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Ep. 424: The Wizard Jeremy Siegel Filleted with Michael Covel on Trend Following Radio

The Wizard Jeremy Siegel Filleted with Michael Covel on Trend Following Radio
The Wizard Jeremy Siegel Filleted with Michael Covel on Trend Following Radio

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Today on Trend Following Radio Michael Covel profiles Jeremy Siegel. Jeremy describes himself as “The Wizard of Wharton.” His website claims that he is credited with contributing and expanding the great bull market of the last two decades. Jeremy is also bestselling author of “Stocks for the Long Run.”

Michael moves right into playing a few clips from appearances Jeremy has made on CNBC. The first clip has Jeremy outlining his predictions in early November 2015: The Dow will surpass 20,000, oil can’t go much lower, and the dollar can’t go much higher. His predictions are perfect examples of predictions without any substance. They have no timelines, or data to backup why he feels the way he does.

Excerpt #2 was filmed around December 13th. The Dow at that time was at 17,300. The S&P was at 2020. Jeremy moves right into more predictions and generalizations. He doesn’t say “buy at this time” and “sell at this time.” Jeremy proceeds to use words like “tremor” and “relief rally.” It is hard to have wrong predictions and forecasts when you use words that have generalized meaning.

Excerpt #3 is from February 8th, 2016. Jeremy had to back peddle because his November and December forecasts had not come to fruition. He admits to being too bullish…sort of. He blames his wrong predictions on the market not doing what the market was suppose to do. Michael weaves in his commentary throughout the clips. The podcast ends with one of Michael’s favorite classic songs from the 1920’s.

In this episode of Trend Following Radio:

  • Predictions
  • CNBC Analysts
  • What is a bull and bear market?

“Jeremy Siegel is one of the great ones. [His article at the market top was] one of the most stark and prescient calls I have ever seen.” – Jim Cramer

Mentions & Resources:

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Willful Ignorance: Trend Following Radio Feedback

Feedback in:

“Most of the misinformation is not deliberate. People want to be led astray. They constantly ask the wrong questions, and those selling information get rewarded by giving them the answers they want.” -Van K. Tharp, Trade Your Way to Financial Freedom

I think CNBC will be around in 50 years, probably answering the same types of questions.

Love the podcast.
[Name]

Thanks!

Note: His feedback is on this.

Willful Ignorance
Willful Ignorance

Ep. 414: Buy and Hold for 50 Years with Michael Covel on Trend Following Radio

Buy and Hold for 50 Years with Michael Covel on Trend Following Radio
Buy and Hold for 50 Years with Michael Covel on Trend Following Radio

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Today on Trend Following Radio Michael Covel starts off talking about goal setting for 2016. He reads a 100 day fitness regimen for 2016. The challenge clearly lays out what is expected, and has concrete rules in place. In contrast, he plays a clip form CNBC with a headline that reads, “Stocks to buy and hold for 50 Years.” Michael tears their predictions apart. He says betting on others “current flavor of the day” stock picks are not how you want to plan your next 50 years.

“Top Stock Picks from 2016” is the next article Michael reads from. “Pro Michael Farr shares his best bets for the market next year including oil stocks, healthcare and consumer staples.” Farr starts off by giving an overwhelming amount of fundamental data to back up his stock picks. In the middle of giving his fundamental data however, he acknowledges that he does not have a crystal ball (and is guessing). He then goes on to guess oil prices will be higher rather than lower three years from now. Michael uses his statement as an example of prediction without foundation.

Michael moves on to diversification. If you trade in the direction of the stock pickers he brought on today, then where is your diversification? Research has shown that you need diversification. If you put all your money into Facebook or Chevron, as his market guru examples have told you to do, then where will you be in 10 years if those companies go the wrong way? Put together a diversified portfolio with rules for entering and exiting. Know how much you are going to trade. Have a plan in place so you can be successful.

In this episode of Trend Following Radio:

  • Diversification
  • Goal setting for 2016
  • Crystal ball prediction
  • The importance of rules in goal setting

“We’re going to bet 50 years into the future on idiocracy? That we can all instant message each other and pass photos back and forth, and there will not be any innovation in the future that could not possibly cause anybody or everybody to tune out of Facebook?” – Michael Covel

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Twisting the Data: The Fed, Correlations and Intoxication

It is amazing how quick people are to forget how wrong one prediction is, only to move onto believing in another prediction. An excerpt from the chapter “Intoxication”, in Trend Commandments:

A bipolar prediction came across my desk recently: “If the market rises over the next several weeks, today will have been a good day to buy. However, no one can know the answer today. Every day there seems to be a surprise. We don’t know how to predict the behavior of foreign countries or their attacks.”

