Trend Following with Michael Covel

Michael Covel is President & founder of Trend Following™, a research-consulting firm. The bestselling author of Trend Commandments, The Complete TurtleTrader & the classic Trend Following, Michael is also the voice behind Trend Following Radio, the underground hit that has reached as high as #2 on iTunes investing with 2M+ listens across 182 countries/territories. Guests across 250+ episodes have included Nobel Prize winners Daniel Kahneman, Vernon Smith and Harry Markowitz. Other notable guests: Ed Seykota, Tom Basso, Larry Hite, Jean-Philippe Bouchaud, Jack Schwager, Marc Faber, Michael Mauboussin, James Altucher, Gerd Gigerenzer, Dan Ariely & Walter Williams. Investments, risk, economics, psychology, human behavior, entrepreneurship and innovation--all passionately explored.
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Sep 29, 2014 0

Michael Covel speaks with Larry Swedroe on today’s podcast. Swedroe is a Buckingham Asset Management principal. He is also a principal and co-founder of BAM Advisor Services, LLC, and serves as the director of research for both entities. Swedroe has authored or co-authored fourteen books and comes at investing from an evidence-based approach. Covel and Swedroe have different vantage points, but there are some commonalities in their thinking. They discuss forecasters and prediction; the three types of forecasters; confirmation bias; how your political affiliation might change your willingness to listen to forecasts; value perspective vs. momentum perspective; the anomaly of momentum; the evidence-based thinking approach; momentum trading in 2008; how Swedroe prepares for the unexpected; not treating the unlikely like it’s impossible; managing your risk; process vs. outcome; the equity risk premium and bear markets; commonplace crises; planning ahead; and diversification attempts to get outside of equities. Want a free trend following DVD? Go to trendfollowing.com/win.

Sep 26, 2014 0

Today on the podcast, Michael Covel opens up relating a Bob Dylan lyric to uncertainty. You can’t tell what’s going to happen tomorrow; you can’t tell what’s going to happen to people in your life. You can just go with it--you can just keep on keeping on. But predicting tomorrow, thinking that you have an explanation as to how it’s going to actually unfold? You’re kidding yourself if you think you can predict tomorrow. People are paid a lot of money to pretend that they can predict tomorrow. But it is pretending, no doubt about it. Covel moves into his main topic for the day, noting that since March of 2009, stocks have taken off. It’s a massive trend--a trend following dream for stocks. Covel also sees that the fundamental guys look at the all-time highs with justifications. Trend followers have no justifications. There have been millions of words since March of 2009 written by fundamental traders justifying the all-time highs, and people get paid a lot of money to write these justifications. What will all those words count for if the S&P makes another 50% drop? How do you make a fundamental decision in the face of a game where fundamentally, the only thing you really have is “can you predict what the Federal Reserve will do next?” Covel also shares some words of wisdom from trend following trader Jerry Parker that he obtained through a recent email, as well as words from Tom Basso and David Cheval. These traders all agree on one thing: ride the trend. Building on these thoughts, Covel moves into talking about football, Chip Kelly, the Philadelphia Eagles, Hal Mumme, and Mike Leach. Covel uses this as a metaphor for why you can’t be a trend following trader in one market alone. So, if you can’t predict tomorrow, what can you do? You can take what’s given. You can take the trend that arrives. Want a free trend following DVD? Go to trendfollowing.com/win.

Sep 22, 2014 0

Michael Covel speaks with Richard Lewis. Lewis is the author of When Cultures Collide and When Teams Collide. He is a cross-cultural expert who has been studying language and communication his entire career. He’s traveled to 130+ countries and speaks eleven different languages. Why have a language and communications expert on a trend following trading show? Covel explains: We live in a complete and real world. You’re not just a trend following robot. There are many facets to life and the ability to communicate can’t be ignored. Covel and Lewis discuss how Lewis’ love affair with language started; the best way to start learning a language; travel as a “magic elixir” of sorts; the Lewis model; cultural differences in language, and what Lewis means by linear-active, multi-active, and reactive; the idea of losing face in the context of cross-cultural communication; microculture and macroculture; cross-cultural teams vs. homogenous teams; normal and abnormal in a cultural context; paperwork and punctuality in different cultures; why the linear-active person confronts with logic, the multi-active person confronts emotionally, and the reactive person is never confronting; and why there’s much more to making a deal than just quantity and price. Want a free trend following DVD? Go to www.trendfollowing.com/win.

