A message has been sent via Collective2 to my C2 subscribers relating to an offer for a free copy of Michael Covel’s most recent book – Trend Following (Updated Edition): Learn to Make Millions in Up or Down Markets.  Based on 129 reviews at Amazon, this book is rated four stars.

Given my investing beliefs, Covel is preaching to the converted.  I have stated before that I do not have opinions about the future paths that any of the ETF’s I trade will take.  I don’t state that gold is in a bubble, for example, nor do I state that bonds are overbought.  I like to tell you that I know that I don’t know and that is what separates me from the analysts paraded daily in front of television cameras.  Television viewers want to see experts espousing their opinions on stocks, bonds, commodities, etc.  The fact that I do not have opinions about various asset classes or individual stocks would make me a terrible interview candidate!

My investing style has evolved to an ETF trend following strategy which employs leverage for long positions but not short positions.  This trend following strategy puts me in agreement with Covel’s writings and the investing philosophies of such great traders as Ed Seykota, Tom Basso, etc.

The forward for the book was written by Larry Hite and his final paragraph reads as follows:

The way I see it, you have two choices – you can do what I did and work for 30-plus years, cobbling together scraps of information, seeking to create a money-making strategy, or you can spend a few days reading Covel’s book and skip that three-decade learning curve.

If you are one of my C2 subscribers you can send me an e-mail and I’ll place an order to have Covel’s book shipped to you.

FJP

As it happened, I launched my Trend Trading system on Collective2.com in what would turn out to be the worst August for US equity indices since 2001 (Source). Nonetheless, as my audited results show, I handily beat the S&P 500.

The best performing ETF components of my system for August were ECH (iShares Chile), MOO (Market Vectors Agribusiness) and TLT (iShares Long Term Treasuries).

I have designed my Trend Trading system to achieve a high Calmar Ratio (compound annual growth rate divided by maximum drawdown).  From the extensive back-testing that I have performed, I have determined that the combination of ETF’s that are included in my system produce a very good return with a minimal drawdown.  Of course, that is back-testing – what counts is actual results and that’s where the audited results from Collective2.com come in.

Later in the month when the Hennessee Hedge Fund Index returns are tabulated for August, I’ll compare the performance of my system to the index.

FJP

I reported earlier that my Combined ETF 2X model had increased in value by 5.8% during the month of July.  At the time, the July performances for hedge funds weren’t available.  My baseline for performance comparison of my ETF strategy which is now on Collective2.com (click here) is the Hennessee Hedge Fund Index.  As of today, the hedge funds that have reported their July performances gained, on average, 1.91% (updated results are available here) during the month.  Fortunately, I handily beat the hedge fund index last month.

The following equity curve is from my actual trades with my Trend Trading model on Collective2 illustrates the model’s performance thus far.

My type of investing doesn’t lead to exciting commentary. I don’t have any bold opinions to share on where the Japanese Yen is going relative to the US dollar.  I won’t forecast where the South Korean stock market is going to be at year end and I won’t predict how much longer the emerging market bonds will continue to rally.  I will, however, continue to apply my algorithms to ETF’s covering these markets and rest assured that my style of investing beats the vast majority of strategies available to the retail investor.  It isn’t exciting but then again investing isn’t supposed to be exciting.

FJP

These are early days indeed for my Trend Trading system on C2.  Below are the equity curve and open positions.

Throughout the month of July, I e-mailed my Collective2 subscribers trades for the Combined ETF 2X Model and I am pleased with the results.  I did add more ETF’s this month to the system as you will note in the list below.

The sugar ETF was one of the better performers for July rising 23% for the month.

The Combined ETF 2X Model gained a healthy 5.8% in value this past month.  In the future, you will be able to view an equity curve provided by Collective2.com for this model.  I recently set up the system on C2 which can be viewed here.  Given that my system is based on trend trading techniques, my new system on C2 is called Trend Trading. My goal with this system is to achieve a positive absolute return with minimal drawdown through the use of trend trading techniques applied to ETF’s and leverage at a 1:1 ratio.  For an account starting with $50,000, for example, my system would borrow a maximum of $50,000 as required for the purchase of ETF’s. I don’t have opinions about whether any particular asset class is overvalued or undervalued nor do I have an opinion on how long a trend is going to last. I never know how high an ETF is going to rise.  However, I am comfortable knowing that I don’t know and trading accordingly!

FJP