Trend Follower John Henry Assets Drop 80% In Year!!!

Quote from Pa(b)st Prime:

...adapting to new environments is important but it's still random as to if we're adapting to something that hasn't really changed. In other words if I'm a tend follower and I say, "this isn't working anymore I'm changing stripes" it's STILL random as to whether trendiness reappears or not. I'm still guessing.
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Fair enough. I suppose that's where caution can pay off. Regardless of whether a trader is employing either basic or sophisticated analytical methods, he is still, as you noted, guessing. And I would think that where guessing and leverage go hand in hand, they are best tempered with caution. We all know that the key to trading is survival. If we can survive our mistakes, then we at least have a chance of prospering.

I read somewhere that there are more skydiving accidents that result from experts taking aggressive risks than from novices running into trouble. (I don't know how the numbers relate proportionately.) This notion may well apply to our fallen Wizards. Perhaps they approached changing conditions a little too confidently or not at all.

I realize that the dots can be connected in any manner of ways after the fact. I'm just putting it out there as a possibility. As I noted in an earlier post, I am certainly not dismissing your notion of randomness. I just think that there may also be other factors at play.
 
Correct, true arbitrage doesn't scale, it's simply too time-sensitive. One of Citadel's convert-arb guys told me last year that >50% of their gains are the result of distressed securities and macro bets. He drives a new Bentley, so I'll take him at his word. ;)
 
Also, they took down half of Brian Hunter's book. Easy money, you say? Well, JPM took down the other half, and "someone" had been selling vols all week long rather indiscriminately. So over the weekend, CIG puts 2+2 together, takes half the book, and by the end of the week is out of about 75% of it. $1b. Thanks for playing.

Just one example of the kind of decisions that get made when you're managing "big boy" money. It's essentially poker.
 
Quote from Pa(b)st Prime:

Well except for true arbitrage, not risk arb, the whole money making equation is variable. And where there is unknown there is randomness.

A leveraged convertible arb trader who has a few 100% years strung together isn't a wunderkind. Yet those returns can make a hedgie one of the Not applicable.

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Our ability to accurately forecast is ripe with random results.

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I'd argue that if one's core strategy is built upon a condition than the appearance or prevalence of that condition does in fact make or break you.

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so, making money is not an exact science and triple digit returns=good....duly noted


rife???


......if your thing is not working then your thing is not working????


i feel weak and woozy... time for a little shuteye
 
Quote from psytrade:

Rodney - Any thoughts on Haug's - Models on Models?

.. Haven't read it yet, but I'm looking forward to it, based on the cute cartoon on the cover.. Did you like the book?
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I'm planning on ordering it. His last book was pretty clear on options. I like the idea of getting tidbits on derivatives modeling and trading.
 
Quote from EPrado:

You should really worry about your own trading as your trades in the indexes have been pitiful.
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My grandfather used to tell me stories about people in glass houses and why they shouldn't throw stones . . . EPrado, do you think anyone (MS) could learn a lesson from that?
 
Quote from basis:

There is definitely some truth to this, but you're carrying it too far. Just because a guy like Griffin makes his money arbing/spreading/scalping/trading esoterica, doesn't mean he doesn't have to make large-scale market calls. Arbitrage doesn't scale well; to make good returns on a decent pile of capital requires you to make decisions like any other kind of trader--they're just not the same decisions a guy sitting in front of the screen flipping stuff on his own is making.
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Certainly true but let's put this in some perspective. We're on a trading board where individuals are trying to turn 5k into 5 mil. Not impossible. Just a 1000-1 shot. Literally. Thus salivating over a fund that returns 26% per year is almost a case of hero-worship.

I'm not saying that producing a few billion a year in profits is easy or necessarily random. I am saying that depending on your risk or if your strategy has been enhanced by conditions, i.e. forces in play that you may recognize as in play but cannot predict will remain in play, then 26% or even 100% is certainly doable. It isn't freakin' earth shattering.

Not to mention many of these strategies have an imbedded return. From that point it's only a matter of leverage. That style is far removed from Paul Tudor Jones just taking shots in futures while doodling at his desk and returning 100% 6 or 7 straight years.
 
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