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

The Grim Reaper

April 30, 2008

Whack!

A Reader

Of course its a fake, but I wonder who exactly had the Photoshop time to make it and why?

Looking for the Man Behind the Curtain Is Perilous Work

April 29, 2008

From Trader Daily's ear to the ground comes a list of questions posed to guest John D’agostino (a former Nymex executive) from FOX's Bill O'Reilly:

Now, who's driving [the price of gasoline]?

Somebody has to put the $125 a barrel on the barrel. WHO does it?”

Bill, come on, you can't be serious?

Art Collins Interview for "The Complete TurtleTrader"

April 28, 2008

The following links are an interview I did with Art Collins about my book "The Complete TurtleTrader". The interview appeared in TradersWorld.com:

Part 1
Part 2
Part 3
Part 4 (4-page PDF version)

That interview took place July 2007 even though the publish date was Spring 2008. Thanks to Michael Martin for spotting the interview and reminding me!

Embrace Failure

April 27, 2008

Consider: "Like public speaking, failure is not inherently bad. We’re conditioned to avoid it, but there are plenty of reasons to change our perspective. Here are nine advantages to failing."

$600?

April 26, 2008

This whole concept is a joke. I am for less taxes, but this is pandering.

Jeff White Review of "The Complete TurtleTrader"

April 25, 2008

Read.

Prenuptial Agreement with the Market

April 24, 2008

At the panel I moderated today in Paris Peter Borish put the concept of a stop loss into terms everyone can grasp. He called it a "prenup" with the market. You have to know your downside, his simple but crucial point.

Paris Panel on April 24

April 23, 2008

I am moderating a panel on Thursday in Paris at TradeTech. The panel includes Salem Abraham and Peter Borish.

Head in the Sand

April 22, 2008

A reader writes:

This post is a complete contradiction to everything you write about on your site. Automated systems don't have character - objective. They are specifically designed to override human weakness and character traits - subjective. Are you losing it Mike? Loll! Best regards, Vince

This reader missed the point. A system does not override "human weakness and character traits". An easy example can be seen in the comparison of three individuals profiled in chapters 11, 12, and 13 of my book "The Complete TurtleTrader". Those chapters outline winners and losers. This reader apparently missed these chapters or just did not get the message. If the system was the only issue that mattered then why did some Turtles fail? Failure by some Turtles started with human weakness (character trait issues). Those kinds of issues can be overcome, but not if you avoid admitting their existence. So yes, a system is critical, but as those three chapters in my book point out there is more at play in the long run then just saying: "I got a system".

"We Don't Need Your Stinkin' Analysts"

Read.

Point Blindness

April 21, 2008

A recent academic study (PDF) on point blindness:

Millions of Americans pay attention to US stock market news. They get this news from many sources. Print outlets, 24-hour news networks, and thousands of websites provide scores of financial reports. Many of these reports focus on the rises and falls of major stock indices. As Robert Shiller puts it, “Nothing beats the stock market for sheer frequency of interesting news items.” One reason for increased attention to the stock market is a dramatic shift in responsibility for the post-work well being of American workers. Part of the shift is from employers to workers. Participation in defined benefit plans (e.g., pensions) has dropped significantly over the past two decades while participation in defined contribution plans (e.g., IRAs, 401(k)s and 403(b)s) has skyrocketed. A parallel shift from government to workers is also occurring due to growing doubts about the extent to which Americans can count on Social Security for retirement income. As the 2007 Annual Report of the Social Security Administration states: “The financial condition of the Social Security and Medicare programs remains problematic; we believe their currently projected long run growth rates are not sustainable under current financing arrangements. Social Security's current annual surpluses of tax income over expenditures will soon begin to decline and then turn into rapidly growing deficits as the baby boom generation retires.... The longer we wait to address these challenges, the more limited will be the options available, the greater will be the required adjustments, and the more severe the potential detrimental economic impact on our nation.” Where recent generations looked to employers or government for post-work guarantees of income, younger and middle-age workers have a different future ahead. Their future financial security is more likely to depend on their own and others’ investment decisions. As a result, what Americans believe about the stock market is important – not just to their own financial futures but also to governments and others whose assistance will be sought if scores of people make bad investment choices simultaneously. For these and other reasons, the conclusions Americans draw from stock market news have important implications.

A complicated way of saying to turn off Cramer.

TV Weather Predictions? Wait Till Friday

An inexact science for sure.

Character Counts

I had a conversation today with a trader featured in my first book. The subject that came up? Character. We both shared stories and anecdotes about the importance of character for those people who find true success. We also talked about a known "name" in the Wall Street world who has achieved very little success primarily due to a lack of character. The concept runs deep. You can't fake it in the long run and it is the true dividing line between winning and losing.

Christian Baha on Managed Futures

April 20, 2008

A recent Hedgeworld interview with trend trader Christian Baha.

Complication for the Sake of Complication

Instead of doing all of this, why not just follow the trend?

