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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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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.

Mar 3, 2017

Donald Hoffman is a cognitive scientist at UC Irvine. He studies how our visual perception, guided by millions of years of natural selection, authors every aspect of our everyday reality. His research is about uncovering the underlying secrets of human perception. Donald has discovered clues that point to our subjective nature of reality. According to Donald, we actively create everything we see. Donald started to learn how to program at a very early age. This is what got him thinking: Are we just machines, or actual humans?

Donald began to be bothered by the reality that we might not be seeing what our eyes are seeing. Do we see reality as it really is? Almost all of us have a belief that we see the world as it is. Michael and Donald go in depth about certain illusions and truths that may be hidden from the main public. Illusions are everywhere when you start looking. Evolution shaped us with certain perceptions and interfaces that we, as humans, evolved to keep us alive. Whether or not those perceptions are real or fake is irrelevant. As long as they keep us feeling happy and alive, that is all that matters. Natural selection has also led us to the reality we see. The only thing that matters in natural selection is fitness. Fitness according to natural selection is not based on physical fitness but rather if you are able to reproduce. That is the only criteria.

Michael and Donald end the podcast posing the question: Do humans have the capacity to even understand what the true reality is?

In this episode of Trend Following Radio:

  • Are we robot or human?
  • Evolution
  • Reality vs. Perception of reality
  • Natural selection
  • Pushing theories to their limits
Feb 27, 2017

Michael excerpts a presentation from Cliff Asness. Asness is rigidly focused on the systematic side of the trading equation. Don’t let the idea of something being systematic scare you into thinking complication alone. Systematic means you follow rules. Asness has models, rules, and mechanisms he automates and executes. That’s smart. We can learn from that thinking.

In this episode of Trend Following Radio:

  • Black box investing
  • Quantitative trading
  • Quants vs High frequency trading
  • Value based trading
  • Momentum trading
  • The dirty words of finance
  • Statistical arbitrage
  • Quant macro
  • Managed futures
Feb 24, 2017

Mark Rzepczynski is the CEO of AMPHI Capital Management and has a deep knowledge of trading, especially trend following trading.

Simplicity beats complexity every time. Unfortunately, people crave more complex. With trend following, traders keep it simple. They just want to get the direction of the trade right. Trend followers don’t care about what the price will be or how far it will go, they just go back to the basics and see what way the trend is going, up or down.

The ability to simply follow the math has always been undervalued. Risk management is about the math of selling losers and hanging onto winners. It isn’t hard math to do, but this is what separates successful managers from losing ones. Successful managers build a portfolio, follow the trends and execute trades properly.

Harry Markowitz said, “If I would have created CAPM around semi variance no one would have understood the math and I would not have won the Nobel Prize.” Mark breaks this quote from Markowitz apart. He dives into good volatility vs bad volatility.

Fake news has been the premise of the 2017 presidential election. But is fake news new? Every time you see a government announcement come out saying they are revising their data, that is fake news. GDP numbers, unemployment, etc. are examples of fake our outdated news that cannot be depended on. We know that prices move and fluctuate from day to day, but trend followers can do things to smooth the uncertainty and prepare with a toolbox of rules such as staying diversified and having crisis alpha.

In this episode of Trend Following Radio:

  • Controlling volatility
  • Style diversification
  • Long term vs. Short term managers
  • Simplicity beats complexity
  • Quant trading
Feb 20, 2017

Many take risk without thinking. They do not quantify risk. One of Michael’s first steps into the risk indoctrination came in the 1990’s through a book, “Against the Gods: A Remarkable Story of Risk.” Michael plays an excerpt from the author Peter Bernstein.

There is no perfect algorithm for risk, only guesses. Everyone has a limited amount of capital. Risk is putting your money down and knowing that you can lose it. In the trend following world, risk is why traders keep it small. How much can you afford to lose? This is the only thing you can control in the markets. Predictions should be a blinking red light for anyone listening.

