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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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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.

Dec 15, 2017

Robin Hanson is an associate professor of economics at George Mason University and a research associate at the Future of Humanity Institute of Oxford University. He is an expert on idea futures and markets, was involved in the creation of the Foresight Institute’s Foresight Exchange, and DARPA’s Future MAP project. He is co-author of “The Elephant in the Brain: Hidden Motives in Everyday Life.” And today Robin and Michael dive right into the heart of our hidden motives.

“The Elephant in the Brain” helps confront hidden motives embedded in the brain–things people don’t like to talk about, also known as, elephants in the room. Robin shows that once our brains are able to confront these blind spots, we can better have a grasp on ourselves and the motivations behind how we think–which of course can then lead to possibly better policy.

Think about it: Why does one person find another attractive? Why do we laugh? Robin answers these questions and more throughout his work. He forces you to dig into the deeper, darker parts of your psyche and look in the mirror. And Michael takes great pleasure in letting Robin reveal his awesome insights on today’s show.

In this episode of Trend Following Radio:

  • Hidden motives
  • Humans as political animals
  • Deception vs. self deception
  • Selfishness
  • Understanding your motivations
Dec 11, 2017

Very experienced guys make great interviews. They bring age, perspective and wisdom to the table. Tom DeMark and Perry Kaufman are two men that have previously been on the podcast that exemplify this statement. Michael went back into the archives to bring these men and their interviews on the podcast today.

Perry Kaufman is an American systematic trader, index developer, and quantitative financial theorist. He is considered a leading expert in the development of fully algorithmic trading programs. He currently is president of Kaufman Analytics.

Tom DeMark is founder and CEO of DeMark Analytics and the creator of the DeMark Indicators. Tom considers himself a market timer and believes that fundamentals are critical; however, he and Michael still have a lot in common. His work is price and technically driven.

In this episode of Trend Following Radio:

  • Price movement
  • Fundamentals
  • Technical analysis behind the scenes
  • Elliott wave
  • The Fibonacci sequence
  • Forecasting
  • George Soros
  • Michael Steinhardt
  • Paul Tudor Jones
  • Steve Cohen
  • Computerizing indicators
  • 100% algorithmic trading
  • Systematic vs. Automated
  • Optimization vs. Validation
  • Tail events
  • Discipline
Dec 8, 2017

Matt Smith is CEO of Royalty Exchange, an online rights platform where users sell portions of their royalty income and investors bid on it. The primary goal of Royalty Exchange is to make royalty streams investable. They have held over 200 auctions in the last 18 months where artists and investors interact in the buying and selling of royalties. Recently Matt launched a sister company Royalty Flow–created to purchase larger royalty streams and get more investors involved.

What is the process of Royalty Flow? Investors can buy shares through a platform called Folio, those shares are then transferred to a major exchange like Nasdaq. Royalty Flow was created after being approached to buy Eminem’s royalties. Royalty Flow provides a way for a pool of investors to purchase. What are motivations for investors to buy royalties? Investors view this as a hedging strategy because it is uncorrelated to their other portfolios. In contrast, what are some motivations for selling off royalties?

There are hundreds of thousands of investors that contribute to artists getting their music out there – music producers, song writers, etc., not just performers. Those contributors have royalties. Artists and their contributors see the advantages to diversification and investors see a sense of security in having a steady flow of income outside of their Wall Street portfolios.

In this episode of Trend Following Radio:

  • Streaming music
  • Music royalties
  • ICO’s
  • SEC regulations
  • Sesame Street royalties
  • Eminem royalties
Dec 4, 2017

Larry Hite recently called Michael and left him a voicemail regarding podcast episode #606. Larry has seen his share of ups and downs and has had a great career so praise from Larry was a nice surprise. Michael follows Larry’s praise by sharing a recent Facebook conversation with a critic. The conversation ensued regarding a post quoting Sam Harris. The back and forth that began with this Facebook “friend” starts with her calling Michael dogmatic (among other things) and by the end of the banter she evolves to calling him a cult leader. What is the takeaway from this conversation? Develop a system for dealing with people and their opinions. What is a key thing to keep in mind while developing that system? Not everyone’s opinion matters.

