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.