Turtle Talk : Episode 013

Episode 013 is live. This month Rich Brennan, Jerry Parker, and Adam Havryliv are joined by a very special guest, Mike Melissinos, founder of Melissinos Trading and one of the handful of genuinely uncompromising classic trend followers left standing. Same system, same rules since 2011, no drift and no compromise. Rich and Adam are also fresh back from a few weeks in Malaysia, and they have returned to one of the wildest months the markets have served up in a long while. What follows is the kind of honest, no fluff conversation that the polished finance pods never seem to give you, and it turned into one of the most entertaining episodes the show has produced.

Adam opens with the April numbers, and they are worth pausing on. The Classic Trend Index finished the month up 6.7%, the highest return against the peer benchmarks the team tracks, and a strong reversal of a slightly negative prior month. The outperformance held on the long term risk adjusted measures too, whether you reach for MAR, Sharpe, or Sortino. What makes the result remarkable is the month it was carved out of. Adam walks through April week by week, and it reads like a stress test. A tariff shock and a commodity explosion in week one sent oil ripping higher. A ceasefire reversal in week two dragged crude straight back down. Week three saw the trend cycle re-engage amid more volatility, and week four closed with the Strait shutting again, a rally in energy, and a fall across the metals complex. A genuine whipsaw from open to close, and yet the systematic universe held its nerve.

From there Rich steers the conversation toward the deeper story the monthly figure cannot tell. Looking at the VAMI chart, the separation between the Classic Trend Index and the rest of the field since January 2020 is not narrowing. It is widening. Rich frames this as the shift from what he calls smooth world to rough world. For much of the decade after the global financial crisis, the wider industry made a rational commercial choice to smooth their return profiles, trim volatility, and manage drawdowns tightly in order to look more palatable to institutional money. The problem is that smoothness is never free. You pay for it with your convexity, quietly trimming the outlier trades that are the entire point of classic trend following. In smooth world you might get away with it. In rough world, the world of pandemics, inflation shocks, energy crises, and geopolitical fracture, you pay a steep price. Worse still, those smoothed and modest profiles are now being undercut by cheaper replication products that approximate them at a fraction of the fee. Rich argues the rise of passive may be accelerating all of this, because as capital floods into index strategies, pricing grows less efficient, correlations shift, and the macro trends systematic traders exploit become more pronounced and more persistent. The drawdown the classic guys took earlier in the year was simply the price of admission, and they have accelerated back toward their high water marks at pace. As Dave Dredge would put it, this is the racing car with the good brakes, able to absorb the worst of the volatility and then power hard out of the corner.

The episode then moves into live market action, and the charts do not disappoint. Jerry leads with the Australian dollar, one of the strongest currencies on the board, and uses it to make a broader point that trend followers do not have to pair everything against the almighty dollar. Pair the Aussie against the New Zealand or Canadian dollar and you get bigger trends, different chart patterns, and a smaller entry ATR on two highly correlated markets, which translates into a larger position when the correlation finally breaks. He reaches back to the 1990s for the perfect example, a long German Mark against French Franc position where neither leg moved much against the dollar, but the combination became a monster trend because the ATR was tiny and the correlation so tight that only a small break was needed to unleash an enormous move. Do not forget your currency crosses.

Mike brings the chart of the episode. SanDisk, up over 4,000% in a year, a genuine 40-bagger and the poster child of the AI storage trade. It entered his universe through a separate strategy that watches the components of the S&P, applies a fixed selection rule, and takes equal weight positions in whatever is genuinely strongest. SanDisk has sat at number one for months. Jerry, true to form, took issue, not with the performance but with the philosophy, arguing that any rule which filters markets in and out runs into sample size problems, and that classic trend following demands a fixed universe where you take every single trade. The math gods, as he put it, do not care whether you missed the cocoa trade because of a clever filter or a lapse in discipline. You did not take the trade, and that is all that matters. It made for a lively and good natured stoush, and it opened up the deeper question of why so many CTAs happily trade the components of a commodity or currency index yet freeze at the idea of trading single stocks with the exact same breakout rules. Adam tied it back to the AI and RAM thematic sweeping the Asian indices, with Taiwan up around 100% over the trailing year, Japan around 50%, and the Samsung-heavy Korean index up roughly 300%, and weighed the real trade-offs between indices and single stocks. An index will not gap fifty percent on a takeover, which mutes the outliers, but it also will not blow up on an accounting scandal out of nowhere. For now the team trades the futures for the liquidity and the low cost, trainer wheels still on, though nobody ruled out single stocks finding their way in down the track.

