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Trend Following with Michael Covel

Bestselling author Michael Covel is the host of Trend Following Radio with 6+ 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 600+ eps at trendfollowingradio.com/rss.
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Now displaying: October, 2017

Bestselling author Michael Covel is the host of Trend Following Radio with 6+ 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 600+ eps at trendfollowingradio.com/rss.

Oct 30, 2017

Mike Salguero is a serial entrepreneur. His newest venture is Butcher Box – delivering meat from the farm straight to your door. He got his start in the business space selling t-shirts in high school and continued making t-shirts throughout college. He credits his t-shirt businesses to teaching him how to market and grow a brand from the ground up.

Mike’s first large scale business was a company that helped carpenters market and sell their custom furniture. The company was called CustomMade. Mike and his business partner bought the URL for $150,000, revamped the website, raised $30 million of venture capital and at it’s peak employed 60 people. By the time Mike left the company they were down to 6 employees. His partner stayed with it and has turned the company around, but most investors lost everything. He learned a lot from CustomMade – the paramount lesson being how to market a product.

Butcher Box was started a few years after stepping away from CustomMade. Mike and his wife wanted to eat cleaner and healthier. He found a farmer whom he was able to buy grass fed, humanely raised, hormone free meat from. After about a year of buying the meat for himself and his friends he started learning how he could turn buying grass fed meat into a business. Mike started the company with $10,000 of his own money and did a Kickstarter campaign that raised $215,000. Today, they are north of 30,000 subscribers with three distribution facilities. Butcher Box sells beef, chicken, and pork from hundreds of different farms across America. What is their #1 goal? To replace the butcher.

Michael ends the podcast asking Mike, “What is the one thing I didn’t ask you in this conversation that you want the audience to know?” Mike drives home the point that if you want create a successful business you have to have extreme discipline focused on seeing how you are going to get to the next day, week, quarter and beyond. Most think they need to raise lots of money. That focus needs to shift to building a great company, with a great business model, that you are able to personally manage without outside investors.

In this episode of Trend Following Radio:

  • Benefits of eating grass fed meat
  • Marketing a product
  • Commodity meat vs. grass fed
  • Raising capital (or the importance of not raising capital)
  • Entrepreneurism
  • Starting a business
Oct 27, 2017

Ryan Moran is founder of Capitalism.com and Freedom Fast Lane. He started with nothing and turned himself into a successful entrepreneur. Ryan helps other self-starting high achievers build their business, reinvest their profits, find freedom in their work and move away from the 9-5 mindset.

Ryan entered college thinking his life would go down a much different path. He grew up in a religious family and went to college to become a minister. Everything changed for him while sitting in an economics class listening to the morals behind an economic system. His professor explained money as an exchange of value. This was a new concept to Ryan. Looking at money as an exchange of value made him realize making money was a positive rather than something to feel guilty about. It was a source of freedom rather than a source of greed or evil.

Ryan quickly saw capitalism and entrepreneurism as the only system where he could define the world he wanted to live in, rather than having it defined for him. As the millennial generation matures there seems to be a desire for the state to fix everything. People change the most when they see actual results that make a difference personally in their life. Ryan shares examples of people getting in the game, participating in transactions, and getting motivated. Free market allows the chance for everyone to create and have a light bulb moment. The more empowered people are, the less need for state intervention.

In this episode of Trend Following Radio:

  • Intentional community
  • Capitalism
  • Free market society
  • Opportunity making products
  • Free market society
  • Capitalism vs. Cronyism
  • 2008 crash
  • Life is a gift
  • Artificial intelligence
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
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