Milton Friedman is one of Michael’s favorite dead guests to bring on the podcast. He takes complicated subjects and breaks them down clearly. Today, Michael curates two interviews between Phil Donahue and Milton Friedman. These interviews were recorded back in the 1980’s, but many of the points made are more relevant today than ever. Milton foreshadows Uber, talks about the deep state (without mentioning the deep state), brings up airline service and monopoly. His solutions to problems in government 35 years ago were to cut government spending, hold monetary growth back and cut regulations. The same solutions to government are at the forefront of American politics today.
In this episode of Trend Following Radio:
Liberty in trading
Unknowingly supporting private interests
How to prevent monopoly
“I don’t believe government is the mother of children, I don’t believe it is the father of children, I believe government is a way in which you and I and our fellow citizens achieve certain things jointly that we can’t achieve separately.” – Milton Friedman
“The private market system is a system of profit and loss. And the loss part is just as essential as the profit part.” – Milton Friedman
I think he’s referring to that guy who wrote Chavez was great…
[David Sirota] used to have a column in one of the daily papers here in the NW. He’s been an economic kook (technical term) for decades. Seems to think that the State owes us all something. Probably didn’t pay enough attention in college and flunked Econ 101 and 102.
Look, capitalism isn’t perfect (and you correctly point out that our current “crony capitalism” is a perverse version that will lead to bad outcomes), but all you have to do is compare Singapore and Cuba from the time that both started the current regimes (mid-1950’s) and the outcomes are so startlingly different that there can be no debate about which system is better. End of rant.
Michael Covel speaks with Simon Black. Simon is an investor, entrepreneur and the founder of Sovereign Man. He has a travel perspective that has given him unique insights on freedom, making money, keeping as much of it as possible (and protecting it from the government whatever government that may be).
Michael starts off the podcast asking Simon, “I want to know your story. How did you go down this path? How did you start?” Simon’s journey started in the military. He went to West Point. Upon graduation he was commissioned as an Army intelligence officer and stationed in the Middle East around the time Bush was accusing Saddam Hussein of having weapons of mass destruction. As the U.S. was gearing up for war, it became abundantly clear that it was all a lie, and Simon realized that if the president would be willing to go to war over something that was so false, then what else would the government be willing to do?
Simon breaks down the idea of currency. He says that everyone should have physical cash money. There are different forms of money or “legal tender.” One form of currency would be U.S. government bonds which are used by large entities. Another type of money is banking accounts. That is what most of us use. 90% of the money supply is in banking accounts, otherwise known as in digital form. Most people have their money in a computer stored in a windowless building somewhere. Physical cash is another form of money. It is the money you see in your had. Those are three very different forms of money, however they all happen to trade at a 1-1-1 exchange rate. That could change at any point. Simon urges that everyone should have physical money at their disposal in the case that banks shut down our ability to withdraw.
Michael and Simon talk travel next. Modern transport technology has made travel simple and given people a unique opportunity to see different places and cultures. Simon makes the point that freedom is a state of mind, it isn’t necessarily attached to travel. Every country has a unique vantage point such as great health care or education. Simon talks about health care in particular and the cost differences in the U.S compared to certain places in Asia.
The thrust of today’s podcast is to point out that everyone should be responsible for his or her own security and safety. One should be sovereign over his or her own life, experience freedom and live independently. Challenge the status quo. Think outside the box, whether that be choosing your healthcare, profession, or where you want to live. Think differently.
In this episode of Trend Following Radio:
Breaking the rules
“In the face of such obvious risks, hope drives us to do nothing, and to have confidence in the system that has constantly failed us.” – Simon Black
On today’s show, Michael Covel talks about how people that are ahead of the curve often find themselves isolated – even ridiculed – by those who don’t yet get it. This, as Michael points out, is certainly true for trend following traders, and some of the sharpest push back comes from the talking heads of the media.
To emphasize his point, Michael plays clips from an interview between CNBC’s Joe Kernen and Graham Capital’s Ken Tropin, a highly successful trader who heavily incorporates trend following techniques into his overall strategy. To Michael, of utmost significance in the two men’s exchange, is the fact that Kernen bumbles through the interview wholly unprepared (either via incompetence or on purpose). Kernen didn’t respect Tropin or his strategy enough to do even the most basic homework beforehand.
Michael’s discussion then moves on to the topic of uncertainty. In direct opposition to media personalities, that are paid to pretend to know what the market will do, trend following traders embrace the knowledge that they can’t predict the future. Uncertainty makes the game more exciting, and not just the investment game. As Michael demonstrates, the principles of trend following can be effectively applied across myriad disciplines.
In this episode of Trend Following Radio:
Recognizing that without a strategy, you’re at the mercy of the machine
Understanding that knowing every market move won’t help without a plan
The importance of setting your strategy beforehand
Seeing that media personalities are paid to pretend to know all
How the principles of trend following apply to other disciplines
“Trend following is one of the most mature and well-established systematic trading styles with a thirty-three year track record of profitability.” – Ken Tropin
On today’s show Michael Covel vents some of the frustration he’s been feeling over the past few weeks. Central to his discussion is the idea of failure, and how the vast majority of people are unable – or unwilling – to accept how vital it is to overall long-term success.
