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Trend Following with Michael Covel

Bestselling author Michael Covel is the host of Trend Following Radio with 7+ million listens. Investments, economics, decision-making, human behavior & entrepreneurship--all passionately explored. Guests include Nobel Prize winners Robert Aumann, Angus Deaton, Daniel Kahneman, Harry Markowitz & Vernon Smith. Also: James Altucher, Dan Ariely, Jean-Philippe Bouchaud, Kathleen Eisenhardt, Marc Faber, Tim Ferriss, Jason Fried, Gerd Gigerenzer, Larry Hite, Sally Hogshead, Ryan Holiday, Jack Horner, Ewan Kirk, Steven Kotler, Michael Mauboussin, Tucker Max, Barry Ritholtz, Jim Rogers, Jack Schwager, Ed Seykota, Philip Tetlock & Walter Williams. All 600+ eps at www.trendfollowing.com/podcast.
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Bestselling author Michael Covel is the host of Trend Following Radio with 7+ million listens. Investments, economics, decision-making, human behavior & entrepreneurship--all passionately explored. Guests include Nobel Prize winners Robert Aumann, Angus Deaton, Daniel Kahneman, Harry Markowitz & Vernon Smith. Also: James Altucher, Dan Ariely, Jean-Philippe Bouchaud, Kathleen Eisenhardt, Marc Faber, Tim Ferriss, Jason Fried, Gerd Gigerenzer, Larry Hite, Sally Hogshead, Ryan Holiday, Jack Horner, Ewan Kirk, Steven Kotler, Michael Mauboussin, Tucker Max, Barry Ritholtz, Jim Rogers, Jack Schwager, Ed Seykota, Philip Tetlock & Walter Williams. All 600+ eps at trendfollowingradio.com/rss.

Apr 23, 2018

Entrepreneurship is a niche group that makes up a small number of the population. Being an entrepreneur is something visceral that starts deep down in a person. Michael reads from three pieces, adding commentary throughout, to further drive his point: “The Top Five Reasons to be a Jack of All trades” by Tim Ferriss, “Why Entrepreneur’s Start Companies Rather Than Join Them” by Steve Blank, and “Asymmetric Information in Entrepreneurship” by Deepak Hegde.

Entrepreneurs

Start up companies

Trading as an entrepreneur

Apr 20, 2018

David Burkus is author of “Friend of a Friend: Understanding the Hidden Networks That Can Transform Your Life and Your Career.” David has delivered keynotes to leaders of Fortune 500 companies and future leaders of the United States Naval Academy. His TED talk has been viewed almost 2 million times and he is a regular contributor to Harvard Business Review. What if the advice we have all heard about networking is wrong? David outlines the right way to network in the modern age.

How do you meet people? How do you meet the right people? Once you meet those people, what do you do with the relationship? Maybe you haven’t talked to someone for a few years but you could still call him or her up and have a personal talk with them. This is an example of one of the most useful networking ties, known as a “dormant tie.” David uses UFC founders, Dana White and Lorenzo Lamas, as an example. They went to high school together, hadn’t talked for years, both had a passion for fighting, but lived in different spheres of the fighting community. After reconnecting at a high school get together they realized they had some aligning career aspirations. They ended up buying the UFC and made it the fastest growing sport in history.

When you start taking chances on meeting people and putting yourself out there, that is when your network really expands. David shares another example of a movie producer who got his foot in the door by getting creative, taking some risks, and reaching out to the right people for conversations. Who do you know? Who do your friends know? Where do you know them from? These are basic questions that can get the ball rolling when trying to expand your network.

Knowing a ton of people is not necessary to be successful, you just need to know the right people to give yourself credibility. Shared activities and hobbies are ways to draw in a set of diverse people to build deep relationships. Networking events have become a thing of the past (thank goodness).