A Man Who Can Swing

April 19, 2008

Manny Ramirez' career stats mean zilch if baseball is not your game. But for those who played or for those who are fans those are mean numbers...

Cool Photo

A long time trend follower updates his crib.

Jesse Livermore

A reader forwarded a PDF copy of a very old Jesse Livermore title. Worth checking out to see relevance for today.

David Harding Article

An interesting article in Trader Monthly about trend trader David Harding of Winton Capital.

Richard Dennis on Computers

An excerpt of an interview with Art Collins and Richard Dennis follows. First the question from Collins and then the answer from Dennis:

Q. How hands on are you behind the programmers? Are you standing behind them explaining exactly what you want optimized, etc?

A. I spend most of my time talking to programmers and waiting for results. I've been working with most of these people for 20 years so I•m able to get into that intermediate zone between computer-ese and real English. I call them up and say here's the idea in English. Here's my idea of how it would go in the program, but you're the guys who are going to have to decide that ultimately. It's actually quite an adventure because a good programmer will get the first iteration wrong half the time.

Google Black Box

Barry Ritholtz brings up the notion of Google's black box and how it might affect the firm's fundamentals. For me it is further confirmation as to why the only real thing you can know is the traded price each and every day.

Happiness and Money

April 16, 2008

Can money buy happiness? Watch video.

Don't Jump Yet

April 15, 2008

Read.

La Mere Vipere and the Turtles

La Mere Vipere, often called the world’s first punk dance club, opened in Chicago in 1977. It subsequently burned down in 1978. At that bar not yet a Turtle Lucy Wyatt met Richard Dennis' brother Tom Dennis (also a trader). There is a very good chance the Turtle experiment would never have happened if not for that random chance encounter between Lucy Wyatt and Tom Dennis (more on that to come). And that chance encounter surely included the Sex Pistols' Johnny Rotten belting out at least once that night "God Save the Queen".

More for those Sex Pistols fans out there.

Jim Rohrbach Video

A good video from James Rohrbach. Keep it up Jim!

When Do You Get off the Ship?

April 14, 2008

Feedback in:

Hi Michael! This is not a response to anything in particular. It may even qualify as a rant. The idea below keeps popping up in many settings and I don’t get it. Maybe you can explain why it makes sense or why it persists when it doesn’t. The idea is the “price target”, as in, “Sell the stock when it reaches your price target”. A common way to create a price target is to estimate what the P/E ratio should be or will be, and estimate what earnings will be. Then, multiply these two numbers to get the target price. Thus, this number is the product (both literal-mathematically and figuratively) of multiplying a guess by another guess to end up with a number that is believed to be significant and should govern your trading. So, if I have a stock that is heading up like a rocket leaving the launch pad, I’m supposed to dump it because it reached some analyst’s price target? Regards, Chuck Cain

Another Turtle Interview

April 12, 2008

I had the opportunity to spend four hours tonight with Turtle Lucy Wyatt Mattinen in Reston, Virginia. While we did not speak for the hard cover edition of my book, Wyatt Mattinen's interview added great detail for a new Afterword that will appear in the 2009 paperback edition.

Decipher?

April 11, 2008

Can anyone decipher this for me? I can't tell where he is trying to go exactly. My (2) books, as but an example, don't cover traders with "uncertainty of exit schemes".

One reader writes:

Hi Michael, I read the article you linked to and was thinking it was another mathematician over-optimizing everything in sight, then I read the date it was published - 1st April 2008! So I guess it's a case of take your pick really....Matt

Minyanville Review of "The Complete TurtleTrader"

April 10, 2008

A review of "The Complete TurtleTrader" from Quint Tatro of Minyanville.com. He asked the rhetorical question: "What books did you read during 1Q?"

Consistently soaking in knowledge is a must in this profession and as you grow your desire for outside literature should increase. This past quarter my reading was hit or miss. I read about five trading/investing books and four out of five were garbage. The following was the only one worth mentioning: "The Complete TurtleTrader": This was a great read by Michael Covel and delved into the depths of the Turtle strategy which, in a trending market, correlates with my style quite well.

Bubble Watch

Cramer is the man.

Ed Seykota: The Whipsaw Song

Ed Seykota's debut on YouTube is a memorable one. Enjoy his trend trading tale "The Whipsaw Song":

I still find Ed Seykota to be the most perceptive person I have ever met.

Turtles for 2008

April 09, 2008

The Turtles that still publicly trade have returned these performance numbers over the first 3 months of 2008:

Jerry Parker: up 11%
Liz Cheval: up 17%
Tom Shanks: up 37%
Paul Rabar: up 13%
Howard Seidler: up 28%
Bill Eckhardt (Dennis' former parter): up 14%
Salem Abraham (second generation Turtle): up 13%

No assurance it will continue, as they can be volatile, but the numbers are the numbers. And they are numbers people don't expect when the nightly news and CNBC are yelling something quite different 24/7.

