Michael Covel monologue.
Michael Covel discusses two philosophical approaches that are the key to being a success in any field: being awake to the outside world and thinking outside the box. Being part of the system is not going to reward you, and if you're awake to the outside world, you can see things you wouldn't otherwise notice that you can use to your advantage. From his childhood to early experiences doing opposition research in a political campaign, Covel offers several anecdotes regarding "lightbulb" moments that have come about as a result of thinking outside the box. Covel has used the same principles and outside-the-box thinking to get at the insights of how trend following really works. Trying to figure out how people like Bill Dunn, John W. Henry, and Jerry Parker all pieced together was revealed to Covel at a conference in London. He relates the story that was the foundational thread for much of his later work. Covel also connects outside-the-box thinking to trend following in general: If there's anything hard about being a trend following trader, it's that you have to be comfortable being by yourself. You can't take solace in the crowd, and thinking differently is the key.
Michael Covel talks to Mike Dever, founder of Brandywine Asset Management and author of "Jackass Investing: Don't Do It. Profit From It." Covel talks to Dever about being an entrepreneur from an early age and making his first investments in his early 20s. Starting with $5,000 in 1979, Dever quickly ran it up to $60,000 and learned some of his first trading lessons along the way. After deciding to set up some systematic trading models to help protect his investments, he put together his first fund in 1981. Dever had some interesting experiences at a fairly young age with some people who became big names on Wall Street: Paul Tudor Jones and John W. Henry. Deciding to get outside brokers to manage a fund to diversify his own business, he ended up starting funds with both of these legendary traders. Covel and Dever discuss some of the myths discussed in "Jackass Investing"; how everybody is a market timer; the stigma against investing in futures; return drivers; the risks you take by being risk averse; and the shift in attitudes towards volatility in America. In 2011, Dever relaunched Brandywine; he discusses why strategies based on sound return drivers are so important to his firm and where he's at today. Dever was on the show many months ago, but this episode goes much more in depth with some really fantastic color regarding the early stages of the managed money world. Note: This is Dever's 2nd appearance on the podcast. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel talks about the importance of entrepreneurism today. We're not in a world that rewards doing what you're told anymore. Covel discusses Fairfax County, VA (where he grew up), home to one of the highest median incomes in the United States of America. Covel discusses why this area you might never have heard of has this status, and why this simply isn't a sustainable way of life for the rest of us. People seem to think that there's a job out there waiting to fall into their laps that will give them easy access to the American Dream. In today's world, you need the vision of an entrepreneur to successfully get to where you want to go. With all of the technology at our disposal, the road to this success is more open than ever before. Even going down the path of being a trend following trader requires the skills of an entrepreneur. Covel relates the story of Boone Pickens, one of the entrepreneurs he's had the good fortune of learning from. Pickens has the attitude that today's entrepreneurs need; when he got started, it was about taking a risk and making something happen, i.e. a "wildcatter". Covel invites you to take a look at your own motivations. When you get up in the morning, are you going in a direction that you control, or are you following someone else's plan? Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel interviews author and reporter Scott Patterson. Patterson has made a career of reporting the subterranean inner-workings of the markets, writing for the Wall Street Journal, Rolling Stone, and Mother Earth News. His first book, The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, was released in 2010. Patterson talks to Covel about his newest book, Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System. Covel and Patterson trace the history of high speed trading and electronic communication networks (ECNs) back to Josh Levine, who founded Island, the computer system that led to the high frequency trading we see today. Patterson discusses the technological revolution behind Island, and how its transparency led to dark pools - opaque markets where bids and offers are not made public. Dark pools have the benefit of operating in the shadows, helping institutions do what they do without anyone checking in on them. Today, Patterson goes on to propose that the entire market has gone dark. Covel and Patterson discuss the relation of dark pools to the flash crash; the regulation of dark pools; and how the real New York Stock Exchange is in a data center in the countryside of New Jersey. Not a trend following podcast, but an episode every investor should absorb. