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Trend Following with Michael Covel

Bestselling author Michael Covel is the host of Trend Following Radio with 5 million listens. Investments, economics, decision-making, human behavior & entrepreneurship--all passionately explored. Guests include Nobel Prize winners Robert Aumann, Angus Deaton, Daniel Kahneman, Harry Markowitz & Vernon Smith. Also: James Altucher, Dan Ariely, Jean-Philippe Bouchaud, Kathleen Eisenhardt, Marc Faber, Tim Ferriss, Jason Fried, Gerd Gigerenzer, Larry Hite, Sally Hogshead, Ryan Holiday, Jack Horner, Ewan Kirk, Steven Kotler, Michael Mauboussin, Tucker Max, Barry Ritholtz, Jim Rogers, Jack Schwager, Ed Seykota, Philip Tetlock & Walter Williams. All 500+ eps at www.trendfollowingradio.com/rss.
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Bestselling author Michael Covel is the host of Trend Following Radio with 5 million listens. Investments, economics, decision-making, human behavior & entrepreneurship--all passionately explored. Guests include Nobel Prize winners Robert Aumann, Angus Deaton, Daniel Kahneman, Harry Markowitz & Vernon Smith. Also: James Altucher, Dan Ariely, Jean-Philippe Bouchaud, Kathleen Eisenhardt, Marc Faber, Tim Ferriss, Jason Fried, Gerd Gigerenzer, Larry Hite, Sally Hogshead, Ryan Holiday, Jack Horner, Ewan Kirk, Steven Kotler, Michael Mauboussin, Tucker Max, Barry Ritholtz, Jim Rogers, Jack Schwager, Ed Seykota, Philip Tetlock & Walter Williams. All 500+ eps at www.trendfollowingradio.com/rss.

Oct 23, 2017

Roger Ver, also known as “Bitcoin Jesus”, started his first company in Silicon Valley while still in college and made his first million before 25. Roger is a libertarian who has dedicated his life to the pursuit of getting individuals to interact outside the state system. He has been a relentless advocate for blockchain currency, pouring all his capital and energy into the startup. Also, Roger is currently working out the details of starting a non-government run country.

Roger began turning away from government while in grade school. He was learning about the military draft in school and the idea of forcing individuals into fighting seemed backwards to him. He had read a book by libertarian Murray N. Rothbard who related the draft to kidnapping and slavery. Roger now defines government as “A small group of people that claim the right to use violence against peaceful people.” There shouldn’t be an exception for government. Other humans do not have the right to take our money or order others to kill people. Why should the government?

Roger is currently starting a non-government run territory. This non-country will have no government, but instead will be run by principles of the Anarcho-Capitalism philosophy. Right now he has over $100 million dollars of private capital committed to this non-country. Money raised will be used to purchase a plot of land for the free society to operate. He has the hope of purchasing other pieces of land and continuing to grow his non-government led society. Michael finishes the conversation asking Roger, “Looking ahead, where do you see things evolving in the next five years? Will there be a rapid adoption of crypto currency? Are we potentially close to that?”

In this episode of Trend Following Radio:

  • Voluntarism
  • Libertarianism
  • Bitcoin in Tokyo
  • Victimless crimes
  • Morality
  • Free Society
Oct 20, 2017

Michael has audio books for Trend Following (fourth and fifth editions), The Complete TurtleTrader and Trend Commandments. He starts the podcast today playing the afterword to the 5th edition of Trend Following written by Larry Hite. He follows this reading with Stig Ostgaard’s white paper titled “The Origins of Trend Following” first published in Trend Commandments. Michael finishes up the podcast playing a full chapter on psychology from his newest edition of Trend Following.

In this episode of Trend Following Radio:

  • Psychology of trading
  • Irrationality of people
  • Behavioral economics
  • The meaning of money
  • NLP
  • Evolution of trend following
  • How Larry Hite began trading
  • Risk management
Oct 16, 2017

Today’s combo episode consists of four classic episodes aggregated into one big modern podcast. Jack Schwager, Peter Brandt, Larry Williams and Toby Crabel are four pro traders who hopefully give every listener an aha moment.

