Michael Covel is the author of the internationally bestselling book Trend Following

Silence of the Turtles

November 30, 2007

One of the most interesting aspects of the Turtles was Jack Schwager's chapter title of "The Silence of the Turtles" in his classic book "The New Market Wizards" (1992). While there was almost no information in that book on the Turtles (no one would really talk to Schwager in detail) the book did set in motion a Turtle secrecy mantra that for many has stayed in place all the way to this day. My book "The Complete TurtleTrader" took two related efforts to bring the book together: it was a combination of detailed investigative research and first person interviews. To this day some of the Turtles still don't want the story out there, even though it is one great, educational lesson for everyone.

Michael Covel Podcasts

November 28, 2007

Someone asked the other day about my podcasts. They are still going strong here.

Demystifying Managed Futures

November 27, 2007

A brief paper (PDF) aimed at demystifying managed futures from Man Investments.

Searching for the Holy Grail

November 25, 2007

A recent comment seen:

[I] would like to know what was the top stories in the past few days/months to find out what was the main reason why the market moved that direction on this day...does anyone know which would be the best source online to find this info? I'd like to be able to just select the day and find out exactly what happened on that day instead of searching through a load of mixed events.

Trying to find "news" explanations for historical price movements is an entirely subjective exercise...and pointless.

Jim Rogers on No Prediction

I caught an interview excerpt the other day:

Dave Goodboy: Do you use technical analysis at all?

Jim Rogers: No, its pretty simple just figuring out what is going on in the world. I try to find things that are cheap and invest in them if I see some positive change coming. I don’t understand the charts. Don’t misunderstand me, I do look at the charts, but I only look at a simple long-term chart to see what has happened over the last 15 years or so, not to tell me what is going to happen in the future. For example, if I am looking at sugar, I want to know the high, the low, when, why, and things like that. I look at the charts to educate me, rather than a predicting tool.

Rogers, who has said that he is not a trend follower to me, sure sounds very similar with his non-prediction stance.

Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't

Are free market economies really based on fleecing the consumer? Is the U.S. economy truly just a giant free-for-all that encourages duplicity in our everyday transactions? Is everyone from corporate CEOs to your local car salesman really looking to make a buck at your expense? Watch.

Michael Lewis Article About Wall Street's Irrelevancy

November 23, 2007

The December 2007 issue of Portfolio magazine has an article titled "The Evolution of an Investor" by Michael Lewis. An excerpt that caught my eye:

Nobody knows what the market as a whole is going to do, not even Warren Buffett. A handful of people with amazing track records isn’t evidence that people can game the market. Nobody knows which company will prove a good long-term investment. Even Buffett’s genius lies more in running businesses than in picking stocks. But in the investing world, that is ignored. Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud. The problem was the entire edifice of modern Wall Street, in which some people—brokers, analysts, mutual fund managers, hedge fund managers—presented themselves as experts and were paid fantastic sums of money for their expertise. But essentially, Ellis argued, there was no such thing as financial expertise. "I read this book," Blaine says, "and I thought, My whole life is a lie, and everyone around me is facilitating this lie."

Magazine Layout Version of Trader Monthly Article

November 21, 2007

This is the magazine layout version of my recent article in Trader Monthly.

Paul Wasicka Poker Interview in Las Vegas

I interviewed Paul Wasicka yesterday in Las Vegas for the film I am producing. The simularities behind Paul's poker process (resulting in over $7 million in winnings in a few years time) and top traders' trading process are freakish. Paul's interview ended a film travel stretch for me that started In Washington, DC on October 30. I went from DC to London to Frankfurt to Hong Kong to Macau to Hong Kong to Tokyo to DC to NYC to DC to San Diego to Las Vegas to DC on Nov 21.

Bloomberg Review of "The Complete TurtleTrader"

The following review of "The Complete TurtleTrader" by James Pressley appears on Bloomberg today:

***

Nov. 21 (Bloomberg) -- With the dollar sinking, oil rising and hog futures slumping, this market looks ripe for the Turtles.

I'm not talking about the soda-pop band girls grooved on in the 1960s, "so happy together." The Turtles I mean are the trend followers trained by trading heavy Richard J. Dennis.

