Turtle Bust: Learn A Lesson

A few years back a former pupil of Richard Dennis started touting his new money management firm. This man (who we will call “Bob”) had never traded for profit except while under Dennis’s guidance, so his nearly 20 year absence from the markets was greeted mostly with a yawn by the investment community. Nonetheless, “Bob” hooked up with a less than savory broker (who was fined shortly after the fund started) to raise money and started touting his trading prowess in chat rooms.

“Bob’s” firm started their track record in Spring 04 and got up to $800,000 under management from client additions. Yes, even with a resume that connected with Richard Dennis, less than a million dollars was all that could be raised. At the end of July 05 that number was down to around $300,000 from a combination of extremely poor performance and hasty client withdrawals. Uh oh.

Of course, the markets have been up and down, but compared to his peers “Bob” has seemingly blown up. How can this happen? If you have all the trading rules in the world, but you are sloppy, lazy and a poor businessman with many failures behind you, trading failure is not exactly a surprise. I am still amazed that some people think that trading rules will repair poor character.

Interestingly, I had met “Bob” before, so none of this was unexpected. As one hedge fund associate commented to me recently, “I saw [his] recent numbers….game is over.”