Please enjoy my monologue Abundant Anarchy with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive.
In this episode of Trend Following Radio:
Ego
Preparing yourself for the next crash
Abundance
Downfall of the economy
“Connectivity is giving us a consistency of the like minded.” –Josh Brown
“The only way to save the economy is to crash it. There is too much of everything and it isn’t good for anyone.” –Josh Brown
That chart always makes me recall a moronic line from Ben Stein: “If you made money in October 2008 you were doing something wrong.”
You don’t want volatility? That’s ok. It’s all a trade-off. The big question: Can you imagine something like October 2008 happening again and what will you do?
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You know, if we’re going to argue about the 1990’s instead of talking about the future, which I’d much prefer because I think every election is about the future, and you all deserve to know what we will do to help you have a brighter future — but, if we are going to talk about the 1990’s I think it’s only fair to say that at the end of the 1990’s, after two terms of my husband’s presidency, the unemployment rate in Michigan was 4.4 percent.
The 1990s were the biggest stock market bubble in USA history. And now 16 years later, via slight of hand and a fantasy timeline, shes brag about the then great economy that magically only concluded at the tail end of her husband’s Presidency.
Bottom line, politicians are never the path to wealth and their words never tell anywhere close to a full story. Here are the 1990s in Nasdaq chart form:
My guest today is Didier Sornette, the Professor on the Chair of Entrepreneurial Risks at Swiss Federal Institute of Technology Zurich. He is also a professor of the Swiss Finance Institute, associated with both the department of Physics and the department of Earth Sciences at ETH Zurich. He has worked on the King effect, a theory used to predict economic bubbles. Didier also set up the Financial Crisis Observatory in October of 2008. He brings an interesting perspective to financial crisis’s, and bubbles.
The topic is market bubbles.
In this episode of Trend Following Radio we discuss:
The adaptive market hypothesis
Dragon Kings vs. Black Swans
New economy syndrome
Predictive markets
Finite singularity
Equilibrium of the world
“When herding behaviour among investors ramps up, a stock’s or index’s growth rate can increase faster than exponentially, leading to more herding. This positive feedback brings the system to a tipping point. About two-thirds of the time, a crash results.” – Didier Sornette
I received a call from my dad asking if I was OK with the market panic selloff. Even though I had explained how I trade he and many others still think a drop in markets is bad for everyone. Naturally the panic selling was not the start of the down trend so I was nicely short the Dow prior to sell off.
I still can’t believe how robust this system is. Conceptually, I felt I understood it in the past but you just don’t get it until you trade it. And I am still amazed that the general market still thinks that you can only profit from stocks and commodities going up. At the same time I am profiting from that ignorance, so I am inclined to enjoy it.