In this episode of Trend Following Radio:

  • Stop loss
  • Know your risk
  • How much are you willing to bet?
  • Coarse risk management
  • Long Term Capital Management
  • Too much dependence on math
Feb 17, 2017

Annie Duke is on the podcast for the second time. She is a poker player, author, decision making expert, and cognitive scientist. Her understanding of how luck, skill and uncertainty all play a role in life is fascinating.

Donald Trump has made some unusual cabinet choices, especially for getting elected by such a small margin. Annie breaks down her perspective on why Trump chose the way he did. One of the hardest people to play against is someone playing aggressively across the board, such as Trump. She relates Trump’s aggressive political playing to poker, giving insights as to how Trump opposition might be playing their cards to beat him.

Annie moves on to decipher luck and skill in decision making and outcomes. Black and white thinking can be harmful. Decisions that don’t go your way are not always the wrong choice. You may have taken the right direction, the cards just didn’t fall in your favor. You need to be able to move on and know that another chance is around the corner. Fixating on decisions that were wrong can easily start to snowball and make things personal. The key is to learn to move on from one hand dealt to another quickly because life won’t pause for anyone. Take the time to reflect later, but don’t get caught up in the moment and dwell on what mistakes you may, or may not have made.

The world of poker is a male driven sport. Focusing her purpose on winning the game rather than getting people at the table to like her enabled her to get over discrimination and actually use it to her advantage. Not caring about the approval of peers instantly gives the person being discriminated against the upper hand. Once you view something as a challenge rather than adversity you become a stronger person and begin creating a positive narrative for that situation and your life. Shying away from adversity is a way of giving up on yourself and falling victim. Facing adversity as a challenge provides self power and confidence.

In this episode of Trend Following Radio:

  • Quality of outcome vs Quality of your decision
  • Game theory and math
  • Applying poker decision making to life decision making
  • Cognitive science
Feb 13, 2017

Five guests are featured on today’s mega episode, including: Jason Fried, Andy Puddicombe, Steven Kotler, Walter Williams and Jack Horner. These men have all found great success in their fields of study. As different as they all may be, there is a thread that can be found connecting them all.

Jason Fried is the founder and CEO of Basecamp (formerly 37Signals). Fried is also the co-author of the book Rework.

Andy Puddicombe is the founder of Headspace, an award-winning digital health platform that provides guided meditation sessions. Puddicombe is also a former Buddhist monk with a degree in Circus Arts.

Steven Kotler is an American bestselling author, journalist, and entrepreneur. His newest book is The Rise of Superman.

Walter Williams an American economist, commentator, and academic. He is the John M. Olin Distinguished Professor of Economics at George Mason University, as well as a syndicated columnist and author known for his libertarian views.

Jack Horner is a world renowned paleontologist. He was the technical advisor for all of the “Jurassic Park” films.

In this episode of Trend Following Radio:

  • Zen and the moment of now
  • Building an audience
  • Meditation
  • Daily practice
  • Flow
  • Minimum wage
  • Morality of markets
  • The welfare state
  • Bailouts
  • The process of learning
  • Scavenger v. predator
Feb 10, 2017

Jennifer Mueller, author of “Creative Change: Why We Resist it, How We Can Embrace it,” is my guest today. Many crave the life of creativity but choose not to live it. Jennifer explains creative change in a way that newbies and professionals can understand.

“What was the initial aha moment that made you go down this particular path?” People have this “love/hate” relationship with creativity. During a study, Jennifer found that more people relate the word “vomit” to creativity than they relate words like; love, peace, and happiness. This made her wonder, “What is it about creativity that makes people feel that way?”

More and more customers want a creative experience. When people think of a creative experience they think of: something beautiful, not mass marketed, not necessarily fashionable, something that took time and effort to put together, feels authentic and makes them happy. Corporations do think of creativity in the same way, however they end up moving in the opposite direction. They often get sucked into feeling like their product needs to be for everyone, mass marketed, fashionable, etc. so they can sell the product.