Dennis was the wizard of the Chicago pit in the '70s and '80s. By age 37, he had made "hundreds of millions of dollars out of an initial grubstake of a few hundred," as Michael W. Covel recalls in "The Complete TurtleTrader," an absorbing inquiry into how Dennis and his partner taught novices to trade.

Dennis maintained that anyone, with the right training, could become a successful trader. His partner, William Eckhardt, disagreed. To settle the debate, they trained apprentices, then handed them $1 million apiece to trade for the firm.

"We are going to grow traders just like they grow turtles in Singapore," Dennis said after seeing a breeding farm there.

Recruited from classified ads, the Turtles had little in common but smarts. They included a Czechoslovakian-born blackjack master, a fantasy-game designer and an evangelical accountant. A Harvard MBA made the cut, along with a former pianist who had dropped out of med school.

Dennis and Eckhardt put them up in Chicago's staid Union League Club, with its wood paneling and oriental carpets, and gave them two weeks of training in January 1984. The rules they learned "would have made investors like Warren Buffett cringe," Covel writes.

Forget about buying low, holding and selling high. The Turtles were taught to buy when a price was rising and to sell when it was falling. This was trading in its purest form.

It mattered not whether they were dealing in soybeans or International Business Machines Corp. All they needed to know about the thing being traded was its current price and usual volatility: If Microsoft Corp. on a typical day bobs between $48 and $52, a Turtle would say its volatility is four.

Beyond that, they needed to track how much money they had after each trade, because they would trade only a set percentage of what was left.

The Turtles entered trades when a market -- be it gold, yen or cattle -- broke through a recent high or low. They would buy, for example, if the price was the highest in the last 55 days. Then they "pyramided" their trades, adding money to winners until they reached a predetermined exit point.

Because little losses from "false breakouts" could devour capital, Turtles scaled back their bets during losing streaks.

Dennis and Eckhardt resembled "a mass merchandiser who sold 90 percent of their products as loss leaders so they could make a gigantic profit on the remaining 10 percent."

Though Covel brings the experiment to life, there's only so much narrative tension to be squeezed from traders sitting at metal desks in a Spartan office, marking charts and making unemotional calculations on loose-leaf paper without even a TV to distract them. If a market wasn't moving, a Turtle didn't trade.

Still, Covel excels in explaining how the system works and describing "second-generation" Turtles like Salem Abraham, who built his trading business in rural Texas. Most beat-the-market books aren't worth my shelf space. This one is.

Harry Markowitz Interview

November 20, 2007

I interviewed Dr. Harry Markowitz at his San Diego area office yesterday. In Las Vegas now to talk with pro poker players.

The Singapore Straits Times - Bestsellers List

November 19, 2007

"The Complete TurtleTrader" just made The Singapore Straits Times top 10 bestselling list for non-fiction for the 4th week in a row. Still not sure how that demand got stirred up!

1. (1) The Secret by Rhonda Byrne
2. (2) English As It Is Broken by The Straits Times
3. (3) The Age Of Turbulence by Alan Greenspan
4. (4) Marley And Me: Life And Love With The World's Worst Dog
5. (5) Think Big And Kick Ass by Donald Trump and Bill Zanker
6. (6) The Complete TurtleTrader by Michael W. Covel
7. (7) Mother Teresa: Come Be My Light by Mother Teresa
8. (8) Feng Shui For Apartment Buyers by Joey Yap
9. (9) I Can Make You Rich by Paul McKenna
10. (10) Why We Want You To Be Rich by Donald J. Trump

Casting Call for Film

Film project underway.

College Football Polls Aren’t What You Think

November 17, 2007

An interesting read that gets one into "numbers".

When a Pack of Cigarettes Costs $222

Kip Viscusi, who teaches economics and law at Vanderbilt Law School, has written widely and well on the risky choices that people make, especially smoking.

The Buffett System

One system? Buy after Buffett buys!

Research Behind the Book "The Complete TurtleTrader"

November 16, 2007

One of the projects I am working on? Figuring the best way to bring the vast amount of research that went into my new book to the public. The audio alone is dozens of hours. Then there are emails, articles, research, etc. which all helped bring the book to life.

