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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: June, 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.

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
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