Michael Covel goes straight for the jugular of organized education on today's podcast. Organized education is broken and the typical university experience is a fraud. Tenured professors make a ton of money, and students are stuck with hundreds of thousands of dollars of debt. The whole situation is vicious, and a student's best hope for a steady job after school is to serve lattes. Millions of people think that if they go and sit through classes at a university for four years, listen to professors who have never made an entrepreneurial dime in their life, that they'll be in a better position to make money. Covel discusses an essay found on oftwominds.com (http://www.oftwominds.com/blogmay13/genX5-13.html) about one specific generation of college graduates. People don't want to talk about this, but the moment the US stock market takes a prolonged dip, that's when the dam will break. Are there alternatives? Yes. With access to the internet, we're in a better place than ever before to educate ourselves. Covel further illustrates his view with excerpts: The first is from entrepreneur David Gilmour, who started Fiji water, extolling the virtues of travel. Next, Covel plays a clip of a TED talk from Ken Robinson, who talks about the connection between education and curiosity--which is the true engine of learning--and the difference between education and learning. Covel notes that it's not about following the rules; it's not about doing what you're told. Automation is eliminating so many blue and white-collar jobs so quickly, there's no hanging on anymore. So where does that leave the college student? The final excerpt comes from Angela Lee Duckworth, who talks about what she thinks the real key to success is: grit. Passion and perseverance for long-term goals; stamina. Sticking with your future, day in, day out. Not just for the week or for the month, but for the rest of your life. Duckworth says that those with grit look at life like a marathon and not a sprint. Covel notes that the idea of grit works perfectly with trend following: it's a marathon. There are ups and downs, but over the long haul trend following grit delivers a healthy mind as well as a healthy wallet. Free trend following DVD? Go to trendfollowing.com/win.
Today on the podcast Michael Covel talks about the idea of resilience and the ability to operate with variability as the norm. There's going to be volatility and you can't make it go away; to operate with variability as the norm is to be a trend following trader. If you try and make it go away, you might end up falling with the next 50% drop in the S&P killing your account. Because it will happen. There will be another major equity drop. There will be the same panics that we saw in 2000 and 2002, the fall of 2008, and October of 1987. Most people will lose 50% of their net worth because they don't have a strategy that deals with variability. The 100-year flood doesn't happen every 100 years; it happens every 2-3 years. Covel moves into a clip with David Harding of Winton Capital Management and quotes author Nassim Taleb about surviving when the black swan flies in. It's the difference between taking a punch when you're prepared for it or being caught off-guard with a punch to the gut when you least expect it. Those that simply buy and hold and put their trust into the government and the Federal Reserve? They're the ones getting a punch to the gut that they don't see coming. Next, Covel moves into another clip from Michael Lewis (author of "Liar's Poker" and "Moneyball") about what was behind "Moneyball" and how rather than being a story about baseball it is about misinterpreting value and misappraisal. Building off what David Harding said, Lewis also talks about the idea of measuring, counting, and using statistics to make good judgments. What David Harding and Michael Lewis are getting at is not generally accepted. Most aren't paying attention. Covel shares a quote from a Stanford psychologist: "A man with a conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point." In many ways, that's what Covel feels like when he's trying to get the ideas of trend following across; that's what he's up against. He's also up against the buy & hold mutual fund industry, who love fees. They have no desire to tell their clients about trend following strategies, how to look at the world from a statistical perspective, or how to prepare yourself for the next black swan. Covel is fully aware of the controversial nature of his views and the idea of trend following in general, and he closes by reading a polemic and playing a clip from author Christopher Hitchens, as well as another king of controversy: Glenn Danzig. Where else do you find such diversity on a podcast about making money? Free trend following DVD? Go to trendfollowing.com/win.
Michael Covel talks to Cole Wilcox of Longboard Asset Management. Wilcox has been in the trend following space for quite some time, first as a CPO and now as a CTA and mutual fund manager. Wilcox is trying to find the "next wave" hence the name for his firm, Longboard. Wilcox was also profiled in Covel's "Little Book of Trading" with his partner Eric Crittenden. Wilcox has achieved some notoriety in past four weeks because a stock that he's been speaking about has been doing quite well (Tesla). Covel asks Wilcox about his firm's recent fundamental-style pick on the aforementioned stock despite the fact that much of Longboard is an automated, technical trend following firm. Wilcox talks about discretionary aspects of Longboard and the fact that price still rules in the end. Covel and Wilcox also discuss process and how Wilcox found his way into Tesla; finding the next Tesla; asymmetric bets; parabolic moves; the reception to having a fundamental trend-spotting program as well as a traditional systematic price-based approach; why a purely systematic trend following system would have had you in Tesla anyway; being flexible when your hypothesis has been revealed to be wrong; whether new technologies can succeed against the vested interests of those that are making money from keeping those new technologies from succeeding; comparisons of Apple to Tesla; pollution and the electric car; Wilcox's thoughts on J.P. Morgan's recent profits 63 of the past 63 days, and why a firm like Longboard doesn't have those kinds of profits; raw information, the idea of information overflow, and how to narrow things down and not find yourself distracted; the importance of travel; the future of communication; language; and the importance of resiliency and the ability to prepare, plan for, absorb, recover from, and more successfully adapt to adverse events. Enjoy! Complimentary DVD delivered: www.trendfollowing.com/win.