Steve Jobs created “corporate creativity.” He had a way of connecting with people from how he dressed to connecting through his products. When people engage in a creative effort they feel like their lives are meaningful and are happier. Jobs captured that. Giving people a surprise is one of the top things people attach to creativity, along with beauty. He was able to wrap all these things up in one presentation.

“We want more creative change. We know there has to be a disruption and we know we can’t predict the future. The heart of your work is to get people to understand, ‘This won’t make you feel comfortable to adopt creative change…it will not be a linear process.’” When you go through the process of learning something, sometimes that process can feel horrible. The good news is though, when you figure this out yourself, it can feel pretty empowering. When we generate creative ideas, we are more accepting of flexibility. Change is a psychological problem. It is not just emotional or rational, it is both.

In this episode of Trend Following Radio:

  • Jeff Basos vs. Steve Jobs
  • Integrating creativity with regimen
  • Rational uncertainty
  • Problems with risk assessments
  • 2001 vs. Star Wars
  • Disrupting the system
  • Millennial generation
Feb 6, 2017

Charlie Munger and Warren Buffett are two men that not only have survived over time but made a boat load of money in the process. They are not trend following traders, yet they are very keen about risk management, position sizing and other core concepts that lead to success. Munger and Buffet, however, perform a type of strategy that you (as the average investor) cannot. They trade massive derivative positions. Trades that only happen when you’re at their level and can coordinate with the like Goldman Sachs. Buffett held the power in 2008. He had the money and called the shots. Across the media you can find hypocrisy in his statements, but the ultimate measuring stick is money. Has he made money? Has he made it generally in an ethically way? Absolutely.

This podcast and these excerpts aren’t about strategy. It is about getting into the mindset of Munger and Buffett. Even though we cannot replicate their strategy, we can take their philosophical views and apply them to our money making strategies.

In this episode of Trend Following Radio:

  • Psychological denial
  • Incentive cause bias
  • Pavlovian phenomenon
  • Negative psychological tendencies
  • Efficient market theory
  • Contrast phenomena
  • Envy bias
  • What distorts judgment
  • Tupperware parties
  • Watch one, do one, teach one
  • Compounding
  • Avoiding credit cards at all costs
Feb 3, 2017

Martin “Marty” Bergin is the President and owner of DUNN Capital Management. Bergin began working with DUNN in 1997. He took over the day-to-day operations of the firm in 2007 and became owner in 2015 (Bill Dunn remains Chairman). DUNN has an outstanding track record that spans over 40 years. Bergin first met Dunn while he was tasked with doing an audit of the company over the course of 7 years. Once the audit was over, Dunn offered him a job.

There has been ongoing dialogue since 2008 that trend following has been a negative. DUNN Capital’s track record does not reflect that. They have been doing things different. They are 100% systematic. They do not have an army of traders staring at screens. All emotion has been removed from the equation and traders use algorithms that have already been put in place to make day to day trades. They take positions strictly based on what the system tells them to do.

Managed futures (read: trend following) was the only strategy that stood out during the 2008 crisis. Historically DUNN has been able to outperform the S&P over their 40 year track record. I argue that when looking at their performance side by side with S&P performance, there could be a whole class taught on the chart. Bergin says that with all the changes in America (mostly political) there is no telling if the new policy’s that are said to come will crash the S&P or double the S&P. He has no way to predict the future and neither does anyone else.

In this episode of Trend Following Radio:

  • Management fees
  • How the financial industry works
  • Systematic trend following strategies
  • Trading off of price data
  • The advantages of diversity in your portfolio
Jan 30, 2017

“I could be wrong I could be right. It’s a flip of the coin.” What is done after the coin is flipped is what counts. But people want a prediction. They want someone to tell them where a stock will go next, or where the S&P will top off at. The last question you want to be asking yourself when trading is where a price will be going next. It is just “you know what in the wind.”