Jack Schwager is author of the Market Wizards series and just completed his second edition of A Complete Guide to the Futures Markets: Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options.

Peter Brandt is author of Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading, and a trader who has been in the commodity trading space since 1976. He has traded his own proprietary account from the late 1970’s until today, and is currently entering the hedge fund world by running a multi-CTA fund-of-funds.

Larry Williams is the author of eleven books, most on stocks and commodity trading. He is also a stock and commodity trader, and politician. He has been in the trading game for over four decades and his name is well known in all trading circles.

Toby Crabel is founder of Crabel Capital Management. Toby is a short term systematic trader which is a much different trading style than trend following. Toby is also a former pro tennis player and has a philosophical nature in discussing the trading world.

In this episode of Trend Following Radio:

  • Fundamentals vs. Technical analysis
  • Risk management
  • Contrarian view on fundamentals
  • Charting
  • Science vs. art in trading
  • Whipsaws
  • Exploiting trends
  • Sharpe ratio
  • Efficient market hypothesis
  • Five minute chart patterns vs. a weekly chart patterns
  • Mistakes as a novice trader
  • Averaging losers
  • Risk management
  • Upside volatility
  • Reducing incessant head chatter
  • Living in the moment of now.
  • Price movement and volume
    Price shocks
    Diversification
    Objectivism
Oct 12, 2017

Moritz Czubatinski specializes in helping traders get going. He has been traveling, trading and running a business for about 8 years. Tradeciety, his first business, was formed to help traders get started in the markets. Next, Moritz started a trading journal software company called Edgewonk. Every trader needs a journal, and when Moritz started out trading, there were no practical journals available.

Moritz started off as a professional poker player but wanted a more legitimate way of making money. He started his trading career with zero education in finance and now trades off 8 to 10 charts for 6 to 8 hours a day. He was use to playing 24 tables of poker at a time (online) so Moritz is use to the constant action. He saw trading as a perfect career shift. Another positive about making the jump to trading from poker? The playing field is constant. In poker, as you get better, the players you play against get better. In trading, the great traders are forever competing against newbies.

What is Moritz favorite market? He likes trading currency futures because it is open 24 hours a day, 5 days a week. Michael asks if this type of constant action, from a concentration and time stand point, will be more difficult for today’s generation. Are they able to sit in front of a screen 6 to 8 hours a day? Will they be as successful at it? 90% of the people Moritz mentors will not stay in day trading. Most feel miserable. Moritz watches a screen all day for work and then to relax, he plays video games. Watching screens is just what he loves to do. Michael and Moritz finish the conversation talking travel the best places to visit.

In this episode of Trend Following Radio:

  • Bitcoin
  • Currencies
  • Win rates vs. Risk ratios
  • Trading time frames
  • Poker
  • Day trading
  • Winning vs. losing probabilities
  • Richard Dennis in the trading pits
  • Trading journal
  • Sleep hygiene
Oct 9, 2017

Rob Arnott is an entrepreneur, author, investor, and writer. He serves as Chairman and CEO of Research Affiliates LLC. advising on over $160 billion dollars in institutional investment assets. Rob is one of the worlds preeminent voices on investment strategy.

What was Rob like as a young man? At age 16 he was extremely mathematically inclined with an avid interest in both the stock market and astronomy. He wasn’t sure which path he wanted, but he knew his mathematical skills were good enough for a top tier job in finance, but not in astronomy. So he took his math skills and entered the world of finance.

Rob has been with quantitative investing since it’s inception in the 70’s. With the rise in computer capabilities, quant traders were able to start to make a name for themselves in the trading community. What is one of the biggest failings of the quant community? Traders have fallen into a trap of making systems so complex that the average investor can no longer understand them. He is a big fan of keeping things simple.

What is one rule Rob always sticks by? If you have an idea you think is a good, always try. There will be others that came before you, but that doesn’t mean your idea won’t be just as successful or more successful. However, if you never try, you will never know. When it comes to investing what is another rule? Diversification is key.