In this episode of Trend Following Radio:

  • Curiosity conversations
  • LinkedIn
  • Network science
  • Self observation
  • Dormant ties
  • Robust networks
  • Network science
  • The majority illusion
  • The spread of Facebook
Apr 16, 2018

Inspired by this post from Seth Godin… Michael expands it out on today’s podcast: “What is and what might be: They have much less in common than you might expect. The key step in creating a better future is insisting that it not be based on the assumptions, grievances and dead ends of the past. The future won’t be perfect. We won’t be perfect. But we can be kind. We can listen. We can give opportunity the benefit of the doubt. The future won’t always work. We won’t always succeed. But we can be alert and seek out the possible instead of the predicted. The future won’t always be fair. But we can try. We can care. We can choose to connect. It can be better if we let it.”

Seth Godin’s work centers around business, self help, and thinking clearer. Michael expands on Seth’s blog post by sharing an email he recently received from a disgruntled man who does not appreciate where Michael now lives – Vietnam. Michael’s main point? Assumptions, grievances and dead ends of the past should not be pushed on other people. You have a choice: Use past and present experiences to make yourself better and make your life better? Or let those experiences cripple you?

Embracing the moment of now is where the mind wants to be. Worrying about the past or future brings the mind down. Michael ends with another blog post from Seth Godin and an example of a client who is frustrated with his two months of trend following trading.

In this episode of Trend Following Radio:

Travel

Experiencing life outside the U.S.

Embracing opportunity

Mindfulness

Apr 13, 2018

From IMDB: “An unsettling and eye-opening Wall Street horror story about Chinese companies, the American stock market, and the opportunistic greed behind the biggest heist you’ve never heard of.” That’s the opening description for a new documentary titled “The China Hustle” (2017).

Today, Michael talks with Director Jed Rothstein about the backstory for his film and the complexity of fairly describing a modern China. Whether you know something about China or not–this conversation will stimulate your China understanding.

Academy Award-nominated and Emmy-winning filmmaker Jed Rothstein specializes in hard-to-get stories from around the world that help people understand one another better. Whether seeking out heavy metal musicians who become Arab-Spring revolutionaries (PBS’s Before the Spring After the Fall); pioneering doctors (HBO’s Coma and Pandemic); Al Qaeda terrorists (The Oscar-nominated HBO documentary Killing in the Name); defenders of free speech (The 2009 Sundance film Shouting Fire); journalists on the front lines (Independent Lens’ Democracy on Deadline)–Rothstein works with people to help them tell their own stories in their own words. His films and television programs have played in festivals around the world, enjoyed special screenings at the United Nations, and been broadcast on HBO, PBS, National Geographic, Amazon Prime, The Discovery Channel, IFC, Channel 4, the BBC, CNN and elsewhere.

Apr 9, 2018

Michael reaches back in time to explore a mega episode with three of his favorite guests: Salem Abraham, Walter Williams and Emanuel Derman.

Salem Andrew Abraham (born 1966) is an American investor, hedge fund manager, and philanthropist. He is the president and founder of Abraham Trading Company, a futures investment firm based in Canadian, Texas.

Walter Edward Williams (born March 31, 1936) is an American economist, commentator, and academic. He is the John M. Olin Distinguished Professor of Economics at George Mason University, as well as a syndicated columnist and author known for his classical liberal and libertarian conservative views.

Emanuel Derman (born 1945) is a South African-born academic, businessman and writer. He is best known as a quantitative analyst, and author of the book My Life as a Quant: Reflections on Physics and Finance.

Staying within the title of this episode: three clear thinkers.

Apr 6, 2018

Brennan Dunn is an expert on optimizing websites, improving user experience and scaling up sales through automation. He knows how to persuade funnel customers to create a peak-buying strategy.

Reading dialogue from Plato has been a big influence on Brennan and his career. Plato had a way of talking to people on an individual basis. Brennan took the observation and has built his business model around just that – personalization. He figures out what level of awareness a customer may have on the subject he is selling and curates a selling strategy off that knowledge. Brennan calls this life cycle marketing. He segregates emails based on how long people have been on his email list, what your interests are, and different skill levels. People buy more often when they feel an offer has been completely catered to them.

How does Brennan write such effective copy? He starts with someone’s pain and shows them he knows where they are in life, where they want to be, and what their dreams are. Nobody cares much about what the product is, they care about how it will help them get to their dream. Copywriting is more about curating that creating.

