Info

Trend Following with Michael Covel

Bestselling author Michael Covel is the host of Trend Following Radio with 5 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 500+ eps at www.trendfollowingradio.com/rss.
RSS Feed Subscribe in iTunes
2017
September
August
July
June
May
April
March
February
January


2016
December
November
October
September
August
July
June
May
April
March
February
January


2015
December
November
October
September
August
July
June
May
April
March
February
January


2014
December
November
October
September
August
July
June
May
April
March
February
January


2013
December
November
October
September
August
July
June
May
April
March
February
January


2012
December
November
October
September
August
July
June
May
April
March
February
January


Categories

All Episodes
Archives
Categories
Now displaying: February, 2016

Bestselling author Michael Covel is the host of Trend Following Radio with 5 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 500+ eps at www.trendfollowingradio.com/rss.

Feb 29, 2016

Michael Covel speaks to the timelessness of being a contrarian. He starts off sharing a recent email received. The email suggested Michael tone down the trend following talk and work with people to help find their calling in life. This email dovetails into an excerpt Michael plays of high school football coach, Kevin Kelley.

Coach Kelley is a contrarian thinking football coach. He is known for never punting and onside kicks after every touchdown. Coach Kelley ran the numbers and figured out the probability of winning with punting as opposed to going for it. He has had tremendous success from doing things differently and creating his own answers on the field.

Next Michael reads an article from Andy Staples, “The power of not punting: Why a college coach should adopt Kevin Kelley’s unconventional philosophy.” Andy Staples, a writer for Sports Illustrated, was curious about Coach Kelly and his unconventional coaching, so he visited one of Coach Kelley’s games. During that game, Coach Kelley had to give in and punt on one of his fourth downs. Andy asked, “How hard was it for you to do that?” Coach Kelley replied, “I didn’t really hate it at all. It is what it is if the situation dictates it is something that we have to do. It’s all about winning. It’s never been about anything else.” Coach Kelley’s players don’t win because they never punt and always onside kick, they win because the offense plays as if they are always going to lose. He turns the psychological tables on his opponents, and bases everything off of mathematical statistics. The math indicates that punting is actually the riskier choice.

Michael stresses that no matter how much fundamental information you think you may have, you are lying to yourself. The only thing that you can rely on in the markets is the price data. The only way to get ahead is to be a contrarian. Michael ends paraphrasing Ed Seykota, “Everyone gets what they want, win or lose. If you lose a lot you got exactly what you wanted, to lose.”

In this episode of Trend Following Radio:

  • Math in football
  • Thinking like a contrarian
  • Risk management
  • Fundamentals
Feb 26, 2016

Today on Trend Following Radio Michael Covel interviews Michael Ellsberg. Michael is an American author, blogger and public speaker. Michael Covel and Michael Ellsberg met for the first time in Napa Valley at a Tim Ferris conference. Today they talk about Michael’s newest work, “The Last Safe Investment: Spending Now to Increase Your True Wealth Forever.” The book is about making money, being an entrepreneur, and giving insights that can applied today.

The two start off talking about entrepreneurism and dive deep into how people think about money. Michael, and his co-author Bryan Franklin, wanted to completely rewrite the script for how people think about making and spending money. Michael says the bottom line is to try and make your life as awesome as possible in every aspect. Most people want money for one reason or another. He has found that the three most popular reasons people want money is: happiness, freedom, and security. Michael always wanted to be a writer growing up. He used his savings to help pay his way to become a writer. Most save their money and figure that what they love can come later when they have enough saved up. The question is, “When do you want to start your passion?” When you retire? Or do you want to invest in those things you are passionate about now?

Michael E. then goes into how important the presence of meaningful friends are, otherwise known as your “tribe.” He says that it is important to travel and figure out where you want to settle down and live. When you nail that down you can start investing in learning about the place, people that live there and invest your time in making friends. Traveling and learning where you want to settle down has a lot to do with gaining critical self knowledge which, according to Michael E., is the greatest investment a person could make. When you are self aware you get far more happiness out of the money and time you invest in things. You aren’t wasting as much time and money experimenting, trying to figure out what you like.

Next, Michael E. answers the question, “What is the difference between a market skill and a super skill?” A market skill is any skill that you can sell directly, such as plumbing or marketing. Super skills are skills that can be taken across any job platform and are essential in any marketplace regardless of economic circumstances. Michael E. categorizes them into four categories: interpersonal, creative, technical and physical super skills. Different skills have different levels of entry. Public speaking is one super skill that they go into depth about. Michael E. says that if you learn how to speak publicly even semi well, you will be far above the rest of your competition.

