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Thoughts on the Feedback Following my Tom Basso Interview Podcast

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.

The Trader Tom Basso
Tom Basso Picture from Twitter

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.

Enjoy the ride!
[Name]

Thanks! Read more on new edition reviews. Be sure to listen to my special compilation of Thomas Basso Podcast Highlights and my interviews with Mr Serenity here and Here.

Ep. 63: Darren Kottle Interview with Michael Covel on Trend Following Radio

Darren Kottle
Darren Kottle


My interview with upstart trend following trader Darren Kottle.

Listen to this episode:

Ep. 54: Steve Burns Interview with Michael Covel on Trend Following Radio

Steve Burns
Steve Burns

Steve Burns makes his 1st appearance on the podcast:

Listen to this episode:

Ep. 29: Mike Dever Interview with Michael Covel on Trend Following Radio

Mike Dever
Mike Dever

Mike Dever was my first guest on my new 2012 podcast, but today on his second appearance he provides even more “must-listen-to-insights” for the systematic/trend trading community. Dever’s 30+ years of experience is not to be missed:

Listen to this episode:

Bernard Drury: Grain Trader Turned Trend Following Trader

Bernard Drury (PDF) is a trend trader today, but he started as a fundamental grain trader. He is in my new book.

Disclaimers:

Our firm can not promise you will earn like returns of traders, charts or examples (real or hypothetical) mentioned. All past performance is not necessarily an indication of future results. Data presented is for educational purposes. This information is not designed to be used as an invitation for investment with any adviser profiled. All data on this site is direct from the CFTC, SEC, Yahoo Finance, Google, IASG and disclosure documents by managers mentioned herein. We assume all data to be accurate, but assume no responsibility for errors, omissions or clerical errors made by sources.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

Wise Price Trading Words from William Eckhardt

From William Eckhardt:

“An important feature of our approach is that we work almost exclusively with price, past and current. One reason for this is that to make any progress in the early stages of quantitative investigation you usually have to reduce the relevant factors to one or two crucial variables. Price is definitely the variable traders live and die by, so it is the obvious candidate for investigation. The other reason is that in a system that’s making good use of price information, it is very difficult to add other information without degradation. Pure price systems are close enough to the North Pole that any departure tends to bring you farther south.”

Bill Eckhardt trader
The TurtleTrader Bill Eckhardt. Photograph from TurtleTrader.com

More from a conversation never heard on CNBC:

“Many systematic traders spend the majority of their time searching for good places to initiate. It just seems to be part of human nature to focus on the most hopeful point of the trading cycle. Our research indicated that liquidations are vastly more important than initiations. If you initiate purely randomly, you do surprisingly well with a good liquidation criterion. In contract, random liquidations will kill the best system.”

More from Pricetrader Bill Eckhardt can be found in my 2nd book.

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