In 1977 Stanley C. Waldner began testing a computerized system he had developed for trading currencies. Starting with $35,000 of his own and employees' capital, Mr. Waldner and his firm, Waldner & Co., traded it to $722,000 in four years.
Beginning this week, Mr. Waldner and his company hope to do the same thing for investors who plunked down $10 million in the Chancellor Financial Futures Fund, a limited partnership underwritten by Bache Halsey Stuart Shields Inc., the brokerage house.
Behind Mr. Waldner's success is a computer. The computer is programmed to consider some 200 to 800 technical variables making up the markets in currencies , interest rates, and gold.
Based upon the computer's analysis of major trends, the partnership will either buy currencies, Treasury bills, or gold on the futures markets or sell them short. Unlike funds that take part of their cash out of the markets during volatile periods, this fund is designed to be in them 100 percent of the time and to avoid the major tops and bottoms of markets.
Naturally, the use of a computer does not assure success in trading such volatile financial instruments as currencies.
However, Mr. Waldner, in a phone interview from his Chicago office, points out the computer programs have been fine-tuned since 1972. Before 1972 he had been a limited partner at Lamson commodity area. In 1972 he resigned and went to the floor of the International Monetary Market, a division of the Chicago Mercantile Exchange, to trade for his own account. During that time he became involved with computer modeling to make trading decisions and learned "not to trade against the computer."
While at the IMM, he wrote the chief executive officers of 12 major corporations, including DuPont, Dow Chemical, Standard Brands, Hoover, International, Gulf Oil, Exxon Corporation, and Phillip Morris to sell them his expertise in foreign-exchange exposure management. Ten companies agreed to see him and he walked away from the interviews "convinced we had a product probably more viable in dealing with foreign exchange than anything I suspected was available."
Once he had established his credibility, Mr. Waldner began pulling in fees from corporations that ranged from $15,000 to $75,000.
However, all of the money was reinvested in his company, and into more sophisticated computers and research. Mr. Waldner, and his partners, J. David Tolson and Donald B. Reece, did not draw down a salary. Instead, they lived on the proceeds of their trading account, which was using their computer model.
Mr. Waldner and his partners decided to "go public," with their model since their demand for more computer capacity outpaced their income. Mr. Waldner says that this year his company has budgeted $400,000 for research. Next year research spending will be $600,000-$700,000, and in a few years, he expects the amount to be as high as $1.5 million. By going public, Mr. Waldner says, they have a projected cash flow of $1 million a year, based on their management fees and performance incentives.
Their goal, he explains, is to develop enough experience to become a private merchant bank, specializing in foreign-exchange management. "We would like to reduce our clients to about 10 companies," says Mr. Waldner, "and go to them and say, 'Here is something we have developed and researched, such as a joint venture, and if you provide the capital we'll provide the management.'"
There is a risk, Mr. Waldner concedes, in going-public with his operation "if our results are consistent with our past trading performance."
One of those "risks" is that there will be demand for another fund. Investor interest in the current was so great that Bache increased the offering from $5 million to $10 million -- an amount that was greater than anything Waldner had managed beforehand. (And, of course, there is the risk the fund won't be successful, which would hurt Waldner's reputation.)
Bache has good reason to hope the fund is successful. The broker is receiving $60 in commissions for every $1,000 invested. And, Waldner Financial, the trading manager, will use Bache as its broker to execute its trades on the exchanges. Since Bache's commissions are about 50 percent higher than those used by Waldner for its own trading, it's not the best deal for fundholders.
However, Mr. Waldner says there wasn't a whole lot of choice since Bache was putting up the front money and underwriting the fund. William Haynsworth of Bache says the fund is a good deal anyway, since it allows investors to get into the financial futures area for only $5,000 -- the minimum investment. Also, investors' liability is limited to their investment -- not a number that is larger.
Ashland Oil company is mad . . . at "Big Oil."
Ashland Oil is mad because it saw its prof- its shrink rather dramatically in the last quarter. And, its profits dropped because of gasoline prices.
So, its mad about gasoline prices -- and it knows why they are too low. Too low? Yes, too low, according to Orin Atkins, the chairman of Ashland. The reason they are too low is because of Exxon Corporation.
In his message to the shareholders at Ashland's annual meeting recently, Mr. Atkins said, "Exxon has kept its gasoline prices substantially under those of other companies, even though, as I cited earlier, they are taking substantial losses in their domestic refining and marketing operations.
"One can only conclude from this action that there are objectives they hope to accomplish through the pricing of petroleum products which are over and above purely commercial or market considerations." In particular, Mr. Atkins says, Big Oil is hoping for the end to the windfall profits tax.
Exxon Corporation, said a spokesperson, had no comment.
Stocks continued to pull back last week in moderate trading. For the week, the Dow Jones industrial average fell 9.96, closing at 964.62. Although there was no particular reason for the drop, some analysts pointed to profit taking while others said investors wanted to see how President Reagan's proposals fared in Congress. Steels, chemicals, and consumer stocks were strong last week while oil stocks were mixed.