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Asymmetric Information and Entrepreneurship with Michael Covel on Trend Following Radio.

Feedback in:

Hi Michael,

It’s funny, I was actually thinking of sending you a message. I’ve read Trend Following a few times, I listen to your podcasts (I went back to the beginning archives). I love the interviews and caliber of guests. I’ve thought about signing up for the course back in February. My biggest hesitations – time and mental capacity. I’m currently studying to sit for the CFA (blasphemy!). I passed level 1 December and I had a small window of time before I hit the books again. I knew your course was only 12 or 18 months depending on the package and I knew that I didn’t have that much time to devote (I had less than 6 months). I ended up signing up with another course that had lifetime access. I studied his course, it’s a bit more chart reading and less quantitative / backwards testable. Nonetheless, I studied his methods and tried back testing charts up until I needed to set that aside and get back to the CFA.

Anyway, I wanted to reach out and let you know that I like your interviews, I like commentary on the website, the research and thought that went behind the book. I like the differing opinion from the rest of the financial industry. One day, I plan to sign up with your course, but for now, it’s is just not in the cards. I wish I could take advantage of the offer, but I’m basically on an information diet.

My Ah-ha moment was the email about the limiting losses. For some reason, I couldn’t conceptualize the 1-2% rule until I read it in one of the emails. I understand limiting losses, cutting losses, etc., but I always thought, that the plan was to only put 1-2% into a trade. If you have a $100k account, $1-$2k / position, as opposed to an $X position, with a $1k-$2k, stop loss.

The thing that I still can’t understand is how to build the rules and how to test the rules. I understand that the rules are not what earn the returns, but following the rules earns the rewards, and that is my missing piece. I’ve tried a few theories, but I don’t know how to test it properly. I’ve searched the Internet a bit, but I haven’t had the time to fully devote a deep dive, so that is currently where I am. Otherwise, I like the non-prediction of markets, the psychological discipline required and of course, the returns.

[Name]

Be persistent. You can win!

Feedback in:

Hi Michael,

I wanted to drop you a note, and say that I’ve been recently enjoying your Podcasts. I saw your name come up in during some investment book searches, and saw that you have a podcast. A quick background on me, I’m a financial advisor who is interested in learning more about your trend following philosophy and methods. Being I’ve had a fair amount of experience in the investment business, (I began in 1992) I’m not a total believer in EMH. I am however, a fan of Milton Friedman, and although I have the utmost respect for the likes of Swenson, and Bogle, I believe there’s space for an advisor who can provide the potential for a market beating process to clients. I’ve been subscribing to Dorsey Wright since 2006 or so, and am familiar with P&F charting and basic trend following. I realize this my be foolish and naive, however I want to do all I can to rule out the possibility of a potentially better process, other than EMH.

I especially enjoyed your Podcast with Bernstein and his book “Against the Gods” which I keep on my desk for regular reference. I’m grateful for any information you may direct me to, or suggestions you may have.

Sincerely,
[Name]

You are welcome!

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David Burkus is author of “Friend of a Friend: Understanding the Hidden Networks That Can Transform Your Life and Your Career.” David has delivered keynotes to leaders of Fortune 500 companies and future leaders of the United States Naval Academy. His TED talk has been viewed almost 2 million times and he is a regular contributor to Harvard Business Review. What if the advice we have all heard about networking is wrong? David outlines the right way to network in the modern age.

How do you meet people? How do you meet the right people? Once you meet those people, what do you do with the relationship? Maybe you haven’t talked to someone for a few years but you could still call him or her up and have a personal talk with them. This is an example of one of the most useful networking ties, known as a “dormant tie.” David uses UFC founders, Dana White and Lorenzo Lamas, as an example. They went to high school together, hadn’t talked for years, both had a passion for fighting, but lived in different spheres of the fighting community. After reconnecting at a high school get together they realized they had some aligning career aspirations. They ended up buying the UFC and made it the fastest growing sport in history.

When you start taking chances on meeting people and putting yourself out there, that is when your network really expands. David shares another example of a movie producer who got his foot in the door by getting creative, taking some risks, and reaching out to the right people for conversations. Who do you know? Who do your friends know? Where do you know them from? These are basic questions that can get the ball rolling when trying to expand your network.

Knowing a ton of people is not necessary to be successful, you just need to know the right people to give yourself credibility. Shared activities and hobbies are ways to draw in a set of diverse people to build deep relationships. Networking events have become a thing of the past (thank goodness).

In this episode of Trend Following Radio:

• Curiosity conversations
• LinkedIn
• Network science
• Self observation
• Dormant ties
• Robust networks
• Network science
• The majority illusion
• The spread of Facebook

Mentions & Resources:

• David Burkus
• “Friend of a Friend: Understanding the Hidden Networks That Can Transform Your Life and Your Career”
• Daniel Kahneman
• Vernon Smith

Inspired by this post from Seth Godin… Michael expands it out on today’s podcast:

“What is and what might be: They have much less in common than you might expect. The key step in creating a better future is insisting that it not be based on the assumptions, grievances and dead ends of the past. The future won’t be perfect. We won’t be perfect. But we can be kind. We can listen. We can give opportunity the benefit of the doubt. The future won’t always work. We won’t always succeed. But we can be alert and seek out the possible instead of the predicted. The future won’t always be fair. But we can try. We can care. We can choose to connect. It can be better if we let it.”

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From IMDB: “An unsettling and eye-opening Wall Street horror story about Chinese companies, the American stock market, and the opportunistic greed behind the biggest heist you’ve never heard of.” That’s the opening description for a new documentary titled “The China Hustle” (2017).

Today, Michael talks with Director Jed Rothstein about the backstory for his film and the complexity of fairly describing a modern China. Whether you know something about China or not–this conversation will stimulate your China understanding.

Academy Award-nominated and Emmy-winning filmmaker Jed Rothstein specializes in hard-to-get stories from around the world that help people understand one another better. Whether seeking out heavy metal musicians who become Arab-Spring revolutionaries (PBS’s Before the Spring After the Fall); pioneering doctors (HBO’s Coma and Pandemic); Al Qaeda terrorists (The Oscar-nominated HBO documentary Killing in the Name); defenders of free speech (The 2009 Sundance film Shouting Fire); journalists on the front lines (Independent Lens’ Democracy on Deadline)–Rothstein works with people to help them tell their own stories in their own words. His films and television programs have played in festivals around the world, enjoyed special screenings at the United Nations, and been broadcast on HBO, PBS, National Geographic, Amazon Prime, The Discovery Channel, IFC, Channel 4, the BBC, CNN and elsewhere.

In this episode of Trend Following Radio:

• China

Mentions & Resources:

• The China Hustle

Food for thought:

• The Limits to Data
• Bill Ackman’s Pershing Square Faces Wave of Investor Redemptions
• Research: Learning a Little About Something Makes Us Overconfident
• Warren Buffett explains how to invest in stocks when inflation hits markets
• Double Bottom Chart Pattern Explained
• Rejection of an individual by a group is the worst kind of bullying
• 10 Ways To Reduce Stress
• Meta-Cognition: Understanding How Much I Know or Do Not Know
• Read Jamie Dimon’s full shareholder letter here
• When Breaking up is Easy To Do
• BlackRock Plans to Block Walmart, Dick’s From Some Funds Over Guns
• Finance blogger wisdom: missing ETFs

Enjoy.