You know what you don’t want to do? Change sound trading strategies based on how you feel that day, or due to the daily screams on CNBC, or for whatever fear/greed moment of emotion. Think about this: If clients try to change or adjust how trend follower Bill Dunn trades (see my book Trend Following), he either lets them go or doesn’t take them on as a client in the first place:

“A person must be an optimist to be in this business, but I also believe it’s a cyclical phenomenon for several other reasons. In our 18 years of experience, we’ve had to endure a number of long and nasty periods during which we’ve asked ourselves this same question. In late 1981, our accounts had lost about 42 percent over the previous 12 months, and we and our clients were starting to wonder if we would ever see good markets again. We continued to trade our thoroughly researched system, but our largest client got cold feet and withdrew about 70 percent of our total equity under management. You guessed it. Our next month was up 18 percent, and in the 36 months following, their withdrawal of our accounts made 430 percent!”

This observation always made me wonder why Dunn is not studied in MBA programs. Are Harvard MBAs, for example, aware of Dunn’s trading when they graduate? However, this is but one example for inspiration. Learn from his experience. Learn from how he thinks and acts. And for those who argue that Dunn (and other trend followers) are just lucky, read on.

There were certain things [Richard] Dennis was looking for [in the Turtles]. He wanted students who showed a willingness to take calculated risks. Those who stood out from the herd in some kind of an unconventional way had a leg up. This wasn’t a normal hiring process in the early 1980s, nor would it be normal now. Today, MBA types, for example, are geared to the intellectual rigors of running a company, but are reluctant to get their hands dirty. They are the ones who think IQ and connections are all they need. They don’t want to do the hard work. They don’t want to really take a risk. Dennis didn’t want those people. He was searching for people who enjoyed playing games of chance. He was looking for people who could think in terms of “odds.” Think like a Vegas “handicapper”? You were more likely to get an interview. None of this was surprising to those who knew Dennis. Reacting to opportunities that others never saw was how he marched through life.

Former Google CEO Eric Schmidt:

“There are many, many things that Google could do, that we choose not to do. One day we had a conversation where we figured we could just try to predict the stock market. And then we decided it was illegal. So we stopped doing that.”

Google is a great search engine. It won the title of search king, and Schmidt has made a fortune. Congratulations. However, when he opines like that, he sounds delusional. Schmidt might be worth billions, but wealth does not make up for a lack of common sense.

He is one of many.

A group of eminent economists recently apologized to Queen Elizabeth II for failing to predict the financial crisis:

“In summary, your majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.”

What did the Queen think when she received that? Did she believe it? Did she know better? No one can absolutely know when a market will move and trend. Do you have to know to profit? No.

What is a trend? The question has hit me for over a decade. You don’t spot trends. You don’t find trends. You react to market movements, and hopefully at the end of a big move, a big trend, you will have made great money from that big trend.

Is that the quick and dirty way to think about it? Yes. However, a good many people start with the wrong premise of thinking they can “spot” a trend, so beating the drum hard on this point serves a purpose.

My January 2012 article in Active Trader: Trend-following winners are not “lucky monkeys”.

Feedback in:

Michael, your product is over the top $ wise. The original Turtles had nothing but free money, information and a free education. On your site there is something about don’t bother if you don’t have cash or something to that effect. You are an entrepreneur not an educator. There is nothing wrong with that, but there is something wrong with saying you are here to educate for big dough. It is kind of a oxymoron. John

My firm has done the onerous research work for students. Some might want to learn, some not. Value is all relative to what you do with the training. If a client sees the price of our education as a stumbling block, or compares it to an experiment a few people participated in decades ago not to be repeated, that is fine too. No worries.

