Bruce Kovner Interviews and Trading Strategies

Bruce Kovner started the well-known hedge fund Caxton Associates.

Unlike his left-wing counter part, the eloquent George Soros, Bruce Kovner rarely gives out interviews. When Fortune Magazine suggested an interview titled "The $11 Billion Man" with Mr. Kovner, he declined. He did not want that kind of publicity.

Bruce Kovner graduated from Harvard College in 1966 but dropped out of the Kennedy School before he completed his Ph.D. Then he began to trade commodities.

In 1983 Bruce Kovner set up Caxton. Reports say Caxton has returned 28% annually since inception. According to Institutional Investor, Caxton returned--net of fees--31% in 2001 and Kovner made some $500 million personally that year.

As for the current markets, Bruce Kovner saw (in 2003) the dollar and yen depreciating more, and said, "We still have a very substantial move in gold ahead of us. The same could be true for a number of other commodities. We may be in for a ride in commodities the likes of which we haven't seen in a while." Kovner cited oil and natural gas as examples. As for bonds, he expressed concern about rising rates "for any investor with a two-year or more time horizon."

Quotes of Bruce Kovner

Fundamentalists who say they are not going to pay any attention to the charts are like a doctor who says he’s not going to take a patient’s temperature.—Bruce Kovner

In a bear market, you have to use sharp counter trend rallies to sell.—Bruce Kovner

Place your stops at a point that, if reached, will reasonably indicate that the trade is wrong, not at a point determined primarily by the maximum dollar amount you are willing to lose.—Bruce Kovner

Bruce Kovner's Trading Methodology

* Make currency and futures trading judgments based on analyzing the worldwide political and economic events.

Research/ Analytical Techniques Employed by Bruce Kovner

* Spend tremendous amount of time to follow and analyze intricately the economies of many different countries and integrate these various analysis into a single picture.
* Bruce Kovner gets a gurus report daily. Includes Prechter, Zweig, Ned Davies, and Eliades. He looks for consensus that the marketing is not confirming. He wants to know when a lot of people are going to be wrong.
* Uses technical analysis a great deal, but he can’t hold a position unless he understand why the market should move. Technical analysis is like a thermometer.
* Important to have the ability to imagine configurations of the world different from today (alternative scenarios) and really believe it can happen. Also, stay rational and disciplined under pressure.

Trading Techniques Employed by Bruce Kovner

* To make money, you have hold a position with conviction. It is hard to do so when you are following someone else’s.
* He gets call 24-hours from his staff when currencies breaks out of a redefined (revised at least weekly) range, or if the prime minister resigns, say.
* When you have a fundamental view before a piece of major news, wait till the news is out and see how the market "vote".
* Bruce Kovner usually goes with breakouts.

Risk Management Techniques Employed by Bruce Kovner

* Place stops at where, if reached, will reasonably indicate that the trade is wrong, NOT at a point determined by the maximum dollar you are willing to lose.
* Pays strict attention to the correlation of all his positions, measured by total risk in the market every day.
* Loss of money slows him down, and the change in technical picture will also prompt him to reevaluate his view.
* Whenever Kovner enters a position, he has a predetermined stop.

Philosophy and beliefs of Bruce Kovner

* The reason Kovner is in this business is that he find the analysis of worldwide political and economic events extraordinarily fascinating.
* The first rule of trading is don’t get caught in a situation in which you can lose a great deal of money for reasons you don’t understand.
* A trader has to be willing to make mistakes regularly- Marcus taught him about making the best judgment, being wrong, make the next best judgment, being wrong, make the third best judgment, and then double the money.
* The Heisenberg principle - If something is closely observed, the odds are it is going to be altered in the process. The more a price pattern is observed by speculators the more prone you have false signals; the more the market is a product of nonspeculative activity, the greater the significance of technical breakout.
* Managing OPM represents a call.
* Believes that under a stable, moderate rates of inflation, technical trading systems will kill each other off.
* Stock market has many more short-term countertrends. Whereas, commodities markets are more trending.
* The market usually leads because there are people who know more than you do. e.g. Soviet Union was a very good trader in currencies and grains.

History and other facts of Bruce Kovner

* Worked with Michael Marcus and was colleagues of Jack Schwager at Commodities Corp.
* Studied political science and economics at Harvard, also taught political science at Havard and U. Penn.

Performance Record of Bruce Kovner

* 87% over 10 years: "During the past ten years, Kovner has realized a remarkable 87% averaged annual compounded return." MW, Jack Schwager 1989.
asr: $1,000 with 87% return make $1 Million in 10 years, 1000 doubling each year it makes 1 million in 9 years