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Tag: markets

Ep. 76: Jack Schwager Interview with Michael Covel on Trend Following Radio

Posted on by Michael Covel
Jack Schwager
Jack Schwager

My guest today is Jack Schwager, a recognized industry expert in futures and hedge funds and the author of a number of widely acclaimed financial books. Schwager is one of the founders of Fund Seeder, a platform designed to find undiscovered trading talent worldwide and connect unknown successful traders with sources of investment capital. Previously, Schwager was a partner in the Fortune Group (2001-2010), a London-based hedge fund advisory firm.

The topic is his book Market Sense and Nonsense: How the Markets Really Work (and How They Don’t).

In this episode of Trend Following Radio we discuss:

  • How Schwager was able to make “Market Sense and Nonsense” accessible to both professionals and laymen and touch on some of the subjects contained within: market fallacies and misconceptions
  • The idea of cable news “experts”, and what would happen if you actually followed all of the picks made by people like Jim Cramer and other talking heads
  • Comparing performance streams against each other, and why you have to consider more than just the number
  • Volatility vs. risk
  • If coming to a good risk adjusted return is based more on a scientific approach or personal preference
  • Leveraged ETFs
  • The fear of hedge funds
  • The idea of leverage and why much of “Market Sense and Nonsense” was built around trying to understand it
  • Why fund-to-fund managers putting a large group of trend following traders together in one portfolio might not be a wise move
  • Presidential election and discuss why whoever is selected to be the next president might not make much of a difference in the markets

Listen to this episode:

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Michael Mauboussin Will Make You Think

Posted on by Michael Covel

Michael Mauboussin appeared in my film Broke a few years back and I have always enjoyed his efforts. While not a trend follower much of his work dovetails nicely with the heart and soul of trend following success: human behavior and inefficient markets. Two recent Mauboussin works worth reading (PDF):

The Importance of Expectations. The Question that Bears Repeating: What’s Priced in?
Shaking the Foundation: Revisiting Basic Assumptions about Risk, Reward, and Optimal Portfolios

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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.

The Psychology of Market Expression

Posted on by Michael Covel

A friend sent along these pictures (PDF) of market faces.

Isn’t it interesting how that is the image of moneymaking success turned to failure? The implication being that those people in the supposed right looking outfits with the right looking access–were surprised that it all fell apart.

I don’t know winners who look like that.

Winners understand that surprise happens and is to be embraced.

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.

Laurence Fletcher at Reuters Pens Diss Headline; The Media Still Marginalize Trend Followers with “Black Box” Line

Posted on by Michael Covel

Laurence Fletcher of Reuters writes “Black Box” Hedge Funds Profit in Volatile Markets”:

LONDON (Reuters) – Hedge funds run by sophisticated computer programs are profiting from large falls in stock markets and a rocketing gold price this month, even as funds managed by human beings struggle to cope with high market volatility.

Insiders say so-called managed futures funds [read: trend following], which try to latch onto market trends, are making money from declining bond yields and falling equities, as investors seek safe havens amid the eurozone debt crisis and after the U.S.’s credit rating downgrade.

These “black box” funds are up 4.2 percent so far this month, according to Hedge Fund Research’s HFRX index, while the average hedge fund is down 4.0 percent and managers betting on rising and falling stock prices have lost a hefty 7.3 percent on average.

Why does he use the word “black box”? If he was just “reporting” he would not immediately use a pejorative to describe trend followers like Winton. Bottom line, trend following is making a killing because it is sound trading strategy that performs especially well when the rest of the world ***** their pants. Why is THAT still news after all these decades?

Aug 25th Note: I asked Laurence why he used the term. His reply:

Hi Michael, thanks for your email. I’ve used ‘black box’ as a quick way to describe to the man on the street what computer-driven funds do. Why do you ask?

I asked back, “But how does that tell them? Meaning, how does the word black box tell folks what Winton does?” No word yet.

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.

Roy Longstreet: Viewpoints of a Commodity Trader

Posted on by Michael Covel

An excerpt from ‘Viewpoints of a Commodity Trader’ by Roy Longstreet:

“Each of us, in our daily lives, tends to adjust to this invisible stress point. If a man lives just up to it, he can lead a happy and productive life. If, on occasion, he lives just a little over it, he finds that often these are the periods in which he learns “by running scared”. If, on the other hand, a man lives too far over his stress point, that man will tend to panic. Sooner or later such a practice results in disaster. But the real problem, for most of us, lies in setting our sights too low. Mainly because of fear, perhaps 95% of us live too far under our stress points. For those who dare too little, the penalty which must be paid, while perhaps not as sudden as for those who dare too much, is equally sure and certain. Life becomes dull and meaningless. Those who dare not become so much beef on the hoof; they exist, but they do not live.”

Publish date 1968. Why post the date? I was smiling to myself at a conversation held on my blog some time back when an erudite poster declared that a book (another one) written decades ago could not be relevant today. Everyone does get what they want don’t they?

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.

Ancient Man Had No Risk Management

Posted on by Michael Covel

Putting risk into the discussion:

“There are just four kinds of bets. There are good bets, bad bets, bets that you win, and bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future. You can also lose a good bet, but if you keep placing good bets, over time, the law of averages will be working for you.”
–Larry Hite, Trader

Continuing:

“Life is nothing more than a series of bets and bets are really nothing more than questions and their answers. There is no real difference between, ‘should I take another hit on this Blackjack hand?’ and ‘Should I get out of the way of that speeding and wildly careening bus?’ Each shares two universal truths: a set of probabilities of potential outcomes and the singular outcome that takes place. Everyday we place hundreds if not thousands of bets – large and small, some seemingly well considered and others made without a second thought. The vast majority of the latter, life’s little gambles made without any thought, might certainly be trivial. ‘Should I tie my shoes?’ Seems to offer no big risk, nor any big reward. While others, such as the aforementioned ‘speeding and wildly careening bus’ would seem to have greater impact on our lives. However, if deciding not to tie your shoes that morning causes you to trip and fall down in the middle of the road when you finally decide to fold your hand and give that careening bus plenty of leeway, well then, in hindsight the trivial has suddenly become paramount.”
–Larry Hite, Trader

Continuing:

“Ancient man had no risk management. Everything was left to ‘fate’ and the whims of the gods. Because ancient man felt that he was merely a victim of circumstance he did not see a need to plan for the future. Therefore, he had no future. In his book Against The Gods: The Remarkable Story Of Risk, Peter Bernstein plots out the history of man’s discovery of the law of probabilities and risk management. Suffice it to say, economic progress seems to run parallel with man’s ability to discover, quantify, and manage risk. Risk and reward are two sides of the same coin. One is not present without the other. You cannot receive the reward unless you are willing to take the risk and you cannot expect to keep that reward unless you learn to mange that risk. It is imperative to master both subjects if you expect to be successful in any endeavor, especially the arena of investing/trading.”
–Source: Pearce Financial LLC

The only thing you can control as you face the markets each day? Your losses.

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
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• 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.

The Markets as ‘The Truman Show’

Posted on by Michael Covel

An excerpt I like:

“The Truman Show is a 1998 American comedy-drama…The film chronicles the life of a man who discovers he is living in a constructed reality soap opera, televised 24/7 to billions across the globe.”

Constructed reality soap opera? Our markets today!

Bottom line, from a trend trading perspective — price is king and follow it. But from a “what-the-hell-is-going-on-in-the-world-today” perspective — it is ‘The Truman Show’

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
• Frequently Asked Questions
• Performance
• Research
• Markets to Trade
• 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.