Michael Covel talks to Jim Woods. Woods is a financial journalist with Trader's Reserve. His book "The Wealth Shield, A Wealth Management Guide: How to Invest and Protect Your Money from Stock Market Crashes, Financial Crisis and Global Economic Collapses" is available now. His aim is to make sure you're prepared for whatever black swan might come your way. Covel talks to Woods not to discuss how to find absolute returns, but to talk about the market, the economy, and uncertainty; to talk about the idea that things don't always don't go up. How do you think about the options and the possibilities of the market, and how do you think about what might go wrong? Covel and Woods talk about zero interest rate policy, or "ZIRP", and why normal people are taking on more risk to get the same returns; if another 50% meltdown happened in the S&P while rates were at zero, what might the chain reaction be? Would you be prepared trading wise for that?; technology taking away the need for human capital; the power structure in Washington; the societal implications of ZIRP; what the stock market might do if interests rates went up; the concept of "blowback"; the importance of having a plan; protecting yourself, and the eventuality mindset; the US as a "prison" banking system; and the importance of investing in other currencies for beyond trading reasons. Want a free trend following DVD? Go to trendfollowing.com/win.
Michael Covel speaks with Jason Russell, the President and CIO of Acorn Global Investments in Canada. Russell brings a unique perspective to the show with a very clear strategy on how his firm makes money for their clients. Covel and Russell discuss Russell's background and how he came to form Acorn Global Investments; Russell's strategy for Acorn and "the baker analogy"; the idea of "winners stay, losers go"; showing his investors every position that Russell has; how the terms "commodity trading adviser", "trend follower", "quantitative trading" don't exactly describe what many traders do; Ed Seykota and the "trading tribe"; letting go of "why" and simply riding out trends; where strategies like Russell's fit in the context of a portfolio; the importance of delivering uncorrelated results to the S&P 500; drawdowns and the psychological effect of going through one alone, uncorrelated to other markets; and how there's nothing more important than risk management. More info on trend following? Receive the free DVD: www.trendfollowing.com/win.
There's no better lyric than "Life of Illusion" by Joe Walsh to describe the most recent trading performance that was reported by J.P. Morgan. In the first quarter they were profitable on 63 out of 63 trading days. Think you can develop a trading strategy that can compete with J.P. Morgan? You can't. What J.P. Morgan has done is not trading performance; it's an incestuous union between them, the United States government and the Federal Reserve. You don't make money 63 out of 63 days trading. That's not trading; it's a gift. Of course, if you have a position in J.P. Morgan, that's great; ride the trend. But what's unfortunate is that we're in the middle of a societal tsunami on Wall Street that makes it very difficult for the average person to know what's real. To the average person that wants to learn about trading, J.P. Morgan's performance looks like a noble goal. Unfortunately, this level of making money has nothing to do with a trading strategy. It has everything to do with being in a symbiotic union with the government and the Federal Reserve. It's not trading, it's taking. Can you replicate a trading strategy where you get the same advantages that J.P. Morgan does? And what happens when the black swan flies in? Covel goes on to explain comparing the performance records of Bill Dunn to J.P. Morgan. When these black swan events happen, strategies like Bill Dunn's excel, and fundamental strategies don't. It's that simple. You're left with the idea of worshiping a false idol (JP Morgan) or the Bill Dunn strategy that doesn't make money every day, but in the long haul makes more money and protects you when the tsunami hits. Covel closes by talking about the high priest himself, "Venus", the man from Omaha. Even though his fourth quarter profit rose 49% on gains tied to derivatives--derivatives that he once called "weapons of mass destruction"--it's no matter to his worshipers. Covel gives him all the credit in the world for amassing his great fortune; he's one of the greatest capitalists of all time. However, it's the disingenuous, manipulative nonsense of telling people not to trade derivatives but then doing it himself that really gets to Covel. Venus pretends that his words don't matter. Want a free trend following DVD? Go to trendfollowing.com/win.
