his firm’s global reach. Why was there that second meeting years later to begin with? Chesapeake Capital was a billion dollar fund at the time, but their brain trust still wanted fresh marketing ideas. They were investigating whether the Internet would enhance their business, and if so, how to use it effectively. Our meeting must have given them some good food for thought because shortly thereafter Parker sought to buy the domain trendfollowing.com from me. It was a wise move not to sell, since the domain name trendfollowing.com became the catalyst in launching my first book, ‘Trend Following’, four years later. Today Jerry Parker’s firm Chesapeake Capital still has no online presence to speak of, but that has not stifled his success. He is still far and away the most successful Turtle by a long country mile.

While both publicly and privately almost everyone involved in the experiment expressed appreciation for my effort in objectively telling the story, one Turtle was not happy when some of the legend was investigated. He basically went nuts once documents were made public about how his trading firm imploded:

“[Covel] is a parasite who lives off of the creation and energy of others instead of contributing something to humanity…When it comes to trading Covel is an idiot.” Another [comment]…referred to me as ‘an idiot shyster.’ The…lawsuit threats started: “Covel has been duped by his own anger and his own blindness to the possibility that there might be others out there who are not dishonest charlatans…The courts will prove [Covel] the spiteful jealous liar that he is…[Covel is] an asshole who has made himself my mortal enemy despite my many attempts to get him to stop…Mike [Covel's] continuing actions are only going to make it clearer to a jury that he is being malicious.”

The take away:

Maybe the Turtle story is too perfect. Maybe for some people it is just not believable. The refusal to accept obvious truths is the biggest obstacle to getting more people to adopt sound investment behaviors. Why? People have always struggled with perceptions of truth. It comes down to a general rule: We believe what we want to believe.

The paperback edition of The Complete TurtleTrader is available now.