Michael Covel makes the connection between Miss Korea and a TED speech called "Embracing The Shake" today on the podcast. Miss Korea's video pokes fun at those wanting "more, more, more" and the TED video is concerned with an artist doing more with less. What can you do with less? In the trading world trend following by its very nature is about doing more with less. David Harding was looking for something he could do from a desert island. Getting back to the idea of doing more with less, Covel reads an excerpt about Harding from the Hedge Fund Journal. Harding stepped outside the sheep behavior of the efficient market hypothesis and looked at the data in a different way. Next, Covel plays a clip from former Russian KGB officer Yuri Bezmenov in which he talks about the four step process that forces people to become lost; the four steps which can be used to change the thinking and behavior of entire generations. Demoralization, destabilization, crisis, and normalization. The normalization can last forever. That's what's happening in modern day society. If that is it, the idea of David Harding being curious and looking outside the box (or inside the box as the "Embrace The Shake" video says) is more important than ever. Critical thinking is everything. Want a free trend following DVD? Go to trendfollowing.com/win.
Michael Covel talks with Alpesh Patel an asset manager who has written for the Financial Times for many years. Patel and Covel discuss trading in the context of Patel's book, "How To Win at Spread Betting". Even though Patel's book has a focus on spread betting, the style and strategies he talks about hit home with trend following momentum-style trader. Topics include comparisons betweens stocks and futures; what the winners have in common; trade frequency, and why active traders tended to do better in Patel's study; buy & holders vs. spread betters; academic vs. practical insights; whether Patel finds himself at odds with other Financial Times writers; why people like to imagine that trend following and momentum trading doesn't exist; Patel's experience as an expert witness with "trend following on trial"; why the average person has difficulty with betting small, cutting losses, and letting winners ride; George Soros, game theory and trading psychology; win/loss ratios; a coin flipping experiment performed with Ph.D's, the importance of position sizing, and why systems aren't everything; and why gut instinct is the opposite of what professional traders use. Free trend following DVD: trendfollowing.com/win.
Michael Covel talks about conversations he has had in the past 24 hours. Someone posted an equity curve of Bill Dunn against the S&P, and the criticism of the drawdowns began. They never talk about the S&P going down 50% twice in the past 13 years; they never talk about the NASDAQ going down 77%; they never talk about the NIKKEI going down 77%. It's always "trend followers have drawdowns". It's like a broken record. It's a surefire sign if someone starts telling you that they are either trying to push an agenda or they have no idea what they're talking about. Trend following is the meat and potatoes. Don't just trust Covel: look at the data. Next, Covel talks about advising people in their 20s against buying real estate. Many, many areas of real estate in the US that are underwater: are all of these people simpletons, dummies? Or did they get caught up in the greed and the fear of a bubble, and a black swan hit? Covel goes on to talk about black swans, zero interest rate policy, and bubbles (and why there is a way around it all). Next, Covel talks about nurture vs. nature. Of course, when he talks about nurture vs. nature, the Turtle story must be brought up. Covel plays two excerpts: one from NPR's Planet Money and another called "Enroll Yourself In The Genius Factory", which gets at the idea of how people develop talent. Covel discusses the peers of Richard Dennis; emotional intelligence; and trend following in the context of nurture vs. nature. Want a free trend following DVD: trendfollowing.com/win.
Michael Covel talks to author Tom Asacker, author of "The Business of Belief: How the World's Best Marketers, Designers, Salespeople, Coaches, Fundraisers, Educators, Entrepreneurs, and Other Leaders Get Us To Believe." Asacker's book applies to not only all of Covel's world (trading), but it applies to anyone's chosen profession. Asacker and Covel talk about choice and distraction/distrust; belief and its connection to how people make decisions and habit; faith healers and how information can change our beliefs and perceptions; how the supermarket works as a metaphor for belief and choice; Vernon Smith and Daniel Kahneman; the instinctive "feeling" mind vs. the slow, deliberate thinking mind; leading people to choose themselves vs. just getting a job; thinking like a child; comfort vs. desire; why those that have nothing to lose can put themselves in the best position for success; pulling the curtain back on your own mind to determine what your own mind is doing to prevent you from living a full life; the power shift to the individual via the internet; why we see what our minds are conditioned to see; practice, hard work, and passion; the metaphor of baseball, perception, belief, and behavior; thinking your way to a change vs. acting your way to a change; Alan Watts, and the question of "What if money was no object?". Free DVD: www.trendfollowing.com/win.
