Danie Pretorius of Morgan Stanley: Hit and Run

I recently posted about this view of my new book Trend Commandments:

I’ve found Covel’s previous books interesting, and have re-read ‘Trend Following’ multiple times. The latest book unfortunately does nothing to build on the previous works (for instance, there is still no attempt to deal with survivorship bias in the performance data), but instead loads the pages with random anecdotes and film quotations that tangentially supports his thesis. Disconcertingly, what the book lacks in substance is made up for in ego. If you’re not with him, you’re against him – and a moron. Successful value investors? Don’t exist (sorry Mr Buffet, you made your money through luck and speculating with derivatives). Covel admonishes the world for ‘going with the herd’… ummm… isn’t following a trend exactly that? Too light on science, way too light on humility.

As the post shows, it was debated extensively. Then last night I stumbled onto the reviewer’s real name, saw he worked at Morgan Stanley, and dropped him this simple email:

“I welcome the criticism, but why not use your real [full] name?”

He responded via his Morgan Stanley address:

Hi Michael,

Quite a surprise to hear from you – not sure exactly what your asking? Danie is my real name.

As you no doubt are aware, I am an equity analyst in South Africa. Please do not construe that to mean I am dogmatically attached to fundamental analysis, far from it. I must confess to having reread my copy of Trend Following multiple times. I think precisely because I see the limitations of fundamental analysis on a daily basis, I am conceptually a big fan of systematic trading with objective entry and exit signals, and why I’m so interested in the trend following concepts. Explains why I own all your books…

My criticism on the last book is simply that there was little in the way of new content to build on what you’ve covered before, and that any other trading/investing method is so summarily dismissed, which makes the book seem less objective.

I certainly don’t question the concepts inherent in trend following. However, while I realise the book is not an academic paper, I’m struggling to distinguish between the efficacy of the system & trading rules and the talents of the traders themselves. For instance, the Turtles had the same rules but wildly varying results; by the same token, a sample of successful long-term buy-and-hold investors says equally little about the style if the multiple failures along the way are not highlighted. I think it would add quite a lot to the body of knowledge to deal with (a) the failures in the trend following space – if these are known, (b) the differences between traders’ approaches, and (c) how the successful traders manage whipsaws. E.g., how important is market selection and model parameterisation vs. other factors?

Hopefully it’s clear that I don’t have an agenda here, just a genuine interest in the topic.

My private email address is […]. I look forward to the next book!

Danie Pretorius
RMB Morgan Stanley

I responded:

Hi Danie,

Why not use your real full name and firm name on your review? That was not left out due to the fact that Morgan Stanley raises assets for the very traders mentioned [in my books]?

Of course, there was an agenda. If there wasn’t you would have reviewed the book with a professional disagreement–like in [your] email.

You didn’t.

Michael Covel

This individual owns all my books, likes them all, is not really a diehard fundamental guy, but receives a paycheck from making daily fundamental predictions?

Take your best whack at me personally. Take your best whack at my work. However, if you are going to do so, please disclose when you are a fundamental guy who also works for a firm (Morgan Stanley) who raises assets for the very trend traders mentioned in the very book you slam.

An honorable enough request?