We received great news today from our friends (and EV website members) Gil Morales and Chris Kacher (a.k.a. Dr.K). As of month-end, April 2011, their MoKa Market Direction Fund is up 49.57% year-to-date before management and performance fees, and 41.87% net of fees, vs.
S&P 500: 2.96%
Dow Jones Industrial: 4.13%
NASDAQ Composite: 3.37%
Russell 2000: 2.64%
Gil commented: “What Dr. K and I find is that we are very compatible running a fund together, and instead of running separate halves of the fund as we tried to do with Oceane I we are running it jointly with great effect. Also, having a consistent "ethos" or philosophy towards the market as former O'Neil managers without others in the mix causing distractions is a critical factor with respect to maintaining a strong and even psychology, the most important aspect of managing money in my view. Given the risk controls we are using I believe there is zero chance of any significant drawdowns outside of what is normal for the model.”
I found it was a striking similarity with Pascal and I running jointly our methodologies to build the robots. But even more striking is the similarity of our conclusions: in order to do well in this market, one must absolutely wait for the optimal window of opportunity to act. Gil and Dr.K saw that window in AGQ when silver cleared the $31.50 high and they went in big at that point. They exited on a sell signal almost at the top around SLV =$50. Since then, they remain almost all in cash with a small position (10%) in DGP, waiting for the next window to develop. They have noticed that their fund does very well when it operates in this manner. The test fund was up over 55% being invested less than half the time, so this is a key factor in their success: Patience, followed by decisive, though less frequent, action.
Isn’t it exactly the same message from the conclusions of our own GDX robot report?
In the past 44 months, the GDX Robot found 42 strong buy/short signals, with an average return of about 6% per trade that on average lasted 9 trading days.
That is an uncompounded low-drawdown return of 72% per year, also being invested less than half the time!
Patience, followed by decisive, though less frequent, action on optimal windows of opportunity should become the norm for all traders in this group. Maybe the legendary Trading Holy Grail is hidden behind this simple discipline!
Billy
PS Gil Morales will be on Fox Business News discussing today's market action and some individual stocks with Liz Claman at 1:40 p.m. Pacific time, 4:40 p.m. Eastern, and 9:40 p.m. London time.