In this episode of Trend Following Radio:

  • Trend Following 5th Edition
  • Dogmatic
  • Trend following performance
  • How to filter trolls
  • Sock puppets
  • Sorting the real from the fake
Dec 1, 2017

Michael Gervais is a high performance psychologist. He works with top performers to train and implement skills necessary to pursuing and revealing one’s maximum potential. His clients include world record holders, Olympians, internationally acclaimed artists and musicians, MVPs from every major sport and Fortune 100 CEOs. He is also co-founder of Compete to Create.

Part of Michael’s training is helping clients realize there are things we are in control of and things we are not in control of – therefore focus on what you can control. We can train our bodies, our craft and mind. Michael teaches clients through science based research that refining ALL three of these areas are essential to becoming successful.

So what does world class awareness look like and how do you achieve it? There are no words that can capture what awareness is, but when someone becomes fully aware, it is as if they are fully engrossed in the task at hand. They have an intimate understanding of how their thoughts, actions, and words are lining up with the environment. However, just being “aware” is not enough for mindfulness. Creating mindfulness could be as simple as focusing on one thing for a length of time. This might mean refocusing the mind thousands of times. As soon as you allow yourself to get into the moment, performance jumps astronomically. Athletes are a great way to judge this. They live in a world of compressed time. Most athletes only have a couple of years to compete at peak performance. Because of this, top athletes tend to understand being mindful and grasp the importance of being in the present moment faster than the average person.

Another aspect of Michael’s work is learning what motivates a client. There are two types of motivations: internal and external. Science has shown that people more aligned with internal motivations tend to outperform those motivated by external factors such as money, fame and power. However, regardless of your motivations or natural talents (or lack thereof), Michael stresses that greatness is accessible to everyone. Investing in mental skills that help deal with challenges that come your way is well worth the time to cultivate. Work on mastering the aspects of your life that you can control. Understanding how to do it is the easy part, implementing is the hard part.

In this episode of Trend Following Radio:

  • Living in the present moment
  • Mindfulness
  • High performance training
  • Grit
Nov 27, 2017

Michael explores two of his favorite monologues covering Roger Waters of Pink Floyd fame and trader Nicolas Darvas.

Nov 24, 2017

Tim Larkin is one of America’s leading Pro-Victim Rights and Personal Safety Advocates. He has had a 25 year career training over 10,000 clients in 52 countries in how to deal with imminent violence. His books include How To Survive The Most Critical 5 Seconds Of Your Life and Survive The Unthinkable. His newest book is When Violence Is the Answer: Learning How to Do What It Takes When Your Life Is at Stake.

Tim’s father was an officer in the Navy. He knew at the age of 13 he was going to be a Navy Seal. His whole adolescence and early adulthood was dedicated to that goal. After college he started his Seal training. Toward the end, with just a couple weeks left of rigorous training, he went out on a routine training dive and a wave hit his ear. Tim burst his eardrum and his career was over. This was the first time, at age 21, his body had failed him. Sometimes the smallest things, like an eardrum bursting, can change your whole course of life. This lesson learned early on by Tim translates to everything he now teaches.

Tim has always stressed that the human mind is the only thing we do not have a weapon against. The human mind will always find a way if there is intention and Las Vegas is an example of that. Gun control is important however there is no amount of laws that will stop someone from inflicting pain, and this is where Tim’s work comes into play. He shows how a rational fear of violence is necessary in today’s world.

Knowing where threats lie, having an exit plan and being self-aware at all times might feel mundane, but it could save your life. Tim runs through real life scenarios: both men and women being targeted and attacked. What is the biggest takeaway? There is no benefit in focusing on the differences between you and a predator (ie. he is bigger, stronger, faster), but rather focus on the similarities and where the universal week spots are throughout the human body. We as humans are all hardwired to protect ourselves. Even though predators may be bigger, stronger, faster, if you understand basic human injury, you can exploit that and stop an attacker.

In this episode of Trend Following Radio:

  • Las Vegas shooting
  • Simulated shootings
  • Asocial violence
  • Non-verbal cues
  • Disabling one of your sensory feelings
  • Navy Seals
  • Exploiting the human body
  • Knowing principles not techniques
  • Violence is a 50/50 endeavor
  • Killing with kindness first
Nov 20, 2017

Michael explores meeting the achievers, great coaching and brings back two trend following legends from the archives–a must listen.

