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Category: Risk Management

Spyros Makridakis Interview Followup

Posted on by Michael Covel

A followup from a recent conversation with Spyros Makridakis:

Dear Mike,

It was nice to talk to you this morning. As I promised I am attaching the following three papers:

  • Medicine. This is an extract from an article I am writing about Forecasting and Uncertainty. It is amazing that the forecasting record of medicine is so dismal as it involves our lives and health.
  • Positive Illusions. This is a recent paper that will be published in a book of readings.
  • Why Forecasts Fail. A paper published in the Sloan Management Review that explains why forecasts fail and how I got involved in this line of research.

I am also attaching the cover copy of the book by Ablin (the guy who discovered the PSA test for prostate cancer) and his view about the validity of the test he discovered.

Let me know if I can be of any additional help and please send me the link of your podcast once it is ready.

Best,
Spyros Makridakis

Thanks!

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Ep. 328: Robert Seawright Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Robert Seawright
Robert Seawright

My guest today is Robert Seawright, the Chief Investment & Information Officer for Madison Avenue Securities, a boutique broker-dealer and investment advisory firm headquartered in San Diego, California. Seawright is also a columnist for Research magazine, a Contributing Editor at Portfolioist as well as a contributor to the Financial Times, The Big Picture, The Wall Street Journal’s MarketWatch, Pragmatic Capitalism, and ThinkAdvisor.

The topic is his blog A New Kind Of Investment Outlook.

In this episode of Trend Following Radio we discuss:

  • How Seawright was able to put together this blog piece
  • Perfection and prediction
  • Bias blindness
  • Volatility vs. risk
  • Separating your politics from your investing
  • Financial media as entertainment
  • Whether Seawright encountered any pushback after putting out his article
  • Letting go of the high leverage idea
  • Why the more we trade
  • The worse we do
  • Nobel laureate David Baltimore
  • Adversarial collaboration

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James Simons: Mathematics, Common Sense and Good Luck

Posted on by Michael Covel

I start this at a point where he talks about his entry into trading.

Jim Simons
Jim Simons

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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.

Ep. 315: Michael Mauboussin Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Michael Mauboussin
Michael Mauboussin

My guest today is Michael Mauboussin, an investment strategist in the financial services industry, professor at the Columbia Graduate School of Business, and serves on the board of trustees at the Sante Fe Institute (an independent, nonprofit theoretical research institute). He is managing director and head of Global Financial Strategies at Credit Suisse, where he advises clients on valuation and portfolio positioning, capital markets theory, competitive strategy analysis, and decision making.

The topics are his books More Than You Know and Think Twice: Harnessing the Power of Counterintuition.

In this episode of Trend Following Radio we discuss:

  • Multi-disciplinary thinking and its influence on Covel
  • Looking at larger reference classes
  • The Swiss Franc
  • Mauboussin’s personal take on the recent oil move
  • Fundamentals and expectation
  • Luck or skill when it comes to trading profits
  • The paradox of skill, absolute, and relative skill
  • Whether scientific principles of luck exist
  • Defining luck
  • Outcome bias
  • The general public perception of behavioral economics

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Know Thy Risk Factors

Posted on by Michael Covel

Sandy Brasher turned me onto a piece by Harry Long. Some of his article is off target, and a clear misunderstanding of trend following (“The most popular trend following system is the Golden Cross/Death Cross”), but his passage I liked to some degree (it’s not complete):

When examined in this light, it is not actually statistically interesting to determine if trend following is a holy grail. It is statistically interesting to understand that by engaging in trend following vs. buy-and-hold, one is quite literally exchanging one set of risks for another. Strategies are not about trading assets — they are about trading risk factors. And it appears that buy-and-hold risk factors are more widely held in portfolios than trend following risk factors. Markets have cruel methods for correcting such imbalances.

The key: what are those risk factors? That’s what is not complete.

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Larry Hite and Warren Buffett

Posted on by Michael Covel

ISAM Systematic Presentation 2011-12

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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.

Risk, Reward and Uncertainty

Posted on by Michael Covel

Trend followers understand that life is a balance of risk and reward. If you want the big rewards, take the big risks. If you want average rewards and an average life, take average risks. Charles Sanford gave a commencement address that is timeless. It said in part:

“From an early age, we are all conditioned by our families, our schools, and virtually every other shaping force in our society to avoid risk. To take risks is inadvisable; to play it safe is the counsel we are accustomed both to receiving and to passing on. In the conventional wisdom, risk is asymmetrical: it has only one side, the bad side. In my experience—and all I presume to offer you today is observations drawn on my own experience, which is hardly the wisdom of the ages—in my experience, this conventional view of risk is shortsighted and often simply mistaken. My first observation is that successful people understand that risk, properly conceived, is often highly productive rather than something to avoid. They appreciate that risk is an advantage to be used rather than a pitfall to be skirted. Such people understand that taking calculated risks is quite different from being rash. This view of risk is not only unorthodox, it is paradoxical—the first of several paradoxes which I’m going to present to you today. This one might be encapsulated as follows: Playing it safe is dangerous. Far more often than you would realize, the real risk in life turns out to be the refusal to take a risk.”

Life is fraught with risk. There is no getting away from it. However we try to control the direction of our lives, there are times when we fail. Therefore, we might as well accept that life is a game of chance. If life is a game of chance, to one degree or another, we must be comfortable with assessing odds in the face of risk.

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.