The first time Gregory T. Weldon saw the Comex trading floor in 1983, he found himself in awe of the excitement and the physicality of the pit and of how much it reminded him of playing basketball for Colgate. “That’s the lane,” he remarked, pointing to the floor. “I want to get in there and throw elbows,” he said to Stanley B. Bell, founder of Stanley B. Bell and Company. Bell loved the analogy and after conferring with Craig Bell, offered Weldon his shot to become a trader. “I got a top position because I’m 6’10; so I could hand paper over people, sling it to the back of the booth and throw elbows. It was trial by fire,” he says.
He went on to trade for über trader Louis Moore Bacon at Moore Capital Management, and there learned to watch for and trade macro-economic trends, which was not a typical approach at the time, and to think through multiple scenarios and plan responses for multiple outcomes, And perhaps more importantly, to be extremely disciplined about managing risk. In 1992, he was up more than 25% for the year. He later traded for the Commodity Corp., which he describes as a “think tank” environment, where people discussed the art and philosophy of trading and dissected good and bad trades. It’s there that he developed the confidence in his methodology, and in 1996, his best year there, he was up more than 27%.
To produce a theme, Weldon relies on his own research, which he publishes in multiple newsletters that he writes for hedge funds and risk managers and uses in his recently launched commodity trading advisor. Weldon tears into the data. “You go right to the source, wherever these statistics are,” he says, rifling off a long list of agencies that includes the Bureau of Labor Statistics and the Peoples Bank of China. From there, he tests and retests his ideas against the market. Next, he hones the strategy based on discretion and the synchronization of the market with his macro-economic thesis. “That crystallization is what drives my decision making on the implementation side,” he says. And through that process he anticipated recent moves in the Japanese yen, 10-year note and the huge correction in equities. “It’s a simple methodology, and it requires a lot of work,” he says.
Because of the increase in available information and the speed with which it is disseminated through the market, Weldon says that everything, even the minutia, matters, and that it is critical to plan for several potential outcomes to any scenario.
Nowhere is that more important than in his money management process. “It is the third prong,” Weldon says, and explains that he uses a statistical overlay for each trade, portfolio and sector. “I go at it from a statistical basis where I am looking at risk to stop, variations of volatility, VAR, and standard deviation to monitor the risk as it applies to individual positions, sector risk and the overall portfolio risk.” While he warns that risk can always be greater than you think, by following his statistically derived process, he can calculate risk based on where his stops are and where potential volatility is, with a degree of confidence.
If you get the idea that Weldon is an unemotional trader, you’re right. Weldon funnels that energy into his research and analysis. “I come from the old school; when you are up big, if you allow yourself to be euphoric, you are not going to be able to deal with this. You have to maintain an even keel. There’s always some emotion involved and you’re going to feel it. I channel it into digging and digging and digging.” That’s not to say that he can’t make mistakes. But Weldon understands his potential weaknesses. “One potential data mistake is to look for things that reflect your opinion,” he says. “You have to look at everything and when it doesn’t reflect what you want it to, you have to change your thinking,” he says. Another, because trends start at the micro level, would be entering a trade early, which he did in April 1997. “The Asian currency markets were pegging, de-pegging and the volatility was crazy,” resulting in his worst drawdown, 11.18%. “I tend to be early, so the recovery time tends to be quick,” he says. “We made that money back in two months,” adding that when emerging trends are buried in the micro data, it can take some time to manifest in the market, and the experience didn’t cause him to question his methodology. “I pour my heart and soul into doing what I do,” Weldon says. And with his pedigree, research and confidence, his customers should benefit.
