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Category: Interviews

Ep. 254: William Poundstone Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
William Poundstone
William Poundstone

My guest today is William Poundstone, an American author, columnist, and skeptic. He has written a number of books including the Big Secrets series and a biography of Carl Sagan.

The topic is his book Fortune’s Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street.

In this episode of Trend Following Radio we discuss:

  • Claude Shannon
  • The connection between Al Capone
  • The Kelly formula, bookmaking, and the telephone industry
  • Bell Labs and information theory
  • Why, when betting, if there’s a small chance of losing everything, you will eventually lose everything
  • Criticisms of the Kelly criterion
  • Ed Thorp, blackjack, and card counting
  • Long-Term Capital Management
  • Martingale vs. Kelly
  • Early development of the Black-Scholes formula

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fortunes formula

Ep. 253: Perry Kaufman Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Perry Kaufman
Perry Kaufman

My guest today is Perry Kaufman, an American systematic trader, index developer, and quantitative financial theorist. He is considered a leading expert in the development of fully algorithmic trading programs.

The topic is systematic trading.

In this episode of Trend Following Radio we discuss:

  • How Kaufman came to the idea of 100% algorithmic trading systems
  • The difference between being systematic and being automated
  • Optimization vs. validation
  • The biggest advantages of testing
  • Why discretion is not part of Kaufman’s toolbox
  • The problem of tail events
  • Why discipline is the most important characteristic of a systematic trader
  • The “loose pants fit everyone” philosophy
  • Preparing yourself for uncertainty
  • Comparisons between risk management and risk measurement
  • The Sharpe ratio
  • High volatility trades vs. low volatility
  • Why Kaufman places equal weight on both risk management and the underlying system
  • Systematic trading in established mature markets vs. emerging markets

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Ep. 252: Ben Hunt Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Ben Hunt
Ben Hunt

My guest today is Ben Hunt, the Chief Risk Officer at Salient Partners. Salient is a 19B AUM manager based in Houston, Texas. As Chief Risk Officer, Hunt writes the Epsilon Theory, viewing capital markets through the lenses of game theory and history.

The topic is Epsilon Theory.

In this episode of Trend Following Radio we discuss:

  • Power of the crowd watching the crowd
  • Game theory
  • Having a profound agnosticism about what the future holds
  • The difference between risk and uncertainty in the context of game theory
  • The Panopticon and the chilling effect of being watched
  • The “common knowledge game” and the missionary
  • The island of the green-eyed tribe

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Shout to Marko Graenitz for Nice Feature Article

Posted on by Michael Covel

Read (PDF).

Michael Covel

Source: Jul 2014 www.tradersonline-mag.com.

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Ep. 251: Andrew Huszar Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Andrew Huszar
Andrew Huszar

My guest today is Andrew Huszar, a Senior Fellow at Rutgers Business School and also a former Morgan Stanley managing director. In 2009, he managed the Federal Reserve’s 1.25 trillion dollar mortgage-backed security purchase program.

The topic is the direction of the Federal Reserve.

In this episode of Trend Following Radio we discuss:

  • Looking at the short term
  • Black swans
  • Huszar’s history and how he came to work for the Federal Reserve
  • The changing of the banking model in the US from the 1980’s to the late 2000’s
  • Quantitative easing
  • Why Huszar ultimately left the Fed at the beginning of 2011
  • How the Fed has become over five times bigger in recent history
  • The current source of Wall Street money
  • The idea of an overly financialized US economy
  • The need for long-term structural changes in the US

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Ep. 250: Hersh Shefrin and Arvid Hoffmann Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Hersh Shefrin and Arvid Hoffmann
Hersh Shefrin and Arvid Hoffmann

My guests today are Hersh Shefrin and Arvid Hoffmann.

Hersh Shefrin has done pioneering work in behavioral finance and is the author of Beyond Greed and Fear.

Hoffmann is a colleague of Shefrin. He is a Professor of Finance at Maastricht University in the Netherlands.

The topic is their paper, Technical Analysis and Individual Investors.

In this episode of Trend Following Radio we discuss:

  • Covel and Shefrin discuss how Shefrin came to know that behavioral finance was his path; the two-system framework; the connection to behavioral and eating disorders; the disposition effect; when emotion and reason are in conflict; “transferring your assets” vs. “selling a loss”; distinguishing between rules and discretion; how we stick with rules for ourselves given the context of our humanity; the psychological pitfalls of the 2008 financial crisis; the inevitability of market crises; Minsky and Keynes; the psychology of Keynesian economics; and human ideas surrounding uncertainty.
  • With Arvid Hoffmann, Covel discusses the paper Technical Analysis and Individual Investors; the inspiration for the paper; Hoffmann’s definition of technical analysis; the narrow focus of the paper to short-term trading; technical analysis and trend following; “invest as if the market was efficient”, and “restrict your attempts to beat the market”

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arvid hoffmann

Ep. 247: Van Tharp Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Van Tharp
Van Tharp

My guest today is Van Tharp, Tharp runs the Van Tharp Institute and is the author of four acclaimed books published by McGraw Hill: Super Trader, Trade Your Way to Financial Freedom, Safe Strategies for Financial Freedom, and Financial Freedom Through Electronic Day Trading. He was also featured in Jack Schwager’s Market Wizard’s: Interviews with Great Traders. Van Tharp received his Ph.D. in psychology, is a certified Master Practitioner of Neuro Linguistic Programming (NLP), a Certified Master Time Line Therapist, a certified Modeler of NLP, and an Assistant Trainer of NLP. He has used his expertise in NLP to create the successful models of trading and investing upon which so much of his work is based.

The topic is his book Trading Beyond the Matrix: The Red Pill for Traders and Investors.

In this episode of Trend Following Radio we discuss:

  • Beliefs in the context of trading and investing
  • The moment of now, and the Navajo’s belief of a never-ending present
  • The belief examination paradigm
  • “Big money” and what it means to Van Tharp
  • The idea of “trader jail”
  • Fear of the unknown
  • The importance of sleep
  • The difference between spirituality and religion

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Van Tharp