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Ep. 964: Henry Kaufman Interview with Michael Covel on Trend Following Radio

Henry Kaufman
Henry Kaufman

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Legendary economist Henry Kaufman shares a classic Wall Street story that has never been fully told: a firsthand account of the day in August 1982 that would define US economics for decades.

That single day turned out to be the beginning of the world that we now live in. At the time, after painful years of high interest rates and the inflation of the late 1960s and 1970s, consumers were paying 17 percent and higher to borrow money. But by the end of one summer day almost 40 years ago, the stock market had undergone its second-biggest rally since WWII, while bond prices soared and interest rates plunged. Dr. Kaufman himself had written a memo that sparked this tremendous boom-and it set the global markets on fire, marking the start of almost four decades of US economic growth.

Bio: Dr. Henry Kaufman is an economist. As senior partner, chief economist, and director of research at Salomon Brothers, then the most profitable investment bank in the world, his fame extended well beyond the financial industry and into popular culture, and enjoyed the nickname “Dr. Doom.”

In this episode of Trend Following Radio:

  • COVID-19 Pandemic
  • Financial Markets
  • Low Interest Rates
  • Henry Kaufman Warning
  • Federalism and State Control

Mentions & Resources:

Listen on:

“I have some knowledge of statistics, but I have no, and I mean NO knowledge of trading…”

Feedback in:

Greetings Mr. Covel,

The greatest challenge (se far) has been getting started. I have some knowledge of statistics, but I have no, and I mean NO knowledge of trading. I dabbled a bit in stocks and cryptocurrency, but it was sheer luck that kept me afloat so far. I simply want enough knowledge to be able to plan out a strategy, put it to the test and fine tune it over a decade or so, making some profit with my limited funds along the way. What I lack is a structured guide as to what to look for, where to look for it, and how to react. Not a detailed plan per se, just some guidelines to at least know what to look at and understand next.

I hope that answers your question.

Best regards,
Matija

Start here.

“My biggest challenge is: no gain but am trapped by several badly chosen stocks…”

Feedback in:

Good evening. My biggest challenge is: no gain but am trapped by several badly chosen stocks. Although I have cut losses on several of them. By the way, I am reading your book (The Complete TurtleTrader) and enjoying a lot. I decided to study seriously during 2 to 3 months, by going through basic trading books for building up a base, then will consider to take your course. Hope I am right… Have a nice evening,
Kosei M

Buying a few stocks and holding is not much of a strategy. Finish reading to see how the Turtles approached the markets.

“With reading your book, I am now selling 4 stocks that are not in an upward trend of 38. I also have six investments in SPACs which are awaiting deals…”

Feedback in:

Michael:

I was educated in engineering which suited my analytical bent; for example I can scan a spreadsheet of numbers and the anomalies jump off the page.

When I finally realized enough capital for investing, I was busy with my engineering/finance career (MBA) and owning a successful business (Private college) and had others manage my money.

The first manager brought Northern telecom when it had fallen to 60% of its high holding into bankruptcy I learn from that experience not to catch a falling Knife. The next two tended to be buy and hold with mediocre results with high fees.

When I have had periods of being responsible for my own investments, I have purchased some investment advice services which focused on earning growth and upside potential. I finally realized that I was a self described momentum trader. I held Apple for some years until it broke down in February (195% gain), Microsoft (182% gain) and Amazon (63% gain). I am also still in trades for DE, Copper Stocks at 45% gain; TSM at 100%.

One service that I recently purchase that has helped me is Chaikin Analytics. I am learning the capabilities of this service in allowing me to see trends and use stops based on Average True Range. It was this service that recommended that I buy your book on Trend Following (I am 100 pages in).

I have having trouble with the discipline with stops. Both TSM and PYPL had significant runs above trend pulling my stops up significantly and when the recent shift from growth stocks, both stocks dropped below stops but within the original trend. Believing that the reason to own had not changed, I allowed them to go and both are now below the original trend.

With reading your book, I am now selling 4 stocks that are not in an upward trend of 38. I also have six investments in SPACs which are awaiting deals. This account is over 5 million with 90 % invested. The other 7 accounts Total another 5 million.

As I have only reengage in actively managing my accounts, the majority of the accounts have not returned significant returns yet but I fell that I am not able to recoginze early the trend but get in after several to six months into the trend.

Thus to summarize I need to fell comfortable in applying my stops, identifying investment size and to identify trends earlier.

Allan D.

You need:

• Exact rules for selecting your tracking portfolio.
• Exact rules for entering your trades at the right time.
• Exact rules for exiting your trades with a loss.
• Exact rules for exiting your trades with a profit.
• Exact rules for how much money to bet on each trade.

Right?

“My favorite episodes are the ones where it is just you speaking and educating the listeners…”

Feedback in:

Good day Mr. Covel.

I have listened to many of your podcasts and want to praise you for being a great interviewer and for having such wonderful guests whom have so many different backgrounds. With that being said, my favorite episodes are the ones where it is just you speaking and educating the listeners. I encourage you to do more of the mailbag podcasts because so many of us will have those same questions or be in a similar situation. Thank you for the continued education and entertainment that you have provided to date and thank you in advance for the episodes to come. One last thing, when it comes to you dropping what is referred to as the F-Bomb and other expletives or vulgarities on your podcasts, I’m sure some listeners would prefer that you would use other words to express yourself. However, when it comes to myself, I say, keep them FUCKING coming my friend! I wish you and yours well and if the stars ever line up and I happen to be in your part of the world, it would be an honor to buy you a drink and shake your hand.
Best regards,

Oscar C.
Houston, TX

Thanks Oscar. You’re fucking welcome.

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