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Ep. 105: Hong Kong, Tokyo and Beyond with Michael Covel on Trend Following Radio

Hong Kong, Tokyo and Beyond with Michael Covel on Trend Following Radio
Hong Kong, Tokyo and Beyond with Michael Covel on Trend Following Radio

Michael Covel comes to us with his first podcast in in China, dedicating today’s episode to the the city of Hong Kong. Having just arrived in Hong Kong from Tokyo, Covel ruminates on the differences between the two places. Tokyo is a fantastic, organized, and civilized place. Covel discusses the feel of the city, especially loving green tea vending machines every hundred feet giving hot or cold tea perfectly every time. However, he notes a somewhat slow pace which is a direct contrast to the speed of Hong Kong. Hong Kong is on fire, and everybody is there trying to make things happen. You don’t have to like it– and it does have some rough edges– but it’s alive. It’s a giant melting pot with a pulsating energy in the air of people making things happen. Covel also details the events surrounding the presentation he gave for CLSA at the Hyatt in Roppongi, Tokyo. Following Covel’s presentation, Dr. Marc Faber spoke. Faber and Covel share a view that all of the misadventures happening in society today will eventually end badly. If you’re going to try and trade all this uncertainty you’d better have a timing indicator. Trend Following has a timing indicator built in: price action. You’ll never get in at the very bottom and you’ll never get out at the very top, but you’ll get out alive and with a profit. Covel shares a quote from Seth Godin on that subject and discusses alternatives to staying glued to the television. Is it really fun staying glued to the screen watching blips go by? Or do you do it because you think that’s how you make money? Fortunately, you don’t need to be worried what high frequency trading is doing and you don’t need to be worried about the next Fed announcement. Consider the alternative: you want to be ready when markets move in larger trending directions and get aboard the trends that have much lengthier time horizons than fifteen seconds. You want to be prepared for when the next black swan swoops in. If you put the fifteen second news flashes aside and start trading something like a six month signal instead, doesn’t that allow you a much nicer life than fixating on the minutia of every moment? Also: Covel talks about why Hugh Hendry will probably never do the podcast, shares a speech from the “Kid President”, and finally uses the word “ladyboy” on the podcast.

Listen to this episode:

Authority v. Tradition Is Central to Your Speculative Decisions

“Because we’ve always done it that way.”

Those are the words of someone likely to lose big–soon. Authority is not a wise foundation for speculative moneymaking decisions. Consider:

Appeal to authority is bad, but appeal to tradition is even worse. Experts aren’t infallible, but at least expertise is usually hard-won and retains some applicability over time. By contrast, tradition is often totally arbitrary or based on reasons that retain no relevance whatsoever. Also, an expert can issue a correction but tradition remains immutable and sacred (source: Jeff Darcy).

I would argue that almost all fundamental style investing falls into a category of tradition. Very few look for an alternative such as trend following. They figure that since it appears that everyone has invested or traded a certain way–that it must be the only way. They forget to dig deeper and forget to look for the truth behind why investing/trading works. Always searching for the “why?” is part of my February 25th presentation in Tokyo.

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