What is the best way to get your message or product out to people? What is the most effective platform of communication today? Email. Brennan has launched products through Twitter as opposed to email and the results are nowhere near the same. Email reaches a greater number of people and is not owned by one company – it is a decentralized platform. Michael and Brennan end the conversation talking website development and the importance of usability and simplicity in a website.

In this episode of Trend Following Radio:

Life cycle marketing
Persuasion
Copywriting
Socrates
Niche marketing

Apr 2, 2018

Predictive technical analysis is chart/pattern reading. Trend following, on the other hand, is reactive technical analysis – a diversified portfolio perspective of markets using momentum indicators. You never know what will happen in one market so you use diversification to hedge your bets. Predictive technical analysis has no evidence of success. Reactive technical analysis has decades of proof behind it. How do you find this proof? Seek out the track records of traders using trend following. You can see trend followers making and losing money over long periods of time.

Michael reads a review from a critic who is a fan of predictive technical analysis. Michael uses this review to further make his point – there is no chart that can be studied long enough that will tell you which way a market will move. Trading in this way is a recipe for failure. As Ed Seykota famously said, “Everyone gets what they want out of the markets.” When you trade as though you can predict the future, you will most certainly get what you want from the markets – failure.

Mar 30, 2018

Tarra Mitchell’s new book is “The Yoga of Leadership: A Practical Guide to Health, Happiness, And Inspiring Total Team Engagement.” Her work digs deep into the psychological benefits of practicing yoga and the benefits it provides for overall life wellness.

Tarra made a pivot in her career after the 2008 financial crisis. She was working to raise money for a fund of funds and decided she wanted to set off on her own – become an entrepreneur. Her new business was set to get off the ground just as the 2008 crisis was unfolding – tanking her new business opportunity. Tarra then set off on different ventures, eventually leading her to yoga. Yoga quickly became a part of her weekly routine. She decided to go through yoga teacher training, not to become a teacher, but rather to learn more about the practice. Through that experience, she realized she wanted to give back to the world by bringing the benefits of yoga into the finance industry.

Stress, loneliness, happiness, depression – it’s all contagious. Tarra saw yoga as a great way to counter some of the negativity in everyday life. Breathing and moving on a yoga mat settles the nervous system and helps quiet the mind. Yoga also helps bring students to an ongoing place of greater consciousness. Waking up each morning and doing an assessment of what’s needed for the day helps give the mind balance and power over the senses. With Tarra’s previous ties to the finance world, she quickly saw how valuable it could be to the industry.

Tarra not only see’s yoga as a way to settle the mind, but also as a healing agent. Too often, people turn to drugs and alcohol as coping mechanisms. They turn to pills for anxiety, depression, or other ailments rather than trying to develop real skills to help. Tarra teaches her students how to strengthen the mind through practice and gives students a sense of community.

Mar 26, 2018

When everything is going great in the market, that’s when it is time to make sure that you have a plan for when it all goes downhill. Michael reads a piece from Ben Hunt titled, “The Icarus Moment,” adding commentary throughout. Michael and Ben may have differing views on trading styles, but philosophically they are aligned.

Everyone, on some level, is stuck on a wheel. People are literally baring their souls on a daily basis. Do you want to hear everyone’s daily fears? Their daily drama? Who we are and what we do has become completely separated. What can we do about all this? Start asking the “why.” Trust your biases. Wisdom comes from the ability to think critically. Think of the why, and not just the what.

Michael ends the podcast with a bonus interview with Anders Ericsson author of “Peak: Secrets from the New Science of Expertise.” Ericsson is a psychologist and Conradi Eminent Scholar and Professor of Psychology at Florida State University. He is an internationally recognized researcher in the psychological nature of expertise and human performance. He studies cognitive ability, personality, interests, and other factors that help researchers understand and predict deliberate practice and expert performance.

Mar 23, 2018

Robert Kurson is the author of “Rocket Men: The Daring Odyssey of Apollo 8 and the Astronauts Who Made Man’s First Journey to the Moon.”

