Please enjoy my monologue Don’t Let Them F*** You Around with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive.
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From INSEAD:
First you accept that there are things you can’t control. Then you try to assess the uncertainty and finally augment your plan to make sure you manage risk more effectively.
That means using models, independent opinions, internal and external advice and any other means to assess the unknown risks and to make your business nimble and open to change when the unexpected happens.
“You are better off focusing your energy on planning for the range of possibilities that could actually happen.”
For example, he says it’s very difficult to tell which start-up businesses will be successful in the early stages. If you accept that, a better strategy is to try to diversify over a number of projects just as venture capitalists do. Not all the projects will pay off but you diversify your risk so that you have a better chance of nurturing one that will succeed.
Chance and randomness play a significant role in business and in our lives. “The point is not that the world is hopeless and you shouldn’t do anything, it’s just that we should do a more careful assessment of what we can predict and what we can’t predict. And where we can’t predict then the effort and the resources are better spent on planning,” Gaba told INSEAD Knowledge.
“Instead of trying to predict this, which you actually cannot, you are better off spending your resources and effort on planning for various contingencies.”
And when it comes to managing risk in investing, the authors have pillars of wisdom: “Be average. Be patient. Be risk aware. Be balanced.”
Another vantage to consider? “What can we learn from expert gamblers?”
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Source: gapingvoid.com.
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Hi Mike, my eyes have definitely been opened by your books, and lately listening to the podcasts as well… great interviews thanks!
This week I was listening to an audiobook of a classic novel “The Alchemist” by Paulo Coelho. It’s about a mentor relationship between an alchemist and a boy, but its really full of metaphors for lessons in life. It seems very appropriate to the philosophy behind trading, particularly having to constantly make many hard decisions just to follow a long term goal.
There was also passage which struck me as fitting to your general podcast sentiments. The two characters in the book are stopped and searched, and in the alchemist’s pockets they find a piece of the philosopher’s stone and some of the elixir of life. When asked the alchemist tells them exactly what they are, and that they can turn any metal into gold and make you life forever, and then they all just laugh as if he’s obviously joking. As they walk away the boy asks why he told them the truth. The alchemist replies, “It is often the case when you tell people the absolute truth they rarely believe you”.
Keep up the good work!
Cheers, Mike Blain
Great connection Mike. Thank you. EXACTLY the case for trend following skeptics.
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.
Bailout nation started in 1998 with the bailout of Long Term Capital Management (LTCM). Here was their annual report (PDF) that made them the darling of the investing world back in the day. Why bring it up today? LTCM is arguably at the root of current 2012 chaos. The first cut so to speak.
Shout to Barry Ritholtz for the title borrow!
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.
Alexander Elder is on the podcast:
My guest today is Dr. Alexander Elder, a trader, educator and author. Dr. Elder’s unique and inspiring story starts with his dissatisfaction with the system in his home country of Estonia. At 23, while working as a ship’s doctor, he jumped a Soviet Union ship in Africa and received political asylum in the United States; he also ended up on the KGB’s wanted list. Dr. Elder worked as a psychiatrist in New York City and taught at Columbia University.
The topic is his book Trading for a Living: Psychology, Trading Tactics, Money Management.
In this episode of Trend Following Radio we discuss:
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From SEED:
Nonlinear systems, however, are not so well behaved. They can appear stationary for a long while, then without anything changing, they exhibit jumps in variability—so-called “heteroscedasticity.” For example, if one looks at the range of economic variables over the past decade (daily market movements, GDP changes, etc.), one might guess that variability and the universe of possibilities are very modest. This was the modus operandi of normal risk management. As a consequence, the likelihood of some of the large moves we saw in 2008, which happened over so many consecutive days, should have been less than once in the age of the universe.
Our problem is that the scientific desire to simplify has taken over, something that Einstein warned against when he paraphrased Occam: “Everything should be made as simple as possible, but not simpler.” Thinking of natural and economic systems as essentially stable and decomposable into parts is a good initial hypothesis, current observations and measurements do not support that hypothesis—hence our continual surprise. Just as we like the idea of constancy, we are stubborn to change. The 19th century American humorist Josh Billings, perhaps, put it best: “It ain’t what we don’t know that gives us trouble, it’s what we know that just ain’t so.”
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.