Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.

Lao Tzu

For some reason I’ve always found David Harding very interesting. It’s a damn shame that these CNBC people manage to land interviews like this, and then have no idea what to ask. And of course it’s impossible to craft good questions when your mind is awash in false assumptions.

I’ve been reading these “Trend Following Updates” for about a year now. I don’t understand the constant defensiveness of trend followers, and the perpetual need to chant “we don’t predict, we just follow.” It comes across poorly.

This interview is a good example. Kernen drew out Harding in a way that helps–not hurts–the general public’s understanding of trend following.

His questions weren’t clueless at all. He allowed Harding to draw the distinction between what he does and the kinds of strategies followed by LTCM–even going so far as to point out that the LTCM story is required reading at his firm so that his people constantly question what they are doing as a form of risk control. Harding laughed along with Kernen’s “do I have you to blame” joke (Kernen laughed too), and that gave him a chance to make a very important point about following all applicable rules that keep his activities at a risk level below those of investment banks.

Personally, I think that trend follwers can cut back on being so defensive about what they do, stop mocking those who question it or may not understand it, and mature into a more explanatory mode when they get the chance. That’s what Harding did in this interview, and he did a great job. Whether Kernen’s questions were clueless or not is really irrelevant. He did not argue with Harding on any point, and he gave Harding a good opportunity (within the time available) to explain how his firm implements trend following. He was an “adult in the room.” I’m thinking that’s the way serious trend followers ought to consider presenting themselves instead of sarcasm and “we don’t predict” as if that is an obvious answer to any question.

Dave, that is one view.

You may laugh but Kernan’s attitude is also reflected by a large proportion of institutional investors who still believe in star managers who can predict the markets and this is where his general ignorance stems from. The term “Trend following” seems to always throw up derogatory terms such as “black box” and references to LTCM but people should really ask themselves this….a systematic strategy is a basically a set of organised thoughts, laid out in a logical trading plan whereas a discretionary manager makes emotional calls based on his own assumptions and predictions…which “box” sounds blacker to you?

Look, Winton is a terrific firm – better run than its three main competitors – Aspect, Bluecrest, and even AHL/Man (which is bloated), but this interview was almost Doomed to Fail. SquawkBox is, after all, a “stock picking” program (along with discussions of macro news and some sectorial analysis) for CNBC. Kernen played dumb, certainly, but did give his guest the chance to outline their strategy, which, yes, is about “trend following” in a certain sense. But reducing it to “trend following” is missing the point: Winton Managed Futures is a long/short global macro fund. It’s fair enough to wonder if the London affiliate made a mistake in slotting that spot at all, as it’s not really what the viewers of SquawkBox want/need. The Erin Burnett interview of Harding was much better.

BTW, can you tell me what strategy Winton employs in their “long/short global macro fund” as you describe it?

I asked you what strategy he trades and you give me a list of instruments. No kidding! Instruments are not strategy. How does he trade those? My books cater to wide cross sections of audiences trading all types of markets. Why are you focused on the market or instrument? That is irrelevant. Lastly, the Turtles are trend following traders. My books, as you have seen, cover all trend following traders some of which happened to have been trained by Richard Dennis. What distinction do you think you are drawing?

I don’t think you know what you are talking about. You sound like a guy working in the industry doing something, but with zero practical knowledge. Sales pitches are not understanding.

My lengthy rebuttal is in my new book.