In his first podcast back from China Michael Covel talks about trend following in the context of The Middle Kingdom. Through five flights, four cities, untold hotel rooms, two speeches before crowds of 500 people, and over a dozen presentations in front of some of China’s largest hedge funds, Covel brings the wisdom gained through his excursion back to his podcast audience. First, he responds to a reader from China who heard about one of Covel’s presentations, and the criticism that Covel didn’t give the “secret sauce” to win at trend following. Richard Dennis was famous for saying that he could publish his rules in the newspaper and nobody would follow them, and Covel could explain exactly how to be a trend follower and it’d go over many heads. So it’s not surprising that in a crowd of 500 some would have their expectations of learning about some kind of “secret sauce” not met. Covel isn’t trying to impress that person, and they aren’t the type of person that would ever get it anyway. They’re looking for the shortcut– the angle, the quick fix. If you have Covel speak to your group, after fifteen years of his life spent researching the topic and putting together the best educational materials for new and experienced traders alike, if your first thought is “you didn’t give me the secret sauce”, it might not be for you. But Covel did reach a great many people, and he got a great deal of excellent feedback. He discusses the typical Chinese investor mindset and what got them to take a second look at trend following. Covel also waxes on the idea of trust in China, the parallels to America, and how the acceptance of “the new” in China might go down easier than elsewhere. Next, Covel adds some lessons to the overall trend following education. Covel’s journey shows that an outsider can get to be an insider. Unfortunately, one of the common questions posed to Covel by the media in China was to ask if any average person could succeed in trend following. Covel discusses how this is a defeatist question. If you consider yourself average: quit now. Suitability, however, is something different. Is trend following, or investing in general, suitable for everyone? If you don’t have the education, it might not be. Covel also gives some examples from his journey that help to put trend following in context. Covel notes a bit of censorship in his presentations via the Chinese regulatory committees. One slide was not allowed in his presentation. What was that slide? Covel explains. Also, Covel recently discussed Ray Dalio at Bridgewater, the biggest hedge fund on the planet. Covel reads a letter from a listener that gives anecdotal evidence about how Dalio could be a closet trend follower.
Listen to my interview with Jed Rothstein creator of the China Hustle Film here.