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Mark --
I work for Emerald Asset Management, Ltd. in Chicago - I don't recognize your
name, however. What firm do you work for and how would I have interacted with
you?
As for the claim that any discretionary trader with consistent returns can be
"mechanicalized" (sic), unfortunately there is no way to prove that statement is
true because you would have to test it with every discretionary trader out
there. But there are countless ways to prove that it is false - let's find a
discretionary trader with "consistent" returns and see if his or her approach
can be mechanized! In fact, somebody may have already done that - if I recall
correctly, one of the largest managed futures traders (I'm thinking it was Paul
Tudor Jones but I may be wrong) attempted to do this for his own trading but was
unable to have it completed, even with his hundreds of millions under management
and having hired some of the best computer programmers available. Let me
confirm the name and provide it to you.
As for Roy Niederhoffer and Gateway Futures being among the "worst" case CTAs,
both programs controlled (at their peak) over fifty million (in the case of
Gateway) and (in RG Niederhoffer's case) over a hundred million dollars under
management. They are not the worst in any case, and in fact, I was very
disappointed to see Gateway shutdown temporarily. Their recent returns may
have lagged their historical performance but it wasn't anything like the returns
seen recently by some of Chesapeake's or Dunn's or Willowbridge's programs. As
for Niederhoffer, he's had periods of good returns too and his program has zero
correlation to practically everyone. (Of course, low correlation doesn't help a
whole lot when you're down double digits.) But the fact remains that these
programs have exhibited periods of strong performance historically and have been
used to manage very significant amounts of money within the managed futures
industry, characteristics that confirm that these are far from being the "worst"
programs out there.
As for the claim that I cherry picked high quality discretionary traders, I was
merely making a point in response to your statement: "To sum up, the claim
of discretionary trading is just an excuse for inadequate programming or a
feeble attempt to disguise a non existent trading method." Now, since you're a
professional, you know that a trader without a trading method has a very short
life span when it comes to managing money. How then have all of the
discretionary traders I mentioned in my previous post managed money for many
years? Luck? And do you really think that a CTA managing fifty to a hundred
million dollars would claim "inadequate programming" as to why they use
discretion? Why couldn't they just go out and buy the necessary programming
talent? Is it because they know that they don't need it to succesfully run their
discretionary programs? I think so.
As for my own use of discretionary traders, a new multi-advisor fund that we're
launching shortly has two discretionary programs in it and I will be putting
some of my own money into the fund. Why use discretionary traders? Simply
because their approach CANNOT be copied by a computer, thereby providing greater
diversification to the roster of managed futures programs included in the fund.
Sincerely,
Michael E. Strupp
Emerald Asset Management, Ltd.
NOTE: THE POSITIONS STATED IN THIS EMAIL ARE THOSE OF MR. STRUPP AND DO NOT
REFLECT THE VIEWS OF EMERALD ASSET MANAGEMENT, LTD., ITS PRINCIPALS OR ITS
AFFILIATED COMPANIES. NO STATEMENT IN THIS MESSAGE SHOULD BE CONSTRUED AS A
SOLICITATION TO BUY OR SELL SECURITIES OR TO INVEST IN ANY MANAGED FUTURES
PROGRAM.
Mark Brown wrote:
> Hello mike,
>
> Tuesday, December 07, 1999, 7:29:39 PM, you wrote:
>
> m> Gang,
>
> m> Just to chime in a moment ... I analyze professional commodity traders
> m> (CTAs) for a living and there are a lot of successful mechanical traders
> m> and, unfortunately, not as many succesful discretionary traders.
>
> Mike, this is correct as you know mechanical traders profit far out
> weigh discretionary profitability.
>
> m> This doesn't mean that a discretionary method is an "excuse for
> m> inadequate programming" Few people can do it - but that doesn't
> m> mean that no one can do it.
>
> Mike, I NEVER SAID that a discretionary trader could not make money
> did I? NO! I didn't I hope you are more accurate in your research. I
> did say that if a discretionary trader has a consistent return then he
> can be mechanicalized!
>
> m> Now let's look at some mechanical traders -- especially those who
> m> to Would you m> say their coding is inadequate?
>
> Mike , oh get real do you try and skew the research you claim to do as
> you have this post. You picked two examples of the worst CTA's that
> claim to use mechanical systems and many more of the best of the
> discretionary traders and try to compare. Who do you work for? I
> probably do business with you in one way or another.
>
> m> In my opinion, discounting the possibility of successful discretionary
> m> trading is extremely myopic and reveals a lack of knowledge when it comes
> m> to the world of professional alternative investments programs.
>
> So how many discretionary traders do you have your money with MIKE?
>
> m> Mike
>
> --
> Best regards,
> Mark Brown mailto:markbrown@xxxxxxxxxxxxx
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