In This Episode
This week Dan clears up last episode’s remarks about his views on the bull market before turning immediately to this week’s podcast guest, Michael Covel.
Michael is a five-time author whose financial background includes work at Solomon Brothers before an undercover group of investors caught his attention for their new way of doing things – and far superior profit-making abilities.
Michael pulls back the veil on trend following in this episode, explaining how to know when to act on a possible trend, and why you can ignore almost all of the information about any company or commodity you’re deluged with to focus on five constant questions.
We think you’ll be intrigued by this world where the leading practitioner (as far as we can tell) has bagged average returns of 66% for decades – and for anyone tired of wondering or worrying when a bull market may end, they’ll be interested to learn Michael’s strategy works in down markets too..
NOTES & LINKS
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2:49: Dan corrects the record for a possible misinterpretation of his remarks last week. “It’s not that I’m bullish… it’s that I recognize this stuff could go on for a lot longer than a cautious guy like me would ever expect.”
4:20: Dan introduces this week’s podcast guest, Michael Covel. A five-time author of books such as Trend Following and Turtle Trader. Michael’s specialty is quant investing.
7:55: Michael recalls his time working at Solomon Brothers, before he was liberated from caring about fundamentals and balance sheets. “Once I saw this under-the-radar group of traders, this group of people who weren’t in the Financial Times headlines, The Wall Street Journal headlines, I said, “Wow, who are these people?”
10:44: Michael explains how, as a trend follower, he’s agnostic to the value of the security he’s following. “It could be corn, it could be soybeans, it could be gold, it could be Apple – you really don’t care.”
17:18: Trend following works in bull runs and market calamities – but there’s one kind of market where Michael acknowledges his strategy wouldn’t work.
20:58: Dan asks Michael how he’s able to recognize the start of a trend, and Michael lists the five questions whose answers reveal if and when you should move on the trend you’re seeing.
26:34: Dan suggests the one thing he sees as more important for trend followers than zeroing in on a huge trend, and Michael confirms it. “Absolutely.”
30:34: Berkshire Hathaway became legendary for posting average annual gains of around 21% since the 1960s, but Michael shares the story of one trader who’s averaged 66% for 30 years.
38:17: Profits are never guaranteed, so Michael explains why the great trend followers have honed the art of spotting outlier opportunities.
42:15: Michael makes a prediction about the long term viability of trend following. “As long as humans have fear and greed wired in their souls, I don’t see trends going away anytime soon.”
57:12: Dan asks Michael what his parting advice would be for listeners, and Michael shares a story of explaining trend following to the former head of the Soviet Union.
1:01:20: Dan answers a mailbag from an English listener Tabish R., who asks whether index funds are good vehicles for someone with a 10-20 year time horizon.