At the panel yesterday with the Turtles and Richard Dennis all I heard was “trend following”. They all talked of trend following. I did not hear the term “managed futures”. But very few professional traders use the term “trend following” in their marketing and descriptions. To me focusing on an instrument (managed futures) over the strategy (trend following) doesn’t make much sense if a goal is to get people to understand this type of trading.

From a Yahoo article today:

Investors have become markedly more nervous in recent weeks, worried that the stock market has risen too far, too fast. That many of Mr. Buffett’s picks remain around the prices he paid for them certainly suggests that some value remains. It’s also an intriguing contrarian sign: Since early March, the biggest gainers on world stock markets have been riskier stocks, from Sprint to Citigroup to Las Vegas Sands. Mr. Buffett tends to go for more stable blue chips with strong cash flow. Many such stocks have been left on the sidelines in what one wag has called “the dash for trash.” Buying Warren Buffett stocks at Warren Buffett prices, or less, certainly doesn’t guarantee you will make money. But it surely provides an additional level of comfort for anyone willing to risk their capital. The worst that can happen is that you will lose money in good company.

Isn’t that last line comforting? Below the Oracle says the economy is in “shambles”. He sees no “green shoots” yet. Asked how the government is doing in trying to get the economy on track:

“You can’t produce a baby in one month by getting nine women pregnant.”

The video:

Yesterday’s Turtle panel in Chicago yielded expected results: all of the Turtles adhere to long term trend following techniques rooted in those original Turtle lessons from so many decades ago. Many said they sill use the money management guides as taught. I still need to get the exact phrasing, but Turtle Paul Rabar had a fantastic statement on why trends and trend following persists as a great money-making strategy. What separates some Turtles from others? I go into this subject in chapter 11 of my book “The Complete TurtleTrader”, but this quote from Jim Rogers gets to the point:

“Most of us don’t have the discipline to stay focused on a single goal for five, ten, or twenty years, giving up everything to bring it off, but that’s what’s necessary to become an Olympic champion, a world class surgeon, or a Kirov ballerina. Even then, of course, it may be all in vain. You may make a single mistake that wipes out all the work. It may ruin the sweet, lovable self you were at seventeen. That old adage is true: You can do anything in life, you just can’t do everything. That’s what Bacon meant when he said a wife and children were hostages to fortune. If you put them first, you probably won’t run the three-and-a-half-minute-mile, make your first $10 million, write the great American novel, or go around the world on a motorcycle. Such goals take complete dedication.”
-Jim Rogers

For the first time publicly today Richard Dennis appeared on stage with four of his Turtle students. Joining him were Jerry Parker, Liz Cheval, Tom Shanks and Paul Rabar. The room was packed so I may have missed other Turtles in the audience, but Brian Proctor (Turtle) was sitting behind me.

A good article.

How does one succeed at any entrepreneurial endeavor (including trading)? Passion and persistance are the foundation. Here are some quick reminders of those qualities in some pure bred entrepreneurs.

Dennis Gartman’s trading rules:

1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; it is trading’s driving while intoxicated. It will lead to ruin. Count on it!

2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.

3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.

4. This Is Not a Business of Buying Low and Selling High; it is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it however, and fewer still embrace it.

6. “Markets Can Remain Illogical Far Longer Than You or I Can Remain Solvent.” These are Keynes’ words, and illogic does often reign, despite what the academics would have us believe.

7. Buy Markets That Show the Greatest Strength; Sell Markets That Show the Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break most easily. When bullish we need to sail the strongest winds, for they carry the farthest.

8. Think Like a Fundamentalist; Trade Like a Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technicals and fundamentals, as you understand them, run in tandem.

9. Trading Runs in Cycles, Some Good, Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In “good times,” even errors turn to profits; in “bad times,” the most well-researched trade will go awry. This is the nature of trading; accept it and move on.

10. Keep Your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we’ve known have the simplest methods of trading. There is a correlation here!

11. In Trading/Investing, An Understanding of Mass Psychology Is Often More Important Than an Understanding of Economics: Simply put, “When they are cryin’, you should be buyin’! And when they are yellin’, you should be sellin’!”

12. Bear Market Corrections Are More Violent and Far Swifter Than Bull Market Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and we move on.

13. There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow… usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.

14. Be Patient with Winning Trades; Be Enormously Impatient with Losing Trades: The older we get, the more small losses we take each year… and our profits grow accordingly.

15. Do More of That Which Is Working and Less of That Which Is Not: This works in life as well as trading. Do the things that have been proven of merit. Add to winning trades; cut back or eliminate losing ones. If there is a “secret” to trading (and of life), this is it.

16. All Rules Are Meant To Be Broken…. but only very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.

An interesting read about British manners. An excerpt:

British passengers on the Titanic died in disproportionate numbers because they queued politely for lifeboats while Americans elbowed their way on, an Australian researcher believes. David Savage, a behavioural economist at the Queensland University of Technology, studied four 20th-century maritime disasters to determine how people react in life and death situations. He concluded that, on the whole, behaviour is influenced by altruism and social norms, rather than a “survival of the fittest” mentality. However, on the Titanic he noted Americans were 8.5 per cent more likely to survive than other nationalities, while British passengers were 7 per cent less likely to survive.

But if Americans are so smart why did we follow the social norms of sitting in mutual funds no matter what to our extreme economic disadvantage?

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From a reader today:

Michael, I read much of what you publish on the web and like and respect most of what you do, however this greed thing [of yours] doesn’t hold water. You’ve been reading too much Ayn Rand or something. According to the New Oxford American Dictionary, greedy means: “which implies an insatiable desire to possess or acquire something, beyond what one needs or deserves.”

He adds:

Greedy is especially derogatory when the object of longing is itself evil or when it cannot be possessed without harm to oneself or others. I agree that a strong desire to excel and achieve one’s goals is laudable, however when extended to the level of greed, not a good thing for any of us. Jim

The best response to this? The cagey economist no longer with us:

I know that clip is a regular around here, but I have not seen anyone come close to countering Friedman’s logic.