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Trend Following with Michael Covel

Bestselling author Michael Covel is the host of Trend Following Radio with 4 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 450+ episodes only at www.trendfollowingradio.com/rss.
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Bestselling author Michael Covel is the host of Trend Following Radio with 4 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 450+ episodes only at www.trendfollowingradio.com/rss.

Jul 22, 2016

Laura Roeder is a serial entrepreneur and her newest company is Edgar, a social media application. She started working for herself creating websites for people when she was 22 living in Chicago. It spread to optimizing traffic and online marketing for her clients. In 2014 she launched her social media software business, Edgar. They haven’t taken any money from investors and have grown to 2.8 million annual revenue.

Twitter, Facebook, and LinkedIn are the biggest social media platforms today. Many entrepreneurs get overwhelmed by the scope of content creation and posting needed to be successful. They tend to give up before they have even begun. Laura goes into the advantages of recycling content, notes that small percentages of your audience will ever see your content, and that the nature of the internet is all about repeated content.

The questions to ask yourself are, “How much traffic are you driving back to your website? How many people are buying off of that traffic?” There needs to be a balance between providing worthy content to your social media followers and not just pushing ads at followers. Michael then asks, “How important is it to be authentic?”

Don’t worry about people who want to un-follow or unsubscribe to your email. If they don’t want to follow you, then you don’t want them anyway. The extreme side of un-followers are critics. Laura and Michael talk about critics and how to cut them loose. They finish up talking about Edgar and how it works to make social media easier by automation, along with how Laura has carved out her space as a entrepreneurial woman in the tech space.

In this episode of Trend Following Radio:

  • Social media
  • Business competitors
  • Success of Dropbox
  • Keeping up a great reputation
  • Be aware that competitors can access everything
  • Women in the entrepreneurial space
Jul 18, 2016

Michael starts off explaining how Trend Following Radio has morphed into the diverse podcast it is today. He started Trend Following Radio in 2012. It originally was all about trading, but with a Vernon Smith interview, then Gerd Gigerenzer and Dan Ariely interviews, he realized he could take it in a different direction. With those three interviews under the belt, he was able to secure Daniel Kahneman on the podcast which he believes was the real tipping point for the podcast.

For the rest of the episode Michael plays curated clips from the men mentioned above: Vernon Smith, Gerd Gigerenzer, Dan Ariely and Daniel Kahneman. He wraps up by playing a short clip from another brilliant mind in behavior finance, Nassim Taleb. The clips exemplify the spirit of behavioral finance. They range from helping people understand their behavior at a fundamental level to behavior in markets and what drives the average person to make particular risky moves in life and in their trading.

Michael finishes up talking about the enormous amount of misinformation in news and media. You need to do the reading and educate yourself. Absorb wisdom from the right people, do your homework and put in the work to get ahead. It will not just come intuitively or from “for profit” media outlets.

In this episode of Trend Following Radio:

  • Law of demand
  • Behavioral economics
  • Experimental economics
  • How do you make bubbles go away
  • Using algorithms over emotions
  • Noise reduction
  • Statistical thinking
  • Understanding the difference between risk and uncertainty
  • Probability theory
  • Risk Communication
  • Unconscious things that make us fearful
Jul 15, 2016

Michael and David Burkus start off talking about Fredrick Winslow Taylor. Fredrick’s claim to fame is discovering that it isn’t about innovating a product, but rather about innovating the factory. He looked into factory processes and what it took to make a product most effectively. The downside of his work was that he believed management should be operated scientifically as well. He thought that management was smart and factory workers were dumb. His values helped people focus on how to make a product most efficiently not how to make people sustainable, prolific and healthy. He took a lot of the emotion out of it. Most of his work has shifted from the United States and moved to other more factory driven places such as China.

The new form of work that we are seeing in most countries is creative work. Employees are required to make decisions or make collective designs with people in their company. Michael asks, “Isn’t this about making employees feel like entrepreneurs in their company or organization?” David uses tech start-ups as examples; Even as they get big they aim to make their companies continue to feel like a start-up and train their employees to think like solo entrepreneurs. This is how trust and intellect gets built within a company.

Next, Michael and David discuss the effectiveness of email. Pros: The cost of email is cheap and you can respond on your own schedule. Cons: Constant text and emails have diverted focus and created too much distraction. David stresses that there is no such thing as “multitasking”, there is only task switching. Some studies say it could take up to 15 minutes to get back to the focus you were at before you were interrupted.

Michael and David move the discussion back to the importance of keeping your employees happy. Having outstanding customer satisfaction comes down to putting employees first. Sometimes that means siding with your employees over your customers. You need to be able to tell some customers that your company or product simply may not be right for them. Also, creating the right work environment is key. Open work environments as opposed to more closed work environments have been becoming the norm. In an open office environment the idea is that working together is easy and creates a better collaborative environment. However there are negative effects such as increased sick days (perhaps because they do not want to see certain co-workers) and more distraction.

