Reviewing The Review

Below is the book review Marek Fuchs wrote for TheStreet.com regarding Michael Covel's book The Complete Turtle Trader.

I've read the review a couple times this weekend and keep shaking my head at the flippant and uninformed comments Fuchs makes throughout his review, so I thought I would spend some time this evening reviewing the review. My comments are in red italics.

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By Marek Fuchs

Investment and management books have an alarming tendency to spend a lot of time advising you to take your life and trading cues from one particular wild animal or another. This month's preference just might be the turtle, and I instantly developed the sneaking suspicion that the turtle is possibly in vogue in reaction to the popularity of Jim Cramer, co-founder of this site and, shall we say, not someone who has achieved renown in the field of business commentary from following a tortoise's take on life. (Fuchs apparently is not familiar with the origin of the name Turtle Trader, which came from an interview that Richard Dennis, the co-founder of the Turtle Trader program, gave while visiting Singapore. After visiting a turtle farm, Dennis said he was going to produce traders like they produced turtles. In no way, shape or form is the phrase Turtle Trader meant to imply a slow and steady approach to investing. Fuchs is either ignorant of the term's origin, which means he didn't read the book, or he is projecting his own mental image onto the material.)

Sure enough, The Complete TurtleTrader: The Legend, The Lessons, The Results, (Collins) by Michael W. Covel, does not make it to the back inside cover before it is drawing distinctions between the timeless success of the so-called turtle traders and the "era full of slapdash investing advice and promises of hot stock tips for 'the next big thing,' as popularized by pundits like Jim Cramer of 'Mad Money.'"

The Business Press Maven has, as longtime readers know, been up front with his own quibbles with Cramer, but I'm always suspicious of anyone who defines themselves, as in this case, by what they are not. (Since the Turtle Traders came before Jim Cramer, it is difficult to take this comment seriously. Also, since Covel was not a Turtle, I'm not sure who Fuchs is referring to. Covel isn't trying to define himself in this book, he is simply making a distinction between the stock market hype of today's business media with its incessant BUY, BUY, BUY, SELL, SELL, SELL nonsense as personified by Jim Cramer, and the methodical, systems-based approach taught to the Turtle Traders.)

And the inside front cover, ironically enough, starts with a real go-go come-on -- nothing any self-respecting turtle would ever write, assuming, of course, that a turtle could write:

"What happens when ordinary people are taught a system to make extraordinary money?" (Unfortunately for Fuchs, the whole point of the Richard Dennis/Bill Eckhardt experiment was to answer that very question. The Turtle Trader program was a real-life version of the Eddie Murphy/Dan Aykroyd movie Trading Places. The experiment set out to answer the question: are great traders born or can they be taught? One can argue whether those selected to participate were ordinary people, but one can not dismiss the fact that several people with little to no background in futures trading were able to make millions of dollars after only two weeks of training.)

The second line of the preface draws a parallel with Donald Trump. Again, not one universally recognized as a turtle type. First off, once you start giving momentum play advice, you lose me on the turtle reference. No turtle I know is a momentum player. (Here again Fuchs is mistaken in associating the word turtle with a particular style of trading. The turtle name has nothing to do with the trading methodology used by the Turtle Traders. Fuchs would know this if he read the book. And if he did read the book, then he needs to stop associating the name with the trading style because he is doing his readers a disservice. However, the last sentence indicates that Fuchs did not read the book because the Turtle Traders were momentum traders, that's what trading breakouts is all about. I think what we have here is a case of psychological projection. Fuchs sees turtles as slow and steady creatures, so therefore, Turtle Traders must also be slow and steady investors, of course, they were not.)

When it comes to business books, though, inconsistencies sometimes have to be accepted as a naturally existing part of the genre, in order to get at the underlying premise, which is the only item that matters to investors anyhow. (Again, incorrectly associating the Turtle name with a trading style.)

The premise is that, with his system, Covel ran a contest of sorts, looking for people in totally unrelated fields to train and then set loose on a trading desk. And they did well. Don't be too impressed, though. Wall Street has always been a nonprofessional profession, which is to say a field in which savvy people who have been successful and earned their nicks and world weariness in other fields have come to and been successful. (First, Covel didn't run any contest, Dennis and Eckhardt did. Secondly, Fuchs is missing the point. The Turtle story isn't about whether savvy people have found success on Wall Street, but whether normal people can be turned into very successful traders after being taught simple trading rules over a one or two-week period. Also keep in mind that the Turtle story took place a decade before the invention of the World Wide Web that democratized financial markets with web-based trading platforms and dirt cheap commissions.)

