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New Covel Monologue Series Live Now

Synopsis: Inspired by a blog post by Barry Ritholtz Michael Covel goes over his own list of “Things I Don’t Care About”. You can have the intravenous drip straight into your arm, but what does all that commentary do for you? Ultimately, if you’re a trend following trader or any type of investor you need a process. You need a set of rules that tells you where to enter, where to exit, and how much to bet of your limited capital at all times. Regardless of account size, volatility, etc. You need a process that determines that for you. If you have that then eliminating all other stuff is paramount. And it’s not just for trading reasons; it’s for life reasons. Covel goes through Ritholtz’s list and compares it to his own. On the flipside Covel also goes through a list of the things he does care about: Knowing how the “behind-the-scenes” action really works; the traders that he has learned from in his books; having honest interactions with people; Alan Watts; Ken Tropin’s white papers; The Winton Papers; the Zen Habits blog; and Seth Godin’s website. Covel relates several stories from traders such as Salem Abraham and David Harding which taught him some valuable lessons. Covel explains that if you want to be good at anything you have to be passionate about it. You have to care, you have to get inside it, and you have to own it. In the next segment Covel talks about the idea of the efficient market hypothesis, which is one of the foundational pillars for academics. They claim to have mathematical formulas which can predict the future, even though the underlying assumptions are false. Life is much easier for a professor who can fall back on beautiful mathematics. Unfortunately, many people have been sold up the river using investment products based on efficient markets. Covel quotes Charlie Munger of Berkshire Hathaway regarding extreme proponents of the efficient market hypothesis. Munger, even though he’s a value investing guy, knows there are outliers and black swans. He knows that markets aren’t efficient. Munger notes that mistaken professors were “too much influenced by rational man-models of human behaviors from economics, and too little by foolish man-models from psychology and real world experience.” How can there be rational man when Jersey Shore gets high ratings? There’s no such thing as rational today. Even if there was markets still might go in a completely different direction from what rational is even deemed to be. Free DVD:

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