Michael Covel talks to author, blogger and trader Steve Burns. In his second visit to the podcast Burns and Covel discuss several famed trading quotes containing wisdom from Ed Seykota, Richard Dennis, Tom Willis, Jesse Livermore, Amos Hostetter, Ben Stein, Bertrand Russell, T. Boone Pickens, and Larry Hite. Covel and Burns discuss risk management; position sizing; the magic of compounding; why individual trades have very little meaning; turning down the volume on your emotions in your trades; how your losses can be an education; concept and theory with regard to trend following; quantifying and capturing trends; "just trading the numbers"; greed and fear in the context of trends; the common attitudes and misconceptions of novice to trend following traders; trading against the market vs. trading against yourself; drawdowns, and the importance of studying the track records of the great traders; entry and exit strategies; the importance of starting "right" in every enterprise; the curse of laziness; ignoring the talking heads; why you don't need 20 screens on your desk to trade optimally; cutting your losses; the 1% rule; being blinded by the fundamentals; why if you diversify, control your risk, and go with the trend, it just has to work; I.Q. vs. emotional intelligence (E.Q.); and technology and long term trend following. Special Offer? Receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Are you a gimp? Like that classic scene from Pulp Fiction, the gimp is the average investor. The gimp is the investor that isn't in control, either by their own choice or choices put upon them. They are left to the machinations and maneuvers of forces. They don't think clearly; they don't know how to make a decision. Their decision is simple: sit tight and trust the powers that be. That's what Covel calls "Gimp Investing". If you don't want to be a gimp investor you have to figure out a way to think; a way to be skeptical. Skepticism is where it begins. If you can be a skeptic, then you have a chance. Covel talks about "digging" for information; taking the information that's given to you and sorting it out for truth. Covel moves on to the comparison between digging for information and digging for dinosaurs. This idea of thinking and seeing what the data shows--not just trusting the system and the stories--is exactly what skepticism is all about. Jack Horner, the paleontologist, is one of the greats in his field. He's figured out that dinosaurs built nests, lived in colonies, traveled in herds, and that their skulls changed shape from childhood into adulthood. Most of this was not common knowledge until Horner came around. Horner walked into it wide-eyed; he didn't have a plan. He said, "What can I deduce from this that makes the most sense?" Covel talks about how much this compares to his early experience with looking at the data of trend following traders. Trend following is the other side of the coin to gimp investing. It says if you're willing to take those small losses, you're almost invincible. As long as you can come back to play the next day and you can take those small losses, it puts you in the position where if the black swan comes in, you're prepared. When the gimp style stops working trend following gives you a chance to survive. Covel ends with a clip of Jack Horner. It's useful to hear how an expert goes on to learn. It's not linear learning; if you're trying to make chaos a straight line you're going to have a rough life. Attach Horner's words to good trend following trading and it all connects. Want a free trend following DVD? Go to trendfollowing.com/win.