Put aside reading charts and predictive technical analysis, life is naturally a wild wave that goes up and down. This will not change. Price momentum has always existed and it will always exist. You just need to have a strong strategy that gets you on the trend and gets you off the trend with the proper risk and money management in place. Michael pulls in quotes from Larry Tentarelli and David Harding.

In this episode of Trend Following Radio:

  • Mental Masturbation
  • Price action and no prediction
  • Systematic trend following
  • Robo trading
Jan 27, 2017

This is Tom Asacker’s second appearance on the show. His newest work is “I Am Keats: Escape Your Mind and Free Your Self.” The title of his book spawned from a conversation he had with a friend whose 20-something year old son was still living at home. Tom told his friend “Too bad we can’t wipe his memory clean and start over.” All actions come from your memory so Tom figured if he could wipe the 20 something’s memory clean, he could rewrite his life. After that conversation Tom had a sequence of serendipitous moments that lead to the writing of “I Am Keats.” Tom gives a unique perspective on the human condition that will no doubt give all listening something to think about.

Tom’s work allows people to think of themselves as being in a “mental cell,” to think clearly outside that, and learn how to make better decisions. There is a powerful misconception among people that they have a predisposed identity. Asacker says, “Who you are is what you create.” Just because you choose to go one direction, doesn’t mean that you won’t have some serendipitous event that changes your course of life. Just enjoy your journey, whether it is a journey full of struggle or journey full of success. The process is the goal, not where you think you are going to get to in the future.

There is no linear path to success and happiness. This illusion of stability causes people to wake up when they are 40 or 50 and think to themselves, “What happened with my life?” Life is not predetermined. It unfolds as you live it. What you do in the past sets you up for the future. How do you compete with the Steve Jobs of the world by staying in your office cube? Stop hedging your bets, and jump off the ledge.

In this episode of Trend Following Radio:

  • Taking a leap of faith
  • Traveling for the sake of traveling
  • Serendipity
  • Hypocrisy on the Internet
  • What are your “beliefs”
  • Cognitive dissonance
  • Being driven by inspiration vs. data
  • Bring the engineers in after you have the design
Jan 23, 2017

Michael uses an article from the “Financial Times” titled “A Warning for the Losers of the Liberal Elite” by Wolfgang Münchau. Münchau makes some valid points as well as weaving in made up assumptions that absolutely don’t exist in reality.

Everyday is a fight. You must wake up energized, and figure the game out. There is no permission needed. The successful do not ask for permission. The successful do not ask for “acceptable distribution of income.” Get a plan for yourself and execute it without making excuses such as “The economy is in a slump” or “But… Donald Trump is our next president.”

In this episode of Trend Following Radio:

  • Distribution of income
  • Asking for permission
  • President Donald Trump
Jan 20, 2017

John Jantsch is an author, speaker and marketing consultant. His company is Duct Tape Marketing and he has been around 29 years offering insights. His new book is “SEO For Growth.” John seeks out knowledge for his own personal growth, which then spills over into helping out clients.

One of the major ways to build your brand is producing new, information rich and constant content. Michael and John talk about Twitter and blogging strategies that help tap into your marketplace so you reach your optimal audience. Creating constant content won’t build you or your brand up very much if nobody reads it.

Moving on to SEO, John says “Page one results [on Google search] is your new business card.” When you hear a friend talking about someone or if you are looking for products and services, the first thing you do is search their name or brand. Having an active Twitter and LinkedIn account is a good start to getting your name out there. However, if you take it a step further and write an article for a news source in your field it could give you a much larger leg up on your competition. There was a recent study done with 2,200 buyers. 80% of these buyers made their decisions to buy before ever even contacting the company. They are turning to search engines and their social networks. If you do not show up in their initial research, then you do not exist.

Google’s original objective (when it was founded) and its current objective is for people to get the most relevant results related to their search. Over the years Google has gotten better at refining their objective by creating new code and stopping fraud. John dives into ways to help out your SEO with Google. Essentially it all boils down to creating great content. “Build it and they will come” rings true more now than ever before.

