Debunking A Dangerous Myth: 2015 – The Year No One Made Money

By | January 1, 2016

Apparently, 2015 was the hardest year to make money in 78 years. If you watch the video, you can see the big subtitle – the year no one made money. There are a couple of big problems with this article. The first, and more obvious, is that this headline-grabbing statement is patently false. Just because Warren Buffett had the worst year since 2008, Bill Ackman the worst since 2004 and the average hedge fund is down -4%, it doesn’t mean no one made money. We’re presented here with just one face of the coin. Have a look at Managed Futures & CTA Program Performance (might require free registration): there are plenty of managers of +$100M funds that are positive for 2015. For instance, the famous trend-following firm Dunn Capital made 15.82%. ISAM Systematic Trend Fund, where the Market Wizard Larry Hite works, made 13.47%. Or how about Swiss-based FX fund Quaesta Capital AG which had its best year since inception in 2007, with a 45.7% return.

The second problem and this is where the danger lies, is the negative effect this kind of news can have on a trader if taken at face value. I’m speaking from my own experience because this thing happened to me 7 years ago. Perhaps you remember, or if not, look them up, the kind of headlines and stories that we were being bombarded with during late 2008 and early 2009 – everybody was losing money, managers with decades of experience were closing down their funds and so on. There was this atmosphere of collective sorrow, something like, let’s all join hands and see who lost the most the fastest, who was wronged the most by the worst market environment since 1929. The general message conveyed then, and it’s the same now: it’s not your fault that you lost money, it’s this damned market.

Of course, the behavior of the markets will have an impact on your bottom line. No one makes money all the time and at the same rate in every kind of market. Quoting from Reminiscences of a Stock Operator:

We ran smack into a long money-less period; four mighty lean years. There was not a penny to be made. As Billy Henriquez once said, “It was the kind of market in which not even a skunk could make a scent.”

But, the results of the majority of market participants (be it positive like in the late ’90s or negative as in the above examples) should not stop you from making sure your own strategy is valid and robust. In other words, the fact that many people (high profile or not) are losing should not be used to justify your busted account. You might be losing because you have a bad strategy and/or poor risk management and instead of realizing and correcting these issues, you’re just fooling yourself: oh, it’s the market, even Buffett is down.