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

MF Global Announces $141.5 Million Bad Debt Provision

February 28, 2008

Opps!

The Fed Stays Mum

A perspective I share. That doesn't mean I am predicting anything, but the rate cuts, rate increases and rate cuts have driven the last 6-7 years.

Why Solitary Workers Can Be Faster Workers

An example (article) of something we all have known instinctively, but were probably sometimes embarrassed to admit for lack of "data". I am sure many think they are more productive surrounded by others.

Rose, Rose, Rose

February 26, 2008

Feedback in responding to this recent podcast:

Michael: Oi..vey. You want to go at it again. From December 18, 2007, through January 14, 2008, there was a constant rising trend in the currency pair EUR/GBP, seen on a daily chart, amounting to 497 pips, from the low of the range on the first date to the high of the range on the last date. At that time the pip cost on the spot market was at 2.0 so this was actually a gain of twice the 497 pips, or 994 pips. I routinely review and investigate my log of past trades, and saw this wondering why I did well in this pair over this period, although I did not gain anywhere near the total pips offered. Investigating further, I found reports from Thomson and Reuters confirming that during this period there was information from traders and economists, and other "news", that the BOE would need to reduce their rate, and the ECB would probably stand pat or raise their rate. Ergo, EUR is in demand as against GBP. Would you agree that this is a fundamental reason for price movement,…or not? Despite this fundamental force, I followed what you might call the trend following method, depending on price movement and technical analysis to make the yes or no transaction decision, and time entries and exits. Would you call this "Trend Following"? If not, why? If so, then is this not a blend of using Fundamentals with Trend Following? If not, could you please answer with specific details, and if I am convinced, if I have no further argument, I will admit to you that the two cannot be used together, that they are separate. Michael, it is not nice to call people ignorant as you did in your podcast of February 25th referring to me. I believe you are a very insightful writer and researcher, and I would not at any time call you ignorant although I am sure I have more university degrees than you (including a post grad degree) all from one of the big 5 or 10 universities (as in Harvard, Yale, Princeton, etc.). Now what? Regards, Rose.

A follow-up shortly after:

Michael; I see on re-reading the email I sent some minutes ago that I left out a pertinent fact. I knew at the time of the trades that there was this market force creating the demand for EUR vs GBP, every day I was reading Thomson, Reuters and other news, so I felt I could use the technical analysis backed up by this fundamental market force. I was not trading just from this fundamental scene, but heavily dependent on following the trend. Rose.

Richard Dennis Back in the Day

February 24, 2008

Feedback in tonight:

Hello Michael, I’ve just finished reading The Complete TurtleTrader with great pleasure. I traded on the floor of the Mid-Am from the last few months it was located at the Fisher Building until 1976, when (having made my entire, if modest, living with about $2,000 of capital for a few years) I finally got too worried about possible out-trades (only one of which could have wiped me out) and sold my seat. I was, and remain today, an extremely conservative but fairly consistently profitable trader, by commodities standards. Of course Rich Dennis was something of a legend even back at the old Fisher Building location by the time I’d arrived. It was generally known that he engaged in inter-market spread trading, mostly in grains in those days, since he could then get reduced margins. Then, when Dennis started trading what seemed to be really bizarre inter-market spreads, such as wheat and silver, the old-timers scoffed mightily. But his strategy of buying the stronger of two trending markets had obviously worked - that was clear to anyone who’d been watching his career at that point. Soon after MACE moved to Jackson Blvd,, of course, Dennis moved across the street to the BOT, though he kept his MACE seat for quite some time after that. I well remember the MACE secretary accosting Dennis, who’d come on the floor from the BOT one afternoon after closing, loudly complaining that Dennis never deposited his daily clearing house checks. A few of us gathered around as a slightly chastened Dennis went to his trading desk, pulled open an unlocked drawer, and retrieved something like $50,000 in undeposited checks. He just didn’t seem to pay much attention to his MACE business by that time. At any rate, your book was both informative and entertaining. Thanks! [Name withheld]

Nice piece of insight. Thanks!

Sitting Tight

February 23, 2008

A perspective on behavioral finance.

401K & the Courts

February 21, 2008

I was forwarded this article with this comment:

"Sue because you lost money in your 401k?"

Is that what the article says? I don't read it that way. The suit issue revolves around negligence, not losses.

The Mind of the Market: The Case for Capitalism from an Evolutionary Perspective

February 20, 2008

An excerpt from The CATO Institute (full article and video):

In his new book, The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics, Michael Shermer examines such questions as: How did we evolve from ancient hunter-gatherers to modern consumer-traders? Why are people so irrational when it comes to money and business?

Note: Richard Dennis, father of the Turtles, is still on the CATO Board of Directors. A CATO paper from Dennis.

"Ignore Momentum at Your Peril"

February 18, 2008

Momentum investing in equity markets delivers "striking" and "remarkably persistent" excess returns, according to the most comprehensive study (PDF of article) to date of the phenomenon. Great line from article:

"Every investor we have come across has, explicitly or implicitly, used a momentum or counter-momentum strategy," said Prof Marsh. "[Consequently] people can look like a genius by accident or they can look a fool when they are quite smart.

Note: Full study here (PDF Download). Prior research from Blackstar Funds.

Be Afraid of Your Shadow

February 17, 2008

The background of the author of this article says something about WHO the people ARE who have the ability to SCARE the public. He did break the story where "what happened at one company when a male executive became a female."

Great. Awesome.

Endurance

Dunn Capital has been around since 1974 trading trends. They have endured ups and downs. Their performance.

Subprime Primer Slideshow

A fun overview in the form of a slideshow.

