Feedback in:

Michael, I just wanted to write a quick note of appreciation for not only developing and sharing your perspective on trend following, but for also creating a site that shares other useful ideas, such as Seth Godin’s Linchpin. Your posts are both informative and helpful, as well as entertaining and inspirational at times. The last few years have been rocky, but one thing I found out that works, rain or shine, long or short, stock or futures, was the trend-following approach to trading. It took a while to develop, from prototype model, to a fleshed out approach suitable for me but I’m confident, that with careful, persistent and thoughtful work, I can become an “artist” (ala Godin) in creating a investment business for myself. It’s scary out there, but I have a useful tool in my arsenal to help me survive, thanks to you. I am a grateful member of your “trend-following” tribe. Thank you again, and Happy New Year! Best, Edward

Thanks Edward!

I own a residential piece of property in Fairfax, Virginia. Fortunately, that area is protected by the Washington, DC government force field (for now), but for the rest of the country it’s so not good:

And Now House Prices Will Now Drop Another 20%

Crash Points

Is Housing Due to Revert to the Mean Price?

Where is the inflection point for ‘this’ to all turn positive again? That’s not a trading question, but rather a philosophical one.

Howard Davidowitz says U.S. consumers are in ‘terrible shape‘, but price action sure seems a much better indicator of the trend. However, he does address an issue I keep wondering about:

“Online sales have to lead you to question the whole retail selling strategy. We have 21 square feet of selling space for every man woman and child in this country. We already have double of what we need. With the explosion of online sales, what happens to all these retail malls and shopping centers which are marginals? Huge changes are going to be taking place as people continue shopping online…. In the end what do you do with the retail space…This is going to be a huge question for retail in the next ten years, that’s why Walmart is starting to build smaller stores, that’s why Walmart is building more overseas than they are building here. It’s going to be the biggest retail change that we’ve ever seen.”

Tip to zerohedge.com.

From The Bed of Procrustes: Philosophical and Practical Aphorisms comes two zingers to ponder:

“Those who do not think that employment is systemic slavery are either blind or employed.”

And:

“They think that intelligence is about noticing things that are relevant (detecting patterns); in a complex world, intelligence consists in ignoring things that are irrelevant (avoiding false patterns).”

Second one is all trend following.

There was a film sometime back starring Jodie Foster called Contact. In the film Foster, a scientist, can’t figure out an alien signal until she finds the key — the ‘primer’. She finally gets some help from a Carl Sagan-like benefactor named S.R. Hadden:

HADDEN: The powers that be have been very busy lately, falling over each other to position themselves for the game of the millennium [figuring out the alien signal]. Maybe I can help deal you back in.

ELLIE: I didn’t realize that I was out.

HADDEN: Oh, maybe not out, but certainly being handed your hat. I have had a long time to make enemies Doctor…I wish to make a small contribution. A final gesture of goodwill to the people of this planet…

ELLIE: You’ve found the primer!

HADDEN: Clever girl.

That’s how I have felt (and still feel) about trend following. Amazing that it is still under the radar after all these years of hiding in plain sight.

My 2011 predictions are really one prediction: I predict that no one will accurately predict much in the markets over the course of the year. Sure, someone might be flip a coin and get lucky with a guess here or there, but what prediction are you really relying on with your hard earned cash? Exactly.

Equity Valuations Are Stretched, But Does It Matter?

‘Tis the Season to Be Wary

A Fed-Induced Speculative Blowoff

Excerpt:

“As for the notion that the Fed’s targeted Treasury purchases have directly aided the economy, the argument requires bizarre logical gymnastics. It demands one to believe that although the purchases were intended to stimulate the economy by lowering rates, they have been successful without lowering them, and in fact by raising them, because the expectation of lower rates was so stimulative that it caused rates to rise, so that the higher rates can be taken as evidence that lowering rates without lowering them was a success. Oh, brother.”

After Nearly Two Years Of Searching, TrimTabs Still Can’t Figure Out Who Is Buying Stocks

10 Reasons to be Cautious for the 2011 Market Outlook

***

All of these bearish thoughts ring true with me, but the views in those articles sure are hard to codify into a rigid systematic trading approach. A quiz to consider about ‘thinking’ may prove insightful (shout to Ritholtz.com for tip).

A good reminder:

Opalesque: You have some winning trades, some losing trades, how do you know you’ll come out ahead?

Trend follower Ken Tropin: In this business you need to have ample payoffs from your winning trades but make sure your losing trades do not generate big losses—so the returns have a fat right tail but not much left tail! Suppose over time you make money on half your trades and lose money on the other half. If the winning trades are double the size of the losing trades, then you have a pretty profitable investment.

Source.

Some feedback in today:

Hi Michael, Just wanted to introduce myself via Facebook and also thank you for your continued research and revelations on trend following. I have recently left full time employment and started my own hedge fund so it was perfect timing that I came across all your work! What’s more remarkable is the amount of time I have spent following the markets and researching them too and did not hear ONE single mention of trend following or any of the incredible trend following traders which you have written about and interviewed. I am working on becoming one of them as we speak. Merry Xmas. Best regards, Howard P.S. You’re doing a really great job.

More:

Michael, I purchased your program almost two years ago and I am very thankful. I [also] attended [an] Ed Seykota workshop this December. I am now re-reading your ‘Trend Following’ book. Thanks for helping me in many different ways. Jon

More:

Hello Michael, I have received the [order] instructions, will let you know as soon as…done. Yes, took me by surprise you answering your pre-order questions. Glad I had the chance to talk to you. We in Ecuador use the USD as our national currency, so we need to have a plan to protect ourselves and stop paying a bill which is not ours. I am a fundamental trader, but after finding out about trend following I had an “A ha!” moment, that was the missing part that I so much needed. You have done an excellent job with your books, it’s great reading I enjoyed them very much. Looking forward to watch your DVD. I like listening to Jim Rogers and Marc Faber, Austrians in general, they make so much sense in this non-sense world. You have an awesome project. Finding out and researching the people that have made it in the trading field is so important for us and will save us (self-taught traders) years of hard work. You work is greatly appreciated. Have a great Christmas and best wishes for 2011, Felipe

Thanks!