Michael and David finish talking about non-compete clauses and the counter productiveness of them. There is a difference between a non-compete and a non-disclosure. Apple and Google have two totally different views on this. Google is 100% fluid and open. Apple is very closed off and believes in the non-compete clause. When people migrate from one company to another, it has been shown in studies that both companies actually win from the intellectual knowledge transferred and gained from each other. Non-compete environments benefit everyone in the long term. Also, on a societal level you can see a huge benefit when non-competes are not allowed.

In this episode of Trend Following Radio:

  • Re-designing the factory
  • Physical labor vs. Intellectual labor
  • Machines vs. Man
  • Multitasking = Task switching
  • “The customer is always right” mentality
  • Confirmation bias
  • Introverts and extroverts
  • Customer service
  • Non-compete clauses
Jul 11, 2016

Michael starts an email from a listener that starts with praise, then turns around and claims that a top trend following trader has 400 employees and “super computers” to carry out trades, and that is why he is so successful. Michael uses this listener as just one example of how millions think. They are confused by what a computer does, and simply don’t understand what trend following is all about. The trader he refers to is on record saying that he trades off of Excel spreadsheets. For the remainder of the podcast, Michael expands on his response to the listeners email, and breaks apart algorithmic trading.

Michael next reads an excerpt from “Intuition Pumps and Other Tools for Thinking”, by Daniel Dennett. The excerpt breaks down algorithms in depth. Michael’s point is to show that a computer doesn’t make a great trader, it is the algorithms programed in the computer that creates the success. Where do the algorithms come from? Humans. Trend following is all about having the brilliance to come up with a strategy, but the execution is straightforward.

In this episode of Trend Following Radio:

  • “Super computers”
  • Systematic trading
  • Creating algorithms
  • Coding
  • Machines replacing humans
  • Breaking down the use of software
Jul 8, 2016

Jason Gerlach and Chris Stanton are the CEO and CIO of Sunrise Capital Partners. Sunrise Capital is a systematic firm located in San Diego. They were featured in The Little Book of Trading. Sunrise has been in business for four decades trading. Their goal is to invest in an intellectual way by taking human emotion out of their decision-making.

Michael opens the conversation up with Brexit and how Sunrise Capital reacted. There are foreseeable events and unforeseeable events. Brexit was a foreseeable event. Jason and Chris breakdown the weeks before Brexit, and how Sunrise has been positioning their portfolios in contrast to other firms. Jason and Chris say that in the systematic world there have been two different camps of thought in how to approach Brexit.

Michael moves the conversation from Brexit to Oil dropping in 2014. Jason and Chris say that these events are not just moneymaking events, they are also risk management events. People live in the middle of a bell curve and never think of the tail events in life. They trade and invest for the non-random times and are always shocked when events tend to go further than expected. Sunrise does the opposite and uses technology to curb our human irrationality.

Michael and Chris dive deeper into risk management and the importance of diversification. Sunrise has five systems that operate differently in all market situations. Chris explains risk adjusted return and how setting the “heat” is really the heart of leverage. “What kind of return is optimal for you?” The higher expected rate of return, the more drawdown you may have. When you look at someone’s rate of return, you have to look at what their drawdowns are like. Leverage is a reality in strategies; you just need to be responsible with that leverage and cater it to each individual investors needs.

Michael moves on to ask, “Has Brexit opened up Pandora’s box?” Chris and Jason say Sunrise believes that price distribution has changed since 2013. Intraday volatility has changed and prices now make huge jumps in smaller time-frames than they ever have before.

In this episode of Trend Following Radio:

  • Brexit and systematic trading
  • Price distribution
  • Price action
  • Directional betting on a coin flip event
  • Preparing for black swan events
  • Are computers good or bad?
  • MAR ratio
  • Diversification
Jul 4, 2016

Everyone was told to trust the system and be happy: “Save your money and interest income will be your retirement.” This has come to be completely untrue and people are collectively beginning to wise up, as seen in Brexit.

Michael goes into a timeline of market crashes illustrating trend following success: 1973-1974 stocks go down 50% and trend following kills it. 1987, known as Black Market Monday, US stocks go down 20%+ in a day and trend following kills it. Barings Bank collapses spring of 1995, trend following kills it. August 1998, Long Term Capital Management craters, and trend following made a fortune. It was almost a zero sum transfer from LTCM to trend followers in August of 1998. Spring of 2000, the dot com bubble bursts and trend following cleans up again. 2002 was one of the best trend following performance years ever. After 2002 another bubble is built and when it burst in October of 2008, trend following had outstanding performance results yet again. When the majority of people think the world is ending, trend following is reaping the profits. Brexit? Yes, too.

Nobody can predict the future but if you want to play the game, you have to place bets. Trend followers were in established trends once Brexit hit. They do not predict, but they have educated bets. Michael ends with one question, “What side are you going to be on? The side of the winners or the side of the losers?” It’s your choice.

In this episode of Trend Following Radio:

  • Boom and busts
  • Brexit
  • Certainty in markets
Jul 1, 2016

Michael and Jack Schwager talk about his new venture Fund Seeder. Jack is the author of the Market Wizard series. His books have remained relevant over the past 25 years, and for many traders they are the best trading books on the shelves today. Michael and Jack talk about the structure of the Market Wizards books and how they evolved to interview style format. Michael thanks Jack for opening his mind on the direction he took the Trend Following Radio podcast.

