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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.
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Now displaying: May, 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.

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
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