Odd Lots - The Incredible True Story of the Real Life 'Trading Places'

Episode Date: March 3, 2017

If you have any interest at all in finance, then it's mandatory to have seen the 1983 movie "Trading Places." You remember, right? Two wealthy Philadelphia commodity brokers bet on whether anyone, even down-and-out Eddie Murphy, can be trained to become a successful trader. What you might not realize is that something very similar happened in real life. In this week's Odd Lots, we examine the amazing tale of the Turtle Traders. In 1983, successful commodities speculator Richard Dennis took out a full-page ad looking for novices to train in the art of trading. His novices -- who did spectacularly well -- studied for just a few weeks and were dubbed his "Turtles." Joining us to tell the story is Michael Covel, who wrote a book on the Turtles, and Jerry Parker, a former Turtle who still trades using the same technique today.See omnystudio.com/listener for privacy information.

Thanks for listening to OddLots. Follow the show on Amazon Music for more future episodes or just ask Alexa play the podcast, OddLots on Amazon Music. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a very big. It's a very big. It's a lot. It's a firm. It's a commitment to your clients. We're talking top grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.

That's vanguard.com slash audio. All investing is subject to risk vanguard marketing corporation distributor. Hello and welcome to another episode of the Oddlots podcast. I'm Tracy Allaway. And I'm Joe Wisenthel. Joe, what is the best financial movie of all time? Well, the best financial movie also happens to be the best movie period, which is trading places, of course. There's no question. I am so glad you said that. I was worried you were going to go with something else. The best movie, the best financial movie, and the best Christmas movie are all the same thing. It's all trading places. And anyone who hasn't seen it needs to press pause right now and watch it. And then come back to this. All right. So, Joe, you're clearly a fan of this movie.

You remember the basic premise of it, right? There's two really wealthy commodities traders and they make a bet about whether or not trading is something that you're born with or something that, you know, your upbringing kind of gives you or whether anyone, any man on the street can be taught how to trade. We're lucky to have him managing our firm for us. Oh, hogwash. Exeter, Harvard, he's the product of good environment. It's got nothing to do with environment. With his genes, you can put Winthrop anywhere and he's going to come out on top.

Breeding Randolph, same as in racehors as it's in the blood. Right. It's sort of a classic story. There's two very patrician. heads of this commodity brokerage in Philadelphia, the Duke brothers, and they have this star trader who's played by, what's his name, that actor? Dan Aykroyd. Dan Aykroyd, and then one of them says it's a result of his genetics that he's really,

you know, just sort of naturally gifted. And the other one says, nonsense, it's pure upbringing, and anyone could be trained to do what he does. And so they, of course, find Eddie Murphy, who they find on the street. basically, and they train him to be a great trader. Given the right surroundings and encouragement, I'll bet that that man could run our company as well as your young Winthorpe. Are we talking about a wager, Randolph?

Okay, so that movie came out in 1983. What if I told you that around that same time, there was a real-life trading places experiment going on? I would be completely fascinated and I would love to know what the results of that experiment was. Okay, okay. Well, there was. And I'm so excited because we've been trying to do this podcast for about a year now. And I'm really, really happy that it's finally happening.

Now, when I say there was a real-life trading places, I am not kidding. There were two commodities traders that essentially made the same bet as in trading places. One of them was Richard Dennis. He thought that trading skills could be taught. Another one was Bill Eckhart. He thought that people were just bored with these sort of innate, intrinsic skills. And they ended up finding a group of wannabe investors, want to be traders, and seeing whether or not they could successfully trade.

And we are going to today not just talk to one of those former traders. We're also going to talk to the author of a book, a very good book, on this complete saga. He is Michael Kovil. He is the author of The Complete Turtle Trader, How 23 Novice Investors became Overnight Millionaires. Joe, you can sense my excitement, right? I am just as excited as you are. Mr. Michael, thanks so much for joining us. Hey, thank you for having me. So, Michael, shall we start with that intro? Did we get the gist of that bet right? And is the trading places analogy the right way to think of it?

