Some great feedback came through the other other day:
It’s because of you my friend that I’ve come to know so many in the space. Thanks for your efforts.
His personal message to me (above) was followed by his newsletter to his clients:
In my career, I’ve had many mentors, some of which I’ve met and some not.
Tom Basso is one of these people, and I was fortunate to get to meet him last week where he was generous enough to give me over two hours of his time over lunch in Scottsdale. Tom is also getting added to the email list and may be able to contribute some wisdom from time to time.
Tom Basso trader is probably most known for being profiled in the bestseller, The New Market Wizards, where he was nicknamed “Mr. Serenity.”
The scope of our discussion was very broad… Tom left the money management business largely because of the frustration of working with clients who constantly made poor decisions that were rooted in fear and greed. Tom produced decades of double digit gains for clients on a very attractive risk-adjusted basis yet many never achieved these results because of emotions and performance chasing. As you know, I write on these subjects regularly because they matter that much.
One thing Tom mentioned that was particularly interesting was how at the later stages of his career (approximately 10 years ago) Tom put together a diversified program that was a combination of strategies, asset classes, and products (meaning futures, ETF’s, mutual funds, etc.). He said he himself was the largest customer and it seemed that many people just simply didn’t grasp the value. Regulatory restrictions about combining multiple products together (such as equities and futures) made it overly obstructive. This, in essence, is exactly what I’m trying to do with LCD (Lorintine Capital Diversified) as it mimics endowment level diversification.
The benefit of a multi-strategy single account is it doesn’t give you the opportunity to miss the forest through the trees and take from those who may be underperforming in the short term in favor of those who are currently performing best…essentially the process of buy HIGH and sell LOW where you should be doing the opposite. Tom mentioned how he had a client during the Black Monday crash of 1987 (largest single down day in history where the Dow lost over 22%) that he had set up one account as a stock portfolio and another account as a hedging portfolio where he would short equity futures based on his quantitative market measurements… The client ended up making money on Black Monday (about 1.5% from Tom’s memory) while of course the stock account was down significantly it was more than offset by the short futures account…The client ended up firing Tom as an equity manager because they couldn’t see past the losses in the stock account…yet if this would have been done collectively in one account they would have only seen the net gain (on the worst day in history where many traders went bankrupt). Unfortunately, I’ve witnessed much of this type of behavior in 2014 as some things never change.
This game is incredibly simple, yet not at all easy. It’s simple the same way that getting in shape or losing weight is – just get on almost any decent diet and work out consistently and you are almost guaranteed results… yet few have the discipline to do it day after day for the long term. Make it your goal in 2015 to follow your plan. If you don’t really have a plan it’s like not being able to spot the sucker at the poker table… because you’re it.
Good Day Michael, I received your letter and DVD and am really interested in learning the techniques of trend trading. I have lost a large number of money using Futures and CFD trading platforms in South Africa. Only to uncover that the company whom I used to trade with was actually ripping me off, they use internal stop loss hunting systems and internal trading desks basically to defraud unknowing small traders like myself. I reported them to the Financial services board in South Africa and the case is currently under investigation. So to say the least I am very skeptical about trading again due to the large amount of Rands I have lost. I guess part of the reason I lost the funds was a mixture of greed, fear and ignorance. Not that I am wealthy to say the least I used my investment savings payout of 10 years, as I thought I could fast track my pension savings. Now I am self-employed and do not have any real spare cash to play around with and risk losing again. I do however feel positive after reviewing your website and in Rand terms the investment required to sign-up is quite significant for someone who has 3 small kids and a wife to support and who is self-employed. But I am prepared to take a calculated risk this time and educate myself first with a winning system, but also I need to know that the trading platform that will be used is not stacked against me the trader and it appears as your is actually stacked in favor of the trader. I hope your special offer can make it affordable or maybe you have a special payment plan option that can make it affordable to become one of the students of the process. I hope to hear from you soon.
Trend following trading is not something that relies on a broker or some other financial shark. It is based on price movements and philosophically on your entrepreneurial desire. It is a trading style that can put the odds on your side. However, no one should make any investment or start any investment research with desperate money. However, if you know your risks–no one should tell you to stop moving ahead.
Please forgive me if this may seem ignorant, but do you call out plays with your subscription service?
What do you mean?
Additional Note: Yes, I know what he meant, but I wanted to hear him explain it. My firm teaches clients how to make the plays, not trust gurus. The propaganda machine of how you are supposed to do it is alive and well. Plays…
Bernard Drury of Drury Capital writes in his May 10 newsletter:
“While trading losses are never welcome, we know that encountering price corrections is an intrinsic part of trading these markets. As ever, [our] Program employs a disciplined approach to trade selection, position sizing, portfolio balancing, and equity protection when adverse market conditions are encountered. During a period when markets are behaving in a manner contrary to positions, [our] Program gradually reduces risk in a systematic manner. In some cases, positions in the opposite direction of the original trend may be established, even while some trades in the same sector are still positioned in the original direction. It is a dynamic process that responds continuously to changes in market conditions.”
Wise insights from a long time trend follower who I was fortunate to spend time with.
