Michael Covel: News & Info.

Kevin Bruce is one of the traders who appears in my documentary film. He is a great story.

As with all trend trading systems, the reversal, the next drawdown, always arrives. July was a bad month for trend following traders. Oil going down either forced exits and or the taking of new short positions (either of which meant a give back in profit). Guess what? This is normal. Many might hear this bit of news and say, “that’s bad news, I will do something else with my money instead.” That would be a mistake. If you approach trading not expecting to have losses, if you approach trading not being able to take a loss…you will lose. That is guaranteed.

These days many people cringe when the Dow is down hard as they are only “long only” and are stuck with no knowledge of what other steps they can take. The nightly news programs then reinforce the end of the financial world offering solutions like “stay the course and hang in there” (while some of these people go broke). But some people are making money. For example, David Harding’s Winton Capital is up +18% so far in 2008. Bill Dunn’s Dunn Capital is up +37% so far in 2008. Christian Baha’s Superfund is up +31% so far in 2008. Salem Abraham’s Abraham Trading is up +14% so far in 2008. Those are but a few examples of traders doing well. And by and large those traders are all trading trend following strategies.

From Yahoo Finance an educated view:

“For the time being it’s what we call corrective. … It’s a profit-taking pullback that could still be followed by fresh highs down the road,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. Ritterbusch said Tuesday’s decline may have gained added momentum when computer models used by large investment funds automatically sold oil contracts once prices fell to a pre-set threshold. “A significant part of it’s technical,” he said of the day’s trading. “A lot of these funds don’t watch supply and demand fundamentals.”

I posted this recently on author Alexander Elder. A response to that came in from a reader

The Turtles, if I read your book correctly, were winnowed down out of about 1000 applicants, and given a two week or whatever intensive tutoring, and watched over like hawks. Most traders, investors, or weekend punters, do not have the advantage of intensive training by the turtle trainers, or by a Warren Buffett , for that matter. Possibly Dr. Elder’s advice is more in tune to the “working man”.

The working man. What a term. What a silly term! If you make too much (whatever that number is exactly) you are no longer working? As for the Turtle view presented above clearly this reader only made it through certain parts of my book “The Complete TurtleTrader”. He only absorbed the parts that buttress the view he wants to have. How can anyone read Chapter 11, 12 and 13 and come to his view?

I received an email from Turtle Tom Shanks today that adds more “color” to the story:

This is mainly a clarification of the fourth paragraph on page 33, beginning “Shanks and Svoboda . . .”. This is a fuller account, to the best of my recollection, that you may use any way you see fit:

I first met George [Svoboda] in San Francisco, through Blair Hull. George had a brilliant way of getting right to the core principles of any subject he approached, and he was investigating trading at the time. He quickly learned of Blair’s prominence in the field and flew to San Francisco to meet with him. I was working for Blair (had met him through Blackjack), and Blair knew that George had an extensive blackjack background as well. Since we all had that in common, Blair invited me to join them for lunch. I don’t remember much about that meeting, but a couple of months later Blair sent me to Chicago to research sources of commodity price data that he could add to his Options Research service. During that trip, I ran into a friend of mine named Ron Cohn, whom I had known in San Francisco. I had no idea Ron was working in Chicago; he walked into an office I was in to drop off some keys at the end of a project he was doing for the company, we recognized each other and decided to have dinner that night. I knew George was in Chicago doing more research and I didn’t think he knew anyone socially there so I called George and invited him to join us. We went to a Greek restaurant, I remember, and during the catch-up conversation, I learned that Ron had applied to the first C&D ad that had run the year before, which is the first time either George or I had heard of that opportunity. I returned to San Francisco, looked up the ad in the file of old WSJs we kept, procrastinated for a while and finally applied. After I got the application package, I phoned George to discuss it. In his inimitable way he had cut right to the heart of the matter and told me that he had gone to the library to research RJD to get an idea of how Richard might like to have the questions and essays in the application answered. I thought that was a great idea and did the same in SF. There were 20 interviews granted that year, two a day for two weeks. George and I were scheduled on the same day, he in the morning and I in the afternoon. The rest, as they say…Hope you are well. Best, Tom

PS: In the next paragraph, there is a reference to Dingo boots. There never were any Dingo boots. The boots we used were all made by hand by a Mexican shoemaker in San Francisco. The essence is correct, however: I was tired of boots

Thanks Tom.

Mark Walsh, a second generation Turtle I mention in my book, has an annualized return of 23.72% since September 1985. Those are nice numbers for a style of trading that doesn’t work!

A recent article published in Australia’s Compare Shares.

A nice piece on Salem Abraham by Gail Osten in SFO Magazine.