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel speaks with Mebane Faber. Faber is a a noted author (The Ivy Portfolio), blogger, and portfolio manager with Cambria Investment Management. If you're into quantitative style investing, trend following, and systematic strategies, Mebane is right there with you. Faber grew up in a family full of engineers, and he started off studying biomedical engineering in college. Despite his scientific background, he's always had a strong interest in finance. Faber discusses how coming into finance with his unique background helped to give him the ability to look at the data without getting distracted by investment dogma. He spent the majority of his youth in a raging bull market during the internet bubble; however, when he realized his mother's style of buy and hold investing didn't cut it anymore, he was forced to find new methods. Covel talks to Faber about his white paper, "A Quantitative Approach to Tactical Asset Allocation"; his book, The Ivy Portfolio; the differences between "market timing" and "quant"; behavioral finance; the benefits of trend following systems in reducing volatility and drawdowns over enhancing returns; and the idea of macropessimism/microoptimism. Professor Faber! Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel lays out 25 selected Trend Commandments. While these principles aren't all-inclusive, they're guidelines to help get you to understand the trend following mindset. Covel also brings up a recent review of "The Little Book of Trading" in the Financial Times and offers a response. This critic has a hard time wrapping her arms around the benefits of trend following; however, if you don't "get" trend following, you can't be beaten over the head with it. Covel disputes the criticism that, if you teach something, the sheer act of being compensated to provide information to people disqualifies you from having a valid opinion. If Nobel prize winner Daniel Kahneman gets paid to teach at Princeton, does that invalidate his work? The company Covel keeps with other traders might give a clue that he's speaking the truth. Covel also plays a clip from Nigel Farage on the genius of mutual indebtedness, the bailout of Spain, and the failure of the Euro. In a clearly volatile market, what are you going to do to prepare? How do you prepare for uncertainty when you can't trust just about anything? Trend following is the only trading strategy that has rational basis to it; it allows you to participate in the profits and protect yourself on the downside. Isn't that the goal? Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Tony Bazile of Intrinsic Capital Management is a trend following trader specializing in stocks. Michael Covel talks to Bazile about his background, which is unlike anybody profiled on the podcast so far: He was a professional water skier into his 20s. After observing another water skier trading on the sidelines and making a ton of money, Bazile decided to look into trading for himself. He made quite a bit before the tech bubble burst; when it popped, he was left with the feeling that there was still plenty of opportunity, and he forged forward. He moved to New York with his then-girlfriend and wound up living directly behind the American Stock Exchange, where he spent six or seven months handing out his resume (litetrally on the streets to Wall Street warriors). Eventually, he found himself working for John Mulheren. Bazile relates a story where Mulheren went on vacation after taking a large position. When Mulheren's team sold 80% on the second day of what would become a three week rally, Mulheren returned from his vacation furious, and Bazile learned one of his most valuable trend following lessons. This sent him down a path where he visited Bill Dunn in Stewart, Florida, and eventually ended up working for Ken Tropin at Graham Capital. Tropin told Bazile: "I'm good because I know that I don't know which way the markets are headed." After managing money for Graham Capital, Bazile left and partnered up with David Frakes, and formed Intrinsic Capital Management. ICM uses a trend following strategy to trade stocks, and Bazile and Covel discuss dealing with the sheer volume of information on individual stocks; and how trend following is the strategy, not the instrument. Covel also traces the lineage from Richard Dennis to Jerry Parker to Salem Abraham, and from John W. Henry to Ken Tropin to Tony Bazile. Only time will tell! Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
The Fed has said they will keep rates at 0 for years. That means bubbles, pops, bubbles, pops, etc. So, if that is the case how can you generate a return? Covel offers a down to earth perspective for dealing with this chaos to make money. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel talks to Mike Aponte, professional blackjack player and a former member of the MIT Blackjack Team. Aponte was featured in the bestselling book "Bringing Down The House" as the player Jason Fisher, which was adapted into the movie "21". Covel makes this point about Aponte: Due to his systematic approach, he's definitely not a gambler; he's an investor. The similarities between successfully playing blackjack and trend trading are off the charts, including two of the key linchpins between them: Ed Thorp and the Kelly criteria. Aponte never really played blackjack before the MIT team, but when he learned to approach card counting as a science, he was hooked. Covel and Aponte go in depth about Aponte's beginnings; the similarities between systematic card counting and trend trading; the psychology behind the two; and how even some of the more advanced mathematicians at MIT didn't have the risk-taking constitution it took to make the cut. Aponte tells some revealing anecdotes along the way, including a run in with casino security that ended with them actually asking for his autograph. A must listen for any investor--blackjack player or not.