There is conflicting stories, but the best of my research over the last 20 years is that Rich Dennis and Bill Eckhart went to that movie and essentially Rich said to Bill, I can do that. I can take them off the street. I can train them. And, you know, Bill Eckhart said, no, impossible. And I don't think there was a monetary bet like in the movie, but they placed ads and the Barron's Wall Street Journal, thousands of people responded. I mean, at this time,

the biggest trading names on Wall Street were George Soros and Rich Dennis. So even though Rich Dennis has not been in the public eye for a long time, he was huge at this point in time, having made several hundred million dollars by the age of 37 in 1982, 1983. So essentially, you know, really, really successful. They took thousands of resumes. They hired about 20 people gave them a couple weeks training spread out over two years and really pretty much out of the gate using what they would call a trend following system these students ranging from like 19 to late 30s all started to make money huge money a lot of money in fact millions of dollars and one of those students was jerry parker an accountant at a CPA firm i answered an ad in the wall street journal

the fall of 1983. Richard Dennis, a famous commodities trader in Chicago, wanted to hire people, train them, give them money, and teach them how to trade and put them on their own. And I sort of knew that that sounded like really good since I was an accountant and a CPA firm, not having fun, wanting to get out of that as quickly as possible. Leaving a small town in Virginia, going to Chicago, I mean, it couldn't be any better. I had heard of Richard Dennis through a Business Week article, I believe was called the Barefoot Trader. Rich liked to trade with no shoes on, I guess.

So I knew it was legitimate and that this was a great idea and something that I would learn things that I would only learn by having a great mentor and a real famous, smart person teach me and not something I'm going to like learn in school or anything like that. So I knew I was on the right track and then it just became, you know, how do I get this job? Before we get to the training aspect, the recruiting part, you said they put ads in barons just asking people who if they wanted to become a traitor. Were they looking for any qualities in those people? Were there any sort of initial screens that sort of helped them, you know, find people more predisposed to success? They did give a test, so to speak. They had true false questions and essay questions. the true false questions were essentially the types of questions that you might ask a quantitative, systematic trader, because that's what they were doing. So they wanted to get people that could think in terms of odds, you know, chances, and people that could think in terms of risk. Perhaps that was in their background.

There was some, you know, Dungeons and Dragons author. There were some blackjack players. There was a CPA. So they did go for people. that were fairly grounded in numbers. Because at the end of the day, what they taught and what they learned, what they applied, and to this day, you can still see, was all grounded in something that, frankly, again, to this day, Wall Street doesn't really pay attention to, which is this quantitative systematic,

trend following trading. This, you know, forget the earnings reports, forget the crop reports. Who cares about the fundamentals? We're literally just trading the price of the instrument at hand. Everyone who applied, I think a thousand people in 1983, everyone was sent a test, a true false test. The second part of the test was maybe five discussion questions that you had to answer in one sentence. That was a recurring theme whenever we were asked certain questions. It had to be responses in one sentence.

So 100 true false, psychological type questions, trading questions, you know, sort of getting at the root. How do you think about life? What do you think about the markets? So I carried this test around with me for a few weeks to the audits. And, you know, I was trying to delay as much as possible sending this back in. And then I finally sent it in. And I got a call to come to Chicago for an interview. Walk us through what the training was like.

So two weeks of this trend following training, as you point out, it must have been pretty numbers-based. It must have been pretty rigid. It can't have been that complicated if it took place. within 14 days or so. Yeah, you were looking to give people basic rules that would tell them when to enter a market. For example, a moving average crossover, a breakout. You were looking to give people,

that same rule could be used for your exit. Then they'd get a little more complicated on position sizing. So, for example, if these students, and they did have limited capital, how much should they bet of their limited capital? Now, at the time, at the time they were trading the most liquid futures markets. That was probably, you know, less than 20 or so.

