I posted this recently about some fundamental commentary that made it across my desk. The author, Paul Dravis, responded:

“Interesting that Mr. Covel (who has been receiving my note for over a year) would not reach out and ask for the drivers behind the color coded table on the lower right of the PDF – trend following 101. If anyone is in San Francisco, I will walk you thru the process.”

Amazing. He writes 100% fundamental commentary and somehow he sees it as technical trend following.

Look, a pink unicorn!

David Ricardo (19 April 1772 – 11 September 1823) was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. According to an 1838 book, The Great Metropolis, Volume 2, Ricardo had certain golden rules:

“As I have mentioned the name of Mr. Ricardo, I may observe that he amassed his immense fortune by a scrupulous attention to what he called his own three golden rules, the observance of which he used to press on his private friends. These were, “Never refuse an option* when you can get it,”—”Cut short your losses,”—”Let your profits run on.” By cutting short one’s losses, Mr. Ricardo meant that when a member had made a purchase of stock, and prices were falling, he ought to resell immediately. And by letting one’s profits run on he meant, that when a member possessed stock, and prices were raising, he ought not to sell until prices had reached their highest, and were beginning again to fall. These are, indeed, golden rules, and may be applied with advantage to innumerable other transactions than those connected with the Stock Exchange.”

Said another way: trend following.

Tip: Dorsey Wright and http://en.wikipedia.org/wiki/David_Ricardo.

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A reader writes:

“Dear Mr. Covel, While I’m sure you always get these types of letters, I would like to tell you my story, because you actually met me and influenced years back. A long time ago, I wrote you an email and you replied and were very responsive and kind, which was surprising (I had heard you were a cocky guy). Anyway, I read all your books, and wanted a chance to learn from one of the greats [and you recommended how to go about that]. Well, I got a chance to meet Mr. [name] very briefly, and while [name] couldn’t bring me on because such a tight shop, you both encouraged me to just continuing knocking down doors. Well, sure enough I got a chance to convince a famous manager to train me (this was before you had your course). Anyway, he took me under his wing as long as I kept him anonymous. Sure enough at the end of 09 and making a killing during my “entrepreneurship,” I decided I had to start my own fund. It’s been a long road, but today I now am running [number] million…So I figured I’d stop on by and pick up your course, to see what you have learned from all those greats. [Also with a group of traders] I will be writing the last few chapters on trading “theology,” a little of my background will be intermixed and I would like to mention you. I know you don’t need brand recognition, but while short sometimes, you did encourage me and lead me down the right path with your writings and correspondence…I know you have large fund clients, but I guess you could indirectly say [I was] one of your readers and [now a] third generation turtle [who] is now running money of his own. My [hope] one day [is that] I’ll be able to have you interview me as [one of a] new generation of trend traders. While the path was the toughest I could imagine, [it was] nevertheless fruitful. Thank you, [name]“

Thanks for the nice words. Don’t stop!

From a reader:

“Michael, We have spoken briefly in the past and I have purchased your book and [name] interview years ago. I have recently moved firms from [name] to [name], a regional investment bank in the Southeast. During the transition over, I came across your contact info, and just wanted to send a quick note of thanks for what you do. After reading your materials and after much due diligence on the subject, I started running a technical [trading] portfolio for clients utilizing the services of [name]. To date, I run a fee based business heavily utilizing [a trend trading] strategy. This not only gives clients exposure to the strongest asset classes, it more importantly gets them OUT of under-performing asset classes. For example, the portfolio was only in stocks for the first four days of 2008, thereby not taking part in the huge dip in global equities. In any case, this isn’t a solicitation. I just wanted to say thank you. Take care, [name]“

Welcome.

The world’s oldest man recently died at the age of 114. He revealed his rules for a long life shortly before dying in Montana: embrace change; eat two meals a day; work as long as you can; help others, and don’t fear death “because you’re born to die”.

Nice.

Jim Rohrbach writes today:

“I was outside earlier today talking with a neighbor. He asked me what was causing the market to go down today. I told him I didn’t know and that I do not pay attention to the reasons the market goes up or goes down. I just know that it is doing it’s thing, and I don’t need to know the reasons.”

Mowing the grass…

My video post on poker and trading drew this feedback from a reader:

The Corbomite Maneuver (http://www.youtube.com/watch?v=IUapAAIK_Xs) made an impression on me when I first saw it on TV in 1967 as a teenager. But the real meaning of Kirk’s line “not chess, Mr. Spock. Poker.” is only now beginning to sink in as I study trend following. It may seem illogical (to me, anyway), but it’s apparently another way to be profitable.

More from Kirk and Spock on chess v. poker.

Lenny Dykstra nailed in bankruptcy fraud.