Michael Covel talks about getting "picked" on today's episode of the podcast. Starting off with Blind Melon's "No Rain" Covel sets the groundwork for what's inspiring him today. This isn't a trading specific podcast today, at least for those of you out there that think that trading psychology and trading philosophy are irrelevant. Covel meets people all the time looking for the "secret sauce". Today, you aren't going to get the secret sauce; or at least the secret as you perceive it to be. Inspired by Seth Godin's recent thoughts on being picked Covel talks about Marc Maron, a comedian who recently has found success through his own podcast. Covel talks about how Maron wasn't picked through traditional means: Meeting with Lorne Michaels of Saturday Night Live, Maron's meeting went sideways, he was rejected, and he ultimately had to carve out his own path. Maron started a podcast which became viral, and now even though Lorne Michaels did not pick Marc Maron, Maron sits with his own destiny in front of him, chosen by him. All because he looked at the world slightly differently. Today, he enjoys massive success through an IFC television show, a new book, and a top rated podcast all because of setting out on his own path. Circumstances forced him to do this, but he learned that being picked was not the end all be all. Covel relates this back to his audience: you weren't picked for the trading job, you weren't picked for the investment banking team, and you're already psyching yourself out. A lot of people do this: they don't get picked and then complain for the rest of their lives and essentially quit. If you don't see the relevance in picking yourself to success in trading, you might not ever see it. Godin received complaints through his article on Marc Maron and Covel has received similar complaints which he retells here in the podcast. Some people want to do specific things. Doing "this" requires being picked: "I want to play the flute in this particular orchestra", "I want to trade for Goldman Sachs". At the end of it all, there is a great Buddhist thought: "Live like a mighty river". A mighty river flows. A mighty river does not complain. A mighty river gets it done. Covel talks about his own experience of not being "picked" for CNBC. They were looking for Jim Cramer, Jr. Covel went into the meeting with his eyes wide open and was looking to get the experience to pass along to you today that CNBC, behind the scenes, is a farce. Covel wanted to see behind the scenes for himself, and he got that opportunity being interviewed for CNBC. Covel wasn't picked by CNBC, but they weren't picked by Covel either. That's the attitude to have. Covel concludes with a recent story about being picked that he experienced himself in Thailand, and with what Godin says in his blog post: The problem is that it's frightening to pick yourself, Godin says. "It's far easier to put your future into someone else's hands than it is to slog your way forward, owning the results as you go." Free trend following DVD? Go to http://www.trendfollowing.com/win.
In his first podcast back from China Michael Covel talks about trend following in the context of The Middle Kingdom. Through five flights, four cities, untold hotel rooms, two speeches before crowds of 500 people, and over a dozen presentations in front of some of China's largest hedge funds, Covel brings the wisdom gained through his excursion back to his podcast audience. First, he responds to a reader from China who heard about one of Covel's presentations, and the criticism that Covel didn't give the "secret sauce" to win at trend following. Richard Dennis was famous for saying that he could publish his rules in the newspaper and nobody would follow them, and Covel could explain exactly how to be a trend follower and it'd go over many heads. So it's not surprising that in a crowd of 500 some would have their expectations of learning about some kind of "secret sauce" not met. Covel isn't trying to impress that person, and they aren't the type of person that would ever get it anyway. They're looking for the shortcut-- the angle, the quick fix. If you have Covel speak to your group, after fifteen years of his life spent researching the topic and putting together the best educational materials for new and experienced traders alike, if your first thought is "you didn't give me the secret sauce", it might not be for you. But Covel did reach a great many people, and he got a great deal of excellent feedback. He discusses the typical Chinese investor mindset and what got them to take a second look at trend following. Covel also waxes on the idea of trust in China, the parallels to America, and how the acceptance of "the new" in China might go down easier than elsewhere. Next, Covel adds some lessons to the overall trend following education. Covel's journey shows that an outsider can get to be an insider. Unfortunately, one of the common questions posed to Covel by the media in China was to ask if any average person could succeed in trend following. Covel discusses how this is a defeatist question. If you consider yourself average: quit now. Suitability, however, is something different. Is trend following, or investing in general, suitable for everyone? If you don't have the education, it might not be. Covel also gives some examples from his journey that help to put trend following in context. Covel notes a bit of censorship in his presentations via the Chinese regulatory committees. One slide was not allowed in his presentation. What was that slide? Covel explains. Also, Covel recently discussed Ray Dalio at Bridgewater, the biggest hedge fund on the planet. Covel reads a letter from a listener that gives anecdotal evidence about how Dalio could be a closet trend follower. Want a free trend following DVD? Go to trendfollowing.com/win.