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Ep. 414: Buy and Hold for 50 Years with Michael Covel on Trend Following Radio

Buy and Hold for 50 Years with Michael Covel on Trend Following Radio
Buy and Hold for 50 Years with Michael Covel on Trend Following Radio

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Today on Trend Following Radio Michael Covel starts off talking about goal setting for 2016. He reads a 100 day fitness regimen for 2016. The challenge clearly lays out what is expected, and has concrete rules in place. In contrast, he plays a clip form CNBC with a headline that reads, “Stocks to buy and hold for 50 Years.” Michael tears their predictions apart. He says betting on others “current flavor of the day” stock picks are not how you want to plan your next 50 years.

“Top Stock Picks from 2016” is the next article Michael reads from. “Pro Michael Farr shares his best bets for the market next year including oil stocks, healthcare and consumer staples.” Farr starts off by giving an overwhelming amount of fundamental data to back up his stock picks. In the middle of giving his fundamental data however, he acknowledges that he does not have a crystal ball (and is guessing). He then goes on to guess oil prices will be higher rather than lower three years from now. Michael uses his statement as an example of prediction without foundation.

Michael moves on to diversification. If you trade in the direction of the stock pickers he brought on today, then where is your diversification? Research has shown that you need diversification. If you put all your money into Facebook or Chevron, as his market guru examples have told you to do, then where will you be in 10 years if those companies go the wrong way? Put together a diversified portfolio with rules for entering and exiting. Know how much you are going to trade. Have a plan in place so you can be successful.

In this episode of Trend Following Radio:

  • Diversification
  • Goal setting for 2016
  • Crystal ball prediction
  • The importance of rules in goal setting

“We’re going to bet 50 years into the future on idiocracy? That we can all instant message each other and pass photos back and forth, and there will not be any innovation in the future that could not possibly cause anybody or everybody to tune out of Facebook?” – Michael Covel

Mentions & Resources:

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Gotta Lie To Get Invited Back

After posting the below commentary on my Facebook page I got an interesting response:

This exchange followed:

Alan: Thank you for your thoughtful analysis of my market commentary March 16th. A “Trend Follower” should appreciate my confidence and reasoning that the bull run is still intact. As a market veteran of 25 years with thousands of TV appearances this may be a great opportunity to discuss the insignificance of news nonsense with your podcast listeners. Pick a time I would like to come on to talk media and its negative impact on trading discipline. I am the first to tell traders to turn off the TV as there is very little to help you make money. It is mostly infotainment to keep you emotional and tuned in to pay advertisers. In fact, I have developed a financial news aggregator to search, sort and share market video. The time saving app breaks down the markets into categories and plots the videos from news sources on price and time charts for perspective. That said I make the best effort to give a well thought out actionable trade idea on each of my appearances as opposed to speaking in broad generalizations. Trading is all about risk control, probability, money management and implementation of a trading plan. It should be methodical and boring and as we all know watching television to cheer lead positions does not add to profitability. Looking forward to schedule the podcast interview.

Covel: Hold on. You are the guy on CNN? The guy with videos literally every day providing near useless fundamental factoids and interpretations of what will happen next? And now you are emailing me to say trading is all about risk control, probability, money management and implementation of a trading plan. Don’t you think that is disingenuous? You tell me you have made 1000s of appearances, but [now] you tell people not to watch? I am not [Jim] Cramer. My podcast is not that. Best we agree to disagree right here, unless you can convince me how my eyes are lying to me when I watch your videos of broad generalizations.

Alan: I cannot change the game if I do not appear on TV. Producers and hosts do not understand the markets and create a crisis de jour. My job is to be optimistic of opportunities in any and all market conditions. Stressing a plan of action instead of fear is what I do. Having CNBC on for 10 hours a day or watching Cramer doesn’t help anybody make money. At best it may give 2-3 nuggets of information that could be explored for profit potential. People think news helps when in fact the WHY is of no importance compared to the HOW the market is moving.

Covel: You can’t let the TV hand feed you non-stop and then bite the same hand. None of what you are saying to me was on CNN.

Alan: I gave CNN reasons why I remain optimistic at a time when investors have renewed fears. Calm confidence. Participating in the TV discussion is more productive than not doing so to showcase my disciplined approach. My development of the [name] shows my recognition of this news noise issue and the need to better inform investors.

Covel: Maybe you know the truth, but to appear on TV so much is for you to play a game–their game. Try appearing on TV and tell the real truth. They won’t ask you back. Then you will have made a real advance in your credibility.

Trend Following Machines Cash in—Again

All these years later, all these stories later, and CNBC still has a difficult time explaining trend following to the masses. One good excerpt:

Funds managed by ISAM, Cantab, AHL, Systematica and others produced double-digit gains over the first three months of 2015, according to private performance figures obtained by CNBC. “Trend followers and other macro investors clearly outperformed,” said Robert Christian, head of research at K2 Advisors and Franklin Templeton Solutions. “What’s carried people is just classic, good old trend following.”

Note: ISAM is Larry Hite’s shop. One of my favorite no-nonsense trend following pros.

CNBC Calls Trend Followers “Robots” and Yearns for “Gut” Traders

100% Useless Information (An Example)

A recent email:

Hey Mike, Hope you’re well. I’m sure you’ve come across this before, but in case you haven’t, I thought you might enjoy it. BBC documentary on novice traders. I think when you surround yourself (via social media) with people that trade in a similar way and have a similar ethos and perspective, it’s easy to forget that this is still how the majority of trading occurs.

Barmy! Take it easy!

[name]

Yes, useless day-trading-reality-TV-sh**.

Ep. 249: An Agenda or Acting Job with Michael Covel on Trend Following Radio

An Agenda or Acting Job with Michael Covel on Trend Following Radio
An Agenda or Acting Job with Michael Covel on Trend Following Radio

Michael Covel opens up by discussing a 2011 David Harding appearance on CNBC in his book Trend Commandments. The other day, now in 2014, Harding appeared on CNBC again with Joe Kernen. Covel goes over the clip, discussing CNBC’s policy of prediction and picks, their ignorance of Harding’s style and outlook, and the talking heads in general. Covel then went onto Twitter and posted, eliciting a response from Joe Kernen. Covel analyzes their Twitter exchanges, noting there are plenty of questions beyond what Kernen asked. Why does Harding enter? Why does he exit? How much does he bet each trade? Behavioral finance? Black swans? Trading only price action? It’s always fun to put a lance into the boil of the system and watch it pop, as Covel shows here. Covel surmises that either Kernen was not prepared, or there’s an agenda–it’s an acting job. SPECIAL NOTE: I welcome all of my listeners to join this debate on Twitter. My Twitter is @Covel and Joe Kernen is @JoeSquawk. Check out our conversation and please add smart feedback. However, please keep the conversation above board.

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Joe Kernen Doesn’t Like Being Questioned

This video with Joe Kernen and David Harding on CNBC led to Kernen getting a little testy on Twitter with me. An excerpt from Kernen and I:

Kernen: Oh yeah. [Harding] Great for an interview. Absolutely no predictions or forecasts about what might happen in the future.

Covel: So the interviewee blows if he can’t forecast tomorrow?

Covel: Why have a trader on who does not predict and then ask for a prediction?

Kernen: Why wrestle with pigs when all you get is dirty. Toodles.

Why so curt with me? I did rip him earlier here.

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