How did Robert get hooked on space exploration? He was born in 1963, just five years before the Apollo 8 mission. Some of his first memories were watching rockets take off. He realized he knew a lot of Apollo 11 and 13 but not much about Apollo 8. As he researched the mission he quickly learned that NASA, astronauts, and experts in the field had all talked about this mission being the most astonishing and important of all Apollo missions. Why? Apollo 8 became the first manned spacecraft to leave Earth’s orbit, reach the Earth’s Moon, orbit it and return safely to Earth. The three astronaut crew consisted of Commander Frank Borman, Command Module Pilot James Lovell, and Lunar Module Pilot William Anders.

The U.S. had historically always been behind in the race to space. With Russia continuously one step ahead, Apollo 8 gave us the advantage of having the first crew to reach the moon and paved the way for Apollo 11 to successfully put the first man on the moon.

Mar 19, 2018

Where do you pull your inspiration from? Michael opens the podcast quoting Nassim Taleb addressing bullies: Do you throw punches for the sake of throwing punches? No, you throw punches when it will set a standard for others not to mess with you. Michael also pulls inspiration from the 1980’s Dunbar High School basketball team. The 1981–1982 team finished its season undefeated and the 1982–1983 team continued the tradition with a 31–0 record and a #1 national ranking. They produced three first round NBA basketball draft picks. That team has become legendary.

Inspiration can be pulled from extraordinary athletes, writers, singers, and even architecture. Michael recently visited Singapore for a presentation. He has been there many times and describes it as “San Diego on steroids.” He describes the architecture and beauty of the city as awe-inspiring.

Michael ties the podcast together talking trend following and what inspires him about this style of trading compared to fundamental trading.

In this episode of Trend Following Radio:

  • Bullies
  • Overcoming obstacles
  • Desert island trading
  • Value investing
  • Toxic masculinity
  • Noise elimination
  • EMT
Mar 16, 2018

Josef Marc is an author, entrepreneur, and CEO of Publica developing in the publishing world via blockchain. Publishing companies are some of the most inefficient businesses around today. Josef not only has cultivated a strategy to work around many of the hang-ups created by working with publishers, but has re-imagined the process altogether.

We have reached an era where people no longer care who the publisher is. Buyers can do their own research, read reviews and decide if they want to buy. How does blockchain technology help with this process? During an author’s campaign period, excitement can be generated through blockchain. Searching the content of books is easier through blockchain and there is a deeper sense of engagement throughout the community. Blockchain developments not only supply a platform for an author to get their name out, but it also creates a unique vehicle for payment. Josef also explains how blockchain can help with the re-sale of books and track when, what and who is buying a book or product.

For years Amazon has had a monopoly on book sales. Amazon relies on customer reviews to promote books and get others to buy. There is one small problem with this process – it is almost impossible to track the legitimacy of these customer reviews. How are reviews more accountable through blockchain? Everything is tracked and users have “tokenized” accountability.

Mar 12, 2018

Alison Gopnik is an American professor of psychology and affiliate professor of philosophy at the University of California, Berkeley. She is known for her work in the areas of cognitive and language development, specializing in the effect of language on thought, the development of a theory of mind, and causal learning. Her primary study is looking at how we learn and grow from the earliest years of our lives.

How did Alison get started down this path? She is the eldest of 6 children brought up in a bohemian style family. Being the oldest of 6 she had a deep understanding of children at a young age. She saw relationships between play and learning in babies first hand and was intrigued early on.

Alison also looks at the relationship between how long a baby is a baby before adulthood and how that relates to the rest of their life that follows. Humans generally have twice the amount of childhood than any of our animal relatives. If we have these extended periods of learning, compared to other mammals, what are human babies doing in that time? What are the other animal babies doing in that time? How does this time shape the rest of our lives in comparison?

Why is Alison so passionate about her work? She works with children everyday. She observes, plays and sees first hand how important they are. Other fields of science, particularly the artificial intelligence community, is beginning to take notice of her work. They are starting to look at children and cognitive development to help advance their programming. Introducing play and adaptation to their systems is one thing scientists have taken away from observing children. The more you play around and experiment in your childhood, the more you are able to adapt and adjust to the unknown environments. How do you go about taking on new challenges? Exploring and having fun with things often helps to solve problems quicker.