One of the last topics discussed are the areas in your life that create happiness. Relationships, health and money are the three big contributors to happiness. Each time you spend money you should look at how that purchase will impact every area in your life. If you go to buy a meal you should look at how that will affect your health and if that bleeds into happiness in your relationships. Michael has found that all of these things are interconnected. When you look at things as a whole, spending money can be looked at as investing rather than spending frivolously.

In this episode of Trend Following Radio:

  • Super skill vs. Market skill
  • Systemic spending
  • Cultivating meaningful relationships
  • Thinking three dimensional
  • Creating happiness in your life
Feb 22, 2016

Today on Trend Following Radio Michael Covel speaks with Vineer Bhansali. It is Vineer’s second appearance on the show. He brings a world of experience to the subjects of behavioral finance and tail investing strategies. He believes strongly that sustained portfolio performance comes from expecting the unexpected and hedging both left and right sides of tail risks. Vineer’s firm, Long Tail Alpha, is based on exploiting values from the tails of the probability distribution and also exploiting how human behavior distorts the markets.

Michael starts the podcast off breaking apart Vineer’s white paper, “A Behavioral Perspective on Tail Risk Hedging.” Vineer says the way markets actually trade have very little to do with the idealized models that have been presented in the academic community. Those models are presented because they are easy to solve. All interesting things that go on in the markets are beyond the idealized scenarios. Vineer talks Michael through the idea of the “Three Investors.” His study is based on how people account for gains and losses. The study concluded that people are more adverse to losses than they are to gains, also people like security. Next, Vineer speaks to work done by Kahneman and Tversky that dovetails into his own studies. This work allows him to rationally explain the existence of tails in terms of very persistent behavioral biases.

Michael and Vineer comment on oil and how significant the price of oil has been in the last few years. Where does the behavioral aspects come into play? He says that both kinds of investors, rational and irrational, create market dynamics. He gives an example of a gambler that leaves the casino while he is up a lot, as opposed to the gambler that is down and keeps gambling trying to get it back. “You have people in this commodity market casino who are going in with a certain plan, but they can not execute on that plan.” He goes on to say that people who have a trend following plan are going to do very well. They can go short or long. Their portfolio’s tend to be more dynamic, and unless you know a whole portfolio you cannot make a rational decision. Michael says aggregation is the key word. You can’t look at a price for a hedge in isolation. That doesn’t do anything for anyone.

Michael then asks “What about the timing in Tail Risk?” Vineer says you have to be very open minded in how you construct a portfolio, and the timing relates back to the valuation. These concepts are well known in the finance world, they are just not widely practiced. Tail risk, hedging or insurance is what investing is all about. Michael ends with asking, “We all know everything we know about Oil, China and Rates could go in another direction. What will happen if your thesis doesn’t materialize? If things bounce back to the way they were?” Vineer says that at some point markets overshoot and his firm is set up for when that happens. He is always asking himself, “Where is the valuation? What signals are you getting? What objective framework and model can you build?”

In this episode of Trend Following Radio:

  • Is trend following mean reverting?
  • Tail risks
  • Tail hedges
  • Human behavior and biases
  • Importance of a dynamic portfolio
Feb 19, 2016

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

Michael starts off asking, “Regular folks can beat the experts at their own game?” Phil says essentially that is correct. He started The Good Judgment Project in 2011. It was based around forecasting and was funded by the government. He was shocked by the amount of “regular” people he recruited for his study that were able to compete with, or do a better job predicting than professionals working for agencies such as the NSA.

Michael and Phil move onto discussing the Iraq war. They discuss what the actual probability may have been of Saddam Hussein having weapons of mass destruction. George Bush claimed that it was a “slam dunk” when clearly there was not a 100% probability of weapons of mass destruction being there. Michael asks, “When is society going to adopt more of a probability mindset?” Phil says that soft subjective human judgment is going by the way side. Pundits saying, “Someday this will happen” without any real substance, will come to a stop. As long as a forecaster can say, “This may happen in the future” then they can never really be held accountable for being wrong. Michael brings up the example of Robert Rubin. Robert worked for Goldman Sachs and was under Bill Clinton during his presidency. He was a great probabilistic thinker. Everyone loved him until the 2008 crash. Phil uses him as an example of even the best prediction people getting it wrong.

Bottom line, superforecasters look for aggregated data. They know there is interesting data laying around and they tend to look at crowd indicators heavily. The distinction between superforecasters and regular forecasters is their ability to start with the outside view and move to the inside slowly. Regular forecasters start with the inside view and rarely look at the outside view. Superforecasters also believe in fate less than regular forecasters do. When you highlight all the low probability events surrounding outcomes, such as the lottery, many chose to think the event was decided by “fate” or just “meant to be.” Superforecasters think in a way of “well someone had to win, and they did.”