Today, that universe is much wider. And that was essentially what they were really learning. And it was, frankly, not as much about the rules. They were important, but it was that discipline to follow the rules. Because here you have Rich Dennis who says, here you go, two weeks of training. The rules are straightforward. Now I'm going to give you my money. You have to follow these rules or you're out.

You know, we have a two-week course, maybe three-week course, and we're taught everything we need to know about how to trade. It's right around Christmas time, so the final exam question was delivered at the Christmas party verbally to all of us, and that is something like if you get a cell signal in soybeans, but you hear through the grapevine that Richard Dennis is long, what are you going to do? And of course, that obvious answer is we're going to.

to follow the rules and sell those soybeans. So a lot of people describe the essence of what or what Rich and Bill were trying to get out of this was, can trading be taught? Rich said maybe yes, Bill said maybe no. But I think in the final analysis, it wasn't, can it be taught? Of course, you can teach anyone the rules, these were not complicated rules, but really it is how hard is it to follow those rules all the time, regardless of how bad it gets. So Michael, when you say that they learned the exact right amount to bet. Are you talking about something like the Kelly criterion? They would not have got that in depth. It would have, it was something more robust and more basic. But yeah, essentially, I tell people, look, if you have, you know, a million dollars

capital and you're going to go place a bet or place a trade, how much are you going to bet on each trade? Are you going to bet 10% on each trade? Five percent? 20%. I mean, look, if you get 10 losers in a row and you're betting 10% per, you're toast because you know you're going to get a string of 10 losers, especially with the type of methodology that Rich Dennis and Bill Eckhart taught their students. So the idea was to bet small and to when you got a breakout or an entry to take it and ride that trend as far as it could go. And within their risk management, within their position sizing, they would pyramid. So the idea would be at the end of the day if you had a huge move in coffee, in XYZ year, you would just make a fortune from coffee.

Now, your other trades might be break-evens, small losers, et cetera. But the idea was that each year you were going to try and capitalize on an unforeseen trend in a big liquid market, something that no one could predict. And to this day, that's what they do. Did you say they would pyramid? What does that mean? Well, for example, let's say you get an entry signal. I used coffee.

Let's say you got an entry signal into coffee. you take a position in coffee. If it starts to go your way, the rigid mathematics behind Eckhart's reasoning was that you would put on more. And so you might start with an initial small bet, but if that trend kept going your way, you would risk more up to a limit.

So they had certain risk management limits, but that was the idea that you would pyramid in, you would increase your position if the trend that you entered kept going your way. Got it. So talk to us a little bit about the, just sort of the initial results. You said they did really well.

What do we know specifically about how much money was allocated to these amateur traders and how quickly and how much returns they started seeing? Well, you know, I went back and I was able to find their actual track records while they were under Dennis's management. Their account sized ranged from, you know, a few hundred thousand dollars to a million to several a million. And frankly, even to this day, some of them don't understand how that money was allocated to them. And there's not necessarily any, any rhyme or reason as to how some of the, some of those allocations were made. But in terms of performance, I mean, these were, they were

blowing the doors off. This was, this wasn't just 12% a year. They were trying to make 50% a year, 100% a year. This was shooting for make a lot of money. Richard Dennis believed so strongly in this experiment that he gave them, gave the traders some of his own money. Well, a significant sum of his own money to trade with, right? Yeah, absolutely. Absolutely. He was, they didn't have money. I mean, the deal was they were going to sign a contract.