The nonsense doesn’t stop there. While on the East Coast recently, I was listening to an AM radio finance show. An older man called in to ask how he could buy into various commodity markets. He was worried that they had run too far already. The female host assured him that there was plenty of time and to jump into the market. The caller mentioned that he liked to buy low and was waiting for a pullback. The host told him to start preparing for hyperinflation. She named an African country to enhance her theory and leaned the conversation toward food insurance, needed of course for the coming descent into anarchy.

Think not knowing what you are talking about is new? Think again. President Herbert Hoover circa May 1930: “While the crash only took place six months ago, I am convinced we have now passed through the worst—and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” Can’t just pick on old-timers. Consider the current day. Lloyd Blankfein (head of Goldman Sachs) said his firm would have survived the credit crisis without government help. The firm’s president, Gary Cohn, was more definitive: “I think we would not have failed. We had cash.” Treasury Secretary Timothy Geithner countered, “None of them would have survived” without government help.

More contradicting rhetoric from a 2010 60 Minutes interview reinforces the propaganda spell cast:

Scott Pelley: “Is keeping inflation in check less of a priority for the Federal Reserve now?”

Ben Bernanke: “No, absolutely not. What we’re trying to do is achieve a balance. We’ve been very, very clear that we will not allow inflation to rise above two percent or less.”

Pelley: “Can you act quickly enough to prevent inflation from getting out of control?”

Bernanke: “We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.”

Pelley: “You have what degree of confidence in your ability to control this?”

Bernanke: “One hundred percent.”

That confidence seems misplaced when you consider Bernanke’s words but a few years before:

In 2005, Bernanke said: “We’ve never had a decline in house prices on a nationwide basis. So, what I think is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.”4 In 2006, Bernanke said: “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

In 2007, Bernanke stated: “At this juncture…the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.”

Worse yet? Bernanke told the Senate Banking Committee in March 2011 that he saw “little evidence” that the stock market was a bubble, but provided certainty with this ditty of a response: “Of course, nobody can know for sure.” Why again do we care what this man says?

Not only can the pros not understand the data, but the conclusions they draw are almost always wrong.

Feedback in that adds to my thought:

Hi Mike, thought you might enjoy these. I listen to some of the BBC “More or less” podcasts, found this one (spurious correlations) when scrolling through their archives. So many out there (not just in finance) tend to torture data to find what supports their bias. The podcast and site do a good job at poking some fun at those tendencies.

Thanks!

For the audience:

Podcast “More or less: Behind the stats”: http://www.bbc.co.uk/programmes/p0201hpg

Spurious Correlations website: http://www.tylervigen.com/spurious-correlations

Ep. 369: Market Predictability with Michael Covel on Trend Following Radio

Market Predictability with Michael Covel on Trend Following Radio
Market Predictability with Michael Covel on Trend Following Radio

Subscribe to Trend Following Radio on iTunes

Just as shamans have been consulted throughout time to provide the desperate and gullible with prophecies, so too are financial shamans (often masquerading as experts) are looked to for comforting myths about market direction.

Of course, we can and should prepare for the many possible market eventualities by looking at the data and trading trends, but to expect anyone to be able to provide absolute predictions for the future is absurd. The truth is that we do not know for sure, and anyone that tells you they do know might as well be gazing into a crystal ball.

Today’s episode looks at the various attitudes and beliefs concerning the falsehood of market predictability. Michael Covel runs the commentary, drawing a narrative thread through various excerpts from some of the most prominent economic and financial thinkers.

In this episode of Trend Following Radio:

  • Recognizing when you are being misled by the experts
  • What to look for in trend analysis and what to be wary of
  • Considering bubbles and other unpredictable global factors in the markets
  • Finding an objective approach to investing based on quantifiable information
  • Considering timeless human investment psychology elements
  • Making investment decisions without being blinded by rigid economic processes or political ideologies

“It’s mind numbing to study financial history, because it is so repetitive: we do the exact same things over and over. We have followed this pattern in every major bubble, starting with the coin mania in the Roman empire.” – John Galbraith

Mentions & Resources:

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Have a question or comment about this episode? Post it below.

Use a computer rather than your brain…

CNBC: One of the U.K.’s most successful hedge fund managers [David Harding in pic] has spoken of the benefits of using the “emotionless systematic approach”.

Covel: That’s another way of saying trend following.

David Harding
David Harding

Source: www.insidermonkey.com

Trend Following Machines Cash in—Again

All these years later, all these stories later, and CNBC still has a difficult time explaining trend following to the masses. One good excerpt:

Funds managed by ISAM, Cantab, AHL, Systematica and others produced double-digit gains over the first three months of 2015, according to private performance figures obtained by CNBC. “Trend followers and other macro investors clearly outperformed,” said Robert Christian, head of research at K2 Advisors and Franklin Templeton Solutions. “What’s carried people is just classic, good old trend following.”

Note: ISAM is Larry Hite’s shop. One of my favorite no-nonsense trend following pros.

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