Michael Covel plays a musical clip to illustrate where we are today - something you might not expect, but particularly relevant to our current climate. Covel also talks about an article called "Spotting Bulls*** in Financial News in a Few Easy Steps". He profiles one young writer in particular, and how anybody right out of college with a journalism degree can reach millions of people in the financial markets, yet still not have any idea what they're talking about. Not to pick on this young writer, Covel discusses how dangerous articles like this can be for an inexperienced trader. Staying in the world of media, he discusses two videos on CNBC in the last week. One interview with Jason Gerlach of Sunrise Capital had CNBC, in typical style, asking for specific picks; Gerlach explained that this is not in line with a trend following approach, to complete confusion from CNBC on air types. Another CNBC piece with Jeff Applegate from Morgan Stanley had him explaining managed futures as a relative safe haven. Of course, CNBC's reply left Covel shaking his head. Covel also discusses the Facebook IPO craze, puts it in context of the last tech bubble, and takes a look at how you can't trade it from a trend following perspective - yet. He also previews an upcoming podcast with a member of the MIT Blackjack Card Counting team, as discussed in the book Bringing Down The House. As shown in the chapter on Ed Thorpe in Jack Schwager's new book, blackjack has particular relevance to the trading world. In fact, two of the original turtles were on competing blackjack teams. Covel waxes that wisdom can be gained from people from other walks of life, especially those closely related to the trading world. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Covel talks to entrepreneur/trader Timothy Sykes. While their views differ on trading approaches, they agree on certain base principles--especially their skeptical nature and not trusting the system. Sykes is not a trend following trader, but Covel discusses certain systematic approaches that Sykes has used. Other topics include Sykes's early career entry into trading, studying the market his way and how tennis for him relates to trading. Love him or hate him, Sykes is compelling! Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel talks to Todd Miller, a trader who runs a systematic trend following firm, Availeth Capital, with partner Jim Byers. Availeth is a small fund which was started in February 2011, and Covel relates Miller's start to his chapter in 'The Little Book of Trading' on trader David Druz. Covel and Miller discuss how Miller got his start working at Fidelity, and how observing the annual returns of one of Fidelity's biggest mutual funds after the tech bubble burst led him to adopting a trend following mindset. Miller put in some serious studying during his next few day jobs at National City Bank and PNC, and he discusses the path he took that eventually led him to starting Availeth Capital. Miller and Covel also speak about the importance of in-person interaction; the issue of survivorship bias; how trend following is the only strategy that can take advantage of the uncertainty that is coming; and how some trend following traders have followed other passions once they've made their billions. Covel also discusses his upcoming 10,000 (!) page book, Trend Following Analytics. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel talks to writer and trader Jack Schwager, author of the Market Wizards series. Schwager's new book, Hedge Fund Market Wizards, is now out. Covel and Schwager discuss some of the commonalities between the many traders Schwager has interviewed, and the lessons that can be gleaned from their diverse approaches. Schwagger's new book opens with a quote regarding the importance of even-mindedness from rock climber Alex Honnold, and Covel and Schwager discuss how topics seemingly unrelated to trading can contain relevant lessons. Many of the other traders profiled in Hedge Fund Market Wizards are discussed, including Ed Thorp, Steve Clark, Jaffray Woodriff, and Ray Dalio. Covel asks Schwager what his big takeaways from his interviews have been, and the lessons he's learned from talking to some of the most successful traders in the game. Further topics include how markets behave differently in different environments; the importance of asymmetric positive skew trades; how diversification is the "only free lunch on wall street"; how Schwager defines risk; and the "gain to pain" ratio. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel talks to trader and educator James Rohrbach. Rohrbach has been trading for 40 years, created his RIX index, and runs an educational service at Investment-Models.com. While he calls himself a "market timer", he's a trend follower. Rohrbach and Covel talk about why buy and hold is dead, and the psychology behind people desperately clinging onto it. Rohrbach and Covel discuss why - even when buy and hold supplies a winning outcome - it still might not be a good strategy. Further topics include using a 15/30 day crossover as a quick and simple system; why Rohrbach doesn't short; and making sure your feelings don't overrule your process. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel talks to Francisco Vaca of Vaca Capital Management. A math whiz from an early age, Vaca first pursued a career as a particle physicist. Always intrigued by the financial markets, Vaca started an investment club with his family while pursuing his Ph.D., and his scientific background led him to a "stats" approach to investing. When institutional funding stood in the way of working on a particle accelerator, a unique opportunity to work in the financial markets beckoned. After answering a mysterious newspaper advertisement in 1996, Vaca ended up working at the legendary C&D Commodities (see book: 'The Complete TurtleTrader'); he was handed a copy of Jack Schwager's 'Market Wizards', and quickly realized the achievements of his new employers. Vaca and Covel also get to the bottom of the source of profits in the futures markets; why people who are on the losing side of trades still play the game; the importance of diversification; and why you should take every signal you can. Pay attention, Vaca brings wisdom (see: www.vacacm.com). Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Trend following wisdom with the most inspiring Market Wizard Ed Seykota.