The heart of the episode is the spotlight on Mike, and it is everything Turtle Talk was built for. His path into trend following began in the unlikeliest of places, a quiet summer in 2007 spent auditing hedge funds in a Midtown accounting office with nothing to do. Reading to fill the hours, he stumbled across Michael Covel’s books just as the subprime cracks were starting to show. A friend got him an interview at Bear Stearns that autumn, and from inside those walls he watched the global financial crisis unfold while quietly tracking the trend followers who were thriving in the chaos. When Bear collapsed, the lesson burned itself in. The people around him stayed dug into their beliefs even as the building came down, over leveraged and never cutting losses, while the trend followers he admired were honest about their losses, respected the trend, and refused to put themselves in a position to be wiped out. At twenty three, with nothing to lose, he took the leap.

He launched Melissinos Trading in 2011 with three limited partners, into one of the toughest regimes the strategy has ever faced. The years from 2014 to 2018 were, in his own words, an odyssey. Dark times, a lot of rage, and somewhere a moleskin notebook carrying the imprint of an iPhone he hurled in frustration. He survived a drawdown of more than fifty percent. What carried him through was not a tweak to the system but the people around it. A rock solid partner at home, now his wife of eleven years. Coffees with Jerry where the two of them licked their wounds and reminded each other it would be alright. And Ed Seykota and the Trading Tribe, where Mike had spent time before he ever launched, working through the self doubt of starting out. When Mike called him at the bottom, Ed told him, in that precise way of his, that it sounded like he had the trend following blues. That was all. This is just how it is.

The discipline that came out of all of it is the part worth holding onto. Mike described himself as often frustrated but never confused about what to do. The right thing is always to keep doing the system. And when the stellar performance finally arrived this year, his answer to how it felt was striking. He feels nothing. He is doing the system, dotting every i and crossing every t, and trusting the process to do what it is supposed to do. The feelings, he stressed, are never the problem. It is the response to the feelings that takes traders down. Tellingly, during that fifty percent drawdown, not one of his roughly fifty investors called. Except his dad, who is in the same fantasy hockey league and is, by Mike’s own admission, just as much of a lunatic. From eleven markets at the start to around a hundred today, spread across South Africa, Australia, and the Far East, Mike has stayed true to who he is. And he had the line of the day for what that makes him and the few others still doing this the original way. It is punk rock. Countercultural. They are not in midtown with the big shiny offices. They are in the village, the cool kids downtown, and you have to go and find them.

The team had so much fun that they ran clean out of clock at the two hour mark, which means the Myth Busters segment and a Shell Mail listener question on the cutback rule will have to wait. The good news is that Mike is coming back to finish the job, with two Myth Busters lined up, one from Jerry and one from Mike, and a debate on the cutback rule that promises to get the whole table fired up.

April threw everything it had at the systematic universe and the classic guys came out the other side in front. But one month is a slender statistic, and it is the long arc that matters. The divergence on that VAMI chart since 2020 is not noise. It is the quiet reward for keeping your convexity intact while the rest of the field smoothed theirs away. Mike’s story is the same lesson told in the first person. Stay true to the system through the dark years, hold your nerve through the deepest drawdown, and be there with your positions on when the big trends finally arrive. It is punk rock, it is countercultural, and right now it is working.