Sep 19, 2014 0

Michael Covel speaks with Joel Mokyr on today’s podcast. Marc Andreessen, one of the founders of Netscape, tweeted that Mokyr was one of his heroes. This intrigued Covel, and hence his desire to have Mokyr on the show. Mokyr is a economic historian at Northwestern University. He focuses on technological progress, and how it affects growth. From Mokyr’s perspective, we haven’t seen anything yet. He’s not trying to predict what will happen next; he’s just confident and ready that big things will continue to happen. Covel and Mokyr define technology; the notion of playing God with technology; how technology and economic growth are intertwined; why screwing up is part of technology; the acceleration of technology; new ways of measuring growth; anesthesia and antibiotics as technologies and imagining new technologies as revolutionary as them; moving from a wheat and steel economy into an information economy; the factory, the separation between firm and household, and the Industrial Revolution; the death of distance; why technology is often not reflected in the GDP; solving the language barrier through technology; why the global acceptance of the English language is driven by technology; why innovation isn’t natural to us; the declining respect of the writings of previous generations; why the median age will continue to increase; why we are moving into a mass-customization society; changes in material science; and the best way to think about the future. Want a free trend following DVD? Go to trendfollowing.com/win.

Sep 15, 2014 0

Today on the podcast, Michael Covel welcomes Guy Kawasaki. For those of you that pay attention to being an entrepreneur, Kawasaki’s books have been invaluable over the last decade. Currently, he is the chief evangelist of Canva, an online graphic design tool. Formerly, he was an advisor to the Motorola business unit of Google and chief evangelist of Apple. Covel and Kawasaki discuss a lesson learned from Steve Jobs: “Some things need to be believed to be seen.” Covel and Kawasaki also discuss why being a consultant or an investment banker are two of the worst first jobs you can get; working in sales, and Kawasaki’s early experience in the jewelry business; some of the most valuable attributes of a good salesman; marketing, social media, and why you’d want to have a rabid fan with fifteen followers rather than just another blurb on the back of your book from the so-called big name; why a book review in The New York Times isn’t as important as it used to be; the Amazon and Hachette conflict, and why Amazon is still the best thing to happen to authors in a long time; the two types of people in the world--baker vs. eater; how Kawasaki manages his time; looking at your social media presence as core to your existence; disruptive high growth opportunities; introversion and getting better at standing on stage. For more information on Guy Kawasaki, follow him on Google Plus. Want a free trend following DVD? Go to trendfollowing.com/win.

Sep 12, 2014 0

Today on the podcast, Michael Covel speaks with Rande Howell. Sometimes new and experienced traders only want to focus on the system--the rules. They forget the psychology and the mental aspects of trading. Howell has a therapeutic background combined with personal coaching in the fields of human potential and leadership. He has fifteen years of practice as a licensed professional counselor with a Masters in Counseling. Covel notes: if your mind is messed up, it doesn’t matter what system you have--you’re going to fail. Covel and Howell present an interesting conversation to get you in the spirit of the mind. Their topics include what the performance mind is in regards to trading; trading, emotions, and uncertainty; why irrational pessimism is deadly in trading; emotional regulation and mastering emotions; the blurry line between the casino and trading, particularly in Asia; euphoria vs. fear in a trading context; why what you’re afraid of owns you; Jungian archetypes; the Myers-Briggs instrument; biological threat vs. psychological discomfort; the mistake of using trading to measure your worth; getting your emotions right but your strategy wrong; why success in one endeavor doesn’t necessarily mean success in trading; the importance of patience; and the panther vs. the African lion. Want a free trend following DVD? Go to trendfollowing.com/win.

