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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!

Regards,
Danie Pretorius
RMB Morgan Stanley
Johannesburg

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.

Best,
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?


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Jim Cramer Supporter Stalks Me; I Always Wanted a Stalker!

In April of 2010 this guy wrote me about my critique of Jim Cramer (he was reading intro to my 2nd book?). Almost a year has passed with no contact and now today this ditty comes rolling in from Dave Loevner:

I have so far skimmed the information you have to offer, and intend to go back, and read verbatim. What bothers me specifically about you, and certainly not your material is your opinion of me. Obviously, with the fact that I do watch Mad Money w/ Jim Cramer makes me an idiot. Why do you waste energy slamming someone else when, that energy could be used more productively? Why even bring up Jim Cramer when you have so much to offer? Put the energy there. Every time I see your name on the internet, it’s never about you, and what you have to offer. It’s you, slamming Jim Cramer.  Much rather hear more of what you have to offer. Are you so filled with jealousy over not having a TV show that, you have reduced yourself to this playground nonsense? That was rhetorical, only asking that you give yourself an honest answer. You have value, and much to give but, not because, in your opinion Jim Cramer doesn’t. Knock it off, and focus on the information you have to offer. Yes, I enjoy Mad Money. One thing Jim Cramer emphasizes is, due diligence! I take him at his word as he has been wrong more than once. He emphasizes that because he, admits he has been wrong. It is entertaining to me, and I do get some valuable information to at least enable me to continue looking at the market. I have learned much on analyzing my market activity. I intend to learn more from you, as well but, it is difficult learning from someone who thinks I’m an idiot, and focuses so negatively on someone else. Both of you have different styles but, much to offer. When you finally free yourself from focusing so negatively on someone else, and referring to me as an idiot perhaps, I can feel a little better about reading your material word for word. Hopefully, you will move forward with an emphasis on you, and your work. Thank you, Dave Loevner

Let me get this straight Dave, you don’t want to read about trend following because a small part of my job is to slam your boy Cramer? I recommend sticking with him. Working with lost clients is not my cup of tea. Here are two more shows to add to your watch list: 1 and 2. When done there start at about the 27:00 minute mark here.


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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.

Survivorship Bias: An Academic Charade to Ignore Trend Following

From Wikipedia:

“Survivorship bias is the logical error of concentrating on the people or things that “survived” some process and ignoring those that didn’t.”

From the Wikipedia entry on me:

“Critics of Covel point out that his studies do not address survivorship bias.”

I challenge anyone to show me where the trend following failures are not outlined in my second book (as but one example). Not only are they outlined, the “whys” are explored.

Bottom line, if you are going to raise the flag of survivorship bias when discussing trend following, like Jim Cramer protégé David Merkel, you need to name those exact failures and outline the reasons for failure. Just saying there were failures, without being specific to anything, is a charade.


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

Trend Following Podcast Guests
Frequently Asked Questions
Performance
Research
Markets to Trade
Crisis Times
Trading Technology
About Us

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.

It’s Not How Good You Are, It’s How Good You Want to Be

To the trend following skeptics who have whined up a storm here in the last week, I offer a quotation from Paul Arden:

“Nearly all rich and powerful people are not notably talented, educated, charming, or good-looking. They become rich and powerful by wanting to be rich and powerful. Your vision of where or who you want to be is the greatest asset you have. Without a goal it’s difficult to score.”

I bet there are some people who have arguments why that is not true!

Let me take it a step further with controversial Mark Cuban:

“With every effort, I learned a lot. With every mistake and failure, not only mine, but of those around me, I learned what not to do. I also got to study the success of those I did business with as well. I had more than a healthy dose of fear, and an unlimited amount of hope, and more importantly, no limit on time and effort…The point of all this is that it doesn’t matter how many times you fail. It doesn’t matter how many times you almost get it right. No one is going to know or care about your failures, and either should you. All you have to do is learn from them and those around you because all that matters in business is that you get it right once. Then everyone can tell you how lucky you are.”

Larry Hite extends:

“Most of the Ivy League guys I know are so used to being ‘right’ they get very uncomfortable dealing with uncertainty – when there is no right answer. Their ego often makes them so afraid of being ‘wrong’, that they’re unable to make good bets. They are not comfortable with the idea of risk, because they don’t know how to assess it or measure it. [They have been] taught to absorb knowledge, not what to do with it.”

And Hite takes brings it home with even more clarity:

“There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future. You can also lose a good bet, but if you keep placing good bets, over time, the law of averages will be working for you.”


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

Trend Following Podcast Guests
Frequently Asked Questions
Performance
Research
Markets to Trade
Crisis Times
Trading Technology
About Us

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.