What are some lessons we are learning about kids and technology? Will this generation’s technology ruin the world? Michael and Alison end the podcast discussing the ever changing technological advances and what impacts it may or may not have on the world and the children living on it.

Mar 9, 2018

Martin “Marty” Bergin and James Dailey are on the podcast today. Bergin is the President and owner of DUNN Capital Management. He began working with DUNN in 1997 and took over the day-to-day operations of the firm in 2007. He became owner in 2015 (Bill Dunn remains Chairman). James Dailey became CEO of Dunn Capital in March 2016. DUNN has a track record that spans over 40 years.

Today’s podcast was recorded the week after the February 2018 volatility. Inevitably, when there is volatility in markets, machines are blamed. DUNN Capital is a trend following trading firm who uses computers for everything they do. They know fintech well. That said, there is a difference between DUNN Capital and “the machine” traders.

DUNN Capital trades from a higher volatility perspective and it has worked out well for them. They don’t charge management fees, but rather are completely incentive fee based. Further, at DUNN Capital they don’t reduce volatility for the sake of possibly reducing bad events–they still want strong profits and that is the only way they make money. Unfortunately, investors always remember drawdowns and they do try to minimize those without compromising their core system.

Finally, and this a surprise for many, DUNN Capital’s office is quiet and not very exciting. Trend following after all is about discipline and blocking out all of the media noise and information. DUNN’s investors get that. DUNN is managing money for the long term, not short term. Their trend following is geared toward data and everything in their research shows that long term trend following trading is their best opportunity.

Mar 5, 2018

Michael Covel walks the line on trend following.

Mar 2, 2018

Oliver Hart is the 6th Nobel Prize winner to appear on Trend Following Radio. He is a British-born American economist, and currently the Andrew E. Furer Professor of Economics at Harvard University. He received the Nobel Memorial Prize in Economic Sciences in 2016 for his work on contract theory.

Oliver is an expert on contract theory, theory of the firm, corporate finance, law and economics. He studies how ownership roles, structure and contractual arrangements are used in the governance and boundaries of corporations. How did he get his start? After receiving his PhD from Princeton in 1974, he began studying general equilibrium under uncertainty – particularly the behavior of firms when under uncertainty. Summer of 1983 was when his career path shifted – specifically to contracts. He became less interested in what firms should do, and more interested in how firms align with what shareholders want them to do.

Following the 2008 financial crisis, Oliver believed it was dangerous to start intervening in such a fragile economy. Yes, it was an unprecedented crisis but, Oliver believes it was totally overblown. No physical or human assets were disappearing and we had mechanisms such as bankruptcy to fall back on. What was the reasoning behind some banks beings saved and others not? Wall Street was bailed out but mainstream was not? Oliver looked at the crisis as arbitrary and rigged. Michael and Oliver wrap the podcast up discussing the differences in block chain and bitcoin and end the podcast with a 6 minute bonus Q&A.

Feb 26, 2018

What drives, distracts or motivates you? There has never been more availability to information than today. It is being pumped out every second of everyday. Is it useful?

Michael pulls a few quotes from a Farnam Street blog post and Nassim Taleb who further his point; we are not free, we are all part of the matrix, information is transforming us from nice people to neurotic people, and data that is not well discussed is toxic. Twitter, Facebook, CNBC, Bloomberg, and Yahoo Finance (among many others) are brainwashing the public. Shane Parish (from Farnam Street) also encourages people to think about what the information they are consuming means to them. Will it be relevant to them in a week, month, or year? He breaks the value of information down into two parts: Will the information stand the test of time? Does the information have detail?

The highest achievers have figured out how to sort through the chaos. They choose not to participate in the noise and tune everything out that is not essential. They are busy getting things done, rather than watching what everyone else is doing.

 

Feb 23, 2018

Martin Ford is a futurist and author focused on the impact artificial intelligence is having on society and the economy. He is also the founder of a Silicon Valley based software development company and recently started Genesis Systems, focused on creating sustainable water by way of atmospheric water retention systems. He has over 25 years of experience in software development and systems. His newest book is “Rise of the Robots: Technology and the Threat of a Jobless Future.”

