A recent email exchange:
Listener: Michael, Just found your podcast and I’m really enjoying it.
Covel: Thanks! Why do you like it? Starting steps for more? Go here.
Listener: Why do I like your podcast? If you are actually interested, here is a long answer to a short question:
I have two bachelor degrees (including electrical engineering) and have worked in many fields – air traffic controller, test engineer, applications engineer, marketing, sales, etc. At about age 40 I went back to school and got a masters in operations research and finally found my calling in the analytics field.
Currently I work as a one man analytics department for a medium size credit union doing whatever analytical modeling and reporting work is required – retail credit risk recently.
My experience is that most useful models help an executive make incrementally better decisions at the margins – not huge homeruns every time… but that is enough to be really valuable. In my work with analytics I find that even sophisticated people want to put too much faith in a math model and they expect it to always be 100% correct in answering any possible question. They pour all their spoken and unspoken expectations and hopes into a model and expect that it will be like some computer from Star Trek that thinks for itself and can solve any problem posed.
So, I’ve been in the messy proverbial trenches of day-to-day business analytics which shades my opinion of too good to be true investing approaches. I don’t do any work with investing on a professional basis but I enjoy reading about the topic with the hope of improving my results by a percent point or two over the long haul. I’m not really an adherent to the efficient market theory because simple observation of stock market behavior doesn’t really match the theory.
But, I’ve always been a mostly buy and hold type investor for my personal retirement money because I haven’t seen anything that made sense as a way to particularly outperform except perhaps factor tilt towards value or small cap. Most evidence seems to show that active investment on the whole underperforms.
However recently I’ve become interested in the momentum/trend following approach after reading Wesley Grey’s book DIY Financial Advisor. In fact listening to your interview of Wes Grey is how I got turned on to your podcast. The whole momentum approach is attractive because it seems pragmatic, evidence based and systematic and might provide that incremental edge I’ve been pursuing. In particular I like the potential for reducing tail risk and the big draw downs.
I’ve only listened to a few episodes but I enjoy the podcast because it is educational and because it is interesting to hear different takes on trend following from both you and your practitioner guests.
Sorry for the long email and thanks for the links. I will certainly be tuning in on a regular basis.
You are welcome!