Sep 8, 2014 0

Michael Covel speaks with Dan Buettner and John Ratey on today’s podcast. In this two part episode, Covel explains that these two individual’s research is as important for your investing, trading, and entrepreneurial success as any one system, technique, or way of living you might have. Buettner is an American explorer, educator, author and public speaker. He holds world records for endurance bicycling. He is also involved in “blue zone” research and looks at demographics and longevity. John J. Ratey, MD, is an Associate Clinical Professor of Psychiatry at Harvard Medical School, research synthesizer, speaker, and best selling author. His book is called Spark: The Revolutionary New Science Of Exercise In The Brain. Bottom line, everything in your life can change with exercise. If you want to be a fantastic investor, trader, or entrepreneur and your body and mind is not in shape, you have to take a second look. With Buettner, Covel explores age and longevity; “blue zones”; epiphanies and lightbulb moments; “forgetting to die”; loneliness; stress; sacred daily rituals; napping and happy hour; sacred places; relationships and sex. For more information on Dan Buettner go to bluezones.com. With Ratey, Covel discusses exercise as the magic elixir for the brain; prescription drugs and anti-depressants; the joy of movement; exercising the mind; autism; BDNF (brain-derived neuropathic factor); and ADHD and exercise in children. For more information about John Ratey, go to johnratey.com. Want a free trend following DVD? Go to trendfollowing.com/win.  

Sep 5, 2014 0

Michael Covel starts off today’s podcast by playing “Soothe Me”, a classic song. There’s no doubt about it: it’s soothing to have all-time highs in the equity market. Today, Covel wants a different perspective from what is out there in mainstream media. First, Covel talks about the S&P 500 index. The S&P is a trading system. It is a specific grouping of stocks put together with certain weightings and certain rules, and it trades in a certain way. And it has to stick to those rules. Covel talks about how the S&P is a system despite most people not knowing that it is one. Covel compares this system to a trend following system (and notes how trend following is applicable to stocks too). Covel talks about the dangers of correlation if you apply your trend following strategy to only equities, and the importance of diversification across different markets. Next, Covel looks at the S&P system vs. trend following systems in the context of crisis, and questions where the S&P would be without zero interest rate policy and Fed intervention. Is the S&P trading system that good that it will be at all time highs forever? Covel moves on to talk about black swans and anti-fragility in the context of the S&P trading system. Finishing up, Covel discusses absolute risk and relative risk. Want a free trend following DVD? Go to trendfollowing.com/win. 

Sep 1, 2014 0

Michael Covel speaks with Laurie Santos on today’s podcast. Santos is a professor of psychology and cognitive sciences at Yale University. Her research explores the evolutionary origins of the human mind by comparing the cognitive abilities of human and non-human primates. Santos is able to look at monkeys and their behavior in markets and money, and see the similarities with humans. Covel and Santos discuss some of Santos’ early “ah-ha” moments; teaching monkeys about currencies; whether the monkey economy is as irrational as ours; the endowment effect; how monkeys’ behavior in markets quantitatively matches human behavior; whether some monkeys took to the experimental economy better than others; mistakes and predictable errors; why humans might be uniquely irrational when it comes to enjoying what we pay more for; Vernon Smith’s work; relationships between Santos’ work and the financial crisis of 2008; bubbles, monkeys, and Daniel Kahneman; the “G.I. Joe fallacy”; and why we have trouble accepting cognitive limitations rather than our biological limitations. For more information on Laurie Santos visit www.yale.edu/caplab. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 29, 2014 0

Michael Covel welcomes Robert Aumann the fourth individual that has received a Nobel Prize in economics to appear on his podcast. Covel and Aumann discuss conflict and cooperation through game theory analysis; Aumann has a very interesting way of looking at the world via his game theory perspective. Aumann and Covel talk about his first experience meeting John Nash and Aumann’s early background; what game theory is trying to accomplish; the economic definition of rationality; the idea of a strategy matrix; the world champions of peace and the best way to maintain peace; the 2008-09 bailouts from Aumann’s perspective and a game theory outlook; behavioral economics; game theory, diplomats, and the Cuban Missile Crisis; the existence of nuclear weapons and the Cold War. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 25, 2014 0