In this episode of Trend Following Radio:

  • An addiction to complexity
  • Fundamental indexing
  • Momentum trading
  • How to use valuation
  • Benchmarks
  • Diversification
  • Modern finance
  • Weighting your portfolio
Oct 6, 2017

Jerry Parker was one of the original TurtleTraders trained by Richard Dennis. He has had unbelievable success over his four decade career. Jerry has a straightforward way of breaking down how trend following works.

Trend following has typical highs and lows. During the lows, there will always be people pronouncing it dead. Trend following systems are built to protect capital by using diversification and built in stop-losses to counter down periods. Said another way, there is “crash protection” built into a robust trend following strategy. On the flip side, trend following systems are built to exploit the market when it is trending up.

How easy is it to get into different markets with a trend following strategy? The great thing about systematic trading is you become an instant expert in any market. As long as you have the data, you can jump right in and trade. When you are looking at price alone, you come to find that stocks are all the same – Tesla and Coffee are traded identically.

What is the most important thing to keep in mind when trading a trend following system? Having the proper leverage is key. No system is immune to risk of ruin. Sometimes you need to adjust your leverage, reduce your risk, and do whatever you can to stay in the game. Trend following, at it’s core, is a boring strategy. It is simple and that is why it works. Choose an algorithm and from there you can choose how simple you want to make your system. But everything starts with an algorithm.

Are there any resources Jerry recommends? Cliff Asness is a great resource. He is a smart, funny, and humble person that teaches valuable information to anyone that wants to listen. After all, the best way to gain knowledge is to probe the minds of successful people and learn everything you can from them.

In this episode of Trend Following Radio:

  • Diversification
  • Becoming an expert in all markets
  • Risk aversion
  • Why the idea of “simple” works
  • Fall targeting
  • Buying markets on the cheap
  • Learning from experts
Oct 2, 2017

Having the right fundamental information will never guarantee success. Ray Dalio, one of the biggest traders on Wall Street says he trades off of fully automated fundamentals. If this is true what fundamentals does he choose to automate? In the same head space Larry Tentarelli forwarded Michael a tweet recently. It was a tweet from an executive associated with a big USA trading firm. This executive was asked by a business student, “What does a typical week look like for you?” His list went like this [Michael digs in]… How much time is being wasted?

If consuming that information isn’t needed then what do you use to trade? One piece of information – price. You take the price and look at the trend. Things in motion tend to stay in motion. Forming rules that you can stick to when the big trends come is key to anyone’s trading success.

In this episode of Trend Following Radio:

  • Data mining
  • Managing risk based on fundamental information
  • Weekly routines
  • Cocktail party banter
  • Desert island trading
  • Fundamental trading
  • Thinking properly
Sep 29, 2017

Scott Galloway is a professor at New York University Stern School of Business teaching brand strategy and digital marketing. He has started nine firms and his weekly YouTube series has generated millions of views. Scott is also author of “The Four: The Hidden DNA of Amazon, Apple, Facebook and Google.”

Amazon, Apple, Facebook and Google are arguably the most influential entities in the world. These companies have deconstructed who humans are as a species and reassembled who humans are, in the form of for-profit companies. They have scaled up so fast and become so successful by understanding humans most common questions and producing answers instantly. Scott breaks down the specific reasons each of these companies have individually thrived: Google = God, Facebook = Love, Amazon = Consumption, and Apple = Sex.

Mediocre and cheap products have been pushed in years past. However, people have new tools allowing them to practice due diligence and find what product is best for them personally. A better product is the best and only way to brand in today’s marketplace. With customer reviews built into Google and Amazon, they have changed the entire course of how people buy.

These four companies have done a lot of good, but have they become so big that they have become bad for society? In some ways, they are leveraging their power to unhealthy heights. Amazon, Apple, Facebook and Google yield more money and more power than some foreign governments. This has allowed them certain privileges such as tax avoidance and immunity to government oversight. What is another negative? Amazon has literally sucked the oxygen out of other top companies such as Nordstrom, Macy’s, and Sears. Facebook and Google have taken over the digital marketing world. If you are not working with Facebook or Google, then you are marketing with newspapers or magazine — rapidly declining markets. Amazon, Apple, Facebook and Google are not only in zero sum markets, they are creating zero competitors.

