TTU153: Why Investors Keep Getting Trend Following Wrong ft. Patrick Welton

Patrick Welton (0:01)

It's a usual tragedy of managed money, to watch people watch performance, wait for there to be enough confirmation and confidence, get in a little bit too late, and put themselves on a right shift of time off cycle.

SPEAKER_2 (0:20)

Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict.

In each episode, we go deep with some of the world's most thoughtful minds in investing, economics, and beyond, to understand how they think, how they prepare, and how they decide, and the experiences that shaped how they see the world. No noise, no shortcuts, just real conversations to help you think better and invest with confidence.

Niels Kaastrup-Larsen (0:53)

Hey everyone, and welcome to another edition of Top Traders Unplugged, where today Alan Dunne and I are delighted to be joined by Pat Welton, founder and CEO of Welton Investment Corporation, as part of our series focusing on the one investment strategy that we have dedicated pretty much all of our careers to, namely trend following and managed futures more broadly. First off, Pat, it's really great to have you on the podcast. Thanks so much for joining us today.

We really have been looking forward to our conversation. I hope you're doing well.

Patrick Welton (1:23)

I am doing well and thanks for inviting me.

Well, actually, maybe more importantly, as I told you the other day, thank you for all you do for the trading community. You've probably built the single largest and best resource to help traders and investors that they could find anywhere.

Niels Kaastrup-Larsen (1:41)

That's very kind of you to say. Thank you so much. And of course, we do it because we have contributors like yourself. So that's how we can do it. Alan, it's also great to see you. How are you doing? How is Dublin treating you?

Alan Dunne (1:53)

Dublin is very good. Yeah, great to be on. And looking forward to speaking with yourself and Pat. I'm sure we'll have a lot to delve into.

Niels Kaastrup-Larsen (2:01)

Yes, absolutely. Now, before we get into all of the different topics we're going to be discussing, I would like to set the stage a little bit for our conversation so that the audience knows a little bit about your background, Pat. But instead of doing the usual list of places you've worked and all that stuff, I was hoping that maybe you could tell us about maybe two, three pivotal points in your career where you experienced something profound that shaped how you think about investing and maybe also kind of led to where you are specifically today.

Patrick Welton (2:36)

Wow. Well, you know, when you're 65 years old, there's definitely been a few pivots, especially in this industry.

Niels Kaastrup-Larsen (2:42)

Tell me about it.

Patrick Welton (2:44)

You know, I think for those who know me and know that I'm a physician and know that I started a hedge fund years ago, and the usual three pivots that I get asked about are something like why medicine, why trading, and then when they hear those, then the most perplexing one is they say why both. So, we could delve into those. Why medicine is a pretty short story and mostly about working in a cancer laboratory.

Why trading really is a life pivot because that really is also how fortunate I was to meet my wife and co-founder Annette. And why both is, it's a multi-legged story, the capstone of it was probably a very kind Paul Tudor Jones that Annette and I went to visit many, many, many years ago that gave us some resolve afterwards. So, I'd like to delve into any of those.

Niels Kaastrup-Larsen (3:51)

Yeah, actually, you know, because you have a very interesting background and obviously it dates back to the Commodities Corp days. And many people don't really know how important, I think, that that company was. Not that I want to spend too much time on it, but I mean, of course, it could be fun and interesting, maybe just to hear one or two short stories.

You had mentors, you mentioned Paul Tudor Jones. I think, you know, John Henry. There are others that are very well-known people from our industry. If you have a few things you can share, that would of course make it very, very interesting.

Patrick Welton (4:33)

That will probably help condense 40 years into a smaller number. But so sort of spinning my way up, I ended up changing initial college studies into medicine, received a grant for a medical scientist training program, which led me to UCLA, which is also where I met Annette, the very first person I met at UCLA. So I've warned young people for years, be very careful who you get into an elevator with. You might be there for a long time.