Many of the traders Jack was able to interview, such as Bruce Kovner and Michael Marcus, never did another interview after “Market Wizards.” A lot of the secret to the book series success was the exclusivity of the interviews. Michael asks, “Of all the traders you have talked to, what trader impressed you the most?” Jack has a hard time, of course, narrowing it down to just one because there has been so many extraordinary people that he has interviewed. That being said, in terms of track records and sheer intellect, he would chose one. Jack was completely awed by his accomplishments and was surprised how great he was on a personal level.

There has been a strong trend over the years for money to go to bigger and bigger asset managers. It has become a safer thing to do, to put money with a larger manager. It isn’t performance driven, it is purely safety driven. Jack says that even if you have skill it is becoming exceedingly more difficult to gain new clients and get big. Jack’s new venture is focused on helping these start up traders. The firm helps connect investors as well as companies that may want to find new and upcoming traders. Jack elaborates on the match making process and how they present verified and unverified track records.

In this episode of Trend Following Radio:

  • Trading legends
  • Futures markets
  • Equity markets
  • Gaining clients as a new trader; Fundseeder
Jun 27, 2016

Michael starts the podcast asking, “Do you need permission to get through your day?” He goes right into two examples: The first example is of his 12 year old nephew who just finished his baseball season. The second example is of a new show called “Billions.” It is about a hedge fund manager pitted against the U.S. attorney of New York.

Michael argues against/for the political corruption that starts in child sports. Michael says that being screwed over early by the system is a good thing. It makes you stronger in the long run. Every time you face these types of obstacles, you need to learn to punch through them. You can’t get bogged down with seeking permission. Especially at a young age, if children learn to push through and work hard they will have a much better chance at success later on in life.

Michael recommends watching the show, “Billions”. However, there are some things about Wall Street that have been left out. The show is based around a corrupt hedge fund manager that only trades off insider trading. The show does not highlight any other form of trading other than trading off fundamentals. Basing a character off of trend following is not nearly as “sexy” or dramatic. They want to position all of Wall Street as insider traders and corrupt because that is a far better story than making money off of rules and algorithms.

In this episode of Trend Following Radio:

  • Baseball politics
  • Asking for permission
  • “Billions” (TV show)
  • Insider trading
Jun 24, 2016

Michael takes a sci-fi journey on today’s podcast as he interviews Robin Hanson. Robin is professor of economics at George Mason University and his new book is, “The Age of EM.” Robin and Michael look forward about 100 years and analyze what the world will look like.

They start the podcast discussing singularity and what it will be like when robots take over. Michael asks, “How much time will it take to get to singularity and are there faster ways that we may get to this point?” Robin says that robots are a staple of where the future is headed. There are a few different schools of thought on how they will evolve but Robin’s theory is based on porting. In a nutshell, this means that you re-write old software to fit your new criteria. The idea is to do the same thing with the human brain. Robin goes into detail on this idea and says that it may take as little as one century to unfold.

Next, Robin discusses the types of people that will start out being emulated. The first will be top intellectuals of the time. After some years that will expand to other types of humans. Robin says that the economy will boom and double in size quickly. He also expands on “Em cities”, what they are, how they are created, and how they are run. “Em’s” is the term Robin uses for emulation robots.

Michael brings up the effects this next reality will have on mother nature and Em sex. Em’s live in a virtual reality. They never have pain or disease. They have perfect bodies and just have sex for recreational purposes. However, they do not last forever. Em’s will have to retire eventually because of software rot which Robin gives examples of and expands on.

Next, Michael asks about the political ramifications of robots entering the work space. Will Em’s run for politics? Robin says that they will most likely be involved in politics because they would never want to be run by people that are not nearly as fast and smart as them. He then expands on what the bodies of Em’s will look like. He describes the different shapes and sizes that Em’s are going to employ. This leads to the question of death. “Will Em’s be afraid of death?” Robin says that they probably wont see it coming.

Many people, when they look at the future, like to discuss what will happen. There is a degree at which our future can be influenced but to a large degree it is out of our control. Technology has been out of control for awhile. There are such varied interests among people that it will not matter if one group wants to move forward with Emulations or not. Things will continuously evolve. Michael and Robin end on how the political system will be run in the Em world.

In this episode of Trend Following Radio:

  • Singularity
  • Robots taking over
  • Artificial intelligence
  • Slavery
  • Reversible computing
  • Virtual reality
  • Future of politics
  • Democracy in the future
Jun 20, 2016

On today’s podcast Michael breaks apart comments from a Ray Dalio article. Dalio is one of the most successful hedge fund managers alive. He does not give out too much information on his trading strategy, except that he is 100% systematic.

Before Michael begins reading the article he asks, “When the Fed raises interest rates, what will happen? Will the world end like people seem to think?” The first article he reads from was written in 2015 and answers questions on interest rates and the Fed. Next, Michael reads an article from 2016 where Ray comments on the Fed further. Ray is running a systematic firm, however, he gives historical narratives of the debt cycle. Michael still asks the question, “How do Ray’s words connect to trading? When to buy? When to sell?”