Documentary Film Screen Shots: Putting It All Together

November 14, 2007

Some screen shots from the film I am producing:

Bill Miller
David Harding
Salem Abraham
Eric Bolling
Larry Hite
Lindsay Campbell
Michael Mauboussin
Congressman Baker

A Film

As I have mentioned I am producing a film documentary now. Shooting started in August. Who have I interviewed so far on camera for the film?

Larry Hite
David Harding
Charles Faulkner
Bill Miller
Eric Bolling
Michael Mauboussin
Barry Ritholtz
Peter Borish
Salem Abraham
Vernon Smith (Nobel Prize winner)
Mark Mobius
Kevin Bruce
Congressman Richard Baker (R)
Congressman Chris Van Hollen (D)
Rich Blake
Lindsay Campbell of Wallstrip.com
Harry Markowitz (Nobel Prize winner)
David Harding

Futures Magazine Review of "The Complete TurtleTrader" by Bob Pardo

Bob Pardo reviews "The Complete TurtleTrader" in the December issue of Futures Magazine. An excerpt:

Suffice it to say that Covel’s speculations about the significance of Dennis and the Turtles are interesting and ones with which I agree. He suggests that Dennis and the Turtles established a milestone in trading and not only established systematic trading as respectable, but set the bar rather high. The simple truth is that Dennis and the Turtles accomplished something that had never been done before and at a very high level of quality and success. Read the book. There are some interesting trading “pearls” to be had in this book. They are not identified as such, but they are there nonetheless. Enjoy it. I did.

Trader Monthly December Issue Featuring "The Turtles"

The December issue of Trader Monthly has several Turtle related articles including this one (PDF) I authored that covers Richard Dennis to Jerry Parker to Salem Abraham. Beyond the magazine readers may find the contrast between Jerry Parker and not successful Turtles even more illuminating. The first link is a trading presentation by Parker. The second link is a self-produced political video by a Turtle who doesn't trade. The two presentations are a great illustration why some Turtles made it and why some did not. Bottom line, twenty years after the ending of the Turtle experiment it is Jerry Parker, the most successful Turtle, who provides the winning trading lessons.

NYC Interviews

November 12, 2007

In New York City for two days of shooting now. Six interviews total for this particular two day shoot. Details to follow.

Chinese Toy Import Hysteria

November 10, 2007

Come on. China is huge. It is diverse. However, isn't America not reaching a point of hysteria when all you hear coming from US media are stories about "Chinese toy problems"? If the average American visited China they would see far more going on than the silly media portrayals of Communists making dangerous toys for American kids. American is quickly becoming protectionist in a world that could care less. There is too much capitalism outside the US and they don't need our permission to make money. Toy problem? The buck stops with the company who sells the toys in the US. If they sell bad toys, they are responsible.

Impulse Control

Got impulse control? Will we as humans ever graduate?

Except in One Career, Our Brains Seem Built for Optimism

Except attorneys where "pessimism is considered prudence", our brains are mostly optimistic. A nice read in the WSJ.

Road Trip

13 days on the road shooting for a film documentary has made regular and interesting posts difficult. We finish shooting at the end of November.

The Cycle

The Bernanke cycle.

Mark Mobius Interview

November 08, 2007

Before I spoke today at an event in Macau (China), I was lucky enough to land a quick interview with legendary Asian investor Mark Mobius. For those with a memory a few years back I am sure Mobius' commercials will ring a bell. While we only had a few minutes on camera he brought making money back to the basics: psychology. Understanding the market psychology and your own psychology was his message.

Embrace China

November 06, 2007

From the AP:

Former British prime minister Tony Blair said on Monday that the world must pay attention to the rise of China and try to understand the Communist state in order to build alliances with it.

Will the West ever get past the "fear"? I am in China (Macau) right now. This place is exploding. Everyone here appears excited about business. EVERYONE is a capitalist. What is there to understand? How come The Venetian (and Sheldon Adelson) understands it, but the former PM of Britain doesn't get it? Enough politics. China is here. They are an economic engine and they are not slowing down. If you can't get that, well, you are going to miss out on some severe investment opportunities in the years to come.

