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Category: Economics

Fascinating Insights From Nobel Prize-Winner Robert Shiller

Posted on by Michael Covel

Jim Byers passes along:

On why so many experts missed the 2008 financial crisis: “Experts have always missed big events like this. If you look at the record of statistical forecasting models, they tend to get to the recession when it’s starting to come. A casual observer might start to worry about it. Forecasting it years out, they don’t get; in particular, if you look at the Great Depression of the 1930s, nobody forecasted that. Zero. Nobody. Now there were, of course, some guys who were saying the stock market is overpriced and it would come down, but if you look at what they said, did that mean a depression is coming? A decade-long depression? That was never said.”

On short-term thinking: “I think that there’s too much faith in analysis of short-term data. You see some pattern, and you can do a statistical test and prove that will prove that it is significant or passes the smell test to a statistician. But the problem is, the world is always changing. It’s not a stable thing. The underlying human parameters may be stable, but you can see that there is institutional and cultural evolution, and it’s not something that you can quantify.”

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Ep. 166: Harry Binswanger Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Harry Binswanger
Harry Binswanger

My guest today is Harry Binswanger, an American philosopher, writer, and Objectivist as a long-time associate of Ayn Rand.

The topic is his article on the value of 1%.

In this episode of Trend Following Radio we discuss:

  • Being inspired by the 1%, and why his article caused such an uproar
  • The nature of trade
  • Envy and jealousy
  • Understanding where entrepreneurs start and how wealth is created
  • The bailouts of 2008
  • Wal-Mart and its many innovations
  • Why money isn’t the root of all evil
  • Seeing Ayn Rand’s work woven into the cultural fabric
  • Statism
  • Navigators and the new health care laws
  • Why the wealthiest counties in America all surround Washington, DC
  • Why we’re at the “tipping point” in society today
  • Thoughts on Ron Paul vs. the principles of Ayn Rand

Listen to this episode:

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Mark Dow: Everything You Think You Know About the Fed Is Wrong

Posted on by Michael Covel

The other day I had a Twitter debate with Mark Dow (don’t know him). My tweet:

Father Buffett Omaha says the Fed is history’s greatest hedge fund. You did not know your vote got you that? Relax.

Mark responded:

The Fed has reduced the federal deficit by hundreds of billions. Plus, unlike a real hedge fund, no one can pull its funding.

He then went on to outline the benefits of Fed actions with zero mention of risks. He outlined more here with his key rationalizations for never ending activist Fed policy as follows:

They fixed the plumbing and are now trying to incentivize animal spirits to pump water through the pipes.

Animal spirits? Sort of like 98-99 and 03-07 animal spirits that induced the current Fed actions that seem to rock your world? Love the academic sounding cover to disguise boom/bust bubble blowing engineered by the government (a government controlled by the very banks that benefit the most from Fed policy). He continues:

[W]hy…have equities gone up so much in response to QE? The simple answer? Psychology and misconception. By taking an aggressive stand, the Fed signaled to markets that “I’ve got this”. The confidence that the Fed would do everything it could to protect our economic downside stabilized animal spirits. Then it slowly but surely enabled risk taking to re-engage. The fact that so many people believe that the Fed would be “pumping money into the stock market” and so many buy into the aphorism “don’t fight the Fed” (notwithstanding September 2007 to March 2009) made the effect that much more powerful. In short, this largely psychological effect on markets—one that I (Mark) had initially underestimated—bought time for household balance sheets to heal and is allowing fundamentals to catch up somewhat with market prices.

These guys writing academic defenses of the Fed or criticizing what people may or may not know about the Fed–are dishonest actors. We have seen two major Fed induced bubbles in the last 14 years, and most likely we are in the middle of a third. Their rationalizations designed to promote cradle to grave daddy government can be tossed in favor of one simple heuristic: interest rate manipulation is no free lunch. There will be a cost.

Note: This dialogue is not trading advice. None of it matters if you are a trend follower. However, I am a citizen and despise dishonest weenies with crap agendas. Also, if one wants a fundamental counter to Mark, consider.

———-

You may be interested to listen to my podcast with Mark Minervini on how to think and trade like a champion.

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Is Your Only Strategy “Trust”?

Posted on by Michael Covel

Peter Schiff states:

“The Fed’s failure yesterday to announce some sort of tapering of its QE program, despite the consensus of an overwhelming percentage of economists who expected action, once again reveals the degree to which mainstream analysts have overestimated the strength of our current economy. The Fed understands, as the market seems not to, that the current “recovery” could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed’s monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago. Following this playbook, the Fed will likely maintain the pretense that tapering is a near term possibility and that it has a credible plan on the shelf to bring an end to QE. In reality the Fed is stalling for time and hoping that the economy will inexplicably roar back to life. Unfortunately, hope is not a strategy.”

Stanley Druckenmiller (from Zero Hedge) states:

“A stock market at an all-time high would suggest we don’t have a problem with financial conditions.” In fact, Druckenmiller continues, the Fed “blew it… they had a freebie,” they could have started the process to “get us off the dope.” This action, or inaction, he warns “is going to make it so much harder for the next Chairman to start the process.” In fact, he concludes, that from beginning to end – once markets adjust from these subsidized prices – that the wealth effect of QE will have been negative not positive…this has forced us to buy securities at subsidized prices and when they adjust, at whatever point in the future, they will adjust immediately and on no volume.”

I don’t know the timing of when their wisdom will unfold, they don’t either.

But it will.

And what will you do?

Do you have a plan beyond trusting daddy government to tuck you in at night?

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.

Gaining the Entrepreneur Angle

Posted on by Michael Covel

Podcast feedback:

Michael during your most recent podcast with Dan Andrews, he asked you if your listeners would like the entrepreneur angle. The answer is yes. I’m sure a lot of listeners like myself are working hard on making the transition out of the cube. Exposure to inspirational people like Dan is tremendously valuable. Thank you for doing this episode. Please look to bring in similar guests.

Thanks
Brandon

PS you might want to look at Lewis Howes if you are not already familiar with him. Could be a good guest.

Thanks Brandon. Great feedback. Will let Dan know too. Met Lewis briefly before–good idea.

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 Retirement Gamble on PBS

Posted on by Michael Covel

PBS Frontline throws cold water on the retirement dream. I paint a similar picture here.

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.

Right and Wrong

Posted on by Michael Covel

A recent conversation:

Luis: Hi Michael this last podcast is really amazing with Harry Dent. To be honest I live in Portugal and I don´t know what we need more to open our eyes from our Global State of Coma. Keep going with this amazing podcast.

Michael: Why did you like this one so much?

Luis: It is amazing that you keep explaining the manipulation in so many different ways and we just can´t see. And this one is from a more fundamental I hope more people understand now people just love this kind of numbers.

Michael: Some people think it is bad to discuss these issues–trade price alone they say. Sure trade the price for trading, but we as human beings can’t keep ignoring what is the appropriate way to run societies. There is a right and wrong.

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.