They were going to be quiet, non-disclosures, and they were going to trade his capital with his rules, and they were going to get a percentage of the cut. I think it was 10, 15, 20 percent, something in that neighborhood. And so a lot of them made several million dollars working for Rich Dennis during this almost four-year time window. And they all went out on their own around 1988 somewhere in that neighborhood. It was the great story, frankly, of nurture trumping nature. We talk about the Trading Places movie. But that's the great lesson for everybody here is that this isn't an innate talent that you're born with.

you can be taught. You can be taught to be a great trader. And this story is so timeless for that very fact alone. Michael, we mentioned this in the intro, but on that note, these traders, these amateur traders were known as the turtle traders, right? And Richard Dennis came up with that name. How did he actually come up with that? You know, there's differing stories about that name from differing turtles, frankly. The one that's most popular is that I think this is the one that Rich Dennis signs off on is that he was in Singapore and was at a turtle breeding farm and made the off-the-cuff comment that I'm going to grow traders like they're growing turtles here in Singapore. Now, I also heard from one turtle that he was very fond of the musical group, the turtles. So there's

differing, differing thoughts there. So you mentioned it went from nine, 1984 to 1988 for years. How and why did it end? And then what did the turtles do afterwards? You know, I don't think in hindsight, Rich Dennis and Bill Eckhart ever would have ended it. But at the time, it's a long time ago, perhaps they didn't see how great of a story it was going to be. So what happened was it ended and Rich Dennis kind of closed down, retired. Look, he'd made a fortune. and most of the turtles went ahead and registered with the government as fund managers. I went to Wall Street and walked around and tried to raise money. I remember walking around and, you know, pay phones back then, that's, you know, many, many years ago.

And I remember calling up the head of managed futures at Merrill Lynch. And I said, got his assistant. And she said, who are you? I said, Jerry Parker. And I like to meet with the head of the managed futures department. and she goes, no, no, he's very busy. And I said, well, please tell him that it's a turtle. And so she gets back on the phone and she's laughing.

And she's like, yeah, yeah, come on up. So one of the great things that we had coming out of those four and a half years was a legitimate track record that we could, okay, 100%, maybe it's kind of crazy, 200% a year. But, you know, when we started raising money, it was helpful to at least have that background and that track record, and then you start toning it down trying to make, you know, 15 or 20 percent. And then you're out on your own in Richmond, Virginia. Rich is not my backstop anymore.

So I'm maybe exercising a little more discretion, more of my style. And so you're like, wow, this is very interesting to leave that cocoon for the, you know, scary world. And frankly, what's so great about this story is not only was it just the term. But the turtles inspired fund managers that are massive today, that are managing multi-billion dollar accounts. This story wasn't just something that kind of died. Not only did the turtles make all the money and make a lot of money when they left to go trade for their own accounts and trade for other customer accounts, but so many other trend-fowing

type traders, the strategy that they were using, they inspired traders all around the world. that today run multi-billion-dollar accounts. Michael, was every single turtle trader successful? Was there not a single one out of the 23 that didn't make it? So it's an interesting question. I believe one or two of them lasted for a year. And after the program ended, I would say over 90% of them went ahead and traded four clients, opened up a fund management firm, and frankly, we're successful.

I'm able to find having researched this subject just about more than anybody and knowing the cast of characters, as you might imagine, the human nature is such that you're always going to end up with a few oddballs. And, you know, there was a few personality oddballs inside the experiment, but the results are overwhelming, you know, you can actually, and you know, some people might say, hey, you know, these are just the lucky survivors. but I would say, hey, look at the few that didn't make it and find out what they did wrong. And it's pretty easy to look at the few that didn't make it and see what they did wrong.

So it's just one of those great stories. So often when there's a popular strategy, the fear is that more and more people start to do the strategy and then the strategy doesn't work anymore. And there's sort of a common challenge in markets, trades that eventually all the money is gone from them. How does that play into this story if these turtles all were following the same rules and then they inspired all these managers and then they had their own funds and presumably traders working for those funds learned the strategies? Did these strategies have to evolve or did they just fundamentally continue to work? How did the sort of popularity

them affect the performance? Well, trend following has fundamentally continued to work. My guess is about one quarter of one percent of all investing assets today are in trend following strategies. The vast majority of people believe in the efficient market hypothesis. They believe in indexing, buy and hold, all of these things that when the Black Swan swims in, like October of 2008, you know, the vast majority people get crushed. So this is a very, you know, counterintuitive, alternate type strategy. And it has not slowed down at all. Now, it can be difficult for people to perhaps stick with it because you do, you are taking risk. You can possibly lose, you know, depending on what leverage you're employing.

