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Ep. 267: Dennis Gartman Interview with Michael Covel on Trend Following Radio

Dennis Gartman
Dennis Gartman

My guest today is Dennis Gartman, the editor and publisher of The Gartman Letter. Gartman appears on CNBC, ROB-TV and Bloomberg television, discussing commodities and the capital markets, and speaks before various associations and trade groups around the world.

The topic is outside the box market perspectives.

In this episode of Trend Following Radio we discuss:

  • How Gartman first got started
  • Chicago trading in the late 70’s to the mid 80’s
  • Why you should never add to a losing position
  • Buying strength and selling weakness
  • Systems from Gartman’s perspective, and keeping your systems simple
  • Being patient with winning trades and impatient with losers
  • Gartman’s daily grind and process
  • Mass psychology, efficient markets, and behavioral economics
  • Gartman’s thoughts on the market today and geopolitical events
  • How we hear about geopolitical events today compared to the past

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The Narrative as Valuation

Aswath Damodaran writes:

If one extreme of the numbers/narrative spectrum is inhabited by those who are slaves to the numbers, at the other extreme are those who not only don’t trust numbers but don’t use them. Instead, they rely entirely on narrative to justify investments and valuations. Their motivations for doing so are simple.

1. Story telling is a powerful attention getter/keeper: Research in both psychology and business point to an undeniable fact. Human beings respond better to stories than to abstractions or numbers, and remember them for longer. After all, the Harvard Business School has taken story telling almost to an art form with its cases, tightly wound narratives that are supposed to convey larger lessons.

2. Unrestrained creativity: “Creative” people through the ages have always fought back against any restraints on their creativity, especially those imposed by those that they view as less imaginative than they are.

3. The Creative Superiority Complex: Just as numbers people intimidate with mounds of numbers, good narrators can browbeat “bean counters” with superior story telling, especially if they can back their stories up with personal experience.

Don’t trade off storytelling. Just don’t do it.


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1929 Wisdom

From John Hussman:

Galbraith reminds us that the 1929 market crash did not have observable catalysts. Rather, his description is very much in line with the view that the market crashed first, and the underlying economic strains emerged later: “the crash did not come – as some have suggested – because the market suddenly became aware that a serious depression was in the offing. A depression, serious or otherwise, could not be foreseen when the market fell. There is still the possibility that the downturn in the indexes frightened the speculators, led them to unload their stocks, and so punctured a bubble that had in any case to be punctured one day. This is more plausible. “Some people who were watching the indexes may have been persuaded by this intelligence to sell, and others may have been encouraged to follow. This is not very important, for it is in the nature of a speculative boom that almost anything can collapse it. Any serious shock to confidence can cause sales by those speculators who have always hoped to get out before the final collapse, but after all possible gains from rising prices have been reaped. Their pessimism will infect those simpler souls who had thought the market might go up forever but who now will change their minds and sell. Soon there will be margin calls, and still others will be forced to sell. So the bubble breaks.”

Just food for thought for when the machine makes you feel oh so comfortable.


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

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Trend Following Podcast Guests
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Performance
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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Danger Real; Fear a Choice

Money management, or position sizing, is a critical component of trend following trading success: Consider wisdom from Ralph Vince:

You want the fewest moving parts (less parameters and less system rules) in your system. Primitive and simple grinding out profits over the long term. It’s not how profitable a system is, but rather that it is profitable. Money management takes the positive expectation, moneymaking system, and performs the real magic.

More.


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

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Trend Following Podcast Guests
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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

The Scientific Method: An Explanation For Explanations

Nathan Myhrvold, CEO and Managing Director, Intellectual Ventures; Co-Author (with Bill Gates), The Road Ahead; Author, Modernist Cuisine, writes:

Humans are a story telling species. Throughout history we have told stories to each other and ourselves as one of the ways to understand the world around us. Every culture has its creation myth for how the universe came to be, but the stories do not stop at the big picture view; other stories discuss every aspect of the world around us. We humans are chatterboxes and we just can’t resist telling a story about just about everything.