What was the trigger that caused Martin to go down the path of studying artificial intelligence? He was running a small software company from the mid 90’s to the 2000’s. He saw first hand in that short span of time how rapid technology was shifting jobs. Once his interest was sparked, he quickly began looking beyond just the loss of jobs and thinking of the economical ripple effect of jobs disappearing.

How do we disrupt the economical and social impact of severe unemployment? Martin proposes a “basic income”. Basic income would be enough money for the typical individual to get by on and survive, but not thrive. Controversial? Yes. Michael and Martin end the podcast discussing the ever looming threat of sustainable water and Martin’s newest venture, Genesis Systems.

In this episode of Trend Following Radio:

  • Loss of jobs to robots
  • Basic income
  • Rapid advancements in technology
  • Poverty traps
  • Dignity and work
  • Technology in medicine
  • Population and pollution
  • Sustainable water
Feb 19, 2018

Cognitive dissonance, especially in politics, is running rampant. People regularly contradict themselves just to be right. Jordan Peterson is a psychology professor in Canada who has become popular due to his opposing views and his views on political correctness. Michael walks through an interview with Peterson and a sister article breaking apart that same interview and points out the key issues.

In this episode of Trend Following Radio:

  • Cognitive dissonance
  • Ad hominem
  • Political correctness
  • Politics
  • Gender equality
  • Gender pronouns
  • The lessons for life from this are profound
Feb 16, 2018

William Damon is a Professor of Education at the Stanford Graduate School of Education, Director of the Stanford Center on Adolescence, and senior fellow at Stanford University’s Hoover Institution. He is one of the world’s top researchers on development of purpose in life and author of the widely influential book “The Path to Purpose.” In January 2018 he was named one of the 50 most influential psychologists. This conversation lets listeners to rethink their purpose and take inventory on their day to day life.

How does one get closer to happiness? Purpose is what drives individuals through life. It creates positive aspirations. People who think beyond the day to day and move toward goals tend to have a more fulfilled, happier life. Bill’s work help’s youth find that purpose as well as help elderly keep theirs. He has seen first hand how purpose motivates and makes people obsessed with life.

What is the typical trigger for someone to start searching for their purpose? Is there always a particular starting point? Everyone has their own journey, however there are usually patterns young people follow while finding their purpose. Often they have observed a person that has had influence, and they want to emulate them–whether that be a parent, teacher, boss, coach, etc. However, these influences can also help to cause doubts–which may not be a bad thing. It’s a natural human tendency to get charged up and pursue dreams with more zest when others say it is impossible. It took about four years for Bill to get recognition he was going down the career right path. Success is not overnight.

Prospective thinking is the new “a-ha” revelation that is coming out in developmental psychology. It’s based on being able to shape your own future regardless of your past. Michael and Bill end the conversation talking common decency, universal morals and values.

In this episode of Trend Following Radio:

  • Purpose
  • Prestige of colleges
  • Celebrity status misconceptions
  • Developmental psychology
  • Influences of childhood
  • Prospective thinking
  • Basic morals and values
  • Public schools and curriculum being used
Feb 12, 2018

February 2018 has marked the return of volatility in the stock market. With that volatility comes a slew of news propaganda – listening to CNBC and Bloomberg you would think the world is ending. Every news outlet has their own story on why markets are spinning. Think through what is going on. Go back and look at other volatile times. What’s the truth? Markets are just acting how they are going to act. Volatility is normal. It is to be expected.

Adding to Michael’s perspective, he reads a blog post by Cliff Asness of AQR Capital. Cliff further elaborates on “machine haters” and news spinning during volatile times. Michael ends reading feedback from a listener on political correctness and keeping his message true and straight forward.

Feb 9, 2018

Chris Ducker is a British businessman, the founder and CEO of Virtual Staff Finder and the Live2Sell Group of Companies. Chris’s new book is, “Rise of the Youpreneur: The Definitive Guide to Becoming the Go-To Leader in Your Industry and Building a Future-Proof Business.” His book branches out to all audiences – regardless of where someone might be in their journey of building a company or brand.