“An experiment a few people participated in decades ago not to be repeated” When you use their name (TurtleTrader) you are implying that they are in someway associated with your firm which implies that a code has been broken and you have the key. I’m not complaining as a matter of fact I watched your Kevin Bruce CD and pulled some interesting information off of it. I just wish you would tone down the dough a little and get satisfaction in helping others instead of silk sheets. Maybe in ten years you’ll read my book on how I did it for free. Thanks for your response and the very best to you. John

Across my 4 books and film people can see my influences are far beyond the Turtles. I welcome the feedback on our pricing, but it is worth pointing out that most freshman English classes at local colleges are far more pricey. In that sense our value is cheap by comparison.

Extra Note: Yes, a code has indeed been broken and a good many students have been helped over the years: read.

Take it from David Harding: Outcomes, or what actually happens, don’t tell you very much. The process is what is so important. But of course, most people draw their conclusions from outcomes. They see what happens and they say, “Oh, that’s what happened and therefore, I can draw this or that conclusion.” You could almost label that way of thinking as superstitious, but it’s erroneous; it’s wrong. You don’t want to make decisions for the wrong reasons. If you’re going to make the wrong decisions for the wrong reasons, then it’s not going to be good for increasing your wealth.

More on BlueCrest.

A friend has been kind enough to send some fantastic steaks my way for several holiday seasons. The steaks come from a restaurant located in his firm’s building (his friends run the steak house). Are the steaks good? Yes. Should you have some delivered immediately? Yes. Is this what they sell at the local supermarket? No. Trust me! Why my thought now? Well, some just arrived to my house wrapped in this burlap bag (frozen on dry ice of course) for the holiday season. The bag alone (which would be fun to frame) is worth your order…

But is that the question?

Source: ritholtz.com.

Nancy Upton and Don Sexton, professors at Baylor University who have long studied entrepreneurs, pinpointed traits possessed by Parker and other entrepreneurs:

1. Nonconformists: lower need to conform indicating self-reliance.
2. Emotionally aloof: not necessarily cold to others, but can be oblivious.
3. Sky divers: lower concern for physical harm, but does change with age.
4. Risk takers: more comfortable taking it.
5. Socially adroit: more persuasive.
6. Autonomous: higher need for independence.
7. Change seekers: like novel approaches. This is different than 99% of all other people.
8. Energetic: higher need and / or ability to work longer.
9. Self-sufficient: don’t need as much sympathy or reassurance, but they still need to form networks so self-sufficiency need not be taken to extremes.

Same for trading. Big reasons why some Turtles did not make it.

A favorite piece of mine from The Complete TurtleTrader.

***

If you are going to boil the ocean (in other words, if you are going to use all means and options available to get something done), especially if it is a very competitive and lucrative endeavor, there will be ups and downs. Salem Abraham’s experience has been no different. Twice during his trading career, clients left after down or flat performance periods. He regrouped and made new equity highs each time. During trying times, he handled curve balls in his career by working on other ideas to make money. He always focused on his trading, but he also cast a wider net and caught other kinds of fish.

As with trading, not everything works out. One project was a water deal that he almost cut with billionaire T. Boone Pickens (“Couldn’t agree on the price”). Pickens and Abraham’s ranches are right next to each other in the Texas panhandle (even though they are separated by forty miles, their ranches touch) and they have become friends over the years; Pickens was not shy about praising Abraham’s entrepreneurial guts when I talked to him in his Dallas office.

There were other deals that turned out to be big winners. Abraham was humble about them: “I sold water rights to the city of Amarillo. I invested $1.5 million and I got $9 million out. I said to myself, ‘That’s a cool idea.’ Then I did the Chicago Mercantile Exchange deal [CME Initial Public Offering]. I put $1.5 million in, and got about $13 mil- lion out. You recognize opportunities where you see them.”

This kind of thinking and risk-taking is how to make your first mil- lion by age twenty-five—which Abraham did. Still, it’s not enough to simply spot opportunities. The confidence to act on them is mandatory. You need a killer instinct. When faced with real life and death, even with chickens and pigs, it is never easy to pull the trigger or snap a chicken’s neck, even for dinner. You have to be able to pull the trigger when there is blood on Wall Street, especially if the blood is yours.