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Tag: holy grails

No Funnymentals in Trend Following

Posted on by Michael Covel

Feedback in:

Hi Michael, I’ve been trading trends the last 3 years and it’s been good. However, whenever I revisit Market Wizards or listen to your podcasts, I always notice that some of the great traders, including the trend followers, have some fundamental aspects in their trading plus the use of technical indicators other than price. If trading is merely trading numbers and price action is really what matters, is it foolhardy to think that trading without charts(just daily closing prices and nothing else) can be profitable? I had manually churned out a set of performance data based on some EOD price charts of the last 15 years. But I’m planning to work on evaluating my trend following system using only prices and no charts. Is there someone who has traded trends profitably without charts? I appreciate your entire work of trend following. Thank you! Warmest regards, Francis T.

The core trend followers in my books? No funnymentals (Ed Seykota term of course). None of the trend followers in my books talk about charts. They use price data. Do charts help? That’s all subjective! Price is objective.

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The High Priests of Finance

Posted on by Michael Covel

Courtesy of The Economist:

Finance even has its own high priests in the form of the analysts and fund managers who promise their clients heavenly rewards if only they listen to their advice. They preach regular sermons in the form of brokers’ notes and quarterly reports, and they house themselves in vast cathedral-like buildings that dominate the skyline. Each day also has its canonical hours as traders pray for profitable opportunities at the European, American and Asian market openings. Finance has its annual calendar, too, marked with festivals known as results seasons in which the lucky participants receive their temporal (rather than spiritual) dividends.

And like any self-respecting religion, finance has its doctrinal schisms as well. Active fund managers are a bit like the medieval Catholic church, offering eternal salvation to those willing to pay the appropriate sum, which are known in modern parlance as performance fees rather than indulgences. The active-investment sect has its elaborate rituals and language, with a liturgy (“information ratios” and “alpha generation”) as baffling to the layman as the Latin mass was to the medieval peasant. Clients are supposed to listen to their presentations in a reverential hush, trusting that all the mumbo-jumbo will deliver superior results. The passive fund managers, or index-trackers, are akin to early Lutherans. Investors have no need for priestly intermediaries between them and the market, say the index-trackers. All they require is the full text of those companies that are included in the benchmark.

Finance also has its equivalent of holy men, the gurus who pronounce on the market outlook. Not for nothing is Warren Buffett known as the “sage of Omaha”. The faithful conduct an annual pilgrimage to Nebraska every year to attend the annual meeting of his company, Berkshire Hathaway. His folksy demeanour would surely make him the ideal neighbourhood priest, bringing comfort through life’s ups and downs.

Nice.

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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.

Can I Have $2,000 to Trade?

Posted on by Michael Covel

Feedback in:

Hi Michael Covel, can I get a sponsorship from you? Because I am requesting 2000 to start trading. Please help me.

Go away. Best advice I have.

Note: I am not being mean either. Far from it.

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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.

A Great Example of How Too Much Protection Delivers Chaos — Either for Kids or Markets

Posted on by Michael Covel

Many think markets can be made safe. They truly believe there is a way to predict tomorrow and thus watch their accounts go straight up over time. Once all of the nasty unsafe stuff is cut, life becomes roses. A great example of the desire for ultimate protection can be seen in the ban of these stamps by the United States Post Office:

“With the Just Move! stamp issuance the U.S. Postal Service hoped to raise awareness about the importance of physical activity in achieving a healthy lifestyle. However, according to Linns Stamp News, the USPS will be destroying the entire press run after receiving concerns from the President’s Council on Fitness, Sports & Nutrition over alleged “unsafe” acts depicted on three of the stamps (cannonball dive, skateboarding without kneepads and a headstand without a helmet). (There’s also a batter without a batting helmet, a girl balancing on a slippery rock, and a soccer player without kneepads or shin pads.)”

Here they are:

Beam me up!

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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.

Warren Buffett Reaps $10 Billion From Crisis-Era Investments

Posted on by Michael Covel

A comment from Warren Buffett:

“In terms of simple profitability, an average investor could have done just as well investing in the stock market if they bought during the panic period. You make your best buys when people are overwhelmingly fearful.

Without bailouts Buffett’s firm doesn’t survive.

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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.

Should You Invest in Biblical Finance such as Suggested by Dave Ramsey

Posted on by Michael Covel

An excerpt:

Ramsey is overtly religious, and his for-profit Financial Peace University is billed as “a biblically based curriculum that teaches people how to handle money God’s ways.”

Found this intro:

Please don’t add your religious insights to your investing insights. Ramsey is wise to talk of cutting up your credit cards, but biblical finance such as outlined in the Dave Ramsey Five Foundations, is not the wise path.

Dave Ramsey Photograph
Dave Ramsey preaching the 5 Foundations of finance.

For a more scientific approach to investing and improving your financial circumstances take a look at my books.

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.

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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.

Mark Dow: Everything You Think You Know About the Fed Is Wrong

Posted on by Michael Covel

The other day I had a Twitter debate with Mark Dow (don’t know him). My tweet:

Father Buffett Omaha says the Fed is history’s greatest hedge fund. You did not know your vote got you that? Relax.

Mark responded:

The Fed has reduced the federal deficit by hundreds of billions. Plus, unlike a real hedge fund, no one can pull its funding.

He then went on to outline the benefits of Fed actions with zero mention of risks. He outlined more here with his key rationalizations for never ending activist Fed policy as follows:

They fixed the plumbing and are now trying to incentivize animal spirits to pump water through the pipes.

Animal spirits? Sort of like 98-99 and 03-07 animal spirits that induced the current Fed actions that seem to rock your world? Love the academic sounding cover to disguise boom/bust bubble blowing engineered by the government (a government controlled by the very banks that benefit the most from Fed policy). He continues:

[W]hy…have equities gone up so much in response to QE? The simple answer? Psychology and misconception. By taking an aggressive stand, the Fed signaled to markets that “I’ve got this”. The confidence that the Fed would do everything it could to protect our economic downside stabilized animal spirits. Then it slowly but surely enabled risk taking to re-engage. The fact that so many people believe that the Fed would be “pumping money into the stock market” and so many buy into the aphorism “don’t fight the Fed” (notwithstanding September 2007 to March 2009) made the effect that much more powerful. In short, this largely psychological effect on markets—one that I (Mark) had initially underestimated—bought time for household balance sheets to heal and is allowing fundamentals to catch up somewhat with market prices.

These guys writing academic defenses of the Fed or criticizing what people may or may not know about the Fed–are dishonest actors. We have seen two major Fed induced bubbles in the last 14 years, and most likely we are in the middle of a third. Their rationalizations designed to promote cradle to grave daddy government can be tossed in favor of one simple heuristic: interest rate manipulation is no free lunch. There will be a cost.

Note: This dialogue is not trading advice. None of it matters if you are a trend follower. However, I am a citizen and despise dishonest weenies with crap agendas. Also, if one wants a fundamental counter to Mark, consider.

———-

You may be interested to listen to my podcast with Mark Minervini on how to think and trade like a champion.

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
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• Performance
• Research
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• 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.