trendfollowing's Commentaries
Statistically Challenged
I received an email today with the subject heading of:
The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History by George Zuckerman (it is a book)
The email said:
This guy made like $24B in two years. More than all the combined profits of all the trend followers in history. 100% based on the fundamentals. You’d gain even more credibility if you acknowledged that other strategies besides trend following make money.
This is quite possibly one of the most ignorant emails I have ever received. This emailer finds one guy who bet the ranch and won — a strategy that no one else has ever replicated — and that is proof positive of what? The great thing about trend following: There is NOT just one practitioner who made $24B. Don’t get me wrong I salute John Paulson and his brilliance to figure out this great trade as it is the stuff of legends, but trend followers are not about one trade. In looking into Paulson I found this note about his success at Portfolio.com:
Left unexamined is the uncomfortable moral dimension of Paulson’s achievement. If he saw all of this coming, was it right for him to keep his own counsel, quietly trading while the financial system melted down? Do traders who figure out a way to profit from our misery deserve our contempt or our admiration, however grudging?
Paulson deserves admiration. Period. If you hate Paulson, you are a punk.
Tags: statistical-thinking
