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England: a new Trend Following Wizard in town

October 22nd, 2010 · 3 Comments · Off-track

John-W-HenryTime for another off-track/Friday Funny post today with some Trend Following Wizard “gossip”.

John W. Henry has been in the news quite a lot recently, here in England. Nothing to do with Trend Following though. The focus was on his New England Sports Ventures (NESV) company purchasing historical soccer football club Liverpool F.C. – back here, in “old” England.

JWH is (or rather was) near-anonymous in the UK. Therefore a lot of articles have popped up on the theme of “Who is John Henry?”

Of course you probably know that Henry owns the Boston Red Sox via NESV (at least, most American readers do know, I guess) and since he bought them, went on to win 2 World Series. This is what most articles from the press here are focusing on, with barely a mention on his Trend Following debuts.

This BBC article – Who is Liverpool’s new owner? – does, however, mention the following:

Mr Henry is a well-known businessman in Boston, having made most of his fortune using computerised futures trading. He started applying trend prediction to trades in agricultural futures in the early 1980s and founded his own investment firm, JWH.

A key inspiration in his early career was Reminiscences of a Stock Operator, a 1923 book by Edwin Lefevre. He pioneered “managed futures”, effectively the commodities equivalent of mutual funds, says Gavin.

Below is a link to his first interview to Liverpool TV (where JWH discusses the purchase of the club – not Trend Following; funnily enough…):

JWH 5 mins interview video - click to go to Liverpool's website and watch the video

JWH 5 mins interview video - click to go to Liverpool's website and watch the video

Not a Trend Following Trade

Liverpool is one of the most prestigious football clubs in Europe, and joint most successful club in the history of English football (with Man Utd). However, looking at Liverpool’s performance – whether in recent or more distant history – shows that Liverpool are far from being at their best level (which was in the 80’s).

Below is a chart of their league finishes since they came back in the “top flight” in 1962, including their current league position (as of last Sunday):


Clearly not a “Buy” signal from a Trend Following point of view… If anything, this is a breakout to the downside, exemplified by Liverpool’s current position in the table, lying in the bottom three (19th) after losing 2-0 to Everton, in the Merseyside derby last weekend.

But then again, football is not trading, and maybe Henry can reiterate the success he’s had with the Boston Red Sox. As an Arsenal fan, I sure hope they take their time…

John W. Henry’s picture is from wikipedia, under a CC license.
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3 Comments so far ↓

  • Pretorian

    I would like to say that the connection between JWH, sports and trend following is probably bigger than everybody realises. I would recomend reading the book Moneyball, , it is about a manager of the Oakland As in baseball, he developed a “system” based on players statistics, they bought and sold players according to a model that they developed, mainly because the didn´t have to money to compete. They became very sucesful and Henry hired one of them afterwards (after Billy Beane, the actual As manager rejected the position), the Red Sox became champions a couple of years afterwards!!!
    The thing is that a similar approach has been used in european fooball in the last 10 years: Olympic de Lyon, as you probably know the have been quite succesful as well. There is a book called Soccerconomics that explains their system, it seems so obvious that it is incredible not more teams have embrace it! I suspect that Henry knows what he is doing.
    I would recommend everybody in the blog to read those books, it is exactly the same underlying logic as trend following: analizing statistically significant data, and doing things that are opposite to our insticts, funily enought it is also about “the mainstream” puking fun at the theory despite overwhelming evidence. (I am long Liverpool!)

  • Jez Liberty

    Hi Pretorian,
    Thanks – that’s an interesting comment and good ideas of books to read..

    Being French, I definitely know about Lyon and their hegemony on the French league was quite impressive – I did not realise it had been used as an example in soccernomics. 
    I’m not sure if “management by sabermetrics” is going to be as successful for football as for baseball – as I find football more of a real “team” sport where player complementarity is as important as individual player quality, if not more. 
    Admittedly, I do not know baseball very well but if I compare with the equivalent sport here: cricket (also called “baseball for hunchbacks” by some of my American friends), it is often described as an individual sport played in a team, where adding all players with great and relevant individual stats make sense.
    Anyway, it will be interesting to see if a similar “revolution” takes place in football or at Liverpool… 

    Now that I’m thinking about it, I realise that there has been a growing trend of stat collection for footballers (ie number passes, tackles, miles run during a game) with companies starting to sell this data back to clubs and media. Recently one of these companies started publishing the capello index for rating players based on their individual stats, using a “formula” by Fabio Capello (the ironic thing was that it was published during the world cup and all English players had very poor ratings – probably only slightly higher than the French -with Capello being the England manager – he was fuming)

  • Pretorian

    I agree, the structure of the game in Baseball is different and more prone to statistical thinking, besides the way the As bought players, they also had very strict rules regarding how to play: for example, players were forbidden to try to steal a base and to make sacrifices.
    However, the system used in OL is only about the way the buy and sell players, they also have very strict rules: buying players in certain age range, trying not to buy forwards and things like that. Considering how much they win and the fact that they make money out of it, it seems that their system works.
    One last thing. Bill Beane said that the only problem with their system is that it only works in the long run, meaning that they could be sure to win many times during the season, but they could lose in any individual game, since there are play offs in Baseball, he is implying that once you get there, luck plays a big part. The thing is that the european league system is the ultimate “long term bet” you only have success if you are consistent in the long run. As you know OL has won many French leagues but not a single Champions League, it makes lot of sense in this light, of course traditional football fans would make fun of this kind of reasoning but the same happened in baseball and now sabermetrics are standard in baseball management.
    By the way, I heard there are many funds in Britain making bets in sports and making consistent money using stats. Trend Following in Sports the next way to go?

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