Michael Covel speaks with Gregory Morris on today’s podcast. Morris is Sr. Vice President, Chief Technical Analyst, and Chairman of the Investment Committee for Stadion Money Management, LLC. He also serves as the chairman of the Station Trust Board. In this capacity Greg educates institutional and individual clients on the merits of technical analysis and why Stadion utilizes a technical rules-based model. Greg oversees the management of over $5.5 Billion in assets in six mutual funds, separate accounts, and retirement plans. Investing With The Trend is his new book. Covel and Morris discuss Morris’ history as a US Navy fighter pilot; the checklist and how foundational it is to trading; how Morris had his first exposure and understanding of technical analysis; Russian Roulette and trading; risk vs. uncertainty; process and predictions; having a set of daily actions; and learning lessons through failure. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 22, 2014 0

Michael Covel speaks with Dennis Gartman on today’s podcast. Gartman is the editor and publisher of The Gartman Letter. Gartman appears on CNBC, ROB-TV and Bloomberg television, discussing commodities and the capital markets, and speaks before various associations and trade groups around the world. Covel and Gartman discuss how Gartman first got started; Chicago trading in the late 70’s to the mid 80’s; why you should never add to a losing position; buying strength and selling weakness; systems from Gartman’s perspective, and keeping your systems simple; being patient with winning trades and impatient with losers; Gartman’s daily grind and process; mass psychology, efficient markets, and behavioral economics; Gartman’s thoughts on the market today and geopolitical events; and how we hear about geopolitical events today compared to the past. For more information on Dennis Gartman, visit thegartmanletter.com. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 18, 2014 0

Michael Covel opens up today’s monologue by talking about a music video that he thinks sums up today’s society. Next, Covel highlights a clip of David Harding talking to CNBC. Covel highlights some of the past issues Harding has seen in talking to CNBC and plays the clip. Covel discusses the history of trend following and some of the core big-picture ideas employed by traders like David Harding, Larry Hite, Ed Seykota, Bill Dunn, and others. Covel moves into a Twitter discussion he had recently where he posted a Bloomberg article featuring the most misinformed description of trend following he’d seen yet. When the author responded on Twitter, sparks flew. Covel talks about the lessons learned by the exchange: it’s a great opportunity to clarify what trend following trading is, the question of where one makes their money from, and academic chops. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 15, 2014 1

Michael Covel talks with Leo Melamed on today’s podcast. Melamed is a pioneer of financial futures, currencies, and stock indexes. Melamed became Chairman of the Chicago Mercantile Exchange in 1969. In 1972, under his leadership, the CME created the International Monetary Market (IMM), the world's first financial futures exchange, and launched currency futures. He is currently Chairman Emeritus of CME Group (formerly the Chicago Mercantile Exchange). Melamed is also the author of Escape To The Futures. Covel and Melamed discuss overcoming odds; China’s futures markets; the middle class in China; Melamed’s experience meeting Milton Friedman and some of the lessons learned; Melamed’s early experiences escaping Nazi-controlled Poland, and eventually going to work for Merrill Lynch; stock futures; and the importance of speculation. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 11, 2014 0

Michael Covel talks with John H. Cochrane on today’s podcast. Cochrane is the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago Booth School of Business. Covel and Cochrane cover wide territory today. Covel and Cochrane discuss Warren Buffett’s quote that he “would have made a fortune” if the banks weren’t bailed out; crony capitalism; why “a good Bear failure may have saved us from a bad Lehman failure”; the cost of regulation; Uber, taxi service, and regulation; why commodities keep getting cheaper and cheaper, but people with expertise keep getting more and more expensive; the idea of discretion; and healthcare. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 8, 2014 0