You could lose, you know, 20, 30, 40 percent of your capital, perhaps even more. But then again, you know, Warren Buffett's taking his share of 50 percent drawdowns. It's just one of these great under the radar type strategies. And I think what's really cool, I mentioned October of 2008. it's the one strategy that made a fortune in that month of October 2008. So, you know, when Nassim Talib talks about the Black Swans, this is truly a great Black Swan strategy at its foundation, at its core. But if I could play devil's advocate for a second, if the strategy is so simple that it can be taught in two weeks to novice traders, then why isn't everyone doing this? It's a good question, but that's why Daniel Kahneman won the Nobel Prize.

Right? That's why Amos Tversky, if he would have been alive, would have got it as well. That's why behavioral finance exists. You know, people don't want to look outside of the mainstream. And the mainstream is the vast majority of investing assets are in passive index funds, waiting for something bad to happen. So it's just a, it's an alternate counterintuitive stress. strategy that most people aren't willing to accept, especially, look, if when the stock markets

at all time highs, people say, hey, this looks great. I don't have to worry about anything. Mainly, I believe that the trend following that works, longer term than it used to be, is very unappealing. And there's some inherent characteristics of trend following that make it something that is not something people really want to do. 40% winning trend. trades, who in the right mind. Everyone knows you've got to at least have a 50% win rate. No, not really. 40% is about as well good as you're going to do. Take small losses all the time. So you're always getting in and getting out with a small loss. And then, of course, it goes right back to the high. You have to buy it again. So it's a very painful way of trading. Small profits turn into

losses. You're just following that system. You can't say, you know, I want to book a profit. here. Nope. You have to wait for that moving average or breakout to be hit. Big profits turn into small profits. The drawdowns are horrible. It's usually, I think, for a lot of smart people, the first place to start this trend following. Now, we certainly should be able to improve upon it with little bells and whistles here and there. And I think that's where people get in trouble, because I've never tried to really improve upon it. I've just accepted my fate that, yes, if you're going to have a systematic approach that continues to work, it's in the public domain, they write PhDs, write papers about it, about how it continues to work, then it seems only fair that it

should produce a fair amount of pain and suffering and bad periods. And that's what if, I think, keeps too many people away from it. Do you think the Turtle experiment would work again in today's markets? And Joe kind of hinted at this, but in markets that are, you know, full of passive investors, full of high-frequency traders, momentum trading, all of that. Will the turtle rules and the turtle experiments still uphold? Well, momentum is, that was what they were taught. There's two types of momentum. There's time series momentum. There's cross-sectional momentum. And they were taught time series momentum strategies, i.e. trend following. Would it continue to work? I could sit here and I won't bore you, but I could rattle off the names of the professional fund

managers working today. So no, trend following is, is never going to go away as long as we have human nature. Does this, does trend following work across all asset classes? So you mentioned that the turtles trade liquid futures, but is there, do the same principles apply to equities and currencies and fixed income assets? Absolutely. Absolutely. They, you know, back in the day of the turtles, it was, it was commodity markets, you know, your coffee, your gold. You're, your gold. your currencies, that has not changed today. I think the only thing that's changed is perhaps more individual equities have been added to trend following portfolios.

But if you really think about it, since you're just trading price action here, there's no fundamentals involved, it's really hard to make the jump that the action of markets would be different when you look across instruments. Because look, these instruments are just representation of people. And, you know, so it's all humans making these decisions. So really, if you just think about it that way, there really shouldn't be an expectation that it should behave differently. As long as people are involved in markets, there's going to be extreme moves. And as long as there's extreme moves, strategies like trend following will continue to perform well.