The Catastrophist View

November 05, 2007

What would it take to send the U.S. economy into free fall? A doomsday primer. Be very afraid (or something like that)!

Macau Proxies?

November 04, 2007

I am in Macau, China for the first time right now. Question to readers out there: what markets/firms would be good proxies as trading vehicles for Macau? The construction underway here is wild.

Cole Wilcox of Blackstar Funds added:

Major US Casinos developing operations in Macau:

WYNN
LVS
MGM

Hong Kong Listed Macau Casinos:

MPEL

Galaxy Entertainment Group, 2/3 owned by K Wah International Holding, first Hong Kong listed Macau casino.

Chinese Construction:

K Wah Construction, listed for trading in Hong Kong.

Singapore Gives Continued Approval

I posted a note about a bestselling mention for "The Complete TurtleTrader" in the Singapore Straits Times about a week ago. It has now moved up one notch! Of course humility is key here as these rankings never last. As a side note I find it interesting that my book is not yet in the stores in the UK (I checked last week), but clearly it must be available in Singapore. The latest rankings:

Straits Times Bestsellers List
As of 28th October 2007

Non-Fiction
1. English As It is Broken by The Straits Times
2. The Secret by Rhonda Byrne Greenspan
3. The Age Of Turbulence by Alan Greenspan
4. The Complete TurtleTrader by Michael W. Covel
5. I Can Make You Rich by Paul McKenna
6. Marley And Me by John Grogan
7. In My Time by Mr Miyagi
8. Mother Teresa: Come Be My Light by Mother Teresa and Brian Kolodiejchuk
9. The Innocent Man by John Grisham
10. Handbook For Stock Investors by Goh Kheng Chuan

Give Me Some Fear!

November 03, 2007

A nice piece from the author of Freakonomics. Thinking in real numbers is not a human desire, the fear numbers are too good to pass up!

Grady Harp Amazon Top 10 Reviewer

November 01, 2007

Grady Harp is one of Amazon's Top 10 reviewers. His review of my book "The Complete TurtleTrader":

Michael W. Covel has managed to master the art of writing about the stock market, namely the story of the infamous 'Turtle Trader' group, by including all the 'in-house' information and language and statistics while adjusting the significant bit of history into a narrative that reads like a novel. For the reader who knows little about the stock market and the means by which it trades and responds/creates the economic climate of this country, this book is a fascinating insight into an actual experiment where it was proven that financial wizards are not necessarily born ('nature') to their wealthy destiny, but instead can be ordinary people (yes, like us) who can be 'nurtured' by wise teachers to learn the ropes of the sacrosanct.

Covel seduces us in his well-written Preface: 'People do have a chance to win in the market game, but he or she needs the right rules and the attitude to play by. And those right rules and attitude collide head-on with basic human nature.' And there he has us, as neophytes, well in hand into exploring his well documented, thorough, and (most important for neophytes) well written book THE COMPLETE TURTLE TRADER: THE LEGEND, THE LESSONS, THE RESULTS. What follows is a fine background of two big, philosophically disparate money men - Richard J. Dennis and William Eckhardt - who created the Turtle Traders in 1983, a group of men/women who responded to a newspaper ad, coming from widely different backgrounds, and learned the basic rules of trading and investing using the money of the mentors. How they did this and the success they achieved proved conclusively that learning to become wealthy in the money market CAN be learned.

To make this book interest sustaining in nature, Covel identifies the Turtle Traders and follows their group and individual histories in a manner that approaches a screenplay. We get to know them, feel their development, learn of their power plays that result in monumental gains and equally huge losses, and in doing so Covel personalizes his data, adding the follow-up history of this select group to bring a since of closure to his well researched book. And for a book about something as potentially obtuse and foreign to the market-challenged reader, Covel has succeeded in making a page-turner! This strongly written book should be in the library of every person who deals with the Wall Street life, but it is also a tantalizing insider's look at how the mystique of the money baron bubble can be popped!

Grady Harp, November 07

David Harding Interview Today in London

I interviewed David Harding of Winton Capital for my upcoming film documentary today. Harding runs the firm Winton Capital. His firm started 10 years ago with 10 million under management. Today his firm manages over 10 billion. Before Winton Capital Harding helped start AHL (now Man).