What are some great leadership qualities from these top companies? Jeff Bezos, for example, has always kept a long term outlook on consumption rather than short-term. He also has combined fast and free service. Tim Cook has tripled the value of Apple. Apple is the first company in history to have great quality and spend extremely low on production. Facebook has shown tremendous agility in their management. Michael and Scott finish the conversation talking government, and how these companies yield their power in the political arena.

In this episode of Trend Following Radio:

  • Amazon, Google, Apple, and Facebook
  • Ecosystem of Silicon Valley
  • Zero sum nature of Amazon
  • Jeff Bezos
  • Tim Cook
  • Mark Zuckerberg
  • Political views of Amazon, Google, Apple, and Facebook
  • Strong leadership qualities
  • Monopolies
Sep 25, 2017

Larry David is one guy who is totally OK with the unexpected. He wrote and starred in the hit show, Curb Your Enthusiasm. He wanted total control of writing the show and didn’t want HBO looking over his shoulder. However, the show has no script. The actors are comfortable going into the unknown and winging it. So much of our modern world is pre-packaged and scripted down to the last syllable. Larry David knows that life is all about the surprise, and people value that surprise factor.

What do these examples have in common with the stock market? Markets are unpredictable. Yes, it is necessary to have a game plan but with constant unexpected changes, you need to know what to do when things deviate from the plan. Chaos exists, there is no getting around it. To be successful in the game you must look past the chaos and know how to profit from it.

In this episode of Trend Following Radio:

  • Luck in life
  • What happens when plans deviate
  • Chaos is not a pit
  • The realm
Sep 22, 2017

Jeffrey Tucker is an American economics writer of the Austrian School, an advocate of anarcho-capitalism and Bitcoin, and has authored seven books. Jeffrey’s new book, coming out September 2017, is titled “Right Wing Collectivism: The Other Threat to Liberty.”

Michael and Jeffrey start the conversation talking information. Regimes come and go, but information we share with one another cuts through governments. Interactions with others and the tools we use to spread information are what shapes history, rather than governments trying to put their spin on it. Government officials are not visionaries, they do not define the world, they do not create history. They spend their term in office gearing up to get elected for their next term in office. The more responsibility taken out of government’s hands the better. This leads us to Bitcoin…

Why is Bitcoin so important? Bitcoin represents freedom. It’s an international currency, trades the same globally and has increased in value over time. Jeffery has been studying monetary theory since he was an undergraduate. He wrote his thesis on the gold standard and assumed he had the monetary system figured out. So naturally, when Bitcoin came out, he dismissed the idea. After a few years went by, he was forced to acknowledge the advancement of crypto currency. He now looks at markets far differently than he did in the first part of his career. He knows that the markets know much more than any person could ever understand.

Jeffrey switches the conversation to another passionate subject for him, child labor laws. Youth have bought into the idea of needing a college degree to get the right job. Parents see pushing higher education on their children as a way of guaranteeing their children’s success. Unfortunately, degrees are not necessary in today’s age. Youth unemployment and child labor is a major leading factor to issues later in life. Many kids never have their first job until after they graduate from college and every year thousands of college students graduate still dependent on their parents.

Michael and Jeffrey finish up the podcast discussing corporate taxes and building digital walls. The American economy would experience spectacular gains if corporate taxes were slashed. Cutting personal income tax would be nice, however corporate income taxes being cut is the first phase of reform. Our economy also is being hurt by slowing down the flow of information and trying to block it. Is the world going in the direction of building digital walls? Are governments slowing down growth potential by blocking information? Absolutely.

In this episode of Trend Following Radio:

  • Liberty
  • Friedrich Hayek
  • Crypto currency
  • Ledger technology
  • Block chains
  • Excessive waves of hysteria
  • College debt
  • Tax laws
  • Trump administration
  • Nation state
  • Building blocks for a civilized society
Sep 18, 2017

Recently after running sprints, Michael decided to walk home a different way. He ended up walking next to a woman with an artificial foot. She was about 4’9″, 75lbs, missing a foot but looked as if she was still kicking ass. From Michael’s perspective, she had no excuses. She was not sitting at home, complaining. Too many these days complain about their weight, gender, political views, political correctness, etc. — and use anything they can as an excuse for why life is unfair.