Michael Covel speaks with Meir Statman on today’s podcast. Statman is a professor of finance at Santa Clara University and a behavioral finance expert. His acclaimed book is titled "What Investors Really Want." Covel and Statman discuss how we make decisions, and how these decisions are reflected in markets; what investors want besides the utilitarian aspect of money; philanthropy and status; why Madoff’s clients’ own greed helped them fall into a trap; envy and happiness; the fear of losing and the fear of missing out; mental accounting; Statman’s drivers and early influences; libertarianism vs. paternalism; Social Security and mandatory retirement savings. For more information on Meir Statman, visit http://www.scu.edu/business/finance/faculty/statman.cfm. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 4, 2014 0

Michael Covel speaks with Terry Burnham on today’s podcast. Burnham is an economist who studies the biological and evolutionary basis of human behavior. He wrote "Mean Markets and Lizard Brains". Covel and Burnham discuss why Burnham removed $1 million from his Bank of America account and said “I don’t trust the banks”; the two ways to think about risk; separating the ideas of luck and skill; the lizard brain and how it relates back to our choices; a story about interacting with Paul Tudor Jones; why markets have momentum; the great driver of conformity; rationality and irrationality; captive chimps vs. chimps in the wild and the differences in behavior; predicting when the Fed will step in; thinking of the worst case scenario for equities and looking to Japan for an example; and negative interest rates. For more information on Terry Burnham, go to terryburnham.com. Want a free trend following DVD? Go to trendfollowing.com/win.

Aug 1, 2014 0

Michael Covel talks with Andy Puddicombe on today’s podcast. Puddicombe is the founder of Headspace, an award-winning digital health platform that provides guided meditation sessions. Puddicombe is a former Buddhist monk with a degree in Circus Arts. Covel and Puddicombe discuss Puddicombe’s background and how he came into the position he is in today; some traumatic events which may have had an influence on Puddicombe’s decision to become a monk; Covel’s own meditation experience; comparing mindfulness and meditation; the importance of a daily practice; stress and the science behind meditation; neuroplasticity; the wandering mind and unhappiness; the idea of the present moment, and how traders that embrace the present moment have an advantage; and intuition. For more information on Andy Puddicombe, go to headspace.com. Want a free trend following DVD? Go to trendfollowing.com/win.

Jul 27, 2014 0

Today on the podcast, Michael Covel speaks with Sally Hogshead. She’s an American speaker, author, former advertising executive, as well as the Chief Executive Officer of Fascinate, Inc. Hogshead’s newest book is "How The World Sees You: Discover Your Highest Value Through The Science of Fascination". Covel and Hogshead discuss fascination and paying attention; the seven different categories of things that fascinate us; what those who fascinate have in common; developing a personality assessment that shows how the world sees you; understanding your own personal branding; analyzing Michael Covel’s own fascination survey; not being a commodity; why if you’re not generating a negative reaction from someone, you’re probably not fascinating anyone; why you don’t want to be vanilla ice cream. To take the Fascination Advantage test for free, go to howtheworldseesyou.com/you and enter the code “trendfollowing”. Want a free trend following DVD? Go to trendfollowing.com/win.

Jul 24, 2014 0

Michael Covel speaks with Bucky Isaacson on today’s podcast. Isaacson is one of the early pioneers of managed futures. In 1969, he helped to develop one of the first computerized trading systems. He’s been involved in the managed futures industry ever since, particularly in Asia and the US. Covel and Isaacson talk about the fractured state of conferences these days; what it was like to be involved with a group developing a computerized trading system in 1969; being with one of the earliest incarnations of a managed futures firm; trading attitudes; marketing and doing business in Asia; differences in business practices between Asian countries; Refco, MF Global, PFG and other aberrations that have damaged the Chicago futures brand; Madoff as a marketer; raising the initial capital to start a trading venture; how to differentiate yourself from a marketing perspective; and growth in the managed futures industry. For more information on Bucky Isaacson, visit CTAExpo.com. Want a free trend following DVD? Go to trendfollowing.com/win.