"Give me a talking head that says which way is up, and I'll listen. Give me something I can believe in." That's what most people believe, even if it's a fantasy. Michael Covel discusses what makes a good teacher, and brings up one quote in particular: "A good teacher is one who will not give you an answer, but will allow you to find the answer in yourself. A teacher is a guide. He or she will show you that the answer is inside you, and that there is a right answer." Michael Covel discusses a John Hussman quote and explores "right" and "wrong" answers. Hussman's comments are not about trading; trend followers don't attempt to make the analysis that he does. Trend followers don't analyze how poor Bernanke's policies may or may not be; trend followers do not attempt to say whether Fed policies are good or bad. You don't make money trying to make those judgments. Covel discusses some of the comments he received after posting the Hussman quote, noting some supportive Fed comments. Of course, none of these views are relevant to trend following trading. But as a human being--as a thinking person--Covel discusses some Fed policies. Covel's point here is to get you to think: Do you just want to trust the system? With stock markets at all-time highs and interest rates low that everything is rosy and everyone has it figured out? With the S&P having collapsed 50% two times in the past fifteen years do you want to trust that it can't happen again? Do you want to trust that the DOW really can't go from 15,000 to 7,500? This is what Hussman is really getting at. Unlike a trend following trader Hussman is getting at why these machinations and maneuvers of the Fed really don't last. The beast can't be contained. So will you have a plan when all hell breaks loose? Nothing can contain market volatility; it always comes back. And sometimes markets don't recover: look at Japan. Covel asks, "do you want to trust the system, or do you want to have control of your life to some degree?" Bottom line, you can make money when the central planning plans break down. Finally, Covel ends today's show with a long clip from Hugh Hendry that gets at the issue of what capitalism is today. Do you want a free trend following DVD? Go to trendfollowing.com/win.
Wherever you go, gambling and the lottery is how most people think about making money. It is one of the biggest scams put upon the average guy. Most of it is run by the government, too. As Abba so eloquently put in their song "Money Money Money", that's what people dream about. But even when people open up and want to learn something new they often come to Michael Covel asking for the secrets. Covel's answers? There are no secrets; there is only knowledge that you do not yet possess. On today's show Covel launches into a clip from CNBC. Do trend following traders care what Bernanke thinks? Covel talks about propaganda; storylines in the news and whether these "arguments" are as real as they seem; and how real traders go with the flow. Ultimately it's about science; the science of what the market is doing. Covel reads a blog excerpt from Sean Carroll, and goes over a three-part definition of what makes up science to further comment on the CNBC clip. Covel just wants to make the point: you have to look through the haze to find out what's really going on. You have to break it down to science. The most successful trend following trader alive today, David Harding, is a scientist. Going through the whole process of thinking about trend following from a scientific perspective, Covel is showing you the light. Free DVD: trendfollowing.com/win.
Michael Covel just released the first chapter and preface for the audiobook version of The Complete TurtleTrader in a recent podcast. When Covel heard that a Chicago reporter did a retrospective piece on the Turtles for WBEZ in Chicago, he decided to include the piece along with the afterword for the audiobook in today's podcast. The afterword wasn't in the first edition of the original book release due to some of the more "fun" details it included (was added in paperback release). There are some fantastic Turtle traders; many people who did really well. However, for some, it was weird to say the least. That doesn't mean you can't learn from them, and the TurtleTrader book afterword is a wealth of information and insight for anyone with even a passing interest in the Turtles. Do you want a free trend following DVD? Go to trendfollowing.com/win.
Today on the show Michael Covel interviews author Brendan Moynihan. Moynihan's co-authored book, "What I Learned Losing a Million Dollars" is a profile of trader Jim Paul along with Moynihan's ideas and thoughts on behavioral finance, risk management, and loss-taking strategies that all great traders act upon. Although released almost twenty years ago Moynihan's book contains timeless wisdom and principles that pertain to any number of issues surrounding us today. Covel and Moynihan talk about how Moynihan's background, the background of his subject, Jim Paul, and how the two came together in "What I Learned Losing a Million Dollars"; the psychology of loss and what we can learn from losing; the idea that you "just have to make the money" and why that can be a bad place to start as a motivator; personalizing loss; Paul's interactions with Rich Dennis; studying the contradictions of great traders, and how loss is the only topic they agree on; controlling how much you can lose; staying the course and the importance of not changing your strategy mid-stream; profit motive vs. prophet motive; the difference between investors, traders, speculators, bettors, and gamblers; the slippery slope of always wanting to be "right"; the five stages of internal loss; the danger of personalizing your success; the difference between discrete events vs. continuous events; the "uncle" point; why it's important to go broke at least once in your life; and the difference between emotions and emotionalism. Receive free DVD: trendfollowing.com/win.
