Pod Insights Michael Covel's Trend Following Ep. 1317: Tom Basso Interview with Michael Covel on Trend Following Radio About this episode My guest today is Tom Basso, an American hedge fund manager. He was president and founder of Trendstat Capital Management. He is the author of two books, Panic-Proof Investing and the self-published The Frustrated Investor. Tom is widely known in the trading community as "Mr. Serenity" due to his calm and disciplined approach to trading. The topic is Trend Following. In this episode of Trend Following Radio we discuss: Equal opportunity v. equal outcomes Government spending, efficiency, and economic policy Importance of education in trading Public speaking Timeless principles in trading Starting a fund management firm Elon Musk’s mindset and influence Jump in! --- I’m MICHAEL COVEL, the host of TREND FOLLOWING RADIO, and I’m proud to have delivered 10+ million podcast listens since 2012. Investments, economics, psychology, politics, decision-making, human behavior, entrepreneurship and trend following are all passionately explored and debated on my show. To start? I’d like to give you a great piece of advice you can use in your life and trading journey… cut your losses! You will find much more about that philosophy here: https://www.trendfollowing.com/trend/ You can watch a free video here: https://www.trendfollowing.com/video/ Can’t get enough of this episode? You can choose from my thousand plus episodes here: https://www.trendfollowing.com/podcast My social media platforms: Twitter: @covel Facebook: @trendfollowing LinkedIn: @covel Instagram: @mikecovel Hope you enjoy my never-ending podcast conversation!
Transcript 0:00 Speaker 00 No big introduction today. A repeat guest, a new interview with market wizard Tom Basso. Tom has been on this podcast, I don't know how many times, but there's a reason for that. Tom gives you that peaceful, easy feeling and he always seems to have, how do I want to say this? Just the right way of thinking. If you can't learn something from Tom, his tone, his perspective, some insight, some factoid, there's something wrong with you. Without any further delay from me, let's jump right into my episode today with trend following trader Tom Basso.
0:58 Speaker 00 You're a guy that first officially retired at what age?
1:02 Speaker 01 51.
1:04 Speaker 00 And I think you're a very prepared, planned guy, and I'm sure that would have been fine for the rest of your life. But now, here we are, all these years later, and I know it's not for the money. You just must be having so much fun. You're busier. You are absolutely busier from what I can observe just across in social media. And I'll see something in a feed or whatever. You have to be busier than many other young people that are trying to do what you're doing. You must love this.
1:35 Speaker 01 That's true. We got Facebook and LinkedIn chiming in for about 5,000 followers. And we got X now up to 55.5 or something thousand followers. More people, I think, know who Tom Basso is than they did when I was a money manager, I think. And yeah, I've been retired now 20 years. If I go about seven and a half more years, I figure I will have been retired longer than I was a money manager, which is really hard for me to get around my head. Actually, when I retired, I first retired, I took a year off of trading. I went to money markets and I just said, I'm not going to even look at a screen. I'm not going to be in a computer. I'm just gonna go out and prune my
2:18 Speaker 01 plants. And I worked out a lot. I did a lot of Matt Pilates and played a lot of golf and really didn't get on an airplane either. I wanted to stay home. Brenda and I got together and we ended up getting married and she asked me sheepishly one night, you're supposed to be this guru money manager. I guess you should probably look at my portfolio and tell me what I should be doing or maybe manage it for me. I had to come out of retirement. One thing led to another, social media exploded. Really, it was the COVID strangely that prompted this newfound enthusiasm in interviewing Tom Basso. They were desperate. Everybody's sitting at home with masks
3:02 Speaker 01 on or whatever and they're trying to figure out what to do. And the guys that were trying to do some podcasts realized if they could just get more material, people would watch it because they had nothing else to do. Who's available? Well, yeah, Tom Basso is retired. He doesn't have anything to do. Let's give him a call. So I started doing interviews. Everybody realized, wow, they're really easy to listen to. Of course, you have covered what, four or five now? I don't know if this is the fifth or sixth time you've interviewed me.
3:31 Speaker 00 I think the first one was 2012.
3:34 Speaker 01 That's amazing. Time flies.
3:36 Speaker 00 I kind of waited to ask you until after the election. And I'm not necessarily pushing in any kind of political direction. But I think what's interesting about you to a lot of people is your value system. And look, you're not afraid to say your political beliefs, but I think your political beliefs coincide with your value system. And I think what's interesting, and I'm just going to toss out some, some thoughts and some ideas about various things. But when you, Tom, with all your experience, you've had a long career, met so many different people, ups and downs.