However compelling and entertaining these stories may be, they fall short of being explanations because in the end all they are is stories. For every story you can tell a different variation, or a different ending, without giving reason to choose between them. If you are skeptical or try to test the veracity of these stories you’ll typically find most such stories wanting. One approach to this is forbid skeptical inquiry, branding it as heresy. This meme is so compelling that it was independently developed by cultures around the globes; it is the origin of religion—a set of stories about the world that must be accepted on faith, and never questioned.

Somewhere along the line a very different meme got started. Instead of forbidding inquiry into stories about the world people tried the other extreme of encouraging continual questioning. Stories about aspect of the world can be questioned skeptically, and tested with observations and experiments. If the story survives the tests then provisionally at least one can accept it as something more than a mere story; it is a theory that has real explanatory power. It will never be more than a provisional explanation—we can never let down our skeptical guard—but these provisional explanations can be very useful. We call this process of making and vetting stories the scientific method.

For me, the scientific method is the ultimate elegant explanation. Indeed it is the ultimate foundation for anything worthy of the name “explanation”. It makes no sense to talk about explanations without having a process for deciding which are right and which are wrong, and in a broad sense that is what the scientific method is about. All of the other wonderful explanations celebrated here owe their origin and credibility to the process by which they are verified—the scientific method.

This seems quite obvious to us now, but it took many thousands of years for people to develop the scientific method to a point where they could use it to build useful theories about the world. It was not, a priori, obvious that such a method would work. At one extreme, creation myths discuss the origin of the universe, and for thousands of years one could take the position that this will never be more than a story—how can humans ever figure out something that complicated and distant in space and time? It would be a bold bet to say that people reasoning with the scientific method could solve that puzzle.

Well, it has taken us a while but by now enormous amounts are known about the composition of stars and galaxies and how the universe came to be. There are still gaps in our knowledge (and our skepticism will never stop), but we’ve made a lot of progress on cosmology and many other problems. Indeed we know more about the composition of distant stars than many questions about things here on earth. The scientific method has not conquered all great questions – other issues remain illusive, but the spirit of the scientific method is that one does shrink from the unknown. It is OK to say that we have no useful story for everything we are curious about, and we comfort ourselves that at some point in the future new explanations will fill the gaps in our current knowledge, as often raise new questions that highlight new gaps.

It’s hard to overestimate the importance of the scientific method. Human culture contains much more than science—but science is the part that actually works—the rest is just stories. The rationally based inquiry the scientific method enables is what has given us science and technology and vastly different lifestyles than those of our hunter-gatherers ancestors. In some sense it is analogous to evolution. The sum of millions of small mutations separate us from single celled like blue-green algae. Each had to survive the test of selection and work better than the previous state in the sense of biological fitness. Human knowledge is the accumulation of millions of stories-that-work, each of which had to survive the test of the scientific method, matching observation and experiment more than the predecessors. Both evolution and science have taken us a long way, but looking forward it is clear that science will take us much farther.

Foundational to trend following success.


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

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Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

The Fundamental News Is Often Made Up; It Is Fake

A friend of mine once relayed a great story:

A good friend of mine was once employed as a reporter by the largest commodity news service at the time. One day his major story was about Sugar and what it was going to do. After I read his piece, I asked: “Gary, how do you know all of this?” I will never forget his answer. He said: “I made it up.”

If that is true, and it is, what’s next? Keep learning.


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

Trend Following Podcast Guests
Frequently Asked Questions
Performance
Research
Markets to Trade
Crisis Times
Trading Technology
About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Ep. 265: Leo Melamed Interview with Michael Covel on Trend Following Radio

Leo Melamed
Leo Melamed

My guest today is Leo Melamed, a pioneer of financial futures, currencies, and stock indexes. Melamed became Chairman of the Chicago Mercantile Exchange in 1969. In 1972, under his leadership, the CME created the International Monetary Market (IMM), the world’s first financial futures exchange, and launched currency futures. He is currently Chairman Emeritus of CME Group (formerly the Chicago Mercantile Exchange).

The topic is his book Leo Melamed: Escape to the Futures.

In this episode of Trend Following Radio we discuss:

  • Overcoming odds
  • China’s futures markets
  • The middle class in China
  • Melamed’s experience meeting Milton Friedman and some of the lessons learned
  • Melamed’s early experiences escaping Nazi-controlled Poland, and eventually going to work for Merrill Lynch
  • Stock futures
  • The importance of speculation

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