Michael opens by pointing out that most people today seem to be under the delusion that someone will always be there to take care of them. This, as Michael explains, is by design. Government and the talking heads of the media want the average citizen to be soft, dependent, and unwilling to take risks. Safety and security, according to the official line, should be valued above all else (even if it is all an illusion).
But this line of thinking doesn’t account for the truly successful of the world. Those who’ve risked everything and succeeded – specifically because they failed and learned from their mistakes. Success requires tenacity and dedication, but neither are required if you don’t take a risk in the first place. Because if you never take a shot, you’ll never hit the target.
In this episode of Trend Following Radio:
Understanding that success requires failure
Seeing past investment myths
Recognizing that no risk means no profits
Understanding that there’s no such thing as a perfect strategy
Shattering the notion that someone will always take care of you
Accepting that there are no guarantees
“I’ve failed over and over and over again in my life. And that is why I succeed.” – Michael Jordan
It must be obvious, from the start, that there is a contradiction in wanting to be perfectly secure in a universe whose very nature is momentariness and fluidity. But the contradiction lies a little deeper than the mere conflict between the desire for security and the fact of change. If I want to be secure, that is, protected from the flux of life, I am wanting to be separate from life. Yet it is this very sense of separateness which makes me feel insecure. To be secure means to isolate and fortify the “I,” but it is just the feeling of being an isolated “I” which makes me feel lonely and afraid. In other words, the more security I can get, the more I shall want. To put it still more plainly: the desire for security and the feeling of insecurity are the same thing.
Want security in your investments? That’s what you crave? That’s your number one goal?
Hint: You will never get there.
Accept that the desire for security and the feeling of insecurity are the same thing, and you are on your way to making some money. Start here.
Source: Watts, Alan W. (2011-11-16). The Wisdom of Insecurity (Vintage) (pp. 77-78).
Nassim Taleb and Mark Spitznagel talk about how government intervention postpones the inevitable. Excerpts:
Taleb: Mark, your book is the only place that understands crashes as natural equalizers. In the context of today’s raging debates on inequality, do you believe that the natural mechanism of bringing equality — or, at the least, the weakening of the privileged — is via crashes?
Mark: Well straight away let’s ask ourselves: Are we really seeking realized financial equality? How can we ever know what is the natural or acceptable level of inequality, and why is it even the rule of the majority to determine that? That aside, one can absolutely say logically and empirically that asset-market crashes diminish inequality. They are a natural mechanism for this, and a cathartic response to central banks’ manipulation of interest rates and resulting asset-market inflation, as well as other government bailouts, that so amplify inequality in the first place. So crashes are capitalism’s homeostatic mechanism at work to right a distorted system. We are in this ridiculous situation where utopian government policies meant to lessen inequality are a reaction to the consequences of other government policies — a round trip of market distortion. After we’ve been run over by a car, the assumed best treatment is to back the car over us again.
Taleb: I see you are distinguishing between equality of outcome and equality of process. Actually one can argue that the system should ensure downward mobility, something much more important than upward one. The statist French system has no downward mobility for the elite. In natural settings, the rich are more fragile than the middle class and we need the system to maintain it.
Spitznagel: Well straight away let’s ask ourselves: Are we really seeking realized financial equality? How can we ever know what is the natural or acceptable level of inequality, and why is it even the rule of the majority to determine that? That aside, one can absolutely say logically and empirically that asset-market crashes diminish inequality. They are a natural mechanism for this, and a cathartic response to central banks’ manipulation of interest rates and resulting asset-market inflation, as well as other government bailouts, that so amplify inequality in the first place. So crashes are capitalism’s homeostatic mechanism at work to right a distorted system. We are in this ridiculous situation where utopian government policies meant to lessen inequality are a reaction to the consequences of other government policies — a round trip of market distortion. After we’ve been run over by a car, the assumed best treatment is to back the car over us again.
Spitznagel: The main metaphor of my book is the “Yellowstone effect”: A massive fire in Yellowstone Park in 1988 opened the eyes of foresters to the fact that a century of wildfire-suppression, and with it competition- and turnover-suppression, had only delayed, concentrated, and by far worsened the destruction — not prevented it. This isn’t just about dead-wood accumulation creating a fragile tinderbox network. The real issue is how our tinkering artificially short-circuits the fundamental capacity of the system to allocate its limited resources, correct its errors, and find its own balance through the internal communication of information that no forestry manager could ever possibly possess. (The more this is mocked by technocratic naïfs like Geithner, the more valid it is.) But that capacity is still there, and homeostasis ultimately wins through a raging inferno. This is a cautionary tale for our economy. A crash, or the liquidation of assets that have grown unimpeded by economic reality (as if there were more nutrients in the ecosystem than there actually are), looks to academics and bureaucrats — and just about everyone else as well — like the system breaking down. It is actually the system fixing itself.
Food for thought.
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