I want to get back to the trading places analogy because the way the turtle trading experiment was structured. You put these ads in newspapers and these people responsible. responded to them. So I'm wondering if in some respect, the turtle traders kind of self-selected themselves. I mean, they were all reading Barons and the Wall Street Journal anyway. So they clearly had some sort of interest in markets. And they were probably reasonably smart people. So when we look at this experiment and the successful outcome, how much can we actually read into that outcome? Like, could you apply this to anyone, just the man off the street? In trading places, it was a homeless Eddie Murphy.

Would that work? Well, I don't think in any endeavor in life, you can take somebody off the street that has no motivation, no drive, no desire for excellence. I don't care whether it's sports or whatever the job is. I mean, you've got to have some internal combustion going on there. Otherwise, it's going to fail. So I think if you just take, I'm going to use a not a bad word, but if you take some dolt off the street who doesn't really care and is not really interested, they're going to fail. and they should fail. You mentioned that it's still a very tiny amount of assets today are in trend following strategies. You're obviously sort of deep in the weeds on this whole space. Do you see a lot of

people, or do you see interest in these strategies still growing rapidly today, like especially as people sort of rediscover this story, find resources on the internet, has interest picked up? Well, yeah, absolutely. And I wouldn't say. say there's been an explosion of assets, but it's a steady growth of assets under management in trend following strategies. The reason for that is most pension firms today understand that if they're long only stocks, they're exposed. There's a certain risk exposure there. So if they can add into their portfolio, this is like Harry Markowitz 101, if you can add into your portfolio, something that's not correlated, you know, spinning off a different risk return

profile, all of a sudden you end up with a little bit more performance and a little less risk. So it makes a lot of sense for everyone for that reason. And you can find these days there's been quite a few managers that have gone ahead and put together public mutual funds, public ETFs. So there's different ways for people to participate. Of course, they can go do it on their own as well too. Did Bill Eckert pay Richard Dennis a dollar? I never heard anything like that.

I don't know if that was their bet. Maybe if you get Rich Dennis on the phone, he can answer for you. I mean, it's, it's kind of hard to believe. I can, I can, I kind of hear that in both of you like, oh, my God, this story, you know, it's, you know, you got the book in front of you. You know it's factual, but it's still hard to believe, isn't it? Yeah, I think the part that's hard to believe is not the story itself. Like, I'm not surprised the, you know, the period from 1984 to 1988, that I don't find

hard to believe. And I also don't really find it hard to believe that a lot of those, that a lot of those traders went on to have a lot of success and influence. I think the part that feels counterintuitive to me is the idea that there's this strategy that exists out there. The way you say it kind of sounds like picking up free money, that it's, that it works, that it hasn't been diminished by the fact that you wrote this book and that all that this this incident is the stuff of Wall Street legend, that despite all this attention, that the strategy still fundamentally works without a whole lot of innovation. I think that's the part that, to me, most intensely flies in the face of how we talk about finance. That it shouldn't be, not that

beating the market is impossible, but that one strategy or one principle can beat the market on an enduring basis for so long is the is the part that is still hard to believe but i mean i believe it i just it's just the part that uh makes me uncomfortable does that make sense well i think it's it gets it gets back to i bring up daniel coneman again it's his work if you were to find a strategy that exemplified prospect theory and a lot of his behavioral work and the many other uh great minds that have come after him diving into behavioral finance. That psychological element, look, you can have the rules. Rich Dennis used to say he could publish the rules in a paper.

It doesn't make a difference if people aren't going to do it. So we could sit here and talk about rules all day long. And yes, the rules are clever and they're interesting. But if you, anybody, me, you, whoever's listening, if you don't understand those natural biases that you have built into you and you have not put it in your mind that you're going to stick to these rules no matter what, then it shouldn't really be a surprise that, frankly, a lot of people don't want to do it. I mean, like, that's the whole reason why, I mean, Michael Lewis's new book that's out right now.

