Michael Covel’s Official Site

Warren Buffett has once again debated the value of hedge funds. True, not all funds are created equal, but there are no doubt many funds that beat the averages and in some instances by wide margins.

I recently saw a comment (intended to be negative) that “The Complete TurtleTrader” was about traders not trading. Putting aside for a moment the validity of that statement, the point and or distinction of it is?

A review on Amazon of my new book by Stephen B. Aust is titled “It Made My Brain Hurt”:

I really, really, really wanted to like this book. I pre-ordered it, but wish that I had just sat in a bookstore to spend the 60 minutes that it took to read it. Then I could have invested (the money that it cost me to purchase it) in the markets instead. The book contains the “legend” and a little on the “results,” but not much substance on the “lessons,” so what is the point? This book was a real disappointment.
I keep reading how poorly the “turtle traders” are doing in the current markets…massive losses.

The facts of what is in my book don’t mesh with Aust’s view.

This post drove this feedback:

Mr. Covel: Can’t pass this up. Indeed, I understand the concept and use of analogy. Use it myself now and then. I thought the story on Depend(s) simply was not constructive. My initial reaction was that, not unlike a good many other situations, the person who received the largess from P&G or whoever, may have, to put it very gently, been exploiting a situation. To people I know, I would be more blunt, and say rip off. But I am neither suggesting that or even saying that.

The flip side of your position might place blame on the decision-making of an entity that should have known better. Exploiting a situation is the nature of capitalism. Same thing in the markets. You seem to be placing a moral view on my action. Your argument would be akin to blaming the winning side for the losing side’s losses in a zero sum game.

A recent podcast brought in:

I am insulted by the language that you use [here}. I found you unprofessional. My wife was ashamed to hear your message. If you can't speak proper English then how can I trust your trends? If you wish to continue gutter language then take me off your e-mail [list]. If your next message is some of the same then I will e-mail all my friends and tell them what I am hearing from you. I am retired and teach young men at risk and they do not [sic] us your language. Gene A.

Gene needs a dose of the real world! I did enjoy his red herring of connecting foul language to the veracity of my statements regarding trend following. Bad logic.

I posted this podcast the other day. A critic on the web offered:

The 2 minute expression by Covel is a very poor statement about a topic. There are many many things that he does not know about trends. These things I mention are facts….facts about trends. If you have heard Pring speak, he is in the same boat as Covel. When you sit in a session on trends with Oliver Velez, you will come to see a similar vagueness about trends, particularly in the area he avoids addressing: their beginnings. Prentice Hall representatives, Covel’s publisher for his trend compilation, both in the financial department and the editing department, feel that there is still a lot left to be desired as well. Do not expect anyone to make sense of the snippet. Covel is not in a position to admit anything. Do get that straight. Covel is never going to be able to assign utility to trends. Covel cannot do that in any way. You are missing a lot. That is just the way it is in your realm or space. Read the Abstract of Magic Numbers in the DOW, Batchelor and Ramyar, Septembr 2006. The research examines the length and duration of successive trends in the Dow Jones Industrial average. This is research on a subject. The subject to be researched has to exist. It is possible that the subject of their research doesn’t exist as you think Covel suggests. For people who make money using trends, they usually, over time become more knowledgeable, skilled and experienced. The mathematical representation of trends is a broad and exacting science. There is almost no more effective, efficient or optimal utilization of any financial representaion [sic] of markets than the mathematical representaion [sic] of trends. If Covel, Pring, Velez, Batchelor, Ramyar, Steenbarger or you ever got to see the mathematics related to trends it would make absolutely no difference at all. That is just the way it is. John Netto wrote a book that deals with trading to make money. 55 bucks when new. Now a used copy goes for up to 200 bucks. The book has trading information in it from a trader who knows how to trade. There is bullshit out there all over the place. And there are facts and science and coded software that defines things very accurately and correctly and in such a way that money can be extracted to the extent that the market offers. Some people can figure things out. Some people write about things that they have heard of. Some people cannot understand what others have figured out and there is little chance that any understanding can be found by anyone who is trying to understand a person explaining or reading something that the author has just heard about. Covel is missing just about everything on trends. You are worse off; you are missing what Covel is telling you he is missing.