Michael stresses that presenting “Oz behind the curtain” statements do not help anyone in there trading. If someone said buy here, sell here, that would help people, but using terminology that could be interpreted as anything is worthless.

In this episode of Trend Following Radio:

  • Fundamental analysis
  • Bubbles
  • Zero Interest Rate Policy
  • Fed
  • Crony capitalism
  • Quantitative easing
Jun 17, 2016

Michael interviews Tucker Max. Tucker has authored many books, however today he is on the podcast to talk about a new entrepreneurial venture. Tucker created a simple algorithmic process to writing a book. He began by asking himself: What do we have to do to position a book? How do we structure it? How do we outline it? How do we conduct an interview to get the information out of a authors head? And then how do we transcribe it? Once he had these answers, he had a company.

Today, 18 months in, he has signed about 230 authors and has put out about 50 books. With a price point of $20,000-$50,000, Tucker and his company offer the exact steps to writing a book. His company is not ghostwriting. They aren’t learning anything about your content, just getting your ideas on paper in a cohesive manner. You have to qualify in a few ways for their service: Can you pay for it? Do you have sufficient ideas for writing a book? And are you an a**hole? A**holes do not make the cut.

Michael and Tucker bring up the importance of Amazon when it comes to successful marketing. Although Google is the #1 search engine, Amazon is the search engine when looking for legitimate products or the best books to buy on any given subject. When people are looking for a book or a product with reviews, they turn to Amazon.

If you are going into any business, writing a book is the best way for you to become an information authority in that field. Tucker goes into depth describing the steps he takes client through to write their book. He also goes into detail about his clients motivations to writing a book or being held back from writing. Many people see writing a book as an extension of themselves and this holds them back. People don’t want to fail.

In this episode of Trend Following Radio:

  • Marketing positioning
  • Selling to your audience
  • Finding your niche
  • Writing a book
Jun 13, 2016

Today on Trend Following Radio Michael starts the podcast reading an email from a listener. This listener is a fan of the show and agrees with most of Michael’s views. However, he writes Michael asking about his opinion on a fundamental trading strategy that he employs. The listener uses a strategy that can’t be quantified and is not systematic. Michael challenges anyone listening to send their track record.

Next, Michael moves into another trading strategy he is asked about frequently, predictive technical analysis. When you hear predictive technical analysis, you know you are watching a show. It is all made up. Michael throws out the same challenge to any predictive technical analysis trader. Prove that it is a legitimate trading strategy.

In this episode of Trend Following Radio:

  • Systematic trading
  • Fundamental trading
  • Gambling
  • Trend following biases
  • Day trading
  • Predictive technical analysis
  • What is the best strategy?
Jun 10, 2016

Michael Covel has an “out of the box” interview today with Amy Herman. In 2000 Amy started a program called, The Art of Perception at The Frick Collection in New York City. She helps her students figure out how to fix big picture problems by looking at the small details. Her new book is “Visual Intelligence: Sharpen Your Perception, Change Your Life.”

Amy starts the podcast off sharing a story referred to by Michael as “the soap story.” It is about a man from Uganda who was moved by how wasteful the hotel industry is. His big picture movement started with a bar of soap. The staff at a hotel he had been staying at cleaned his room and replaced a bar of soap that he had only used a few times. He contacted the front desk of the hotel and asked why his soap had been replaced when it had not fully been used up. The front desk explained that they replace all the soaps everyday regardless of how much had been used. What came of this small encounter? This man from Uganda jumpstarted a movement that changed the way the hotel industry operates by being more mindful of the how much needless waste they are creating. It was a small detail that changed a big picture problem.

Next, Amy shares an “aha” moment she had in college about art. She went from practicing law to studying museum education which led to her founding The Art of Perception at The Frick Collection in New York City. The program began with teaching medical students about art and how to translate it into their own profession. She started the program in 2000 and in 2004 she was having dinner with some friends which sparked the idea of expanding the program to the police field. It was wildly accepted and in no time, the program was expanded to just about every other professional field. Amy goes into some examples of her students that took her class and that have shared real life examples with her. Her students have been able to apply her teachings to everything from helping diagnose patients to solving crimes. It is all about the small details in the big picture.

Amy says her program has been so successful for two reasons; art is powerful and art is not threatening. She requests that her students do not take notes, and there are no cell phones allowed during class. All that is needed is your eyes, brain, and your ability to communicate. She doesn’t want to teach people how to see art, but rather teaches what she refers to as the five “A’s”: Assess, analyze, articulate information, adapt your behavior, and become accountable for your decisions.

Amy talks about listening to your sixth sense but also being able to articulate what you are feeling so you can act on it. She stresses that precise and consistent communication is paramount and gives some real life examples of why it is so important and what could happen when that ground work is not laid down.

In this episode of Trend Following Radio:

  • Undoing perceptions
  • COBRA methodology
  • Listening to your sixth sense
  • Situational awareness
  • See something say something
  • Pertinent Negative
  • Critical inquiry
Jun 6, 2016

Michael Covel interviews Josh Hawes. Josh is the Risk Officer and Investment Manager of Hawking Alpha. He is a trend following trader now who started off at Goldman Sachs. Josh breaks apart the trading industry, highlighting many of the cons associated with the mutual fund space.