In this episode of Trend Following Radio:

  • What are superforecasters?
  • Probabilistic thinking
  • Looking at aggregate data
Feb 15, 2016

Today on Trend Following Radio Michael Covel profiles Jeremy Siegel. Jeremy describes himself as “The Wizard of Wharton.” His website claims that he is credited with contributing and expanding the great bull market of the last two decades. Jeremy is also bestselling author of “Stocks for the Long Run.”

Michael moves right into playing a few clips from appearances Jeremy has made on CNBC. The first clip has Jeremy outlining his predictions in early November 2015: The Dow will surpass 20,000, oil can’t go much lower, and the dollar can’t go much higher. His predictions are perfect examples of predictions without any substance. They have no timelines, or data to backup why he feels the way he does.

Excerpt #2 was filmed around December 13th. The Dow at that time was at 17,300. The S&P was at 2020. Jeremy moves right into more predictions and generalizations. He doesn’t say “buy at this time” and “sell at this time.” Jeremy proceeds to use words like “tremor” and “relief rally.” It is hard to have wrong predictions and forecasts when you use words that have generalized meaning.

Excerpt #3 is from February 8th, 2016. Jeremy had to back peddle because his November and December forecasts had not come to fruition. He admits to being too bullish…sort of. He blames his wrong predictions on the market not doing what the market was suppose to do. Michael weaves in his commentary throughout the clips. The podcast ends with one of Michael’s favorite classic songs from the 1920’s.

In this episode of Trend Following Radio:

  • Predictions
  • CNBC Analysts
  • What is a bull and bear market?
Feb 12, 2016

Today on Trend Following Radio Michael Covel interviews Angus Deaton. Angus is a British American economist. In 2015 he was awarded the Nobel Memorial Prize for his work in economic sciences on his analysis on consumption, poverty and welfare. Those topics go into one of the most hotly discussed issues in America right now, inequality. He brings some great data driven insights and angles to the discussion.

Michael starts the podcast off discussing the benefits of winning a Nobel Prize and how it opens up debate and reshapes topics. Angus agrees that the Nobel Prize does get conversations going and as an academic, it allows him able to reach a broader audience. Michael and Angus move right into discussing inequality. Angus says that in periods where there has been the most innovation, this is typically when there is the most inequality. Angus also quotes a famed economist saying, “Data is like meatballs. I won’t eat them when I’m out because I don’t know what is in them and I won’t eat them when I’m home because I do know what is in them.” When going through data from places like India, where about 1/3 of all global poverty resides, it is hard to tell whether the data is correct. For example, although there is a rapid rate of growth, the poverty level has not raised. Are poverty levels not moving because the aid money is going straight to the 1% or is it because the data is not correct? Angus says the data is easily skewed so it is hard to really get a read on what is going on.

Next, Michael and Angus discuss how arbitrary the idea of “the poverty line” is. It is hard to classify what poverty truly is. Angus likes to look at the subject as if everybody is poor, but some are just much poorer than others. Measuring poverty across time and place is an impossible thing to do. Poverty data can be skewed by various factors such as if the area being studied has government healthcare or public school systems. Michael brings up the emotional side of poverty next. Angus says that it is very possible to be happy and sad at the same time. Emotion isn’t cut and dry. He has found that not having enough money does have a large impact on your happiness. However, most day-to-day emotional happiness comes from having contact with other people and friends, not money. Money starts to affect your day-to-day interactions if you are so poor that you are not able to do certain things that allow you to spend time with friends and family.

In this episode of Trend Following Radio:

  • Unemployment
  • Minimum Wage
  • Poverty
  • Economics
  • Money and happiness
  • The birth lottery
Feb 8, 2016

Today on Trend Following Radio Michael Covel starts off giving listeners perspective on the feedback he receives. Over the years Michael has received thousands of emails that have created insightful and thought provoking give and take discussions. He reads an email that came in recently on a fairly controversial topic. The listener talked about his disagreement with Yaron Brook in episode 183. He disagreed on the shared viewpoint between Yaron and Michael. The listener’s email also touches on unemployment, minimum wage, and government regulations. The email was extensive and Michael gives his feedback as he makes his way through reading it.

Michael furthers the discussion by moving into reading from an article titled, “The Case Against the Minimum Wage” by Daniel Bier. Daniel says that there is much we may not agree on, but when there are topics that economic professionals do agree on, we should take notice. Economists across the board agree that by raising the minimum wage we will actually increase unemployment. The article’s main premise is that the core value a young person gets from their first job is the life experience rather than the monetary gain. Working with a team, punctuality, and taking direction are just a few fundamental skills that can be taken away from a minimum wage job. These jobs create a track record for an individual that lets them move on to other higher paying jobs.