When you hear the Turtles (the rock band) you know that Michael Covel is going to discuss something Turtle-related. Today's podcast is a little different: it includes the preface and first chapter of the audiobook version of Covel's second book, "The Complete TurtleTrader". Covel talks about his plans for an upcoming Turtle research project. The Turtle rules are not a secret, and neither is the story. However, there are quite a few people out there looking for more information. For a topic like the Turtle story, you can't put all the flavor into 80,000 words alone. Covel discusses the wealth of extra information out there that he plans on including in this upcoming project. Would you like a free trend following DVD? Go to trendfollowing.com/win.
Today's episode is an emotional rescue, so to speak. We don't think about it regularly when it comes to our money, but understanding our emotions is core to investing. Those emotions tie right into when you buy and when you sell. If you think you're going to become a successful trader without obliging the emotional side of the coin, you're wrong. First, Covel talks about the idea of multitasking, discussing an article called "Don't Multitask, Your Brain Will Thank You". Research shows that chronic multitasking can have long-term effects on your brain's functioning. Applied to trading what if instead of the chronic multitasking associated with fundamental analysis you could just focus on one thing? What if you could just reduce it all into something simple to digest? That's where trend following makes sense. Covel moves on and gives an example of a doctor friend who is confused with current markets. Related to that, Covel also discusses an article in the Wall Street Journal by Brenda Crane. There has to be a new way of looking at the investing landscape that can provide some sort of "emotional rescue". Covel moves on to another Wall Street Journal article titled "The Cold Truth About Emotional Investing" and the idea of the "fantastic object", as well as a clip from NPR on behavioral finance. So once you have this understanding that we're facing this multitasking hell, we need a way to decipher the hieroglyphics of the market, i.e. all the conflicting information. Covel's doctor friend is not the only one confused. Flow is one way to avoid the distraction, and Covel shares a classic Bruce Lee clip to illustrate the trend following mindset. Markets going down are only bad if you're only betting for them to go up. Go with the flow. Avoid distractions. Avoid multitasking. Then what? You need a process; you need a system to tell you when to buy and sell. And even if you get the monetary success, what are you going to do? Just buy stuff? Emotions come into the picture again...even when you're successful. Covel brings up an article called "Buy Buy Love" in the Economist about the most satisfying ways to spend your money. In the end, it's all about the tools you have in place to keep your emotions in check. Want a free trend following DVD? Go to trendfollowing.com/win.
Dreams and fantasies, that's what's on Michael Covel's mind in Saigon today. The US stock markets have had a lot of volatility this past week. Bernanke might be moving on; there might be a replacement. QE might be ending. People are preparing for that or maybe not that. In reality, you can't predict anything. That's why Covel opens up today's podcast with an old heavy metal ode to fantasy. Can you believe what your eyes are showing you? Even if you have the perspective to see beyond the fantasy, do you have a tool to make money in these volatile markets? Of course, markets go through periods, cycles of volatility. It's nothing new. The key is, can you be detached? Can you view it as a game? Can you observe and tune it all out emotionally? It's that kind of mindset where you'll make the best decisions. Covel moves on to discuss a TED Talk called "We Can Predict The Next Financial Crisis" by Didier Sornette. Covel shares some beliefs with him, but as Covel opened up talking about dreams and fantasy, prediction is just the same: a fantasy. Even if you could predict the next financial crisis, we make the assumption that prediction equals profit. Even if you could predict, it doesn't necessarily mean you're going to profit. Profit comes from having a specific set of rules that tell you when to buy, when to sell, and how much to buy or sell. Covel agrees with some of what Sornette says, but is anybody making money with it? Sornette says that his predictions work, but it's not tied to real money? Sornette's hope is that never again will there be a financial crisis that will take us by surprise, yet does anyone buy that? Human nature will now end due to his predictions? Covel thinks it sounds like a bunch of bull, and explains why. The ability to predict tomorrow is a dream. It's not something you should be thinking about. It's not a useful endeavor for your life. Instead of trying to predict tomorrow why not just react to what happens with the trend following way of being? React to market movements, follow along, and be prepared for the bubble, the crisis, the unforeseen 100-year flood. Trend following is the best solution for that. Prediction is just a dream. Want a free trend following DVD? Go to trendfollowing.com/win.