It's the, it's the foundation. People are just people. And, you know, we're all a little bit crazy and we really, you know, we want to get rich quick. And we want to, we want to trust people on Wall Street telling us about the latest, you know, high frequency this or the latest crop report. And so, you know, it's a quantitative strategy that perhaps doesn't make money for two years. And then all of a sudden makes a fortune in October of 2008 or has an up and down period for a stretch. People aren't interested in that.

At least the uninitiated are not interested in that. I was going to ask a question, which I thought Tracy was going to ask, but which is, why do we need people to do it? If it's just about having the discipline to follow. If it's just about having the discipline to follow rules, and if it's mainly that the main way you screw up is by letting emotion come into it, doing something intuitive in a market dislocation, why not just feed the rules to robots and have them execute the rules without emotion? Absolutely. I think that's exactly right. Once the initial setup and discretionary, minor discretionary decisions have been made, let it go.

I mean, in my opinion, humans are just going to introduce bad things, not tinkering. Stop the tinkering. Stop trying to make it better. Enjoy the fact that it's not that great and it's very brutal. It's not going to make 8% a year like the stock market with a 50% drawdown because we just have too much diversification and too much risk. control. So it'll make 8% with a 20% drawdown. That's still pretty painful. So enjoy that and see that as a positive characteristic to suffer whipsaw losses and big drawdowns and you made a lot of money. Then you gave it all back. Find joy and comfort in following those rules and quit tinkering.

So yeah, I'm not a fan of human intervention. Yeah, I agree totally. So, Joe, I don't know about you, but I loved that episode, and I'm so glad that we could finally, finally talk about the Turtle Traders. I know you've been wanting to do this episode for a really long time. I'm glad it came together. I mean, I'm such a huge fan of trading places. Anyone who knows me knows that I watch it every year around Christmas. It's my favorite movie. I had no idea that there was anything like that in real life had actually happened.

So that simple fact alone blows my mind. But also just the fact that this strategy persists is still amazing to me. I still can't totally wrap my head around it. There are people that say that they have this strategy that just continues to work year after year. But it's kind of remarkable. So that's the one thing that makes me slightly uncomfortable about the story. like this idea that you can get a bunch of people into a room and teach them these rules in the space of two weeks. And the rules always work and they would work for anyone.

Again, we talked about it in the show, but I'm just not entirely sure why if it's that easy, everyone doesn't do it. And again, I get the whole behavioral aspect to it. But as you were pointing out, why don't we just have all the robots doing that same strategy? It really is uncomfortable. I think especially as journalists as we are, this concept, like, we're just sort of our minds are trained to be skeptical of anything approaching this. And so this idea is sort of like peak uncomfortableness for people like us, the fact that maybe it is the simple. Maybe there is a set of rules. Maybe there is an investment approach that works decade after decade. I mean, I guess it's not impossible. You know, it's interesting. that there's there is academic literature that backs up the case for trend following is a consistently outperforming strategy it's just so it just feels so unnatural to us isn't that right maybe yeah I think that's right maybe we need to do a first person experiment oh we need to go out and become turtle traders ourselves and see what happens oh I love that idea that'd be fun

we like maybe we'll start a little um odd lot's head fund and then start trend following with it. Yeah, let's do that. All right, that'll be fun. All right. Well, that was another edition of the Oddlots podcast. I'm Joe Wisenthall. You can follow me on Twitter at the stalwart.

And I'm Tracy Alloway. I'm on Twitter at Tracy Allaway. And you can follow Jerry Parker on Twitter at RJ Parker, J.R. 09. You can also follow our guest, Michael Covell. He is on Twitter at Covell. And you can listen to his podcast. It's called Trend Following with Michael Covell. Thanks for listening.

June Grasso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world. Listen for complete analysis of the biggest court cases, the latest actions from Congress and regulators, and the legal moves driving the markets. From corporate law to constitutional law and from state courts to the Supreme Court. At Bloomberg Law, we go beyond the day's headlines. We speak with top attorneys, judges, scholars, and policy experts to break down what the rulings really mean. We do this every weekday, then bring you the best conversations in our daily podcast.

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