Another good read (PDF) by another trend follower who finished 2008 guns a blazing.
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Category: Trend Following
Dunn Capital Lesson for the Buy and Hopers
The most recent review of my book “Trend Following” on Amazon is this:
For 200 pages you read how much trend followers made, trend followers are so great, they are always winners…. It’s almost like the book is promoting some money managers. Seriously the book is pretty bad, I almost feel embarrassed to write a review. According to the author you don’t need to know anything about what you are really buying, as long as it trends up. So I wonder if Mr. Covel would buy a bag of dirt for $10 just because it was $7 last week. I don’t want to get to the dynamics of trends and explain that after you buy a up-trending security you may lose money. But I wonder if Mr. Covel plays rulette and bets on red after red hits 3 in a row, thinking the new trend is red. I had the feeling that this book is written to increase the number of trend followers so when the time comes some people can dump the stocks easier. I wonder how Mr. Covel knows that you wont be the one standing without a chair when the music stops. Anyway, I will say one thing, buying this book may cost you a lot more than its price.
I will not bother with the vast majority of the above reviewer’s lack of understanding on my blog (others are welcome to use his comments as an entry into a teaching rebuttal), but his comment about “promoting some money managers” gives me a great opportunity to clarify with hard data. For example, most people have NEVER heard of Dunn Capital unless they have read my book, read Futures Magazine, or are involved in the money management industry. So there is a very compelling reason for me to pass along data like this (PDF of Dunn’s 2008 performance). Personally, whether you want to be the next Dunn, let Dunn trade your money, or just sit there in your mutual fund and wet your pants trying to figure out if someone can give you permission to think for yourself — Dunn’s performance data is NEWS. Not news cause I have some business dealing with Dunn (I don’t), but because most people just lost their *** in 2008 and he just made +50% on his WMA program (inception 1984). And for those who might want to whack at me and say Dunn was an anomaly, no dice on that angle. He is one of many trend traders who just whacked 2008 markets like a piñata.
Here is annual Dunn WMA performance since 1995:
1995: +98.69%
1996: +58.21%
1997: +44.60%
1998: +13.72%
1999: +13.34%
2000: +13.08%
2001: +1.10%
2002: +54.06%
2003: -13.41%
2004: -16.68%
2005: -16.41%
2006: +3.08%
2007: +7.60%
2008: +51.46%
Notice his really bad spell (03, 04, 05) was right when Greenspan was engineering the credit/real estate/stock bubbles? I wonder if in hindsight most people would take Dunn or buy and hold.
Learn more about Trend Performance.
23 TurtleTraders? Maybe, Maybe Not!
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.
Elizabeth Cheval on Correlation; Lessons from An Original Turtle
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.
Geetesh Bhardwaj: His Firm AIG Invests with CTAs
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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Pardo Capital
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
Geetesh Bhardwaj Is the Tool for the Attack; Mutual Funds Go After Trend Following
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.