Michael Covel talks with Dan Collins of the Dan Collins Report. Collins was the managing editor at Futures Magazine for over a decade, and has talked with many trend following traders. Recently, he put out an interesting post on his website commenting on an article called "Quant Hedge Funds Hit By US Bonds Sell-Off" which originally appeared in the Financial Times. Covel and Collins discuss the article and other subjects such as why trend followers are speculators rather than investors; why the Financial Times article showed a misunderstanding of trend following in general; headlines and what drives them; equity-centric writers; why long term trend following is disrespected and why there is a bias towards higher frequency, shorter term traders; why keeping it simple is a good strategy; fees in the managed futures and options industry; "volatility value trading"; "style drift"; why quality trend following traders under the umbrella of "managed futures" allow some lesser strategies to "free ride" on their success; different time horizons in trend following; and why trend following is declared "dead" so often. Collins also shares his views on several traders (Michael Clark, Bob Moss, Bill Dunn, Salem Abraham, and Bill Eckhardt) with short synopses of their styles and trading personalities. Collins provides a wealth of information and insight and some eye-openers along the way. Would you like a free trend following DVD? Go to: www.trendfollowing.com/win.
Michael Covel is a skeptic, and that's how he likes it. If you've listened to him more than once, it's probably because you relate. He wants you to show him the truth. He's agnostic to the market, too; he knows that price is the only truth. Covel starts off today's episode with a song from XTC that reflects that sort of agnosticism. In a continuing search for more truth, Covel spends the rest of the episode providing commentary on a speech called "God Is A Genius Because He Is A Sloth" by Hugh Hendry, who has become a fairly noteworthy hedge fund manager in recent years. Covel points out that Hendry doesn't appear to be a trend following trader; at least not in the classical sense. But his response to questions will make you think. Covel discusses elements of Hendry's speech that includes the impossibility of being able to predict the future; emotional intelligence; "not wanting to know"; why procrastination can kill you; disciplined curiosity; being agnostic to the market; being wary of "the brightest guy in the room"; and why falling in love with your analysis is not risk management. Hendry gets right at some of the root essence of being a trend following trader. Although he isn't a technical trend following trader by definition, he sure sounds like one. Would you like a free trend following DVD? Go to trendfollowing.com/win.
Michael Covel tells his friends in China and Vietnam, "At least you know where your government stands". They know what the deal is. Unfortunately, Covel's home country of America seems to only pretend that there are certain basic civil liberties; that you have a right to privacy. In the midst of the revelations that have occurred surrounding the NSA scandal, Covel discusses an article titled "Big Brother Is Really Watching Us". Covel talks about the extraordinary invasion of privacy we're experiencing and why people don't seem to care. If the revelation is that the United States government is basically spying on everybody, it says that things are extremely unpredictable. In Covel's world--the trend following world--you can benefit from the chaos. The extravaganza happening right now is just another example of why you can't trust the system. You have big brother tracking everything you do, so why do some people not seem to care? Covel explores, questioning whether there is a grand Stockholm Syndrome present in the US today. Covel surmises that the unpredictability today means that we'll have chaos and market movement. So how do you make money in this situation, where you can't trust Social Security or retirement programs, or what the Federal Reserve is going to do next? You need to be in an absolute returns mindset. The idea of going for the averages, mimicking the index, is going to keep you by definition average. In the midst of the chaos, trend following is a fantastic opportunity. Covel also comments on an article by Sam Jones which doesn't seem to understand that trend followers have losing months, which gives way to a conversation on media manipulation of trend following strategies. Covel doesn't care about the masses that are frightened; they're just going to stay frightened. He wants to help people that want to see it clearly for the first time and get motivated, or just to reinforce those out there that already acknowledge the chaos and still want to make money in this crazy environment. Don't trust that the man behind the curtain will take care of you. You can get ahead in an unpredictable world, and trend following is a great way to benefit from the chaos. Free trend following DVD: trendfollowing.com/win.
