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Ep. 593: Scott Galloway Interview with Michael Covel on Trend Following Radio

Scott Galloway
Scott Galloway

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Scott Galloway is a professor at New York University Stern School of Business teaching brand strategy and digital marketing. He has started nine firms and his weekly YouTube series has generated millions of views. Scott is also author of “The Four: The Hidden DNA of Amazon, Apple, Facebook and Google.”

Amazon, Apple, Facebook and Google are arguably the most influential entities in the world. These companies have deconstructed who humans are as a species and reassembled who humans are, in the form of for-profit companies. They have scaled up so fast and become so successful by understanding humans most common questions and producing answers instantly. Scott breaks down the specific reasons each of these companies have individually thrived: Google = God, Facebook = Love, Amazon = Consumption, and Apple = Sex.

Mediocre and cheap products have been pushed in years past. However, people have new tools allowing them to practice due diligence and find what product is best for them personally. A better product is the best and only way to brand in today’s marketplace. With customer reviews built into Google and Amazon, they have changed the entire course of how people buy.

These four companies have done a lot of good, but have they become so big that they have become bad for society? In some ways, they are leveraging their power to unhealthy heights. Amazon, Apple, Facebook and Google yield more money and more power than some foreign governments. This has allowed them certain privileges such as tax avoidance and immunity to government oversight. What is another negative? Amazon has literally sucked the oxygen out of other top companies such as Nordstrom, Macy’s, and Sears. Facebook and Google have taken over the digital marketing world. If you are not working with Facebook or Google, then you are marketing with newspapers or magazine — rapidly declining markets. Amazon, Apple, Facebook and Google are not only in zero sum markets, they are creating zero competitors.

What are some great leadership qualities from these top companies? Jeff Bezos, for example, has always kept a long term outlook on consumption rather than short-term. He also has combined fast and free service. Tim Cook has tripled the value of Apple. Apple is the first company in history to have great quality and spend extremely low on production. Facebook has shown tremendous agility in their management. Michael and Scott finish the conversation talking government, and how these companies yield their power in the political arena.

In this episode of Trend Following Radio:

  • Amazon, Google, Apple, and Facebook
  • Eco system of Silicon Valley
  • Zero sum nature of Amazon
  • Jeff Bezos
  • Tim Cook
  • Mark Zuckerberg
  • Political views of Amazon, Google, Apple, and Facebook
  • Strong leadership qualities
  • Monopolies

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Ep. 450: Making Money Every Month Is Fantasy with Michael Covel on Trend Following Radio

Making Money Every Month Is Fantasy with Michael Covel on Trend Following Radio
Making Money Every Month Is Fantasy with Michael Covel on Trend Following Radio

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Today on Trend Following Radio Michael Covel starts off reading a listener email from someone interested in making 3-4% every month with only 15% drawdowns. Michael gives his personal feedback as well as responses from Facebook after posting the email. The responses were mixed. Some people fully believed these kinds of returns are possible, while Michael and others said that if anyone is telling you they can produce 3-4% returns every month then it is absolutely a scam. Only Long Term Capital Management, Bernie Madoff, and some high frequency traders with insider trading access can tout such returns.

Michael finishes the podcast talking about the upcoming American elections. What is the alternative to Trump and Sanders? Hilary Clinton? Michael says that everything is an act with Clinton and that she’s a bona fide…[fill in the blank].

In this episode of Trend Following Radio:

  • Long Term Capital Management
  • Bernie Madoff
  • Leverage
  • Diversification
  • Indian Stock Market

“Leverage doesn’t matter in this case. Such consistency with low drawdowns goes against nature and cannot exist if it trades long enough.” Michael Melissinos

Mentions & Resources:

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Gotta Lie To Get Invited Back

After posting the below commentary on my Facebook page I got an interesting response:

This exchange followed:

Alan: Thank you for your thoughtful analysis of my market commentary March 16th. A “Trend Follower” should appreciate my confidence and reasoning that the bull run is still intact. As a market veteran of 25 years with thousands of TV appearances this may be a great opportunity to discuss the insignificance of news nonsense with your podcast listeners. Pick a time I would like to come on to talk media and its negative impact on trading discipline. I am the first to tell traders to turn off the TV as there is very little to help you make money. It is mostly infotainment to keep you emotional and tuned in to pay advertisers. In fact, I have developed a financial news aggregator to search, sort and share market video. The time saving app breaks down the markets into categories and plots the videos from news sources on price and time charts for perspective. That said I make the best effort to give a well thought out actionable trade idea on each of my appearances as opposed to speaking in broad generalizations. Trading is all about risk control, probability, money management and implementation of a trading plan. It should be methodical and boring and as we all know watching television to cheer lead positions does not add to profitability. Looking forward to schedule the podcast interview.