Josh has always had a passion for math. He started looking at the performance of different funds within Goldman. As soon as he started to look at returns of some, he began to see a disconnect. They would judge themselves off “beating the index” but they were still losing massive amounts of money. They would also have access to CEO’s of top companies and still not be able to make money off of the information they would share. This is when he began to transition out of the company and turn to other forms of trading, not just long only.

Josh was given many books to read while at Goldman. “Reminiscences of a Stock Operator” was one that resonated with him the most. “Trend Following” was another book that Josh had come across. “Trend Following” triggered him to reach out to some of the traders mentioned in the book. Ed Seykota and Jerry Parker were just a couple of the traders he was able to spark up a conversation with by reaching out.

Next, Michael and Josh break apart index investing. Josh says everyone should ask themselves, “Why does the market owe you anything? And if the market goes down, does that not mean that the markets can go down for a long period of time?” You can’t say that you should go long the market because for 200 years the market has gone up. There has been massive ups and downs and you have to be able to navigate the down periods. Michael then asks, “How does one become the next Warren Buffett?” Josh says that 2008 is one of the best examples of why you could never be the next Warren Buffett. There are a lot of people in the mutual fund space that try and mirror Buffett. Some of these people fail trading the exact strategy as Buffett. So does that make Buffett lucky or a genius?

Josh and his firm guarantees to always follow their stops. He guarantees his clients that he will be a trend follower and although he can not guarantee any level of return, he will always follow his stops. This sets Josh and other trend followers apart from fundamental traders. Josh then segues into what he believes are the four ways to make money: When prices move, when prices don’t move, arbitrage, and high frequency trading. He expands on these four points and gives examples. Michael and Josh end the podcast on the importance of talking directly with clients and connecting with people on a personal basis.

In this episode of Trend Following Radio:

  • Trading off fundamentals
  • Keeping up with the Jones’s
  • Smooth equity curve’s
  • Concept of an Index
  • Mutual fund industry
  • 10,000 hours
  • Arbitrage
  • High frequency trading
Jun 3, 2016

Michael Covel interviews Ryan Holiday. Today they discuss his new book, “Ego is the Enemy.”

Ryan makes the case that ego is the worst factor that you can add into any situation. So many entrepreneurial ideas start out as crazy. However, when the idea works out after ignoring every critic or bit of sound evidence that it would not work, then that can create an ego that can easily get out of control. Ryan says, “This is how a person that builds an empire also destroys an empire.” He uses General Sherman from the Civil War as an example of controlled success. His greatness came gradually and unexpected as opposed to a person like Napolean who thought they were set for greatness from the outset. Google is another example. It was started by two men who did not set out to conquer the internet but because they focused on events as they came, one at a time, greatness gradually happened.

Next, Michael brings up one of Ryan’s book chapters relating to being a student. He tells the story of Kirk Hammett, one of the greatest heavy metal guitarist of all time, being a student of Joe Satriani who is one of the most famous guitar virtuosos of all time. Hammett hired him when he was already on his way to being famous. Even with his success, he knew he still had plenty to learn from Satriani. Hammett was able to be humbled enough, even after being chosen as the new guitarist of Metallica, to hire someone who was an even better guitarist than him so he could continue to learn. Steve Jobs is another example that is brought up. Before he created the iPod and iPhone there were many other layers to his story. His story could have ended after he was fired and he could have become a cautionary tail for CEO’s to learn from but instead he became an inspiring story that everyone can learn positives from.

Michael and Ryan move into breaking apart the “10,000 hour rule.” Ryan says that it isn’t a real number. It is egotistical to think that once you hit that 10,000th hour that you will gain your success at that moment. Outcome is one thing, but the process is something else. If we could learn everything from a book that would be great but some lessons can only be learned from painful experiences. It is a balance between learning from your own experiences and learning from others. Landing on the other side of fear, failure, success, and aspirations can be a great feeling. Ryan says that each person is constantly at one of those points in their life. It is ever changing, but the worst thing you can introduce into any of those phases is ego.

Michael finishes the conversation asking Ryan if he thinks his message will translate to the younger “millennial” generation. Ryan says that this is something he had thought a lot about while writing his book.

In this episode of Trend Following Radio:

  • Letting other people win
  • Being seen not heard
  • Only the paranoid survive
  • Dealing with failure
  • Dealing with success
May 30, 2016

Today on Trend Following Radio Michael Covel starts the podcast off talking about President Obama and his recent visit to Asia. Michael had an interesting bird’s eye look at the President’s visit. He describes the the reaction to President Obama’s visit and why Obama deserves credit for normalizing relations with Vietnam.

Michael moves into talking about free market systems and the necessity for them. Venezuela is a perfect example of a failed socialistic state. They are failing big time with no sign of recovery. Michael moves into reading from an article written by David Sirota from 2013. Sirota thought that Hugo Chavez was an amazing leader three years ago. However, in 2016 Sirota goes on to say that oil is killing the economy rather than socialism.