I feel like I just listened to Brando’s character Colonel Kurtz in Apocalypse Now.

Philip J. McDonnell, a critic of mine, offers this piece about me in one of his recent comments. Not sure what he is illustrating with his comment though (I don’t profess to be mathematician). Decades of trend trading performance was made up by me? All trend traders are lucky? That said, I welcome the interest.

Emma Humbert wrote a review of A Demon of Our Own Design recently on Victor Niederhoffer’s site:

I have a problem with this book, A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. It irritates me to no end that Richard Bookstaber made his money first at Salomon Brothers and then at a major hedge fund that goes out of its way to block hedge fund regulation of any form. His career and fortune was made working at firms that use a lot of leverage and highly complex investment strategies to make money. And he was in charge of risk. But now that he has become a long/short equity manager, a relatively simple strategy that does not require much leverage, he is saying leverage and complexity are bad things. I find the whole thing a little disingenuous. Which is not to say the author does not make some valid observations.

From Warren Buffet’s annual conference:

The “Sage of Omaha” has said repeatedly he is in fine health and does not want to retire. However, uncertainty over who will succeed the 76-year-old investor upon his death has weighed on the share price of Berkshire, the US insurance-to-clothing conglomerate he has built. Mr Buffett, Berkshire’s chief executive and chief investment officer, wants the next generation of leaders to split the roles. He has said he has three, unnamed, internal candidates for the chief executive position. During the meeting, Mr Buffett criticised the “electronic herd” of hedge fund managers, saying their fast trades in and out of assets were a “fool’s game”.

I find it hard to call Jim Simons a fool, who seems to fall within Buffett’s criticism. But frankly, I am not sure what Buffett means by in and out. He may be criticizing holding periods of 6 months as in and out. Or to him a one year holding period could be in and out. How can you call the hedge fund managers who produce billions in profit every year, not trading like Buffett, fools?

I have had my share of critics. There are those who don’t like trend following trading. There are those who don’t like the fact that TurtleTrader.com was even started and has become a great resource for thousands. I have met and talked with many of these people. Some are stand up people with differing opinions, some live in a world of deception. A few of the latter are somewhat well known.

That world of deception is something I have come to know more about in the last 6 months. Specifically, the deception of email and chat forum posts. Consider that last fall on the same day I received (2) emails. One was from a supporter and a considered friend of mine for years. The other email was an anonymous attack email telling me how dumb I was. Fair enough. One good email, one bad! That’s life. Ah, but here is where it gets interesting. Those (2) emails, both sent from Yahoo email accounts, had the same IP address. It was the same person.

Then in the last few months, unrelated to the case above, I started noticing chat forum posts offering agenda type criticism. There seemed to be (2) people leading the charge. One of critics was from a “name” known in some small Wall Street circles, the other was an anonymous alias. The named critic heaped on the negatives from his perspective and so did the anonymous critic. However, the anonymous critic with the alias was VERY praiseworthy of the other critic who was using his real name. It all struck me as odd since they sounded like the same person. The two chat forum posters were one in the same. They were posting under the same IP address.

In a past life I was a baseball catcher. On the baseball field we had a way for dealing with people like these. It was called a fast ball high and tight, and if they got hit, well, that was the point.

One of the best quotes about internet chat forums comes from David Silverman in an issue of Stock, Futures and Options Magazine:

Just as they did in the pits, traders continue to trash-talk, deceive, manipulate, confuse and lie. What I was told so many years ago remains fresh today, and anyone who does not understand this and totally relies on the information they read in chat rooms may get eaten alive. That the Internet is being used to pass misleading information about the markets - and thousands of other things - comes as no great shock, but what I realized as I read one bogus posting after another, is that the anonymity the medium provides can make chat room lies far more insidious than any ever told in the pit. On the trading floor, market professionals, fully aware of the rules of the game, aware of the stakes involved, and able to look any trader in the eye to help determine the degree to which the truth might be shaded, needed protection only from the egregious lie. In chat rooms, by contrast, where the naive and uninitiated congregate with the potential hustlers and con men, it is no fair fight. Anonymity fuels the liar’s sense of invincibility, and often statements are so bold and outrageous it’s amazing anyone takes this nonsense seriously.