In this episode of Trend Following Radio:

  • Meeting the achievers–how?
  • Coaching
  • Trend Following Legends Ed Seykota and Martin Bergin
Nov 17, 2017

Robert Carver got his start in finance working at trend following firm AHL in 2001 during his final year of college. He was introduced to quantitative trading while at AHL and for the first time began thinking of finance in a systematic way. He later went back to AHL, working there from 2006-2013. His newest book is “Smart Portfolios: A Practical guide to building and maintaining intelligent investment portfolios.”

It took a lot of research and digging for Robert to decipher which financial tools available to traders were appropriate for him. He knew he was not the only trader with this problem so he decided to write a book laying out what he had found through his research. Robert gives actionable tips and guidelines for others who may need help finding what trading instruments are right for them. Robert also wanted “Smart Portfolios” to be a book for the average investor. He wrote it in a way that is not over complicated. Any trader, new or professional, can pick it up and find it useful.

Robert bases portfolio selection around three questions: 1. What should you invest in? 2. How much of your capital goes into those investments? 3. Do you make changes to your portfolio along the way? Whenever he receives questions from people, those questions usually fall into one of the above categories. There is never perfection when trying to predict how a portfolio will perform but Robert stresses that if you start your investing answering the above questions, you will be on the right track. After the right portfolio and financial tools have been selected it’s necessary to understand different types of returns. Michael and Robert finish the podcast discussing differences between geometric and arithmetic returns.

In this episode of Trend Following Radio:

  • Portfolio selection
  • Benchmarks
  • International investing
  • Fundamental trading
  • Warren Buffett trading
  • Expected average performance
  • Leveraging a portfolio
  • Luck vs. Skill
  • Venture capitalism
Nov 13, 2017

Michael throws Jeff Bezos, Amazon and trend following into a giant melting pot. Jeff Bezos is a trend following trader – along with venture capitalists, Hollywood, the MIT black jack team, Warren Buffett (to some degree, yes), and many more.

Michael notes an excerpt from a document written in 1983, gleaning wisdom from Richard Dennis and Bill Eckhardt. Not relevant today? Think again. Richard Dennis makes it clear in the document that you never know where the next home run is coming from – missing a big payout is just as bad as taking a loss. Are you guilty of forgetting about big opportunity when trading? Do you focus too much on your downside? Most unfortunately get fixated on the downside and ignore the positive unknown.

Michael also notes an article written by Li Jiang titled, “What I Learned From Reading Every Amazon Shareholders Letter.” Li lists key lessons he has pulled from shareholder letters: type I and type II decisions, end each day of business like it is the first day, always operate like a hungry upstart, only the paranoid survive, make small bets because you can’t predict anything, move fast and break things, and if you are offered a seat on a rocketship – don’t ask which seat, just get on. Jeff Bezos’ words dovetail seamlessly with trend following philosophy. Thinking outside the box is essential to making great things can happen.

In this episode of Trend Following Radio:

  • Jeff Bezos
  • Amazon
  • Type 1 errors/decisions
  • Type 2 errors/decisions
  • Sunk cost
  • Opportunity cost
  • Prediction
  • Trend following is dead?
Nov 10, 2017

Mark Kritzman is a Senior Lecturer in Finance at the MIT Sloan School of Management, founding Partner and Chief Executive Officer of Windham Capital Management and serves as a senior partner of State Street Associates. Mark has written six books, his latest titled “A Practitioners Guide to Asset Allocation”.

Mark began his career on Wall Street in 1974 and was immediately drawn toward systematic trading. At a time when there were not many quantitative traders, he was affectionately titled a “token quant” within his company.

Over the years Mark has been an advisor to many funds. While working with various companies it became clear fund managers were mixing how they invest with how they would choose asset classes. He decided to break down the most basic and logical ways of organizing the investment process. What are some components of an asset class: stable composition, be investable, internally homogeneous, externally heterogeneous, raise the utility of a portfolio, and you should be able to access it in a cost effective way. From there, depending on a persons risk, different combinations of asset classes would make up a portfolio.

Being in the game as long as Mark has, he has been able to witness the enduring and turbulent nature of markets. He saw one silver lining come out of the 2008 financial crisis – it provided a context where investors could go back to the basics of trading, and in particular, recalibrate how they manage risk. Mark finishes the podcast talking fixed weight portfolios, Peter Bernstein on scaling portfolio risk, dynamic asset allocation and explaining Samuelson’s Dictum.

