In 1994 Republicans won the House for the first time in 40 years. From that point the stock market went straight up until the Dot-com bubble burst in March 2000. Now in 2010 Republicans are poised to take the House again. What would that mean for markets?

No one knows.

My point is not to debate Republicans or Democrats. There are very few differences in political crowds, except in rhetoric. The real issue? Waiting (or hoping) for your guy, on the right or left, to win an election is an investment strategy of ignorance.

Managed futures is the [bad] industry term for trend following. Keeping that in mind consider recent wire news:

“Managed-futures funds represent the most popular category among alternative strategies, according to the latest research from BarclayHedge Ltd. For the three-month period ended June 30, managed futures accounted for $233.4 billion of the total $1.78 trillion invested in all types of hedge fund strategies during the quarter. This marks the first time since BarclayHedge started tracking hedge fund data in 1985 that managed futures surpassed all other alternative strategies in terms of assets under management. Driving this rise in popularity is the fact that other asset classes and strategies are struggling, combined with a new awareness of managed futures as a non-correlated asset class, according to Sol Waksman, founder and president of BarclayHedge.”

Sol Waksman of BarclayHedge was a savior for my book ‘The Complete TurtleTrader.’ After all these years Waksman still had Turtle performance data for the time they worked for Richard Dennis in the mid to late eighties. Thanks again Sol!

People are now making fun of people who think Social Security is a scam:

Two more from these idiots:

Here is an event that I will be at briefly in Las Vegas.

“Secrets?”

Not exactly.

Everyone loves that term, but it is hype. Both of the publishers for my two books wanted to use it at one time or the other. No way. This might be the first time in 15 years that I have seen that word associated with my name.

I better find a secret by the 19th!

Linchpin is not a trading book by title or content. It is, however, one of the best books for trend followers that I have had the good fortune to read.

Feedback in:

Mike, read The Complete TurtleTrader in 12 hours after getting it deliverd Saturday. Excuse my French, what a bloody brilliant read. I’m a trend follower myself. New kid on the block. Just launched [new fund]. First month and all that…Keep up the good work. I love your site and all your material. The best resource on the net!
Chris C.
Managing Partner and CIO

Thanks!

For the last few years I have had much of my research and archives on both coasts, but come early November my complete library of trend following resources will be in one location. Going through my Virginia-based resources today and packing it all up. Now? Just need to figure the best way to make it accessible to serious minded traders.

From Michael Gibbons:

“The market is always right and price is the only reality in trading. If you want to make money in any market, you need to mirror what the market is doing. If the market is going down and you are long, the market is right and you are wrong. If the market is going up and you are short, the market is right and you are wrong. Other things being equal, the longer you stay right with the market, the more money you will make. The longer you stay wrong with the market, the more money you will lose.”

Gibbons is a trend follower.

From Michael J. Clarke:

“From the beginning of my investigation, it became evident that the most direct way to make money and the one most compatible with my strengths was to be a position trader using computer models to develop the entry and exit points.”

Clarke is a trend follower.

Markets are not efficient, but that doesn’t stop the fantasy. How do mutual funds continue to raise assets? How do they continue to snooker people into the myth of buy and hold (hope)?

They need an academic.

Who is their favorite?

Eugene Fama.

Who is he? Fama is the father of the efficient market hypothesis. In a 1970 issue of the Journal of Finance he authored an article titled “Efficient Capital Markets: A Review of Theory and Empirical Work” in which he laid the foundation for a generation of typical investors to be fooled. His efficient market misstep gave mutual funds the cover they needed to convince average investors that they could not beat the market.

How has that played out? For the last thirty years we have seen a sophisticated marketing campaign, boosted by an even more sophisticated political lobbying campaign, all designed to convince EVERYONE that they could do no better than guessing or throwing darts, so in turn just invest all of your money in mutual funds and hold on for the ‘long term’ (never defined). Even though most people don’t follow Fama’s academic jargon, they now know deep in their belly that his theories are flat out wrong.

However, for a guy who has the numbers against him Fama remains defiant. Recently he was asked about trend following:

“Some researchers argue that a market timing strategy based on buy/sell signals generated by a 50- or 200-day moving average offers a more appealing combination of risk and return than a buy-and-hold approach. What is your view?”

Fama responded:

“An ancient tale with no empirical support.”

Fama possesses an academic resume second to none. That said, he has no answer for the reality of my two books or the performance record of trend following.

An Efficient Markets Professor Refining His Theories