Covel: Hold on. You are the guy on CNN? The guy with videos literally every day providing near useless fundamental factoids and interpretations of what will happen next? And now you are emailing me to say trading is all about risk control, probability, money management and implementation of a trading plan. Don’t you think that is disingenuous? You tell me you have made 1000s of appearances, but [now] you tell people not to watch? I am not [Jim] Cramer. My podcast is not that. Best we agree to disagree right here, unless you can convince me how my eyes are lying to me when I watch your videos of broad generalizations.

Alan: I cannot change the game if I do not appear on TV. Producers and hosts do not understand the markets and create a crisis de jour. My job is to be optimistic of opportunities in any and all market conditions. Stressing a plan of action instead of fear is what I do. Having CNBC on for 10 hours a day or watching Cramer doesn’t help anybody make money. At best it may give 2-3 nuggets of information that could be explored for profit potential. People think news helps when in fact the WHY is of no importance compared to the HOW the market is moving.

Covel: You can’t let the TV hand feed you non-stop and then bite the same hand. None of what you are saying to me was on CNN.

Alan: I gave CNN reasons why I remain optimistic at a time when investors have renewed fears. Calm confidence. Participating in the TV discussion is more productive than not doing so to showcase my disciplined approach. My development of the [name] shows my recognition of this news noise issue and the need to better inform investors.

Covel: Maybe you know the truth, but to appear on TV so much is for you to play a game–their game. Try appearing on TV and tell the real truth. They won’t ask you back. Then you will have made a real advance in your credibility.

Distraction Kills

Facebook’s CEO Mark Zuckerberg:

“I want to stress the importance of being young and technical. Young people are just smarter. Why are most chess masters under 30? I don’t know. Young people just have simpler lives. We may not own a car. We may not have family. Simplicity in life allows you to focus on what’s important.”

Of course, family, and other aspects of life are important, but that doesn’t take away from Zuckerberg’s wisdom. Want to make something big happen, like trend following success, then avoid distraction. Period.

Trend Following Goes By Many Names

Feedback in:

Hi Michael, I just sent you a friend request, I don’t really use Facebook, not very schooled up on appropriate. Facebook told me I should know you personally to friend you…guess I’ll find out.

You’re on it. I have been listening to you for the past couple months and all I have to say is AMEN brother. Trend following has always been my goal though it hasn’t been until recently I knew it as “trend following”. I’d love to chat sometime but I know you’re a busy guy bringing to light the best for a lot of people.

Learning/trading/systems testing has been my life for the last year and a half. Lonely…nobody gets it. And yet, they are all heading for the same inevitable retirement scenario…there isn’t one, at least for your conventional 9-5er’s. I could rant, but you know it already…

At the sure chance I’ll be preaching to the choir, I would love to hear something on managing 401k’s from a trend following perspective. There are some interesting challenges in 401K’s. Holding periods/penalties and most only offer a specific list of investment options. This is something I am currently beginning to work on for mine and my wife’s retirement accounts, I am sure I can increase the returns with backtested timing models.

Anyway, thanks for your work.

Justin

Welcome! Some retirement information on the podcast in the near future. Good point.

No Day Trading. Please, No Day Trading

A recent dialogue on Facebook:

Shankar: Does trend following work on intra-day as well?

Covel: No. But why would one want to trade intra-day?

Shankar: Frankly I don’t know…but what I wanted to ask was does it work even on a shorter time frame i.e 5 minute charts. It should work right?

Covel: No. But why would anyone try to trade 5 minute charts? There is no system that trades 5 minute charts. None. Anyone who says that there is… is suspect.

Shankar: Any trading is for generating more profits… is it?

Covel: Day trading is not for more profits.

Shankar: Very surprising…

Covel: It is a fantasy. Find me the track records of the great day traders to match the track records of the great trend followers. Let me save you the research: they don’t exist. Why is that surprising?

Shankar: Lots of strategies have been there. I am talking about an Indian contest. Surprising because lot of people keep talking about it.

Covel: There is nothing special about Indian markets. All markets are the same. Talk about it, yes. Talk. Many people talk about doing drugs. Does their talk force you to want to take drugs too?

Shankar: No.

Covel: Trust, but verify.

Shankar: Ok.

Covel: When you can verify day trading, let me know.

Shankar: Why would trend following not work on smaller time frames?

Covel: Why should they?

Shankar: The philosophy is the same right? There are going to be trends in the shorter time frame as well.

Covel: How is it the same to trade long term trends that exceed a year or longer … and that is the same as a 5 minute bar? I talk about these issues in my books extensively.

Shankar: As long as you are running the profits and cutting the losses.

Covel: Go find the proof for the 5 minute bar trend followers. I will wait!

Shankar: Ideally if the philosophy is the same, it should work on all time frames. Hey this is just a question out of inquisitiveness. I appreciate the work you have done. And let me tell you all traders badly need to know the work you have been doing.

Covel: Ideally? Why?

Shankar: I am talking about from the trend following philosophy point of view, also, if you do the back testing on the shorter time frames, you do get good results.

Covel: You get good results, really? Find me the real proof as asked. I will wait.

More on day trading here and here.

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