Michael Covel speaks to Douglas Stewart of Sherwood Forest Capital Management. An education major in college, Stewart was introduced to the financial services world before ever entering the classroom as a teacher. Stewart started his career in finance around 1995, and he shares some of his experiences coming of age during the dotcom bubble. Once the bubble burst, he immersed himself for ten hours a day for several years studying books such as Jack Schwager's "Market Wizards", which led him to his lightbulb moment; he explains how this led him into the trend following space. Stewart also relates an interesting experience he had at a panel in November of 2008 where he explained, in song, how he wasn't able to predict the markets. Afterwards, an esteemed guest brought up Nassim Taleb's "The Black Swan" - and somehow missed the point that Stewart was following the markets rather than following luck. This leads to conversation about how ego can hurt you in the trend following world, why a majority will never really want to adopt a trend following perspective, and the zen of accepting that you'll never be able to accurately predict where the markets might go. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael speaks to Mark Melin, a managed futures expert, editor/writer for Opalesque, and author. Melin has become a defacto investigative reporter for the MF Global scandal. Covel and Melin consider the MF Global story from the very beginning, back to the very basics, and discuss the political context, why the story isn't front page news, and how it might effect you in the long run. A sobering conversation. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael covers several disparate topics and brings them together into a basic trend following message about thinking clearly. First, Michael discusses former Lehmen Brothers veterans starting a "systematic innovative volatility fund". Michael cuts through the jargon and gets down to the core issue: at the end of the day, a trend following strategy has to be clear, and this one sounds confusing. Michael also discusses a newsletter from Hugh Hendry, although technically a fundamental trader, Michael brings up how Hendry might indeed be a "closet" trend following trader. Hendry's core ideas are important to trend following philosophy, such as taking control of your own destiny, and the belief that the unexpected will happen. "You're on your own, you must take ownership of your own destiny". Next, Michael talks about pain and how the latest Jack White single might give some insight into the pain you can find yourself in if you don't have clear thinking (a plan). Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel talks to Tim Pickering, founder/president and lead portfolio manager of Auspice Capital. Pickering has over 15 years of commodity and financial trading experience. Prior to forming Auspice, Pickering was Vice President of Options Trading at Shell Trading Gas and Power in the Houston and Calgary offices. He began his career at TD Securities in Toronto in their elite trading development program and gained experience in a wide expanse of capital market products including foreign exchange, bonds, money markets and derivatives. Ultimately, Pickering held the Senior Trader position for the energy derivatives portfolio. He has extensive experience trading OTC and exchange traded options, futures, swaps and quantitative trend following systems. Covel and Pickering discuss some of his beginnings, "black boxes", indexing, and classical vs. "next generation" trend following.
Michael Covel interviews Thomas H. Basso, a trader who was called "Mr. Serenity" when he was profiled in Jack Schwager's "New Market Wizards". Basso was a stock and commodities trader who was president and founder of Trendstat Capital Management. He is the author of two books, "Panic-Proof Investing" and "The Frustrated Investor". Basso became a registered investment advisor in 1980, a registered commodities advisor in 1984, and was elected to the board of the National Futures Association in 1998. Although he is now retired, there's no half-life for experience in the trend trading world, and Basso has a wealth of knowledge that is relevant to today's trader. Covel talks to Basso about the psychology behind his trading; how he kept his - and his clients' - emotions in check; and how being an entrepreneur can make you think differently. Basso also discusses his beginnings - buying his first mutual funds at age 12 - and how he moved from a chemical engineering position to his career as a trader and money manager. Further topics include how trading for clients can be different than trading for yourself, and the importance of concentrating on process vs. outcome.
Note: This original #10 episode has to been updated to include all Basso interviews so far. 4 hours plus!
Michael Covel monologue.
What does golfer Bobby Jones have to do with trend following? Michael discusses a new IBM commercial featuring Jones which has a number of ideas relevant to trend following - why the process is much more important than the outcome, and how you can't engineer predefined performance results. Consistency in your system, not trying to predict exactly how something might unfold, and sticking to the process are key concepts in trend following. Also: will the huge amount of data that you now have access to change how you approach the markets? Probably not - if you're a trend following trader. Michael discusses the difference between data and knowledge. A healthy dose of attitude throughout - no apologies. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.
Michael Covel interviews original Turtle trader Michael Shannon. In a timeless archival interview given while doing research for his book, The Complete TurtleTrader, Covel talks with Shannon regarding Shannon's experience in the Turtle program with Richard Dennis and William Eckhardt. Shannon offers historical insights and anecdotes regarding the legendary Turtle story. Topics include Shannon's unlikely background; the personalities of Dennis and Eckhardt; why Turtles with outsider backgrounds were generally more successful; and whether or not Dennis and Eckhardt were inspired by the film, "Trading Places". In the second segment of this podcast Michael interviews trader and investor Jim Byers. In the 2006-2008 period, Byers started studying trend following; since then, he's started a fund with his partner, Todd Miller. Covel and Byers discuss how trend following can still be a winning game even if you aren't right the majority of the time. Further topics include more in depth "light bulb" moments that Byers has had since taking up trend following. Special Offer: receive free DVD delivered to your home or office: www.trendfollowing.com/win.