Subscribe now and watch my free trend following VIDEO.

Ep. 482: Two Takes with Michael Covel on Trend Following Radio

Two Takes with Michael Covel on Trend Following Radio
Two Takes with Michael Covel on Trend Following Radio

Subscribe to Trend Following Radio on iTunes

There are back-to-back monologues on today’s episode. The two episodes consist of the same material, just said a little different. The first take Michael was told was too aggressive with too many F bombs, so he re-recorded but still left it up on the tail end of the podcast. The double header podcast today was inspired by a film Michael recently re-watched called, “Boom Bust Boom”.

Michael talks about Hyman Minsky’s “financial instability hypothesis”. Minsky said that there is instability in capitalism and if capitalism was eliminated, that would help eliminate bubbles. Minsky believed that offsetting the economy is how you eliminate instability. This is where the government came up with zero interest rates, and in some places, negative interest rates. Due to the Minsky mentality, economists think they can control the markets and stop human nature from happening.

Michael ties his documentary film into the discussion and describes the insight he got during ’08 when he happened to be filming. Trend following strategies and behavioral economics have these characteristics in common: 1. People will never be rational. 2. Markets will always trend up, down and sideways. 3. You can’t predict trends. 4. There are ways to make money even though numbers 1-3 are set in stone and will not change.

In this episode of Trend Following Radio:

  • The tulip bubble
  • March 2000
  • Fall of 2008
  • Financial instability hypothesis
  • Trend following philosophy
  • Behavioral economics

“The only way to eliminate market bubble’s and crashes is to eliminate people.” – Michael Covel

Mentions & Resources:

Listen to this episode:

Ep. 464: The Next Brexit with Michael Covel on Trend Following Radio

The Next Brexit with Michael Covel on Trend Following Radio
The Next Brexit with Michael Covel on Trend Following Radio

Subscribe to Trend Following Radio on iTunes

Everyone was told to trust the system and be happy: “Save your money and interest income will be your retirement.” This has come to be completely untrue and people are collectively beginning to wise up, as seen in Brexit.

Michael goes into a timeline of market crashes illustrating trend following success: 1973-1974 stocks go down 50% and trend following kills it. 1987, known as Black Market Monday, US stocks go down 20%+ in a day and trend following kills it. Barings Bank collapses spring of 1995, trend following kills it. August 1998, Long Term Capital Management craters, and trend following made a fortune. It was almost a zero sum transfer from LTCM to trend followers in August of 1998. Spring of 2000, the dot com bubble bursts and trend following cleans up again. 2002 was one of the best trend following performance years ever. After 2002 another bubble is built and when it burst in October of 2008, trend following had outstanding performance results yet again. When the majority of people think the world is ending, trend following is reaping the profits. Brexit? Yes, too.

Nobody can predict the future but if you want to play the game, you have to place bets. Trend followers were in established trends once Brexit hit. They do not predict, but they have educated bets. Michael ends with one question, “What side are you going to be on? The side of the winners or the side of the losers?” It’s your choice.

In this episode of Trend Following Radio:

  • Boom and busts
  • Brexit
  • Certainty in markets

“Certainty in markets, that is the delusion. That is the media cacophony.” – Michael Covel

Mentions & Resources:

Listen to this episode:

Long Term Capital Management; Never Goes Out of Style!

Feedback in:

Hi Michael, I am a trend-follower from Norway (the cold country in Europe!), for about 5 years. I just wanted to thank you for all the great information and books you are writing/providing. I have been trading the markets for about 10 years, but the first 5 years with losses. After the first 5 yrs, I sat down and did a great job of analyzing my mistakes, and with Amazon’s help, I found books that led me in the right direction (Starting with Reminiscences of a Stock Operator). I recommend this video [see video below] about LTCM. Very interesting. (related to risk management and black swan events). Thanks again.
Best regards,
Niels

Thanks! If you have not watched it–watch now.

Bailout Nation Started in 1998 with Long Term Capital Management

Bailout nation started in 1998 with the bailout of Long Term Capital Management (LTCM). Here was their annual report (PDF) that made them the darling of the investing world back in the day. Why bring it up today? LTCM is arguably at the root of current 2012 chaos. The first cut so to speak.

Shout to Barry Ritholtz for the title borrow!

Learn to be a trend following trader.
Sign up free today.