Category: Trend Following

For an assortment of reasons, there was no exact Turtle student number back when Dennis hired his crew. Even among Turtles it is debated today. My paperback version of “The Complete TurtleTrader” comes out in February and the subtitle has been changed to say 23 Turtles on the cover. That is the common number thrown around after all these years, but if I had my way I would have said “20+” instead of “23”. Call me anal or call me picky, but all aspiring writers should know that publishers often take steps that authors are not completely on board with! Oddly, the areas where publishers always get mucked up in are book titles and book cover design. Generally, they steer clear of what’s between the covers. I could definitely write a book on writing and publishing a book because some of the back story you could not make up.

I had the opportunity to see this presentation from original Turtle Liz Cheval in person, but since most people were not there that day in Chicago I am sure her online presentation will prove just as educational.

Trend following critic Geetesh Bhardwaj has provided interesting hypocrisy here (and for my new edition of “Trend Following”), but the email that came in below from a trend following CTA is a topper. As you read it keep in mind that Geetesh worked at AIG and has written a paper ripping trend following (while he worked at AIG):

Great stuff with Geetesh…Very entertaining reading. Here’s a bit of irony for you – we manage a significant amount of money for AIG and have done so for several years!

Not really a surprise.

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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Bob Pardo writes very good books on trading systems. He also trades as a trend follower. His annual compounded rate of return:

2003: +27.65%
2004: +4.84%
2005: -14.65%
2006: -15.13%
2007: +63.71%
2008: +114.62%

To those Madoff defenders on here who keep saying that no one could have known that 1% a month every month was a sign of trouble, take a look at Pardo. You don’t win every month and you don’t win every year. More from Pardo:

+19.08%; 11-2008
+114.62; YTD 2008
+937.41; Since Inception 06-1999
+27.92%; ARR Since Inception 06-1999

Follow along with this chain of events:

1. I made this post in November about Geetesh Bhardwaj at AIG who was criticizing trend followers.

2. Within a few weeks of my original post I noted on a new post that Geetesh Bhardwaj was now at Vanguard. Trend followers make fortunes in October 2008 and a mutual fund that has just been devastated is leveling criticism. I thought it was odd to say the least.

Now? The author Geetesh Bhardwaj has clearly noticed that I have been posting about him and his work. He posted here today:

If my affiliation is the only criticism that you have of the results, I am vindicated. So stop taking about who I work for and start justifying the industry wide Sharpe Ratio of 0.09 to your invstors [sic]. You have been stealing investor money for too long, 2-20 for trend following really?????

Let me get this straight:

1. Bhardwaj worked at AIG until a few weeks ago.
2. Bhardwaj now works at an index mutual fund – Vanguard.
3. Bhardwaj, who clearly wants to show off his intellectual prowess, thinks the Sharpe ratio is a fair measure of trend following traders. It is not. Read (PDF).

Bhardwaj is a pawn of the mutual fund industry. The mutual fund industry spends millions through lobbying in Washington and propaganda (i.e “academic research”) to keep trend following traders from advertising their performance. Why do this? The mutual fund industry has a stranglehold on the average investor that they don’t want to lose. They keep the average guy stuck in ‘long only’ dead-end strategies to spin off their massive fees. Bhardwaj is no prophet. His attack is transparent and ignorant. When the immediate retort back is, “Sharpe Ratio”, you know the dice were loaded.

Amos Hostetter started Commodities Corporation (a trading incubator long before Richard Dennis and the Turtles). Who got their start at Commodities Corporation? Paul Tudor Jones, Louis Bacon and Ed Seykota were three prominent names. Seykota brought Michael Marcus into Commodities Corporation and Marcus brought Bruce Kovner into Commodities Corporation. All of these men in one way or the other made their fortunes via trend trading.

I have long found stories of Louis Bacon of Moore Capital interesting. Google him. Read up.

While Bacon is never classified as a trend following trader, he trades off price action and uses futures markets. That sounds a lot like trend trading to me. About 3 years ago I was talking with a top trend trader (who now manages over $10 billion). We were talking about “mystique” and “image” in general of some top traders (Bacon was not discussed). His point to me? Traders, who have consistently posted the big returns, almost invariably are trend following traders whether they publicly admit it or not.