Jul 20, 2014 0

Michael Covel speaks with Megan McArdle on today’s podcast. McArdle is a Bloomberg View columnist who writes on economics, business and public policy. She is the author of "The Up Side of Down: Why Failing Well Is the Key to Success”. She founded the blog "Asymmetrical Information”. Covel and McArdle discuss “trophy kids” and taking the monkey bars away; the idea of a regulator out there trying to guarantee our safety; why the companies that make it aren’t the ones with the best strategic plan--it’s the ones that execute (and fail well); the power of experimentation; Nobel winner Vernon Smith and experimentation; the idea of learning in crisis; how sunk costs are difficult for a large part of the population to grasp; Van Halen, errors, and M&M’s; normative error; small, manageable risks; forager morality vs. farmer morality; and a story about Kentucky Fried Chicken (KFC). Megan McArdle can be found on Twitter at @asymmetricinfo. Want a free trend following DVD: trendfollowing.com/win.

Jul 17, 2014 0

Michael Covel speaks with Cullen Roche. Roche is the founder of Orcam Financial Group, a financial services company based out of San Diego. He also runs a very well-known blog called Pragmatic Capitalism (pragcap.com). His new book, Pragmatic Capitalism, was just released. Roche takes apart the soundbites of the media and gets at how things really work. Covel and Roche talk about entrepreneurism; investing in yourself; the advantages of starting a blog; why the word “pragmatic” is a word that has become central to Roche’s universe; eliminating your biases; why the US going bankrupt is a myth; the myth that central banks exist to enrich bankers; Dr. Laurie Santos and her work with monkeys; bringing risk down to something we can measure; Warren Buffett; and hedging your bets. For more information on Cullen Roche, visit pragcap.com. Want a free trend following DVD? Go to trendfollowing.com/win.

Jul 14, 2014 0

Today on the podcast, Michael Covel speaks with Mike Harris. Harris is President of Campbell & Company (3B AUM), the systematic trading firm started by Keith Campbell (Campbell was featured in Covel’s first book Trend Following). Covel and Harris discuss systematic trading in the early 70’s; education about managed futures; correlation with other markets and managers; trading diverse markets; focusing on data rather than the fundamentals; why “commodities” and “CTA” are misnomers; why Harris wouldn’t fly down to Brazil to investigate fundamental information on the coffee market; risk management, drawdowns, and taking small losses; dealing with uncertainty and helping clients to understand the uncertain nature of trading; how human emotion often gets in the way of profitable trading; the efficient market hypothesis and behavioral finance; continuity and how that has been thought through at Campbell & Company; the Sharpe ratio and why it isn’t the best way to look at systematic traders; and why being defensive is central to being a great absolute return trader. For more information on Campbell & Company, visit campbell.com. Want a free trend following DVD? Go to trendfollowing.com/win.

Jul 9, 2014 0

Today on the show, Michael Covel speaks with Tyler Cowen. Cowen is an American economist, academic, and writer. He’s the co-author of the popular economics blog Marginal Revolution. Covel and Cowen discuss Sabermetrics and the new idea that we will be judged by numbers; Cowen’s early experience studying under Nobel Prize winner Thomas Schelling; the notion of thinking in terms of paradoxes; why we’re moving from the 1% to the 15%; “average is over” and why Singapore and Israel are the two places in the world where this has come true first; problems because of “average is over” in Singapore; pure free markets; thinking about why past regulations have failed; how computers change us; globalization, where things are headed, and what we should be prepared for; zero marginal product workers. For more information on Tyler Cowen, go to marginalrevolution.com. Want a free trend following DVD? Go to trendfollowing.com/win.

Jul 6, 2014 0

Michael Covel speaks with William Poundstone. Poundstone is the author of Fortune’s Formula, a book about the Kelly criterion. This is risk management at its heart. All great trend traders have had to deal with Kelly. Covel and Poundstone discuss Claude Shannon; the connection between Al Capone, the Kelly formula, bookmaking, and the telephone industry; Bell Labs and information theory; why, when betting, if there’s a small chance of losing everything, you will eventually lose everything; criticisms of the Kelly criterion; Ed Thorp, blackjack, and card counting; Long-Term Capital Management; Martingale vs. Kelly; and early development of the Black-Scholes formula. Want a free trend following DVD? Go to trendfollowing.com/win.

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