What is a youpreneur? Chris realized about five years ago that people were personally signing up to do business with him. Not the brand name or the staff he employs, but him. A youpreneur builds a business based around them, the individual, but not reliant on them. Chris has created a movement centered on this philosophy. As you build a business around “you” all sorts of other opportunities start to present themselves. He encourages listeners to think about, “What sets YOU apart?” From there you can cultivate a business specific to you.

Centering a business around your reputation puts you in top control of a company or product you built. Why waste all that work by building your company on rented land. Chris stresses the need to grow your platform on your own domain. Don’t rely on Facebook or Instagram to look out for your best interests. Once you have your domain, what is the best way to reach your audience? By the year 2020, according to Google, 90% of content consumed by users will be by video or audio. Michael and Chris end on tips and tricks on creating a successful podcast, or going on a podcast as a guest.

In this episode of Trend Following Radio:

  • Building your business on your own domain
  • The ripple effect
  • Email campaigns
  • Starting a podcast
Feb 5, 2018

David Ricardo would be just as successful today trading as he was trading 100’s of years ago. He understood, from a trend following perspective, that there is no value in prediction. When trading, you take an entry signal, get into the market, and ride the trend. It is impossible to know with certainty where the market will go, so you trade with the market rather than against it. Some think they have a grasp on bitcoin, but there is no way to understand the “why” behind it or any other market.

You don’t have to be an expert to trade bitcoin, gold, coffee, or cocoa – just have rules in place and start trading. Small losses will happen but they are balanced: home runs – small losses = extreme gains. Do the homework, put rules together and go.

Still uneasy about diving into trend following? Check out performance from trend following traders such as Dunn Capital and Winton Capital. Much can be learned from information in public trend following track records.

In this episode of Trend Following Radio:

  • Time series momentum
  • Cross sectional momentum
  • Definition of managed futures
  • Diversification
  • Trend following diversification
  • Drawdowns
Feb 2, 2018

Annie Duke’s new book is, “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts.” She has taken her poker expertise and graduate level degree of psychology and digested it into a book we all can relate to our lives. She is a poker player, author, decision making expert, and cognitive scientist. Her understanding of how luck, skill and uncertainty all play a role in life is fascinating.

The foundation of decision making crosses over to all genres. She touches on football play calling, crypto currency, and everything in between. In Annie’s book she breaks down “the worst football play in Super Bowl history”, relating to Pete Carol. She proves that it was actually the right call in terms of probabilities and mathematics, Carroll was just unlucky. Carroll is on record admitting that it was the worst result of a call in Super Bowl history, but not the worst call.

Under a stressful situation, like the Super Bowl, would you be able to make the right call? How good are you about checking your beliefs and keeping your bets in line? Are your decisions and outcomes lucky? Smart? Skilled? Very few outcomes are solely skill or solely luck. Phil Ivey, arguably the best poker player in the world, sorts out what was luck and what was skill after every win or loss he may have in a poker tournament.

Learning occurs best when there are lots of decisions to be made in a compressed amount of time paired with lots of feedback to those decisions. Annie first studied this in young children learning to listen, speak, and digest words and quickly saw this study directly relate to the poker table. How do you learn when there is a lot of noisy feedback? Having limited resources, how do you use those resources to make educated bets?

Life is a series of bets that compound on themselves. Annie makes the point that, “I’m not sure” is the best answer in many situations – and there is nothing wrong with that. Coming from a place of uncertainty helps to make more rational decisions. When that decision doesn’t turn out well, you can then analyze how you can improve that action going forward.

In this episode of Trend Following Radio:

  • Crypto currency bubble
  • Decision making
  • Game theory
  • Decision making groups
  • Noisy feedback
  • Decisions in uncertainty
Jan 29, 2018

Do you buy and hold Bitcoin? For those who have held on through the turbulence it has turned out well–so far. Michael reads a lively blog post from a few years back regarding the right way to trade, the wrong way to trade and all the emotions people feel in-between. Michael breaks the post apart with commentary.

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