How do you break free from that mentality? What is the process? What system should be put in place? Creating a routine is a great place to start and has many self-help advantages. Having a routine can help center a person and allow them to measure and see personal achievement.

News prevents us from living authentically. It is not real. It is something thrown at us on a daily basis with an agenda by those creating it. The same can be said for politics. A true experience is you walking down the street and noticing what is going on — taking in the sights, sounds and smells of your environment and making decisions about your life based on those experiences. As shown in news and in politics, this type of thinking is rapidly disappearing. There is nothing rational about how people think. People are crazy and that will never change.

In this episode of Trend Following Radio:

  • Having a system/routine
  • Life is a series of choices
  • Finding meaning in life
  • Lemmings
  • How your actions define you
  • Learning from others and experiences
  • American politics
Sep 15, 2017

Rayner Teo is a 29-year old self-made, independent, ex-prop trader from Singapore. He also is the most followed trader in Singapore. Where does Rayner stand, in numbers, with social media followers? He has about 22,000 followers on YouTube and his Facebook community consists of about 15,000. Most of his followers love what he does, however, with every public figure there are always haters. Rayner gives his perspective on his social media reach and how to deal with trolls.

Rayner entered the military (mandatory) at age 19. 97% of men entering the military end up in the same training camp, however Rayner was placed in an elite camp of men who are the first to go into combat — due to a glitch on his part in his application. Even though life was hard during his time in the military, it did award him his first “aha” moment — he realized his mind was much stronger than his body. He was able to take his body far past limitations that his mind had set. The military also promoted a mind frame of excellence, and that has been a driving force in his life.

Throughout the episode Rayner expands on: the importance of charting wins and charting losses, the true reality of trading, preparing for the big losses so you can wait for the big wins and taking responsibility for your losses so there is opportunity to learn from them.

In this episode of Trend Following Radio:

  • Social media
  • Pitfalls of trading contests
  • Charting performance
  • Predicting trading outcomes
  • Best trading strategies for part time traders
  • Filtering out noise
  • Taking 100% responsibility for the good and bad in life
Sep 11, 2017

Dan Pena is a high performance coach, philanthropist, businessman and author. He has seen every type of business imaginable. He brings an attitude that inspires and provokes action.

The pussification of America has come to fruition through low self-esteem individuals creating a snowflake generation. Youth today are being raised by beta males who aren’t teaching them how to live strong, persistent and driven lives. Dan explains why the lack of alpha males in today’s society is the root of the politically correct driven culture.

When someone has a beta personality, they tend to be less than a high performance achiever. High performance people succeed because they get things done. They walk the walk on a consistent basis. They do not live a sheltered, PC life. How do they accomplish this? Picking the right friends is the first key to success. Pushing yourself to be around others who inspire, will lead to you being inspired. When kids are around other kids looking for success, they are given a much higher probability of becoming successful.

Dan doesn’t have a subtle, gentle teaching style – as anyone can sense from this podcast. His students regularly ask him, “Why are you so mean? Why do you use such harsh language?” He responds by saying, “Because life is hard.” Most people want change, but they only want change that conforms to their definition — and that is not change. That is staying the same.

In this episode of Trend Following Radio:

  • Lack of leadership in today’s society
  • Alpha males
  • Beta males
  • Getting out of victim mode
  • Political correctness syndrome
  • Snowflakes
Sep 8, 2017

Robert Sutton is Professor of Management science at the Stanford Engineering School and researcher in the field of Evidence-based management. Sutton is also the best-selling author of “The No Asshole Rule.” What does it mean to live in a “no asshole environment”? It means to weed out the people who demean and make you and others feel horrible. He gives the science and craft behind how to deal with assholes, how to prune these people from your life and get out of negative situations.

But the question ever since that book has been:

“Help, I’m dealing with an asshole! What can I do?”

