Tim Morge Interview
Tim Morge Interview
Reprint
Blackthorne Capital, Inc
Building on the past
Publisher’s note
This article originally
appeared in the July 2002
edition of MAR.
The article is in all
respects identical to the
original.
Reprinted by
permission
© 2002 by Managed
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Reproduction in any form
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The reports on commodity money managers published in this newsletter are based solely on information and data supplied by them.
Such information and data have not been verified by the publisher, who therefore cannot guarantee their accuracy or completeness.
Any statement non-factual in nature and any statements of opinion constitute only current opinions, which are subject to change. A
prospective client should independently investigate a commodity money manager before engaging the services of that manager.
Specifically, a prospective client should carefully review any CFTC-required disclosure documents prepared by the commodity money
manager. In addition, a prospective client should consult with independent qualified sources of investment advice before using the ser-
vices of a commodity money manager. Due to the volatile nature of commodity markets, the investments discussed in this newsletter
are regarded as being suitable only for individuals who have a net worth (excluding homes, furnishings and automobiles) of $50,000
to $200,000, depending upon the amount of risk capital required by the companies discussed herein. Also, past performance records
as reported should not be considered indicative of future results. Principals and/or associates of Managed Account Reports LLC may
from time to time have a position or interest in the investments referred to in this newsletter.
© 2002 by Managed Account Reports LLC ISSN 1531-0264
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40343_PDF_AGS 7/31/02 12:44 PM Page 2
By Marsha Zapson
BLACKTHORNE CAPITAL, INC A dichotomy emerges in conversations boxes containing hand-drawn charts and
1870 Diamond Creek with Timothy Morge, founder of correspondence between, among others,
Aurora, Illinois 60504 Blackthorne Capital, Inc. He’s an abstract Andrews and Marechal. The debate
USA mathematician and former economist—a between those two, as manifest in the let-
Tel: +1.630.236.3441 theorist who sees beauty in the charts of ters, sent Morge on a mathematical
Fax: +1.630.236.3448 various commodities. Yet, he’s eminently investigation that ultimately shaped his
email: [email protected] practical: His goal is to make money for current trading model.
his 95 investors. He sought a specific pattern, which
Vital Statistics And if his index program’s perfor- was neither intuitive nor visually present
Assets under mgt $10.5 million mance to date is any indication of alpha, in charts. “It was maddening at first,”
Combined Index Program $7.0 million Morge is meeting his objective and then says Morge. “But we did isolate it, and
Financial Futures Program $3.5 million some. now describe it as a zero state, which
During his 25-year career, Morge has means the market is in equilibrium. It’s
Minimum investment
been a floor trader on the CME, a cash the market’s next move out of that state
Combined Index Program $50,000
forex trader, an institutional arbitrageur, that propels the model’s next move.”
Financial Futures Program $100,000
an offshore fund manager, a private From that zero state, says Morge, the
Registration CFTC market will regain its energy. And at that
speculator and a bibliophile. He opened
Fee structure Blackthorne in July 1991, and launched point, he will go either long or short.
Management fee 2% his Lucida Combined Index Program in The model generates entry levels for the
Incentive fee 20% September 1999. But his attraction to upside and downside, as well as stop-
Commissions $20 commodities dates back to his teens losses and profit targets.
when he accessed an extensive trading This model, which is the basis of the
Ratios
Avg margin-to-equity 10% library, replete with manuscripts of tech- index program, is constantly reexamined
Ann comm-to-equity 4% nical analysis circa 1930 through 1950, by Morge and his partner, Gary Fritz,
Roundturns/$M/year 2,500 belonging to a family friend. because markets change, he says. “The
Later, while attending the University markets today are much different than
Auditor N/A
of Chicago, a roommate’s father, who they were in 2000, for example. The diffi-
was a floor trader, presented the stu- cult part is creating money management
and risk reward rules that exploit the non-
dents with a trading problem to be
changing zero state pattern in an ever-
solved using a computer. Because com-
changing market.”
puters were then in their infancy, the
Blackthorne, with some $10.5 million
time and programming the task con-
under management, currently runs two
sumed are almost inconceivable today,
programs. The first, the Lucida Combined
he says: three or four days in the mid-
Index Program, has some $7 million
1970s versus five or 10 seconds today.
under management and is open to all
Blackthorne’s current program,
investors. It trades only Nasdaq 100 and
though not directly descended from his S&P 500 futures.
student work, can trace its origins from The Financial Futures Program, with
that period. Morge was—and continues some $3.5 million under management,
to be—influenced by Dr. Alan Andrews, trades bonds and currencies (euro, Swiss
Roger Babson and George Marechal, all franc, Japanese yen). Because it is still
doyens of technical analysis’ golden age. being tested, it is open only to qualified
investors; however, Blackthorne plans to
Isolating a pattern officially launch it for all investors in the
Once Morge began working, he was able near future.
to purchase old trading manuscripts and Blackthorne’s trading model is applied
books, amassing, he estimates, a library to both programs, although each has
Timothy Morge that today includes some 10,000 items. slightly different trading characteristics.
During one estate sale, he acquired 150 The index program is short term ori-
40343_PDF_AGS 7/31/02 12:44 PM Page 3
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