Winning and Losing Like a “Turtle” (w/ Jerry Parker)

Winning and Losing Like a “Turtle” (w/ Jerry Parker)


JERRY PARKER: I
lost 60% in one day. 1986, we were just
making so much money, and I know we were up 200%. And I went home on
Friday at peak equity and my bonus was
a million dollars, and I was just on
top of the world. And I think just from
the very beginning, and from the Turtle program, it
was just a tremendous emphasis on diversification. Trading single names just
seemed an obvious thing to do. JOE PERRY: Right. JERRY PARKER: It’s
a pain in the butt. It’s much easier to just
to trade the indices and all of your markets
are in this FCM account. It’s just a piece of cake. Clients kind of prefer it. But you need to
stand up and make a, try to do something
better and different, even though client’s
not asking for it. Maybe they complain
about it a little bit. I’ve definitely
had people complain that, well, I understand
the trend following of the currencies and
commodities and the bonds, it’s getting a little
too close to me for you to say, oh, just follow
these trends in the stocks. I don’t really
think that’s right. And so we’re like, well,
sorry, we’re going to do it. JOE PERRY: Yeah. JERRY PARKER: It’s, we’ve
had a lot of success with it. JOE PERRY: I’d imagine that that
diversification held you out from some of those or maybe
you didn’t lose as much during some big equity
sell-offs like we had in the fourth
quarter of last year. JERRY PARKER: You don’t lose as
much, you don’t make as much. When the markets are
in a big uptrend, it’s hard to beat the
S&P or the FANG stocks. You don’t make it on the
upside, but it definitely reduces the drawdowns and in
the same way that I would not desire to trade the dollar index
or the euro only or a commodity index, I like having
longs and shorts. I complain when I don’t
have longs and shorts and the currencies. So yeah, it makes perfect
sense in the stocks as well. JOE PERRY: So people
are your clients because they like the
stability that you offer. JERRY PARKER: Yeah. JOE PERRY: Besides
you’re making them money. JERRY PARKER: Yeah. It’s different. And we do things
differently than other. We don’t vol target. We’re kind of traditional
classic trend followers, where we risk a small amount,
but if the volatility gets higher and higher as
the trade becomes very, very profitable, we don’t
have a tendency to get out of any of it. We just sort of let it go. And so we’re a good complement
to all of the European CTAs who are vol targeting. JOE PERRY: Right. JERRY PARKER: So you’ve got
to be a little different. JOE PERRY: Right. What would you
say is the largest drawdown that you’ve ever had? JERRY PARKER: Well,
definitely Richard Dennis. I lost 60% in one day. 1986, we were just
making so much money, and I know we were up to 200%. And I went home on
Friday at peak equity, and my bonus was
a million dollars and I was just on
top of the world. And Monday was just this
day of all the markets going against us. We had made so much
money so quickly. And just like, oh
well, such is life. Rich approves of
it, you know, he’s telling us to do, we think
we’re doing the right thing, that it must be right. But I quickly
figured out 1988 when I started Chesapeake,
that maybe 200% was not what I should
go for in order to have a stable business. But I do remember being jealous
and hearing my other Turtle friends who had not made
that transition quite yet are doing really well in that
green, the drought in 1988. But yeah, it’s an
evolution over time. A lot of positive
from the Turtle program and a lot
of things that you have to get out
of your head when you trade sort of client money. JOE PERRY: Is it a lot
easier now with computers as compared to like 1980s, where
you had to execute everything by hand and pick the phone
up and make a phone call down to the pits? Now you have these algorithms
and you don’t necessarily have to make the decisions
right there, because they will do it for you in a sense. You program them,
but in a sense, you don’t have to actually
go and physically do it. Does that take a little
bit of pressure off of you? JERRY PARKER: I think it
makes us more disciplined. And probably the
traditional CTA firm would have a research
department that creates the models, a committee
that approves the models, and then you run those models
each day on the new data. And then you have a
separate department that executes the trades. So these guys who are
executing, their only job is to get a good fill. JOE PERRY: Right. JERRY PARKER: And everyone
else’s hands are tied. They can’t walk in there and
say, hey, do a Jerry trade or do a Joe trade. I’m getting freaked out. So I think this
division of duties gives people more
consistency and discipline. There are still ways to what I
call, systematize discretion. It’s really easy sitting in
front of the computer and say, I’m really nervous
about this coffee trade. The coffee skyrocketed in
1988 as well or maybe ’89, and I remember
sitting there going, I really want to get
out of this coffee, it’s just going up too much. So now I think more than, a lot
of people just program that in. JOE PERRY: Right. JERRY PARKER: It’s a rule. So rules are not a panacea
either, if you have a bad rule. I think there’s a
lot of temptation is to have bad rules. I’ve done it before
and just think that you can get away with it,
because it’s computer code. You can’t. JOE PERRY: How about
on the other side? What was your biggest winner? JERRY PARKER: We definitely
had some trades that lasted a year or two or three. Short yen I think in
the ’90s or 2000s. You know, crude trade in ’14
came in at a really good time, $90 down to $20 something. Hasn’t been a lot
of great trades. You know, the heating oil
trade I mentioned earlier, both of those are
legendary trades. Natural gas has been some
major moves in natural gas. ’87 or ’88 drought. Oh, the base metals and ’04,
’05, ’06, gigantic trades that lasted a year or two. When you put up a
weekly chart, I’m not saying you need
to trade weekly, I’m just saying put
up a weekly chart and scroll through the charts. Massive trends just pop out. And you look at the
little jig in the middle where it goes down a little
bit and it comes right back, like, oh, it’s a piece of cake. You blow it up into a daily. JOE PERRY: Yeah. JERRY PARKER: It’s
like, oh my god. Where you live through it. Living through things, I think
Bill Eckhardt has a good quote. I can’t remember what it
was, but something like today is really a bad day and
it’s really important, but you won’t even remember
it in a month or two.

Randy Schultz

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3 thoughts on “Winning and Losing Like a “Turtle” (w/ Jerry Parker)

  1. David Chorak says:

    Longs and shorts is a good strategy in high volatility.

  2. Jack Malloy says:

    Chesapeake Capital Diversified Program Performance Returns:

    2019 +2.04%
    2018 -7.69%
    2017 +4.51%
    2016 -3.92%

    Is underperforming the market a pre-requisite of being interviewed on Real Vision? I mean COME ON

  3. eugyero says:

    >>>I will never look at turtles the same way.<<<

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