Sutton has heard that question asked in a thousand different ways. He answers the question in “The Asshole Survival Guide: How to Deal with People Who Treat You Like Dirt”. It shifts focus from building civilized workplaces to providing relief for anybody who feels plagued and pushed around by assholes.

The Asshole Survival Guide delivers a cogent and methodical game plan. Sutton starts with diagnosis—what kind of asshole problem, exactly, are you dealing with? From there, he provides field-tested, evidence-based, and sometimes surprising strategies for dealing with assholes—avoiding them, outwitting them, disarming them, sending them packing, and developing protective psychological armor.

Ultimately, this survival guide is about developing an outlook and personal plan that will help you preserve the sanity in your work life, and will prevent all those perfectly good days from being ruined by some jerk.

In this episode of Trend Following Radio:

  • The no asshole rule
  • The role of assholes in entrepreneurship
  • Steve Jobs
  • Demeaned and de-energized
  • Self-awareness
  • Depression in relation to to workplace
  • Weeding out nasty people from your life
  • The asshole tax
  • Avoiding “the crazy”
Sep 4, 2017

Jason Calacanis is a venture capitalist, entrepreneur, angel investor, author, blogger and has years of perspective when it comes to investing in start ups. His new book is “Angel: How to Invest in Technology Startups–Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000”. Even if you never plan on becoming an angel investor, his book is a great look at how the modern economy works.

Technology is accelerating at an ever-increasing rate and Jason argues that there are approximately 30 million jobs that will disappear in upcoming years due to advancements in technology. He wrote his book to try and help people step away from the usual way of thinking and look at where the world is moving. For example, the cheapest car you could buy today is far and above more sophisticated than the most expensive car you could have bought 20 years ago. When Jason evaluates a company, he looks at a couple things: What is in the best interest of society? And what is the best technology that we can use to get there?

What is Silicon Valley like through the eyes of someone living and breathing it? Jason talks about Silicon Valley as the center of the world. There is an infectious need to look for the next $100 billion dollar idea rather than the next million dollar idea. It’s also very liberal, political and quirky. It is where the largest amount of high power tech companies derive from.

What is the biggest factor in becoming a successful angel investor? Success in angel investing comes down to portfolio diversification. You need to cast a wide net, knowing you are going to have a lot of loser companies. There are massive implied odds. The upside to finding a winning company far exceeds any amount of losses you may incur. Michael relates this to the Babe Ruth effect and Jason puts his own spin on it, “Finding a winning company is more like the equivalent of a grand slam scoring 100 runs rather than just four.”

In this episode of Trend Following Radio:

  • Creating a global footprint
  • Who is able to export their ideas around the world
  • Silicon Valley
  • Chinese border controls
  • Unicorn companies
  • Portfolio diversification
  • Risk aversion
Sep 1, 2017

Laura Doyle is bestselling author of “The Surrendered Wife”, and her newest work is “The Empowered Wife.” Relationships are a skill just like everything else in life. They can be hard and sometimes and having some basic survival tools could make the difference between having a failed relationship or a thriving relationship. Laura gives a perspective and tools that we can all use in our modern day relationships.

Laura went through thousands of hours and thousands of dollars of marriage counseling that did not work before she tried asking her friends what they were doing right in their relationships. She wanted to learn what was working for them and what hadn’t worked for them over the years. Her main “aha” moment was when she realized the problems her and her husband were having were self inflicted.

Who has the most power in a relationship? How do you make your spouse feel respected? What are some main differences emotionally between men and women? What type of language do men respond best to? What type of language do women respond best to? Laura answers these questions and more on today’s podcast.

In this episode of Trend Following Radio:

  • Different traits between men and women
  • Femininity
  • Men and Women are more powerful together
  • Self care
  • Spouse fulfilling prophecy
Aug 28, 2017

Michael dives in for a weekly monologue. Listen at your own peril.

Aug 25, 2017

Richard Clarke is co-author of “Warnings: Finding Cassandras to Stop Catastrophes.” Richard was also the former National Coordinator for Security, Infrastructure Protection and Counter-terrorism for the United States. He worked for the government starting with Ronald Reagan’s Presidency and continued to move up the ladder until he resigned in 2003 under President George W. Bush’s presidency.

