Performance: ‘Twenty Plus’
To understand who Gil Blake is, consider the following:
Gil Blake calls his management company Twenty Plus, a name that reflects his exceptional trading performance and his ability to consistently deliver impressive returns. His business card and stationery feature a logo showcasing a probability curve with a +20 percent return falling two standard deviations to the left of the mean.
This visual representation signifies his confidence in achieving a minimum annual return of 20 percent with a 95 percent probability.
Gil Blake has consistently demonstrated exceptional trading performance. With an average annual return of 45 percent over twelve years, Blake has never had a year with a return below 20 percent. In fact, his worst year still resulted in a 24 percent gain. What truly sets Blake apart is his remarkable consistency.
Out of 139 months, an astounding 134 months (ninety-six percent) were either breakeven or profitable. He even achieved a streak of 65 consecutive months without a single loss, comparable to Joe DiMaggio's famous hitting streak.
Blake's confidence in his trading approach is evident in his unique fee structure. He charges clients 25 percent of total annual profits but also agrees to share the risk by paying 25 percent of any losses and 100 percent of losses in a new account during the first year. To date, Blake has not had to fulfill these guarantees.
Blake's trading style revolves around mutual fund timing, utilizing technical models to determine the best investment opportunities on a daily basis. His holding periods typically range from one to four days, allowing him to generate consistent monthly profits even in months when the funds he invests in experience declines.
Timeline
1978:
Gil Blake's friend shows him some municipal bonds and asks for his opinion.
Blake notices a systematic trend in the numbers and becomes intrigued.
1980s:
Blake conducts further investigation into the persistent trends in municipal bonds.
His research leads him to discover the basis for his mutual fund timing strategies.
1984:
Gil Blake experiences his worst performing year, with a return shy of 24%. However, he still made money in all twelve months.
1988:
Gil Blake participates in the U.S. Trading Championship and finishes second.
1989-1993:
Gil Blake wins the U.S. Trading Championship for five consecutive years.
1992:
Jack Schwager's book "Market Wizards" is published, featuring quotes from Gil Blake.
1993-present:
Gil Blake continues his trading career with consistent success.
Blake achieves an impressive streak of 65 consecutive months without a loss.
Blake stops accepting client funds, making only two exceptions for close friends. He remains focused on his independent trading approach.
The Approach and lessons
Gil is somewhat secretive about how his strategies evolved over time, however he gives us great pointers to understand how he outperformed most of Wall Street. To understand his strategy, consider the following:
"Hey, Gil, take a look at these numbers." His friend had invested in a municipal bond fund to take advantage of the prevailing high interest rates, which at the time were about 10 to 11 percent tax free.
Although he was getting a high interest rate, he discovered that his total return was actually declining rapidly because of the steady attrition in the net asset value [NAV].
Upon investigating, Gil found out that the NAV had declined for approximately twenty-two consecutive days.
"Fidelity allows you to switch into a cash fund at any time at no charge. Why couldn't I just switch out of the fund into cash when it started to go down and then switch back into the fund when it started to go back up?"
Gil started to look deeper into the price action and discovered it wasn’t random:
The "one penny" rule.
"In the two years' worth of data we had obtained, we found that there was approximately an 83 percent probability that any uptick or downtick day would be followed by a day with a price move in the same direction. In the spring of 1980, I began to trade Fidelity's municipal bond fund in my own account based on this observation."
Gil Blake had found the edge he was looking for, he was trading the mutual fund market through quantitative models. Gil is secretive about how it evolved from there. Let's delve into some of his notable quotes and gain a deeper understanding of his trading philosophy
His Philosophy
"Whenever I take a position, I like to imagine what it would be like under the worst-case scenario. In doing so, I minimize the confusion if that situation actually develops. In my view, losses are a very important part of trading. When a loss happens, I believe in embracing it."
Blake recognizes the significance of preparing for potential risks and uncertainties in trading. By envisioning the worst-case scenario, he mentally prepares himself for adverse outcomes and reduces confusion during challenging times. Rather than shying away from losses, he embraces them as integral learning experiences, understanding that they contribute to his growth as a trader.
"First of all, most traders don't have a winning strategy. Second, even among those traders who do, many don't follow their strategy. Trading puts pressure on weaker human traits and seems to seek out each individual's Achilles' heel."
Gil highlights the common pitfalls of traders who lack a winning strategy or fail to adhere to their established approach. He acknowledges that trading can expose our inherent human weaknesses, making it crucial to develop a robust strategy and maintain discipline. Recognizing and overcoming one's own vulnerabilities is vital for consistent success in the dynamic world of trading.
"If you break a discipline once, the next transgression becomes much easier."
Discipline plays a pivotal role in Gil Blake's trading approach. He emphasizes the importance of maintaining unwavering discipline in executing one's strategy. Any deviation from discipline can create a slippery slope, making it easier to deviate further from the established rules and guidelines. Blake's commitment to upholding discipline strengthens his ability to navigate the markets with consistency and confidence.
"The critical ingredient is a maverick mind. Focus on trading vehicles, strategies, and time horizons that suit your personality. In a nutshell, it all comes down to: Do your own thing (independence); and do the right thing (discipline)."
Blake encourages traders to cultivate a maverick mindset, emphasizing the importance of aligning trading vehicles, strategies, and time horizons with one's unique personality. He underscores the significance of being independent in one's decision-making process and having the discipline to adhere to the right strategies.
"Opportunities change, strategies change, but people and psychology do not change. If trend-following systems don’t work well, something else will. There’s always money being lost, so someone out there has to win."
Blake recognizes the dynamic nature of the markets and the need to adapt to changing opportunities and strategies. However, he emphasizes that the fundamental elements of human psychology remain constant. While specific trading systems may fluctuate in their effectiveness, the potential for profit and loss persists.
The Framework
Lastly, Gil gives us his trading framework.
1. "focus on trading vehicles, strategies, and time horizons that suit your personality"
2. "identify nonrandom price behavior, while recognizing that markets are random most of the time"
3. "absolutely convince yourself that what you have found is statistically valid"
4. "set up trading rules"
5. " follow the rules"
This paper used Gil Blake’s approach to backtest the results on the Indian mutual fund market. The results indicate that it is feasible to time the market and take appropriate buy and sell decision to improve the returns in relation to the mutual fund schemes, though it is not feasible with all mutual fund schemes.
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Thanks for the article! But the guy in the front is jack schwager hahaha
Good afternoon
I am new here and don’t know yet the proper protocol.. can I ask if CUE Biopharma would be a good buy?
Regards
Michael