Founder/CEO Brandywine Asset Management, Inc.
Program(s) Developed: Book "Jackass Investing: Don't bet on it, Profit from it"
Interview Date: September, 2011
Interviewed by John F. Gallwas, Founder of Striker Securities
Michael Dever is a highly regarded author and developer of hundreds of trading ideas and research techniques that have been used for his books and for his CTA Brandywine Asset Management, Inc., where he is founder, CEO and Director of Research. His new book “Jackass Investing" published this May, has been described as a "ground-breaking" entirely new and eminently logical processes for investing.
With offices in a early 19th century mill converted into an office building located 30 miles east of Philadelphia, Mr. Dever and his businesses have been the subject of numerous interviews and articles in publications including, The Wall Street Journal, Barron's, Futures Magazine, Forbes and Fox TV.
John Gallwas: Tell us a little about yourself and how you have reached the point of being a successful author as well as a Commodity Trading Advisor.
Mike Dever: I began trading futures in 1979 and after a decade of discretionary trading, sitting in front of a screen both day and night, made the decision to systematize my approach. This forced me to define and quantify every trading strategy I employed and to fully understand its source of returns. That led to many of the investment terms and concepts I introduce in my book. It was actually in 1999 that I became determined to write the book, as I had become frustrated with the misinformation being provided as "conventional investment wisdom" to the average investor – in particular to "buy-and-hold" stocks for the "long-run," and wanted to show them a better way to earn both greater returns and be exposed to less risk.
John Gallwas: Based on the reviews, it appears that your new book, "Jackass Investing: Don't do it. Profit from it.", released this May, is being well received. Who should read this book and why?
Mike Dever: The book was written for every investor. Certainly those who are looking for a better way to invest than how they been taught by the mainstream financial press and advisors. By stressing undiversified portfolios concentrated in stocks and bonds those sources have taught people to gamble with their money, creating what I refer to as a "Poor-folio." The book presents and refutes 20 common (and costly) investment myths, such as "Stocks provide an Intrinsic Return" (instead of there being a 'magical' intrinsic return I show exactly what makes stocks go up and down) and "Futures Trading is Risky" (remember, it's a myth!). I then show people how they can use this information to construct a 'truly' diversified portfolio; one that can earn greater returns with less risk. Because of this favorable risk-reward combination, I refer to these as the "Free Lunch" portfolios. In the "Action Section" for the book on the www.JackassInvesting.com web site, I present Free Lunch portfolios that any investor can employ.
John Gallwas: How can information and guidance in the book help the investor to enjoy better results?
Mike Dever: By introducing investors to the concepts of "return drivers" and "trading strategies" I am able to show them how primitive, ineffective and actually dangerous the existing financial advice is. The book itself explains the thought process that will help investors better understand why they should ignore much of what is conventionally-preached, and why they should embrace this new way of thinking about investing. The "Action Section" gives them specific advice they can follow to increase their odds of making consistent profits across a variety of market conditions.
John Gallwas: You started to trade futures in 1979 and founded Brandywine Asset Management in 1982, which was one of the early and very successful CTA’s. Recently you reactivated Brandywine and A/O July 1, 2011 began accepting new investors. Why did you close the business and what triggered your decision to reopen?
Mike Dever: Brandywine was one of the first CTAs to incorporate a broadly-diversified, multi-strategy, systematic approach to trading. While we started out trading on a discretionary basis throughout the 1980's, that approach became problematic as I began to trade in more than 100 markets across all time-zones. That is what led us to develop our fully-systematic approach to trading. The result was our Brandywine Benchmark program, which was profitable every year it traded during the 1990s.
My entrepreneurial drive also led me to founding an early ecommerce community (now called social shopping), spree.com, in 1996. By 1998 spree had grown into being the world's 7th most-trafficked ecommerce company and the business began to require more of my time and attention as the company was approached by suitors, investment bankers and VCs.
Now, the situation is reversed. Although I spent much of the past decade involved with running internet businesses, trading and investing has remained my primary passion. The move back to full-time trading began after I sold one of my Internet businesses in 2007. The first step to relaunching our trading was to update the trading strategies Brandywine had employed during the 1990s. The results were extremely encouraging, as the aggregate performance of the trading strategies we had used previously continued to perform as they had more than a decade previously. I had also collected a 'library' of new strategies that we began to develop, which provided further diversification value to Brandywine’s portfolio. By late last year we reached a point where we felt we had the ability to produce returns that were even better than we had with our top-performing Brandywine Benchmark program in the 1990s. I then went out to some past investors and arranged for one to provide us with a seed investment of $10 million. We began trading that in our new Brandywine Symphony Fund in July.
At the same time, the financial crisis in 2008 compelled me to complete the writing of Jackass Investing. I was troubled by the bad advice that was constantly being regurgitated; such as "stay the course" or "diversification doesn't work," and "all investments lost money in the financial crisis." I, along with I'm sure, most of your readers, know that just isn't true. But the vast majority of people are unaware of the diversification opportunities available to them, including managed futures. One of the more popular myths in the book is "Myth #12: Futures Trading is Risky." I wrote it with a bit of a "surprise ending" that makes an impact with people by showing them how powerful managed futures are not only in providing portfolio diversification, but also as a standalone investment when compared to stocks.
So in answer to your question "what triggered your decision to reopen;" it was a combination of my passion for futures trading, combined with my belief that managed futures can provide ordinary investors with their best opportunity to truly diversify their portfolios.
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