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Daniel Peris is author of “Getting Back to Business: Why Modern Portfolio Theory Fails Investors and How You Can Bring Common Sense to Your Portfolio” and a portfolio manager at Federated Investors. Before transitioning into asset management, Peris was a historian focused on modern Russian history, but now self identifies as a business investor.

Daniel’s clients tend to be more conservative investors that approach markets from a business perspective rather than a passive investment approach. His main focus is to help clients make better business like decisions about markets. Not everyone has the time or desire to be an active investor, however Daniel hammers the point that if you don’t want to take responsibility for your own trading, there are plenty money managers for hire that will align with investors needs.

Daniel has strong views on economic practices like the efficient market hypothesis (Eugene Fama) and modern portfolio theory. Daniel sees the modern portfolio theory as particularly outdated. Modern portfolio theory was a hypothesis developed by Harry Markowitz in his paper “Portfolio Selection,” published in 1952. It is an investment theory that investors can build portfolios to optimize or maximize potential return based on a prescribed level of risk within the market. This theory governs the typical investors portfolio and is the most influential economic theory in finance and investment today. Daniel argues in his book and on the podcast that this system was developed in the 50’s and does not connect to 2018 investing.

In this episode of Trend Following Radio:

• Modern portfolio theory
• Efficient market hypothesis
• Value investing
• Momentum investing
• Diversification
• Portfolio selection
• Defining risk

Mentions & Resources:

• Daniel Peris
• Getting Back to Business: Why Modern Portfolio Theory Fails Investors and How You Can Bring Common Sense to Your Portfolio
• Federated Investors
• Harry Markowitz
• William Sharpe
• Eugene Fama

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Peter Boettke is economist of the Austrian School. He is currently an economics and philosophy professor at George Mason University; the BB&T Professor for the Study of Capitalism, Vice President for Research, and Director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at GMU. His newest book is “F. A. Hayek: Economics, Political Economy and Social Philosophy (Great Thinkers in Economics).”

Peter got hooked on economics during college after being hired for his first job – digging pools. He saw taxes being taken out of his pay and personally felt the negative effects. The philosophy behind why his checks were being garnished didn’t sit well with him. Rather than be frustrated, he got fascinated with the way economics worked and quickly saw there was something obviously wrong with the way government was ran. Along with signing up for all the economics classes he could, Peter went to the library and read. He had “a-ha” moments in those reading sessions that has molded him to be the economist he is today.

Michael and Peter touch on a broad scope of topics including: What is Peter’s perspective on President Trump’s view of trade wars and tariffs? Should intellectual property be protected? What is rent seeking and how does it relate to Jeff Bezos? What separates the American entrepreneurial spirit from entrepreneurs overseas?

In this episode of Trend Following Radio:

• Trade deficits
• Trump politics
• Politics in the marketplace
• Zero sum game
• Jeff Bezos and rent seeking
• The market for privileges
• Merchant class mentality

Mentions & Resources:

• Peter Boettke
• F. A. Hayek: Economics, Political Economy and Social Philosophy (Great Thinkers in Economics)
• George Mason University

Feedback in:

Hello Mr. Covel,

I am a big fan of your podcast, and I would like to thank you for spreading so much amazing information for free! You have inspired me to take a new step in my investing career, moving into trend following, with a completely different perspective of what I’ve been taught (BUY AND HOLD).

I hope you will send me your recommended steps to take into this new world of investing, and I must add that I have been deeply impacted by long-term investing – Warren Buffet/Charlie Munger style investing for the last year, but somehow your approach just resonates much better with me.

Thank you so much and best regards from Norway.

[Name]

Welcome!

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Paul Britton is a portfolio manager at Apollo Systems Research Corporation.

What got Paul going down the trend following path? In high school Paul’s dad put him into a stock that went from $5 to $60. He took his profit and put money into a couple more stocks that turned out to be winners as well. These lucky trades peaked his interest in markets. Shortly after making these initial trades, Paul’s dad also gave him a copy of “Reminiscences of a Stock Operator.” He started working and looking at data trying to see if he could get a system of his own to work. He quickly learned that you can play around with entry and exit points, markets, etc., but as long as you pick up on the big trends and ride them until they lose–that was the #1 way to make money.

Paul lets the experts in different markets such as milk, coffee, orange juice, sugar, stocks, currencies, etc. “tell him how to trade” by showing their opinions hidden within the price. “You don’t need a fundamental expertise to be trading any of these markets.” Paul is in 110 different markets. He trades strictly off price and has no idea outside of price “why” stocks are going up and down. Every strategy they develop at Apollo Systems Research Corporation has to work on many markets and have maximum diversification. Paul loves adding diversity to his portfolio where other trend followers may not be.

In this episode of Trend Following Radio:

• Momentum bias
• Let your winners run
• Fundamental trading
• Diversification
• Global macro trading
• Compounding
• Supply and demand

“In the long run, it’s the compounding that is going to do all the heavy lifting for you.” – Paul Britton

Mentions & Resources:

• Paul Britton

Feedback in:

Another great confirmation from non other than Mr Tim Ferriss:

“People view all of these people as massive risk-takers, and when you actually sit down and talk to these guys, you realise they are expert risk mitigators. I think it’s very easy to come to the mistaken conclusion in business, for example, that you only win big if you bet the farm. And in fact, when I talk to some of these companies here in Silicon Valley for instance that have become worth billions and billions of dollars… in my experience, in no cases have they bet the farm. They have evaluated the downside – they’ve tried to measure the maximum allowable downside – they know not only their bet and their bet size, but when they’re going to fold. They have an exit strategy for minimizing or capping losses… I remember hearing an expression, I don’t know who to attribute this to, but it’s like ‘If you cap your downside, the upside takes care of itself’… if you take enough shots and you’ve constantly capped your downside, if you have a couple of outliers that give you disproportionate upside–in the long run, you’re going to average out ahead and beat most people.”

Indeed. Trend following.

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Michael loves finding “golden eggs.” Today he shares a presentation from Charlie Munger, the 94-years young billionaire business partner of Warren Buffet. While Michael my not share the same style of trading as Munger, he loves the world view and psychology behind how Munger thinks.

In this episode of Trend Following Radio:

• Knowing the edge of your own competency
• Humility
• Integrating disciplines
• Occam’s razor
• Academia in America
• Diversification
• Capitalism

Mentions & Resources:

• Charlie Munger

Feedback in:

Hello Michael,

I am sure you have seen this article today in the FT, if not here it is.

I have all your books, and I am a regular listener to your podcasts, which I enjoy. My trading style is based purely on psychology and trend following, with manged risk. I would not trade any other way! Averaged 35% return over the last four years. Love it when you get Tom Basso, Richard Dennis and others on your podcast. Why make trading complicated…!

I think as human beings we can’t in today’s world, think simple is best. I have proved to myself, and to my bank account it is, and I use your books and listening to your podcasts to keep me on the straight and narrow. As sometimes you think you know best, and you completely F**K it up.

Great content, thank you for sharing.

An appreciative Trend Follower, who is very much Long on Covel Futures…!

Best regards,
[Name]

Welcome!