Tom Basso - Market Wizard

Thu, 13 Mar 2003
From Tom Basso (with permission)

Ed,

I saw a comment in the January FAQ's referring to "Tom Basso does not like very much heat (25% drawdowns max)."

Everyone should remember that I approach the trading game as a person managing other people's money. I have tried to trade the client assets with a heat that they might, on average, be okay with (cause I never will really know if I got it right with so many clients). If they aren't, it's just another excuse for them to leave.

I agree completely with your comments to a number of traders that heat is up to the individual preference of the trader, and, I might add in the case of someone managing other people's monies, the preferences of the client for whom you're working.

For new traders, always remember that less heat allows a bit more room for error. Lots of heat can put you in harm's way.

Trendstat will close its client business April 30th and I will be concentrating on trading my own portfolio after that. I do not intend to trade my portfolio anything like what I did for clients, as my financial situation and risk tolerance allows me to do some things very differently than I would ever consider doing for clients.

I had fun reading the questions and your answers. Keep up the good work!

Trade well,

Tom

http://www.seykota.com/tribe/pages/2003_Mar/Mar_09-15/
 
no_pm,

Thanks for the information.

Tom Basso's name came up in couple of conversations I had in May. Bad news unfortunately travels fast in our business !

However I am still not clear as to what exactly transpired.

I was actually somewhat shocked by the news. I always thought of him being very level headed. I bought his book a few years back and liked his views on balancing family with business of trading.

I don't know what that says about the business of trading, there aren't that many individuals who have sustained success over time...maybe we are all doomed..
 
No big disaster...no big blowup. All his clients left over the past couple of years. He was losing money, but at a slow bleed.

Very similar story by other trend following traders. The risk/reward is worse than for people managing money ala Toby Crabel. The customers have figured out that you don't need to put up with 30% drawdowns to achieve a 30% return.
They just use notional funding and they get much better risk/reward profiles. It's happened with other "Turtle" traders as well.
 
Quote from no_pm_please:


Very similar story by other trend following traders. The risk/reward is worse than for people managing money ala Toby Crabel.
More...

In my opinion Toby Crabel is rather overrated. If you read his disclosure document you find that his performance results include interest income, which makes them a whole lot less impressive. Also, if you look at his leveraged fund, where the interest income is less important, you find that his annualized performance is around 20%/year with a maximum drawdown that's just a little bit lower. Certainly no better than a good long term trend follower.

One area where Toby Crabel excels is marketing, hence the large amount of capital under management.

So just to be clear, I think Toby Crabel is a fine manager, but he is not at the stratospheric level that many people imagine him to be at.

-bbc
 
I don't have access to his disclosure document. At the IASG site, the Crabel Capital Management-Diversified (1X leverage) lists a max. drawdown of 4.24% since 1-92 and a annualized return of 10.41%. His assets under management went from under 200 mill. in 2000 to over 1.2 Bill. now. With those kind of results all a big investor need do is use 3x notiional funding to achieve 30+% returns with a 12-13% max. DD. I don't see much hype in that.

I think Campell & Co. is the best marketing firm. They don't have nearly as good a risk/reward profile....but they sure are getting lots of money.
 
Does anyone know other failed Market Wizards?
More...

in the new edition of Stock Wizards, schwager does a follow up on each of the traders. some not doing so well.

didn't Lauer go out of business recently???
 
>>I don't know what that says about the business of trading, there aren't that many individuals who have sustained success over time...maybe we are all doomed..<<

Chessman, given a long enough time EVERY-ONE (no matter who) would eventually run into a streak of losers long enough to wipe one out.

However it may take several lifetimes to reach such a position so even though we all are on the way of DOOM chances are that one will not reach it in this lifetime.

freealways
 
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