German Translation Book Jacket

February 16, 2008

Here (PDF) is the book jacket for the German translation of "The Complete TurtleTrader".

Alex Spiroglou Review; Appeared in Trader Daily

February 15, 2008

Alex Spiroglou's review (PDF) recently appeared in Trader Daily.

MFA Panel

February 14, 2008

I moderated a panel yesterday at an annual MFA conference in Key Biscayne, Florida. It was an interesting experience to see the disadvantages that traders often face in trying to win institutional investors over to their way of thinking. Most interesting thing heard for me? Apparently some United States Senators, with oversight over the CFTC, are unaware of the term managed futures (primarily trend following traders). With over $100 billion dollars invested in managed futures programs that kind of ignorance is startling.

Dow 18,500

February 13, 2008

Feel like a nice morning prediction for today?

Sadness May Encourage More Extravagance

There are so many psychological reasons why people behave in whatever way when it comes to their money. Sadness is another.

Nelson Freeburg Review

February 12, 2008

Some feedback from longtime industry veteran Nelson Freeburg of Formula Research:

Michael, I just finished reading your fine book [The Complete TurtleTrader]. You are a researcher of great diligence and depth. I admire your stress on the entrepreneurial imperative, distinguishing Jerry Parker and Salem Abraham from the rest of the pack. And you are a fine writer with a gift for the apt turn of phrase. (My favorite passage: “Maybe it is that down-to-earth perspective gleaned from living in handshake country [love that phrase!] that gives Abraham a clear perspective.” I also liked your observation about self-actualized individuals who don’t fear striking out so much as missing any possible opportunity to bat.) One piece of advice from this grizzled veteran…for your next book you should find a copy editor who can do justice to your literary and investigative skills. You are an authentic talent. With best wishes and many thanks…Nelson Freeburg

Buying Opportunity or Short Opportunity?

February 10, 2008

A chart to consider from China. I am not saying it will end like this or this, but it could.

Ad Promoting German Translation

February 09, 2008

The publisher of the German version of "The Complete TurtleTrader" (they titled it "Turtle Trading") sent along an ad (PDF) they are using to promote it.

Euros in NYC City

NEW YORK (Reuters) - In the latest example that the U.S. dollar just ain't what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise.

Warren Buffett

Arabic Version of "Trend Following" Available

February 08, 2008

The Arabic version of "Trend Following" is available.

Craving the High That Risky Trading Can Bring

February 07, 2008

Hmm...

Svoboda Inspiration

Feedback:

I wrote to you in June '07 to thank you for the inspiration received from the Battle at Kruger video clip that you sent with your weekly. This week's piece on Mark Cuban was good also and obviously these two messages are meshed. I wholeheartedly agree with your comment about reinforcement and inspiration when a person looks at the stories of others who have gone before; I need to keep bathing in the positive atmosphere. When I listened to George Svoboda's music I was transfixed. Here's a man that's in flow. It's like I've been given unspoken validation in pursuing (sticking-to-it) trading success and my dream to take up the guitar again some day. I've been encouraged again to keep on the entrepreneurial path in life. One of the keys for me is to focus on how it will be when I get there, rather than what might happen "if" I fail. Words fail many times in describing feeling, but here's another thank you. Rick R.

Six Degrees. Not So Fast

Maybe it doesn't really work.

Milky Way Inflation

February 06, 2008

I am no monster sweet tooth, but I do know today was the first time that I have ever bought a normal size candy bar (not one of the monster ones) and have had the cashier ask for more than $1 dollar. Price? $1.01. Inflation? Prices just about everywhere are rising. So does the Fed save real estate and stocks or curb inflation? And if they sputter around with no real plan, what next? Anyone else have the feeling the ride is just beginning?

Dazzle 'Em with Words

I received a nice note recently from a retired pathologist. Some subtle sarcasm came in today from him:

This week I was at an ice creme shop in a fancy part of town. A visiting hegd fund evaluator sat down next to me and in our conversation he said his approach involved more than metrics on financial performance and included finding out if a firm attended to the business side of the business. This reminded me of the latter 1/3rd of your book which focussed on turtle subsequent success. I mentioned that to the evaluator who knew of your work and the "trend followers". Because he was not a trader himself, I suggested he might find your book well worth the read. He also was concerned about the explosion in volume, variety and interconnected risks in his world. I wondered if we are really in for a rough ride given [what he described of] W.D. Gann's admonition that log rises are followed by severe contraction and Soros's contention that speculative markets tend to always get out of control, lacking reliable self correcting homeostatic mechanisms and credit default swaps daisy chained to India. "Come on." said the retired pathologist as he finished up his cup of rum raisin.

Review from India

February 04, 2008

Vivek Kaul's review from India.

Michael Martin on MSFT + YHOO

February 03, 2008

A take on the proposed mega merger. The YHOO trend was definitely not up!

Black Swan

So was the black swan the Giants win or the Patriots undefeated record until the Giants win?

Now I Am Relieved!

From the campaigns:

I am not anti-Clinton, but I do think this ad is a pathetic distortion of what a politician can really do to affect the economy. It was good to see Obama decline to endorse the idea of freezing rates. Are any Republicans after rate freezes?

The Economics of Repugnance

February 02, 2008

Alvin Roth, an economist at Harvard University, asserts that people don't pay enough attention to how repugnance affects decisions about what can be bought and sold. It is yet another bias under the umbrella of behavioral finance.

Super Bowl Strategy

February 01, 2008

With Super Bowl Sunday festivities ready to kick off, investors looking for a sure bet would be wise to watch the commercials. Buying the stock of publicly traded companies that run advertisements on game day has historically been a recipe for success, say researchers at the University of Wisconsin-Eau Claire. Sure bet?