What are some of the things people are doing right now that are on the Google “do not fly list?” The biggest mistake made is paying people to get results by bogus links. It may work for a month or two but after awhile you will probably get blacklisted from Google’s search engine. This is the most obvious of the “do not do’s” with SEO. Content creation will help the most with SEO, and getting people to stay interested in what you are doing. Ebooks, podcasts, books, articles, etc. all count as content. Responding quickly to client emails or calls is also a great key to gaining strong followers. Expectations have gotten so low on the customer service front that something as simple as returning an email in a timely fashion may be the differentiating point between you and the competitor.

In this episode of Trend Following Radio:

  • Benefits of podcasting
  • Evolution of podcasting and blogging
  • SEO
  • Behind the scene of the Google algorithm
  • Seven stages to your hourglass
  • Critics and criticism
  • Voice activated searching
Jan 16, 2017

Michael starts the podcast quoting from a recent blog post of Seth Godin’s called “The Candy Diet.” Most people want a Guru or someone to spoon feed them something, anything. They want to be told what will happen in the future. They are on the “candy diet” that Seth Godin speaks to. People want to be baited with quick and easy. Michael reads from the obituary of the late Jay Forrester next. Forrester made the point in one of his classes that not a single one of his engineering students had ever taken the back of the toilet seat off to see how it worked. Looping back to Godin’s candy diet piece: There isn’t enough curiosity out there.

Michael quotes Jameis Winston, quarterback for the Buccaneers next. Jameis was asked if the Buccaneers were playoff contenders. Jameis’ response was that he was just trying to be 1-0 each week. He was living in the “moment of now.” He wasn’t worrying about week five while he was playing a game in week one. This thought process goes for everything in life, especially trading. You need a systematic approach that keeps you in the moment of right now. Otherwise you become bait.

Jared Kushner ran the Trump campaign. He tried to run the Trump campaign on the cheap. He would see what worked, and if it didn’t work then they would cut their losses quickly. If it worked, they would keep that strategy going and scale it up.

Michael finishes up the podcast talking about the new version of his Trend Following book. He points out some edits the publisher wanted him to make to move toward a more politically correct book. Michael brings in a term coined by Nassim Taleb, “intellectual yet idiot,” to explain his stance on making his book more politically correct.

In this episode of Trend Following Radio:

  • Political correctness
  • Curiosity
  • Living in the moment of now
Jan 13, 2017

Michael releases another mega episode with three trend following traders: Chris Cruden, Salem Abraham and Brian Proctor.

Chris Cruden has been in the trend following space for over 25 years. In 1988 he became a Director of Adam, Harding and Lueck Asset Management Ltd (AHL) in London, a famed trend following shop. He is currently the head of Insch Capital Management.

Salem Abraham is the President of Abraham Trading Company with a 27-year track record (with much trend following success). Over the years, Abraham has been kind enough to offer Covel fantastic insights. Abraham also appeared in Covel’s film, Broke, and is the last chapter of The Complete TurtleTrader.

Brian Proctor is an original TurtleTrader trained by Richard Dennis and Bill Eckhardt and today is a Managing Director at EMC Capital. He began his futures career in 1982, with experience at both the Chicago Mercantile Exchange and Chicago Board of Trade. Proctor was a participant in the renowned Turtle Program, and managed all trading operations at C&D Commodities through 2000.

In this episode of Trend Following Radio:

  • Price action
  • Trading only currency
  • Benchmark and time period selection
  • Don’t force the system
  • If you can’t measure it, you can’t manage it
  • Markets teach humility
  • Swiss Franc and Crude Oil
  • Asian economics
  • Location independence
  • The Turtle program
  • Diversification
  • Black Swans
Jan 9, 2017

Michael interviews Evan Carmichael, author of Your One Word: The Powerful Secret to Creating a Business and Life That Matter: "In this bold and empowering guide, entrepreneur and social media sensation Evan Carmichael shares the secret to turbo-charging your path to success on your own terms. With thought-provoking questions and inspiring, instructive examples, Your One Word will help you nail down your personal mottos – the word that captures your purpose and passion. With this operating philosophy in hand, you will then learn how to leverage this powerful tool to create the business and future of your dreams."