In this episode of Trend Following Radio:

  • Venezuela
  • Hugo Chavez
  • Negative interest rate policy
  • Trading off politics
May 27, 2016

Michael Covel speaks with Daniel Shapiro. Dan is author of “Negotiating the Nonnegotiable.” He demonstrates negotiation as a process and quantifiable. His work tries to articulate practical negotiation skills based on the most recent science. Dan’s work started when he was working in eastern central Europe when countries were going from open, to closed societies. He wanted to help people deal with conflict more effectively especially the emotional side of it, and more specifically, dealing with identity. He looked at: Do relationships matter in negotiations? Do emotions matter? And how do you deal with them? He has spent the last 20 to 25 years learning how these intertwine. Dan’s website sums up his work perfectly saying, “Drawing on these experiences and his years of research at Harvard, he has developed a wealth of practical approaches to amplify influence and leadership—in business, in government, and in life.”

Dan and Michael start off discussing, “What gets us so stuck in emotionally charged conflicts?” This is a question that drives Dan and his work. In the early 1990’s Dan was working with refugee’s in Yugoslavia hoping to promote good communication. He was doing a workshop in Serbia where he met a women who shared a personal story of tragedy that has stuck with him for the last 24 years. His work is a homage to help people who may feel hopeless, like there could not be any more room for negotiation. Michael says, “Well aren’t there some situations where negotiation is not even on the table and things are just going to play out?” So often we get into ruts of feeling this way, thinking there is no possible way out, but more often than not there is always negotiations that can take place. There is always a way out.

Next, Michael asks, “Don’t both people need to be willing to negotiate to enter a negotiation?” The short answer is no. It only takes one side to move toward a resolution. Also, don’t ever assume that both sides of a conflict need to be rational. The classic challenge within conflicts that he sees is “How do you deal with an irrational person?” Everyone thinks that they are the rational ones and the opposite party is irrational.

Michael and Dan move on to discuss BATNA. BATNA is an acronym for; Best Alternative To a Negotiated Agreement. It is your “walkaway alternative”. Most people walk away to a worst situation than they were in. You always need to think rationally and not emotionally about your alternative. Lastly, Dan gives an overview of what he calls the five lures of the tribal mind; vertigo, repetition compulsion, taboos, assault on the sacred and identity politics. Dan expands and gives examples of these lures. He says that these concepts are obvious and everyone has experienced them. He just puts words to these feelings that people have so people can identify and help work through them.

In this episode of Trend Following Radio:

  • Negotiations
  • Self awareness
  • BATNA (Best Alternative To a Negotiated Agreement)
  • Five lures of the tribal mind
May 23, 2016

Michael Covel breaks apart Bill Ackman and Valeant Pharmaceuticals. He reads from a MarketWatch article that highlights documents that came from a Senate committee investigating the Valeant scandal, and the various reactions of top people involved. Michael also outlines and comments on various interchanges between Bill Ackman, Warren Buffett, Charlie Munger, and news outlets.

This episode is a “behind the curtain look” at billionaire traders and the seduction of fundamentals.

In this episode of Trend Following Radio:

  • Fundamentals
  • Valeant vs. Enron
  • The Deep State
  • Fixing the media
  • Trading off price
May 20, 2016

Michael Covel talks with Daehee Park and JT Marino. They are the owners and founders of Tuft and Needle, a modern mattress company. They met during college at Penn state, parted ways after college and then met back up in Silicon Valley at a startup tech company.

Two young men, who had never worked at a mattress store and were coming straight out of Silicon Valley, hardly fit the mold of mattress company tycoons. When they first started Tuft and Needle, the majority of questions they received all circled around how and why they came to enter the business of mattresses. The answer was quite simple; JT and Daehee started the company based on horrible personal experiences buying mattresses. After their experiences and talking about them together, the two sat down and wrote out all the painful things associated with shopping for a mattress and discussed how they could eliminate those experiences. They came to find out that their wasn’t any “love” or brand loyalty associated with a mattress or the company. This was something they wanted to change.

Since they started with zero mattress experience, Michael asks the obvious question, “What was the first step you took once realizing you wanted to be in the mattress business?” The first step was building up the list of negative experiences they had encountered with personally buying a mattress. Second step was trying to figure out, “What is a mattress? What is the science involved? What are the root principles? And working backwards from that.” They ripped open one of their own mattresses and figured out the components. After seeing the makeup of the mattress, they called around to manufacturers to figure out what it would cost to build.

Next, Michael asks “What kind of motivation did you have for disrupting the industry?” JT and Daehee only figured out the kind of traction they could gain after about a year. They didn’t know how big of an “old boys club” the mattress industry really was. However, their success has proved that there was definite need for disruption in the industry. The bar was set so low to begin with in the industry that they immediately started disrupting it in all areas: price, technology and service by just by listening to customer feedback. Even with increasing their marketing over the years, the majority of their growth is 70% organic and word of mouth.

In this episode of Trend Following Radio:

  • Marketing a company
  • Growing a startup
  • Product development
  • Importance of customer service
  • Creating art
  • Simplification of products
  • Venture capital
May 16, 2016

Today on Trend Following Radio Michael Covel starts off reading a listener email from someone interested in making 3-4% every month with only 15% drawdowns. Michael gives his personal feedback as well as responses from Facebook after posting the email. The responses were mixed. Some people fully believed these kinds of returns are possible, while Michael and others said that if anyone is telling you they can produce 3-4% returns every month then it is absolutely a scam. Only Long Term Capital Management, Bernie Madoff, and some high frequency traders with insider trading access can tout such returns.