Was there a starting point to Islamist terrorism? Were American’s affected much by the Gulf War? What was some red flags raised about the World Trade Center bombing? What are Cassandras? What did we know, and what were some warning signs at the time of 9-11? Why did we still go to war after 9-11 when the evidence was so lacking to go into Iraq? Michael and Richard go through these questions and many more throughout the podcast. Michael ends the interview asking Richard, “How can you see the next 10 to 20 years unfolding?”

In this episode of Trend Following Radio:

  • The Gulf War
  • Islamist terrorism
  • World Trade Center bombing
  • Osama bin Laden
  • The underestimation of Al-Qaida
  • Forcing democracy on the world
  • 9-11
  • War on Iraq
  • Global Warming
Aug 21, 2017

Peter Borish is chief strategist of Quad Capital. He works as a trading coach and helps recruit new traders and develop the company’s trading strategy. He also is a founding member of the Robin Hood Foundation. The Robin Hood Foundation has made great strides in their charity work and are continuing to do bigger and better things. Peter believes that the quality of life for those around you is much more important than the material possessions that can be accumulated.

Michael and Peter change gears from charity work, to trading and Quad Capital. Quad Capital has had only 5 or 6 down months since inception about 42 months ago. What does their multi-strategy approach consist of? They look at alpha generating, capacity constrained strategies. They also believe investors are looking at liquidity, therefore that is exactly what they provide in their funds.

Peter is the business of managing risk, not just being right. Another way of putting it is, “Are you interested in making money or are you interested in being right?” We should all be in the business of making money, over being right. That being said, is Quad Capital open to other strategies that could make them money? As long as the strategy fits within their trading philosophy, then they are always open to new talent. Michael and Peter finish the conversation talking sports analogies. A lot of traders think they are Michael Jordon, but are they Michael Jordon on the Bulls? Or are they Michael Jordon on the White Sox?

In this episode of Trend Following Radio:

  • Politics
  • Robin Hood Foundation
  • Risk management
  • Discretionary trading
  • Having objectivity in your trading
  • Kelly criteria
  • Own up to your mistakes
Aug 18, 2017

Collin Seow is author of “The Systematic Trader: How I turned a $250,000 debt into profits through stock trading.” He also is a qualified Chartered Portfolio Manager with a Certified Financial Technician qualification, and a member of MENSA Singapore and Technical Analysts Society Singapore.

Michael and Collin switch discuss the “Singaporean perspective.” What is the Singaporean perspective and what helped lay the foundation for their success? The founding fathers of Singapore set forth strict rules and regulations so people knew what they could and could not do. The system was laid out clear and concise. Citizens knew what their boundaries were down to the last detail. For example, there are rules defined ranging from whether or not you can chew gum to how for trees are allowed to be planted apart from one another.

Collin moves from the Singaporean perspective socially, to their perspective on trading. More traders in Asia seem to be open to the idea of systematic trading. When he back tests a system, he doesn’t just look at making money, he tries to figure out how to filter out the losses. He wants to protect what he has so the returns will take care of themselves. Picking a certain percent that you’re willing to risk on a trade is not necessarily intuitive. Collin also looks at both position trading and swing trading, and adjusts his risk according to trading style. Although there are many different styles, and factors that play into how one will trade, Collin still attributes over 50% of trading success to having the right psychology.

In this episode of Trend Following Radio:

  • Different types of momentum trading
  • Singaporean perspective
  • Risk management
  • Position trading vs. swing trading
  • A sense of entitlement in today’s society
Aug 11, 2017

Mihir Desai is author of “The Wisdom of Finance: Discovering Humanity in the World of Risk and Return.” Mihir is currently the Mizuho Financial Group Professor of Finance at Harvard Business School and a Professor of Law at Harvard Law School.

He wrote his new book with two goals in mind: 1. Demystifying finance and 2. Have people look at finance in a more inspirational way. After each financial bubble bursts, the public repeatedly retreats to stereotypical ideas of finance. Mihir doesn’t want to wait for a generational shift to take place for finance to be looked at in a positive light. Financial literacy has gone by the way side in schools. How do you get children to think about basic risk taking? How do you think about protecting yourself? How do you buy insurance? How do you pool your money as a family? He hopes his book may help change some views and enlighten.