The real story? Two guys talking about the psychology behind successful entrepreneurship.

In this episode of Trend Following Radio:

  • Entrepreneurship
  • Your one word
Jan 6, 2017

One of Michael’s favorite things to do is intellectually kick people in the ass. People have stopped thinking. We have social media overload and virtual reality is taking over reality.

Michael brings a clip from Daniel Dennett on the podcast. Daniel specializes in providing people with different tools for thinking. Thinking is not genetic, it is learned. “Do tools evolve and make us smarter? Or do we evolve to become smart enough to make tools?” The answer is: Yes. It goes both ways. Daniel uses a chimpanzee example to explain the difference between our minds and the minds of any other animal.

In this episode of Trend Following Radio:

  • Flynn effect
  • Surely alarm
  • Genetic evolution
  • Shaping neurons in the brain
  • Intrinsic value
Jan 2, 2017

Michael and Wesley Gray cover wide territory today across the subject of momentum in the markets. Wesley Gray served as a Captain in the United States Marine Corps and taught as a finance professor at Drexel University. He earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania. Wesley is founder of Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. He has published four books including: “Quantitative Value,” “DIY Financial Advisor,” “Embedded” and his newest book “Quantitative Momentum.” He is a contributor to the Wall Street Journal, Forbes, and the CFA Institute.

In this episode of Trend Following Radio:

  • Efficient Market Hypothesis
  • Cross-sectional momentum
  • Time-series momentum
  • Trend following
  • Behavior
  • Career risk
Dec 30, 2016

Episode 515 is another “Mega episode.” It is a culmination of interviews comprised of four of the most successful trend following traders alive today: Ewan Kirk, Jean-Philippe Bouchaud, Martin Lueck and Christopher Cruden.

Ewan Kirk is the head of Cantab Capital and has brought his firm from $30M AUM in 2006 to over $5B today. Kirk employs several strategies but clearly uses a trend following foundation.

Jean-Philippe Bouchaud is founder and Chairman of Capital Fund Management (CFM) and professor of physics at École polytechnique.

Martin Lueck holds an M.A. in Physics from Oxford University and currently is the Research Director and President of Aspect Capital. Lueck was originally with Adam, Harding and Lueck Limited (AHL), which he co-founded with Michael Adam and David Harding.

Christopher Cruden has been in the trend following space for over 25 years. In 1988 he became a Director of Adam, Harding and Lueck Asset Management Ltd (AHL). He is currently the head of Insch Capital Management.

In this episode of Trend Following Radio:

  • Importance of consistent marginal improvements
  • Understanding a client’s drivers
  • Benefits the economy, society, and the world
  • Randomness is everything
  • Discretionary traders
  • Losses are statistically inevitable
  • Holy grails in trading
  • Behavioral biases
  • Volatility as measuring risk
  • Exploiting vs. Exploring
  • Tail risk premia vs. Pure alpha
  • Behavioral economics
  • Systematic trading
  • Price action
  • Benchmark selection
  • Time period selection
  • Markets teach humility
        Time management
Dec 26, 2016

Michael has put together a compilation of past appearances aggregated into a four hour episode. Guests today include: Daniel Kahneman, Laurie Santos, Steven Kotler, Anders Ericsson, Philip Tetlock, and Colin Camerer.

Daniel Kahneman has been called the most important psychologist alive today. He is the 2002 winner of the Nobel Memorial Prize in Economic Sciences, and is the guy behind the theories of behavioral economics and behavioral finance.

Laurie 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.

Kotler is an American bestselling author, journalist, and entrepreneur. His articles have appeared in over 70 publications, including The New York Times Magazine, LA Times, etc.

Anders Ericsson is a Swedish psychologist and Conradi Eminent Scholar and Professor of Psychology at Florida State University. He is internationally recognized as a researcher in the psychological nature of expertise and human performance. His new book is “Peak: Secrets from the New Science of Expertise.”