Michael finishes the podcast talking about the upcoming American elections. What is the alternative to Trump and Sanders? Hilary Clinton? Michael says that everything is an act with Clinton and that she’s a bona fide…[fill in the blank].

In this episode of Trend Following Radio:

  • Long Term Capital Management
  • Bernie Madoff
  • Leverage
  • Diversification
  • Indian Stock Market
May 13, 2016

Michael Covel interviews Neil Pasricha. Neil is author of the New York Times best seller, “The Happiness Equation.” He is also author of the popular blog, “1,000 Awesome Things.” Neil brings great insights on finding happiness and staying positive.

Neil starts the podcast sharing how his success started. During his first years of gaining notoriety for teaching about happiness, he actually wasn’t happy himself. He was going through a divorce, hardly sleeping, and still working a full time job at Wal-Mart management. His creative output was nothing. He ended up falling in love with a women and that ended up shifting his thinking. He went from observing awesome things, which he is probably most known for, to the application of integrating those awesome things into your life, such as “How do you live a happier life?” “The Happiness Equation” started as notes to Neil’s unborn son. He essentially wanted to write down everything he wanted him to know about life.

Neil details some of his techniques on how he starts writing a book. He is a huge believer of “the note card system.” For a few years he carried note cards around and wrote down any thoughts or tidbits that he would see during the day that were interesting. This is a great example of placing action before motivation which is critical to reaching goals. Neil says that taking small steps is the key to success. Michael brings the conversation back to Neil’s book and happiness. The first thing that pops up on Google search when you type in “how to be” is “how to be happy.” Everyone wants to be happy but they are struggling, searching, stressed, and looking for balance.

The traditional way of thinking is, “Study hard, get good grades, and you will be happy.” Neil says that you should flip that upside down and work on; being happy, then doing great work, and then you will have big success. All studies show that choosing to be happy above all other things leads to a better life. The healthiest societies in the world do not have retirement. Instead they focus on loving what they do throughout life. People need to have a challenge and a way to stimulate the mind and body. Retirement, for most, tends to put an abrupt halt to those things. Michael ends with taking quotes from Neil’s book and having him elaborate.

In this episode of Trend Following Radio:

  • Happiness
  • Retirement is a lie
  • Loving your work
  • The lottery
  • The note card system
  • Criticism
  • Goals are never ending
  • Having less wants in life
May 9, 2016

Today, Michael Covel interviews Mike Lofgren. Mike’s new book is titled, “The Deep State: The Fall of the Constitution and the Rise of a Shadow Government.” We are in a world where everyone thinks their vote matters and that the next President will fix all of America’s problems.

Michael starts the podcast off reading an excerpt from Lofgren’s new book. The two dig into expectations that people had for George W. Bush. As he failed, the people then voted in Barack Obama. Obama failed to meet people’s expectations as well. Lofgren explains what he describes as a “deep state” phenomenon.

Next, Covel and Lofgren dig into: “Does our vote really matter?” Lofgren says that whoever is elected President matters on the margin. The general vector of who gets what, what the general distribution of income is, and what our general foreign policy is, is going to be pretty much the same no matter who is elected. However, Donald Trump and Bernie Sanders are so far out of the box that they may change those norms because of how out of distribution the system has become. The public knows something is wrong. Trump and Sanders have, at the very least, shaken up the political structure regardless of if they win the election or not.

Lofgren goes into economics and military next. He doesn’t look at economics and military as separate entities. He sees all arms of government as intricately intertwined. When you see a change in the economics of the country, you can see just as large of a shift in the military and vice versa. Michael and Lofgren also discuss Dick Fuld and the Lehman Brother collapse.

Michael moves on to ask, “Why aren’t their more whistle blowers coming out of the government?” Lofgren says that it is largely because people don’t want to go to prison. More people are being charged with espionage in America than within any other government. Michael and Lofgren continue to dig into depth about politics, corruption, and Wall Street for the rest of the podcast. Michael ends asking Lofgren, “Is there really anything on the horizon where this deep state entrenchment goes away?”

In this episode of Trend Following Radio:

  • The deep state phenomenon
  • Military industrial complex
  • Vietnam War
  • National debt
  • Negative interest rates
  • Capitalism in communist countries
  • Does your vote matter?
May 6, 2016

Michael Covel interviews Ben Hunt. Ben is the Chief Risk Officer at Salient Partners and the author of “Epsilon Theory.” This is his second time on Trend Following Radio. He has an interesting way of looking at capital markets–through the lens of game theory.

Michael and Ben start the podcast off talking about buy and hold and why the strategy does so poorly. Ben moves on to break apart monetary policy and domestic politics and how they are intimately intertwined. When you have a world of massive debt, like we do today, then deleveraging naturally should take place. Instead, in today’s world you have the ownership of that debt shifted from private entities taking responsibility of it, to the government.