So many people miss the point: It isn’t about the money, it’s about the experience. Having exposure to minimum wage jobs at a early age has long term effects. Daniel Bier says that it is actually more about politicians trying to feel good than actually doing good. Michael finishes with a quote from Nobel laureate James Buchanan further touching on the ramifications of raising minimum wage.

In this episode of Trend Following Radio:

  • Unemployment
  • Minimum Wage
  • Ayn Rand
  • American economics
  • The seen and unseen consequences of a law
  • Libertarianism
Feb 5, 2016

Today on Trend Following Radio Michael Covel speaks with Steve Kamb. Steve is the author of “Level Up Your Life: How to Unlock Adventure and Happiness by Becoming the Hero of Your Own Story” and has built a career in the niche of Nerd Fitness. He gives great insight on how to reach a specific audience and gain a loyal following. He knew he was horribly mismatched in his career and had to make a drastic change. Not wasting much time, Steve moved to Atlanta and took a job making half the money and loved it. It was at this job where he started getting into fitness and creating a website to help others. His company, Nerd Fitness, soon turned into a full time job.

Michael starts the podcast asking, “What is your definition of a nerd?” Steve quotes Wil Wheaton, “A nerd is not what you love but how you love it.” He elaborates saying that you could be a comic book nerd, medical school nerd, Star Wars nerd, etc. Steve’s outlook on fitness is about keeping a healthy lifestyle while keeping your other passions alive. It took Steve years to get his fitness regime down. He knew there had to be more people that were struggling to find the right information when it came to fitness. Steve started writing about sound strategies to build solid plans to get on the right fitness path. He uses movie and comic book references to help get his clients motivated and relate more to what he is teaching.

Steve also started looking at his life, and his clients lives as if they were on their own “hero’s journey.” He calls it the “hero’s call to action.” This journey is cyclical. You go out and come back and it is never ending. He shares stories of superhero’s like Clark Kent/Superman or Indiana Joans/archeology professor. Regular men that go out time and time again on their hero’s journey, only to return back to reality after accomplishing what they set out to do. His book, “Level Up Your Life,” is about re-framing ones life in a hero’s journey type of way. Strength training, yoga, live action role playing, etc. could all be things that motivate you to get off the couch and start your own hero’s journey.

Michael and Steve finish up sharing tips on how to travel smarter. Steve says that when it comes to jet lag, what works best for him is exercising immediately after traveling. Also, buying the cheapest ticket can ruin the first few days of a trip by adding to your jet lag.

In this episode of Trend Following Radio:

  • Traveling domestic and internationally
  • The hero’s journey
  • Marketing yourself
  • Marketing to a niche
  • What is a nerd?
  • Tailoring your fitness needs
Feb 1, 2016

Today on Trend Following Radio Michael Covel discusses three topics: the idea of two Americas, crowds, and his recent Barry Ritholtz interview. Michael starts off reading from an article titled “Two Americas.” The article focuses on people who contribute, and those who do not. People who work and those who do not. The article disagrees with the notion that all incomes should be equal. Different choices lead to different consequences. Those who choose wisely have a greater degree of success and should not have their success taken from them because others chose unwisely. The article goes on to say, “Entitlement has replaced effort in American society.” Just because you went to college doesn’t mean you are entitled to a certain level of income. On the other hand, those that do not have an education or work hard to make something happen are also not entitled to a certain level of income. Achievers do not want a pat on the head or a fake handout. Free money doesn’t work. You need passionate effort for there to be a desirable end result. If the drive is not there then the result is there.

Michael then reads from a blog post by Seth Godin titled “The crowd, your work, and a choice.” Seth dives into crowd mentality. He says that the public would rather, “Watch a movie than read a book, stand in lines for the popular attractions…likes explosions, resolved plots and ample lighting…Crowds only care about fast, easy, cheap, fun, now and simple.” Crowds demand that they are told how much they will make and in what markets. When it comes to investing and trading there are no deadlines. Trends come and go, there is no timeline.

Michael moves on to discuss his recent interview in New York with Barry Ritholtz. He talks about himself and Barry as a piece of media and how media is becoming more individualized with the help of social media. There are so many outlets to get your name out whether it be your blog, podcast, or news column. All these places are just distribution outlets. Places like twitter and Instagram give you a platform to contribute value and feedback to people. It is now easier than ever to build a one man media conglomerate.

In this episode of Trend Following Radio:

  • Two Americas
  • Crowd behavior
  • Marketing yourself
1