In fact, talk to a lot of traders and the last guy they'll want working on a trading desk with them is someone with formal training -- a business school automaton. When The Business Press Maven was a stockbroker, there was an office joke that if someone scored too high on their Series 7, they were in for a bad career, because it meant they were too financially book-smart to succeed on their feet. Even Hare Cramer, the anti-turtle, started as a journalist and went to law school.

So I disagree with the basic premise that a system that turns novices into successes is much of a departure from all the other systems that have always turned everyone without financial experience into successes. (Fair enough, but the fact other people find success on Wall Street doesn't answer the question: is their trading success a result of traits they were born with or the result of effective training programs? In other words, are great traders born or taught? Discussing the Turtle Traders without putting the story in its proper context of the bet between Dennis and Eckhardt is just poor journalism.)

Still, what of the system? Well, as in the case of many of these systems, I have nothing specifically against it, but I also have nothing specifically for it. The Turtle System is, in the end, a mix of common sense maxims about trading ("If the Turtles lost money in a market, they had to move on. Accepting and managing losses are part of their game") to advice to be more concerned about when to sell than when to buy to technical indicators, like buying into strength during break-outs.

Is there some value to reading all this obviousness formalized together in one place? I suppose, in that it can't hurt, and maybe collecting all these maxims in one place, even if you've seen the same maxims elsewhere, will set some sense in people's minds. Still, I'll slap a dreaded Business Press Maven "Hindrance" label on this book. There might be value to amateur investors, as every trader needs a plan, but I can't in good conscience suggest paying $25.95 for a book of maxims. Finally, if you do read it, please don't make too much of pianists and computer geniuses making money because of this system. In the history of Wall Street, those who have focused on quirky successes in other fields have done well under many programs. (If the trend following strategy and risk management rules used by the Turtles are just so much common sense, then why isn't every retail trader or investor a millionaire? Last time I checked, researchers in behavioral finance have found that most retail investor types do the wrong thing at the wrong time because they allow emotions to influence their trading decisions, including cashing in winners while holding their losers until they come back to breakeven. The simple and effective rules followed by the Turtles and other system traders only become obvious once traditional fundamental-based investors set aside their prejudices and examine the markets from a different perspective, which they get introduced to via books such as The Complete Turtle Trader.)

In addition to this trading advice book, there is a tortoise and hare on the cover of one of the latest business self-help books -- but the hare is winning. The book The Age of Speed: Learning to Thrive in a More-Faster-Now-World, (Bard Press) is written by Olympic-speed-skater-turned-corporate-consultant Vince Poscente, who speaks about the need for speed.

This book, like most of these management pamphlets that happen to come with a hard cover, is not to be taken too seriously. I only mention this one -- and give it a (again, hesitant) "Help" label because of how it uses the capacity for speed as a lens through which to look at companies. In other words, speed as a baseline condition to our economic and social life is a given. Dealing with it is the ante you have to put up to get into the game.

So how does a company you are investing in measure up in this regard? Poscente is most interesting in analyzing Dell which he calls a "Bottle Rocket," which pursues speed at all costs, but is lacking in ability to harness it, which ultimately puts it in danger. Though Dell didn't start out as a Bottle Rocket, its inability to evolve from the "Dell Way" over the past few years turned it into a prime example.

In the end, thinking of companies in terms of their ability to surmount and even capitalize on the speed of modern society is something that anyone -- tortoise or hare -- would be well served to do.

(Overall, Fuchs did a wham-bam thank you ma'am-type review that failed to put the story of the Turtles in its proper context, while doing a fair amount of psychological projection by associating the word turtle with a particular type of trading.

While I have several obvious disagreements with Fuchs, any credibility he has quickly evaporated as a result of this one sentence:

No turtle I know is a momentum player.

Sorry, but the entire Turtle trading strategy is based upon entering a trade after a 20-day or 55-day breakout, and a breakout play is by anyone's definition a momentum play. Every Turtle Trader was and is a momentum trader.

As a result of this obviously incorrect statement, I can only conclude that Fuchs didn't read or understand the book, which is too bad for TheStreet.com's readers, because if they take Fuchs' advice not to buy the book, then they will miss an opportunity to read and learn about one of the great trading stories of the late 20th century.)