Central bank policies are always a direct reflection of the politics that are going on in the big four economies that drive the world; U.S., China, Europe, and Japan. The domestic political interactions going on in those countries are what you see in the world’s economics. This leads to cooperation during economic crashes, for example, during the great recession. Countries inflate their economy to get out of economic crashes. Going to a lower or negative interest rate is a perfect way to devalue a countries currency. Right now, we are moving from a positive sum on trade, to a zero sum on trade and Ben says that the outcome is very predictable. He says that we have seen this movie before and it isn’t hard to see how it is going to play out.

Michael brings up Ray Dalio and asks the question, “Why are all these companies putting their money in one place, with one company and with the same model?” Ben notes Ray Dalio’s massive amount of money that he manages and what Bridgewater (his company) has created is an easy process that is implemented in an automated and quantitative system. The whole notion of having a rigorous process and managing clients money within that process is Bridgewater and Dalio’s most widely spread influence. Bottom line, instead of trying to predict what is going to happen we need to try and react quickly to circumstances.

In this episode of Trend Following Radio:

  • Monetary policy
  • What drives the value of currency?
  • Economics in recessions
  • Systematic models
  • Central Banks
  • Policy controlled markets
  • Expectations of the public markets
May 2, 2016

Michael Covel talks political correctness. Americans take regular issues, and blow them up to the extreme. We see it 24/7. In addition, there is massive abundance, arguably a distraction to the freedom to make choices. Is the freedom to make your own choices even real?

Michael reads excerpts from an article by Josh Brown titled, “Abundance.” He makes the case that abundance is now the enemy, which sets our economy apart from every other culture in history. For example, so much entertainment is free these days; movies, video games, apps, dating websites, music, the list goes on. People are taking paid versions of products and producing cheap and free versions. Josh points out that a year ago he was writing about scarcity, now its abundance. We use to have pop culture or a #1 hit TV show or hit band. Now there are 50 different sub cultures and genres.

But abundance is killing us. Josh notes that it would be best if there was a major flush of the system. Capital needs to be exchanged and shifted. The imbalances we are experiencing will inevitably correct and restart, it’s only a matter of when. Michael stresses that you need to have an investment strategy to prepare yourself for that inevitable correction. You need an investment strategy to take advantage of the next crash, as well as save yourself from the next crash.

In this episode of Trend Following Radio:

  • Ego
  • Preparing yourself for the next crash
  • Abundance
  • Downfall of the economy
Apr 29, 2016

Michael Covel interviews Parag Khanna. Parag is an international relations expert, a CNN Global Contributor and Senior Research Fellow at the National University of Singapore. He is also the Managing Partner of Hybrid Reality, a geostrategic advisory firm, and Co-Founder & CEO of Factotum. Parag’s new book, “Connectography: Mapping the Future of Global Civilization” recently came across Michael’s desk. The concept of connectivity does not just relate to mobile phones and Skype. There is a very physical and tangible evolution of connectivity that can be boiled down into three categories; transportation, energies and communications.

Michael and Parag start the podcast off touching on what connectivity is and then dive into the relationship between cities and states. Parag says that there is not one single successful state that is not built upon the stability of their successful cities. We have more mega and viable cities than states in the world. Cities are the drivers of growth. More mayors are sitting heads of states or presidents nowadays than any other time in history and think of themselves as CEO’s rather than politicians.

Next, Parag elaborates on supply chains. The diversity of products available today is truly global. A product can have digital design from Silicon Valley, assembly in China, and a call center for product customer support in Vietnam. As a business, the combination of infrastructure investment and connecting through supply chains to global markets makes you a real player in the economy. Michael brings up the economical impact that globalization has made, in particular to taxes. Apple is working with Ireland to keep their investments outside the U.S. More and more companies are realizing that they can operate over “the cloud.” Markets are everywhere and sales are everywhere so investments should be able to be everywhere as well. American politicians have been counter productive in trying to capture taxes from some of the biggest companies in America.

Michael brings the conversation back to China and their infrastructure. China has made a global plan to help counties boost their infrastructure. They are spending their own money to help gain trust and also smooth the flow of goods in and out of developing countries by building railways, airports and shipping ports. Most of the world trade growth is happening across the Indian Ocean because of the Chinese.

Next, Michael brings up country borders and the reservations citizens may have about immigrants. No country has gained more from accepting immigrants into their society than America Parag argues. Parag says that unfortunately people are acting more with their hearts rather than acting on the data. There are far more benefits to welcoming immigrants into societies as opposed to shutting them out. People talk about globalization doing us wrong. It is not. It is political governments that are failing. Policies in politics are the problem.

Michael and Parag finish up discussing the booming rise of Dubai, and how the city is a perfect example of infrastructure growing a city. Dubai has thought strategically about all their expansion, from their roads to their buildings to their education system. It’s a place that represents a leap in quality of life for people who are on the move and doing different things.

In this episode of Trend Following Radio:

  • Supply chains
  • Connectivity
  • Cities vs. State
  • Chinese infrastructure growth
  • Trade
  • Trust among China’s neighbors
  • Territory borders
  • Globalization
  • Winners and losers in the 21st century
  • The idea of “not in my backyard”
  • Growth of Dubai
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