Philip Tetlock 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.

Colin Camerer is an American behavioral economist and a Robert Kirby Professor of Behavioral Finance and Economics at the California Institute of Technology (Caltech). Camerer’s research is the interface between cognitive psychology and economics.

In this episode of Trend Following Radio:

  • Remembering self vs. Experiencing self
  • How the measures of happiness are being implemented into public policy
  • How failure to accept one’s losses can lead to risk-taking in trading
  • Crowd behavior relating economic bubbles
  • Why capitalism is largely driven by optimism
  • Behavioral economics affecting the trading world
  • Monkeys and humans
  • The monkey economy
  • The endowment effect
  • G.I. Joe fallacy
  • Discipline and practice
  • Solo and group practice
  • Flow state
  • Social motivation
  • The late birthday rule
  • 10,000 hours of practice
  • Nature vs. nurture
  • Brain plasticity
  • What are superforecasters?
  • Probabilistic thinking
  • Looking at data
  • The basis of decision making
Dec 23, 2016

Phil Donahue and Ayn Rand are on the podcast today, but one of them is of course dead. Rand is best known for her two best selling novels, “The Fountainhead” and “Atlas Shrugged.” Michael plays two clips of Donahue interviewing Rand. Rand is controversial, but her thinking is accurate and clear. She breaks down altruism, government regulation, free market, monopoly, God, feminism, terrorism, and many more topics. You may not agree with her on all points, but there is inspiration to be taken away from her passion and to-the-point thinking.

In this episode of Trend Following Radio:

  • Altruism
  • Government regulation
  • Acting on faith
  • Living by emotion, not reason
  • Women’s rights
  • Religion
  • Monopoly
  • Spending money on the un-gifted minds rather than the gifted
  • A “me” society
  • Definition of a dictator
Dec 19, 2016

Tim Price has worked in capital markets for over 25 years across three management firms. His book is “Investing Through the Looking Glass.”

Tim thought Brexit would be the biggest thing in politics during his lifetime, until Trump. People love a narrative and those behind Brexit and Trump produced a great one. People were so fed up with the establishment that even though they may not have agreed with the idea of Brexit or the agenda of Trump, they wanted a vote against the establishment.

“What was the driving force behind wanting to write your first book?” The seminal event for him was the collapse of Lehman Brothers, which led him to think: “How on earth did we end up in this mess?” Interest rates are still at zero eight years post crisis and central banks are still printing money out of nowhere. He has spent the years since 2008 researching what the causes were and essentially the “Who done it” in the bailouts. Michael and Tim talk about the economy and the avalanche that is building on the horizon. Michael asks, “How did we get to the point where so many of us have just accepted that there are these show figures making decisions for us that we have no choice in?”

In Tim’s work he takes people on a detailed journey through the banking system, bailouts, bond market, stock market and the solutions. “What other options in trading exist after you have value, momentum and gold?” Michael and Tim discuss why there aren’t really any other options beyond those.

In this episode of Trend Following Radio:

  • Trusting central planners
  • Going against the establishment
  • Banking system
  • Owning gold
  • Lehman Brothers collapse
  • 2008 bubble
  • The Brexit and Trump narrative
Dec 16, 2016

Building off of last weeks podcast Michael brings another dead guest on his show, Alan Watts. Watts is responsible for introducing eastern traditions to the West, i.e. Buddhism. He has been featured many times on the podcast. Is money the root of all evil? Is money the goal? Why are making mistakes so crucial to your life? Does money equal wealth? These are all topics that are discussed and answered on the podcast.

Before Michael plays a clip from Watts, he shares a story from his recent trip to California. Michael had lunch next to a table that was the quintessential example of money, wealth, and the stereotypes that live in Los Angeles. His opening story is food for thought as you listen to Watts and his wisdom.