In this episode of Trend Following Radio:

  • Definition of an asset class
  • Actively managed portfolios
  • Passively managed portfolios
  • Time diversification
  • Portfolio diversification
  • The fallacy of large numbers
  • Leverage
  • Value at risk
  • Risk management
  • Fear and greed
  • Risk and reward
  • Exposure to risk
Nov 6, 2017

Today’s mega combo episode is Chris Voss, Robert Cialdini, Philip Tetlock, Spyros Makridakis, and Tim Ferriss.

Chris Voss is the author of, Never Split The Difference: Negotiating As If Your Life Depended On It. Chris is a former international hostage negotiator for the FBI. He has had an amazing career full of great experience and insights. Chris first entered the FBI in 1983 and has been involved with over 150 kidnapping cases.

Robert Cialdini is best known for writing Influence: The Psychology of Persuasion published back in 1984. Robert is the “go to man” for understanding effective persuasion. Reciprocity, commitment and consistency, social proof, authority, liking and scarcity are six key principles of influence he teaches. His new book, Pre-Suasion: A Revolutionary Way to Influence and Persuade, introduces a seventh key principle of influence.

Philip Tetlock is a Canadian American political science writer currently at The Wharton School of the University of Pennsylvania. He is right at the intersection of psychology, political science and organizational behavior. His book, Superforecasting: The Art and Science of Prediction, is probabilistic thinking defined. Phil is also a co-principle investigator of The Good Judgment Project, a study on the art and science of prediction and forecasting.

Spyros Makridakis is Rector of the Neapolis University of Pafos NUP and an Emeritus Professor of Decision Sciences at INSEAD as well as the University of Piraeus and one of the world’s leading experts on forecasting, with many journal articles and books on the subject. He is organizer of the Makridakis Competitions, known in the forecasting literature as the M-Competitions.

Tim Ferriss is an author, blogger and motivational speaker known for his bestselling books. Tim has revolutionized the idea of writing a book; he has engineered the process of a bestseller.

In this episode of Trend Following Radio:

  • Aversion to negotiation
  • Negotiating skills
  • Never pretend people are rational
  • Business negotiations compared to hostage negotiations
  • Lying three times
  • “How” and “Why” questions
  • What are superforecasters?
  • Probabilistic thinking
  • Looking at data
  • Location independence
  • 80/20 rule
  • Known knowns, known unknowns, and unknown unknowns
  • Uncertainty
  • How to publish a book
Nov 3, 2017

Frank Ostaseski has dedicated his life to helping others. He is co-founder of the Zen Hospice Project and founder of the Metta Institute. Frank is a Buddhist teacher, international lecturer and expert on the end-of-life experience. His work spans from helping the homeless to the wealthy to the young and to the elderly have an easier transition to the other side. Frank loves what he does because of how “real” the experience of death is. His new book is The Five Invitations: Discovering What Death Can Teach Us About Living Fully.

How did Frank begin helping people with the experience of death? It was not a linear path. Frank had experiences with death early on in his life with the passing of his parents. He later was introduced to the Buddhist practice with the central tenet of Buddhism being the study of constant change. When his son was born he felt it was important to “birth his soul”. He went to a program where everyone was grieving and learning about the loss of a soul. Frank on the other hand, wanted to learn how to gain a soul for his son. He didn’t find much help with that, however the leader of the program invited him back to see first hand what experiencing death was like. He later visited Central America working in refugee camps where he saw a lot of misery and death. He then went to San Francisco when the aids epidemic was running rampant on the streets. Each experience kept pulling him in a little more and more and every death he witnesses continues to show him how precious and precarious life is.

Frank’s five invitations, outlined in his book, have become his road map and guidelines for life: don’t wait, welcome everything and push away nothing, bring your whole self to the experience, find a place of rest in the middle of things, and cultivate don’t know mind.

In this episode of Trend Following Radio:

  • The territory of mystery
  • The inevitability and intimacy of dying
  • How saying goodbye at a party relates to saying goodbye when dying
  • Importance of human connection
  • Don’t wait
  • The reality of constant change
  • Openness during the travel experience
  • Trusting our intuition
  • Common humanity
  • Resting in the middle of activity
  • Discovering the truth
  • Stoicism
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
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
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