Michael Covel plays a clip from investor and owner of the Dallas Mavericks, Mark Cuban. Cuban says some not-so-kind words about buy & hold, and notes several other trend following concepts along the way: don't just put positions on your account just to have them; take action when the market moves. Cuban's success doesn't mean we should blindly follow his wisdom, but shouldn't you be curious if someone like Cuban calls buy and hold a "crock of sh*t"? Covel often hears people say, "I can't be a trend following trader because I can't take the drawdowns". But at least with trend following you've got a chance to make a heck of a lot more money. Cuban also makes a great point regarding volatility. You can't make big profits without volatility. Jack Bogle of Vanguard fame came out squarely against Cuban, and Covel plays another clip. Covel critiques the clip and discusses "the average investor", exit strategies, and Bogle's view of buy & hold investing. When do you get out of a buy and hold strategy? What if you pick the wrong decade? What if, when you retire, it's the fall of 2008? Bogle says to expect two 50% drawdowns in the next ten years. You might see that in a trend following strategy too, but at least your upside makes it worth the investment. Bogle notes that all investing could be considered "buy & hold". However, the strategy he vouches for is essentially buy & hold with no exit strategy. If you want to go ahead and call trend following buy & hold with an exit strategy, more power to you. But which do you want? A system with an exit strategy, or a strategy where you're put in a position that makes you have to trust the system? A system where you have to trust that you'll exit at the exact right time? Covel isn't saying it'll be the exact right time for trend following either, but historically, trend following has a chance to make so much more money. So if there are mistakes to be made, if things don't happen at the exact right time for you, at least you've made that much more money along the way. This is your money. What else are you gonna do? Rely on Social Security? It basically guarantees to take your money and earn you less than inflation. That's what you're up against. You've only got one life. Put your kids on the right path. Break the cycle. Do something novel. Trend following is novel. It's fresh. Philosophically, psychologically, trend following makes a lot of sense. Take a chance on a strategy that isn't "average". Free trend following DVD: www.trendfollowing.com/win.
Michael Covel talks with James Altucher in his second appearance on the podcast. Altucher's new book, "Choose Yourself!" was released on June 3; he believes so much in the message that if you can prove that you bought and read "Choose Yourself!", Altucher will pay you back for the cost of the book. Covel and Altucher discuss the new book and why all the rules we thought of as normal ("The banks will always finance my house", "The stock market will always go up", "The big corporations will always hire me", "If I have a college degree, there will always be a job for me") are imaginary. Covel and Altucher also discuss why a good trader trades their own self first, and the importance of choosing yourself and making a consistent inner life; the need to become an entrepreneur and artist in today's climate, and why you might be looking down the barrel of a career in temp staffing if you don't; the collapse of the middle class and 9-5 "jobs" as we know them; the importance of doing the un-obvious; why you're only as valuable as your network; the need to exercise your idea muscle; sunk costs and opportunity costs; breaking the cycle of consumerism, buying memories and not buying objects; commitment bias; finding a career at 27, Stan Lee of Marvel Comics, endurance, and the importance of doing something for yourself today; David Gilmour of Fiji Water and the benefits of adventure; medication, lifestyle choices, and the necessity of good sleep hygiene; and the need to be an artist where your life is the canvas. Diversity! Free DVD: trendfollowing.com/win.
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, author of Trend Following, The Complete TurtleTrader, The Little Book of Trading, and Trend Commandments, introduces his podcast--Trend Following with Michael Covel. This is the first episode, the starting introduction, of the podcast. Want to get started in your trend following understanding? Receive a free trend following course to your home or office: www.trendfollowing.com/ecourse.
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.