Profiting in Bad Times

From Bloomberg:

Mulvaney Capital Management Ltd., a $127 million managed futures fund based in London, rose 57 percent in the first two months of 2008, the most recent data available. The same program was down 33 percent in July and August. "This time the boot is on the other foot," said Colin Lloyd, head of investor relations at Mulvaney Capital. "For a systematic manager one of the greatest difficulties is to resist the temptation to say the world has changed and start recalibrating the model." Managed futures suffer their worst performance when markets suddenly reverse, explaining why some funds gave up gains in March when crude oil, wheat and gold fell from highs. David Harding, one of the original partners in AHL, said an "agnostic" approach to investing often has critics ready to pounce. "Most people believe it doesn't work, or it did it soon won't work," said Harding, founder of Winton Capital, which oversees $13.6 billion. "We almost never do anything based on our opinions. If we do, it's based on opinions about mathematical phenomenon and statistical distribution, not opinions about Fed policy."

Mulvaney and Winton are both systematic trend traders.

From A Spring 2008 Graduate

April 08, 2008

From a reader today:

Hi Mr. Covel, I have been meaning to thank you for a while now, and because I just found out that a friend of mine at [College Name], [Name], is a family friend of yours, I am finally doing it. This past summer, I was at the bookstore and came across your first book, Trend Following and I really liked it. I started reading your Blog, and later subscribed to your Podcast (I went back and listened to every single Podcast you have made). I also picked up the Complete TurtleTrader. All the knowledge that I acquired from your material helped me a ton with my Finance interviews this past Fall, and ultimately helped me land pretty much my dream job (Assistant Trader at [...], which is a proprietary trading firm/hedge fund in New York; I will basically be getting paid to learn from professional traders for 2 years). At my interviews I was able to talk about trend following and the idea of buying high and selling higher and shorting low and covering lower (which obviously goes against what I had previously been exposed to). Who knows if this ends up being the foundation for my trading philosophy (I will be trading equities, so chances are it may not), but it was your engaging and easy to read books that got me thinking about different types of trading philosophies. After learning about trend following, it was my natural inclination to learn about the other side of the spectrum as well, and so I also bought Victor Niederhoffer's books and read his Daily Speculations blog. In the end, I know that if I am going to be a successful trader, I am going to have to find my edge on my own, but reading and listening to your words has been a huge benefit for me. I know it is often a challenge for people to break into finance without really knowing anyone, and I really believe that I may not have gotten the job I got without your work..Thanks a lot for the time. As long as you keep putting out new stuff, I'll be reading and listening! Take care. Best, XXX

A random world separated by often far less than six degrees!

Wisdom from 1974

April 06, 2008

Barbara Dixon, a student of master trend follower Richard Donchian, writes in 1974:

Technical Analysis is based on market action, or price. The theory derives from basic economics. The price of a commodity at a given time is determined by the supply, the demand, the general economic outlook, the weather, the political climate, the optimism or pessimism of the population, and other factors. The technician looks only at the price, since by itself it represents one side of the equation and thus encompasses all the other inputs. The technician mentally substitutes the words “buy” for demand and “sell” for supply. Thus, when corn increases in price, the technician says that buying – demand – is increasing and that the price is going up. The trend follower makes no attempt to forecast the extent of a price move. His basic tenet is that once a trend begins, it has a tendency to persist in the same direction for some time. He devises precise rules to determine what, to his mind, constitutes a trend and identifies the situation when a trend has finished or reversed. He then further disciplines his thoughts into a strict set of conditions for entering and exiting the market. He acts on these rules (his “system”) to the exclusion of all other market factors. In so doing, a trend follower removes, hopefully, emotional judgmental influences from his individual market decisions.

Not exactly dated wisdom!

Freakonomics Guys Also Ask "Why"

A question I have been asking on a redundant basis for over 10 years.

Interviews

April 05, 2008

Someone asked the other day about hedge fund managers and or traders who I have interviewed who I have not spoken extensively about. A partial list includes: Grant Smith (Millburn Ridgefield), David Harding, Toby Crabel, Bernard Drury, Peter Borish Michael Clarke and Christian Baha. Many of their insights will be in my third book.

A Veteran View of "The Complete TurtleTrader"

April 04, 2008

Feedback in from Jack Zaner:

Michael: during the four decades that I have traded, I have read hundreds of books on the subject. After reading yours for the second time, I place it easily in the top ten. My personal fascination, having selected CTAs for some of the earliest public pools, is with those Turtles (and trend followers) who persevered to become incredible successes. You have told a bold story that is instructional at the how-to-do-it level as well as one which challenges the reader to fire up his own ambitions to exceed his trader's grasp. Congrats and keep writing. Jack Zaner

How Goldman Sachs Secretly Destroyed Bear Stearns

April 03, 2008

The piper comes calling if you play with fire.

Politicos Will Bring Energy Prices Down!

April 01, 2008

Now this will cause gas prices to drop for sure! A dog and pony show...