Busted flat in Baton Rouge… waiting for a train

Not all trend followers are the same and not all stick to their rules.

A few years ago a young guy under the tutelage of a known and famed trend follower (not a Turtle in this example, but I know two Turtles who walked the plank so to speak) started a fund. He raised over several hundred million in assets under management. He was making good money, but the credit crisis started and for whatever reason this trader went from systematic trend following to discretionary day trading leaving fellow employees scratching their heads (can’t make this up). It did not end well. Firm is gone now. So what do we all do with this example? Is that a trend following failure or something else? Clearly, it is something else. I know quite a few examples like this. Do some money mangers get into trend following, raise $, get in over their head then start changing this or that because of some gut impulse… and go bust? Absolutely. Rules in this world are important.

Lessons? Manage risk, and the reward will follow. Ignore your process and that opening lyric from “Me and Bobby McGee”…will happen. In my book, there is as much to learn from the consistent trend following studs as there is to learn from the cons and quitters.