Mihir explains why diversification isn’t important just in the markets, it is important to diversify in all aspects of life. As an athlete you should workout all your muscles not just pinpoint one area. Or if you are looking at your health, you should look at all aspects of your health, not just what you are eating or how you are sleeping. Broaden your outlook and diversify your time and energy accordingly.

What is Agency theory? If you give someone money to invest, why do you get the money back? Arguably this is the biggest problem in modern finance. 150 years ago most people were self employed. Nowadays we appoint people as our “agents”. We have a system where we give money to people we don’t know and expect them to take care of it. Michael and Mihir end the conversation talking about people finding their path and true happiness in life rather than doing what their parents or society has told them to do.

In this episode of Trend Following Radio:

  • Reputation of finance
  • Diversification
  • Risk management
  • Black-Scholes model
  • Behavioral phenomena
  • The magic of leverage
  • The asshole theory of finance
  • Agency theory
Aug 7, 2017

You won’t expect or see this episode coming… First, consider a truism: Asian American students dominate in academia. Asian Americans know that if they get the right scores, and check off all the boxes, they get the good school. However, this is not how it works at Harvard and other Ivy League institutions. They don’t operate based on who has the best test scores.

Michael reads a passage from a New York Times article illustrating the injustices in Harvard’s admission processes. Once one ethnic quota has been filled, that’s it. No more students can me admitted. Public universities handle their admission process differently. Asian Americans make up 34% of The University of California’s student body as apposed to about 15% of Asian Americans allowed to attend the Ivy schools due to diversity regulations.

“America, the home of equality?” This catch phrase has gone by the way side. When students work hard, but then are slapped down because of their race, this goes against the American dream. And when the system turns against you its time to make a choice: Fight against it or walk away? Michael’s answer is counter-intuitive and dovetails with trend following.

In this episode of Trend Following Radio:

  • Ivy League quotas
  • The American dream
  • Asian Americans
  • Fair competition
  • The secret sauce myth
  • Letting go
Aug 4, 2017

Art Collins is author of “Beating the Financial Futures Market: Combining Small Biases Into Powerful Money Making Strategies”, “When Supertraders Meet Kryptonite”, “Market Rap: The Odyssey of a Still-Struggling Commodity Trader” and “Market Beaters.” He has been trading systematically for the past 30 years.

How was Art Collins able to get Richard Dennis, Bill Dunn, Bob Pardo, Mike Dever and Larry Williams (to name a few) to talk? He made the interviews more like a partnership, than an interview. He made an impressive name for himself which led to positive word of mouth spreading.

What does robustness mean to Art? He uses four rules for prudent testing: 1. Don’t settle on your best result if it is a “diamond in the rough”. 2. Strategies should test well in various markets, particularly similar ones. 3. You don’t want your results to be bunched up in limited time frames. 4. Stay focused on testing concepts you understand in the markets.

Throughout the years Art wasn’t only focused on trading markets. He also studied how to beat the blackjack table and how to skew the odds in his favor when betting on sports. Trading football lines, and trading the price of stocks – what’s the difference? There isn’t much of a difference when you take a technical and systematic approach to them. It’s about keeping emotions out of it. He never wanted to be a cowboy trader or thought of as a “genius”, he just wanted his systems to work. Michael and Art spend the rest of this episode diving into card counting, mechanical systems, gambling on football, data mining and the fools errand of making $1,000 a day.

In this episode of Trend Following Radio:

  • Systems trading
  • Richard Dennis
  • Card counting
  • Mechanical systems
  • Robustness
  • Data mining
Jul 31, 2017

Michael reads an article he recently wrote for The Observer. He weaves in commentary throughout and speaks to the gross misuse of political power. Michael portrays politicians and the D.C. culture as a dog and pony show.

In this episode of Trend Following Radio:

  • Parliament of Whores
  • Bill Clinton presidency
  • Political dog and pony show
  • 2000 stock crash
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