In this episode of Trend Following Radio:

  • Liberty
  • Relationship between guilt and gold
  • You don’t learn if you don’t make mistakes
  • Psychological attitude toward money
  • Money is just bookkeeping
  • National debt
  • Money as the circulation of information
  • Changing the psychological attitude toward money
  • The cost of paying income tax
  • Psychologically poor
Dec 12, 2016

Milton Friedman is one of Michael’s favorite dead guests to bring on the podcast. He takes complicated subjects and breaks them down clearly. Today, Michael curates two interviews between Phil Donahue and Milton Friedman. These interviews were recorded back in the 1980’s, but many of the points made are more relevant today than ever. Milton foreshadows Uber, talks about the deep state (without mentioning the deep state), brings up airline service and monopoly. His solutions to problems in government 35 years ago were to cut government spending, hold monetary growth back and cut regulations. The same solutions to government are at the forefront of American politics today.

In this episode of Trend Following Radio:

  • Government spending
  • Liberty in trading
  • Government regulation
  • Unknowingly supporting private interests
  • How to prevent monopoly
  • Legalizing drugs
  • Prohibition
Dec 9, 2016

Van Tharp is on today’s podcast. It is his third appearance on the show. Van runs the Van Tharp Institute and is the author of four acclaimed books published by McGraw Hill: Super Trader, Trade Your Way to Financial Freedom, Safe Strategies for Financial Freedom, and Financial Freedom Through Electronic Day Trading. His new book is called Trading Beyond the Matrix. He was also featured in Jack Schwager’s Market Wizard’s: Interviews with Great Traders. Van Tharp received his Ph.D. in psychology, is a certified Master Practitioner of Neuro Linguistic Programming (NLP), a Certified Master Time Line Therapist, a certified Modeler of NLP, and an Assistant Trainer of NLP.

Michael starts the podcast asking Van how he felt the year Eugene Fama and Robert Shiller won the Nobel Prize. Van has a long standing theory that those who win the Nobel Prize are just supporting the ideas of the status quo. It is meant to propel the majority into believing they are in the right. Trend following does nothing to support the status quo, therefore Van says that Michael and himself will not be winning the Nobel Prize anytime soon.

People looking for help constantly approach Van. Michael asks, “What is it like to observe the learning of people who come into your world?” Van goes into the steps he takes new students through when teaching them how to trade. He shares some typical biases that new traders have when starting their training. He first teaches people to understand that they need to take total responsibility for what happens to them while trading. If was easy to make money in the markets then big money would make it hard to participate in the game, but since it is not easy to make money in the markets, they make it easy to join.

Michael switches gears and asks, “When were you first exposed to the ‘how much’ question?” Van says that it was at a workshop with Ed Seykota. Seykota asked, “What is the most important factor in your trading?” Van responded, “Well, It’s you.” And Seykota said, “No, it’s how much.” It all starts with how much you are willing to lose and how much you can afford to lose. Michael moves on to ask “Are there anymore interesting things that you learned from working with Ed Seykota?” Van shares a story about Seykota and the psychology behind what makes him such a legendary trader. He moves on to share some stories about another legendary trend following trader, Tom Basso. Van shares personal stories about how he conducted his business and trading.

Discretionary trading is the next topic. Van says, “If you are a pure discretionary trader, it seems to me that it would be very difficult to implement some of the position sizing methodologies that are in your work.” A trader needs to know when something is not working anymore. You need to be aware of market changes, and subtle changes in that market that no longer works.

Michael ends the podcast asking, “Who changed your thinking in your life? Who helped to send you down this path?” Van started his business around 1982, which coincidentally was probably the low point in his life. He went to a life science church that helped him work on himself. He can’t pinpoint a specific event or person that has molded him into who he is right now, it was a collaboration of events and people.

In this episode of Trend Following Radio:

  • Systems theory
  • Money management vs. Position sizing
  • Ed Seykota’s trading and psychology strategies
  • Tom Basso’s trading and psychology strategies
  • Yoga
  • Training your brain how to think
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