4:18 Speaker 00 When you hear these conversations about equal opportunity versus equal outcome, how does that make you feel? I don't know how you can really have a society or a functioning civilization if the goal is to try and force through some magic hand or big hand, quote, equal outcomes. For example, even what you're talking about right now during COVID time, doing interviews, that's energy. That's energy from Tom Basso to do this, to wake up, to make it happen. So you have the opportunity to do it, you do it.
4:50 Speaker 01 Equal opportunity is the only way to go. I use the simple example of say you and me. I've got a chemical engineering degree. I had to take differential equations and integral calculus and all that. I have no idea what your exact course levels are, or your math skills, or your computer skills. But they're going to be very different than mine, probably. Given that the opportunities in the market are there, I mean, you and I have the same opportunity. But we're going to have to approach it very differently and get something that works for each of us to be successful. I can't expect you to start coming up with algorithms that are based on differential equations or something. You might not know that.
5:35 Speaker 01 On the other hand, you certainly, being over in Vietnam, you know a lot about the Far East markets. I don't have a clue. Little by little, I've been dabbling here and there, but we each have different backgrounds. We just have different resources. The opportunity is there. The markets are the ultimate opportunity. Everybody has a chance to come to the party and. Bring whatever they can bring. Life's the same way. Like Ben Carson, who's a great man, he came from nothing and ended up becoming one of the renowned neural surgeons in the world for kids and had a very successful career. There's so many other stories like that. Having an opportunity does not mean that the outcome's going to be the same.
6:19 Speaker 00 It's an unfortunate way where so many people get distracted with what sounds easy. Oh, wow, there's somebody out there, some leader, some elite person, and they say that I don't have the same opportunities as everybody else. And so therefore they're going to legislate an outcome. If someone just plays through the math of it, it doesn't work.
6:43 Speaker 01 It never ever will work. It's impossible.
6:47 Speaker 00 How do you feel about the current situation? I find what's happened now after the election quite interesting. I can't think of a time in my life where there might actually be the opportunity to decrease the size of government. Most people would like that idea regardless of their politics. I think most people would say, oh, hold on, if there's a lot of waste over here and a lot of spending of my tax money, whether you're on the left or the right, I think most people would say, I like that idea. Maybe we're at that point, even for your lifetime too. Going back a little bit farther than me, is this the first time you have the chance at shrinking it?
7:25 Speaker 01 Well, when they talk about the golden era for the US and I'm thinking that I'm in my golden years, wouldn't that be nice? I could have my golden years in the golden era. That would be wonderful. What's ending up happening with some of the nominations and the philosophy that seems to be underpinning a lot of the decisions that Trump and company seems to be making and along the same lines with this government efficiency, the DOES, I love that acronym. There's definitely a lot of low hanging fruit. And if you go back to simple behavioral economics and how we've now run this economy up to GDPs up in the
8:09 Speaker 01 Four or five trillion and spending another like six or seven trillion and your deficit is two trillion and you're adding to the deficit and adding to the debt and their interest paid on the debt is now greater than the military budget. That gets a little third worldish if we don't watch it. If you realize that inflation this time around was largely caused by the Inflation Reduction Act, which wastefully spent all sorts of money that we didn't need to spend, that we didn't really have, and did nothing whatsoever to decrease inflation because what it did is ran up government spending. So there's a lot more money floating around in the economy.
8:51 Speaker 01 If you simply then reverse that thinking and say, okay, let's strip out trillion if we can find it. Elon threw that number out when somebody asked him in an interview. And that would be out of like a seven trillion budget. So you'd be knocking out 30% maybe of the spending. By doing that, there's almost a worry that the economy will start contracting because it's so used to all this extra money washing around. But in reality, I'm not too worried about it because by taking that amount of spending out of the government's hands and returning it through
9:31 Speaker 01 lower tax rates and growth in the economy into the private sector, I think you're going to see a private sector that's like a rocket ship or an F-15 taking off vertical. And you're going to see the government spending keep going down and down and down. And they'll just, it's going to happen over time. You're not going to be able to take two trillion out of the US government tomorrow. It's going to take a little while. So good luck to those guys. They're going to have a fun year and a half or so. The goal is July 4, 2026 with the 250th anniversary of the
10:08 Speaker 01 Declaration of Independence, I guess it was. So that'll be a fun celebration. They hope to dismantle DOGE, the committee, on that date as a birthday gift to the American public. So we'll see if they can pull it off.
10:22 Speaker 00 Growing up in that DC area, let's see, they're going to fight like crazy. The deep state is the deep state. So we'll see. I want to take it back to something you were bringing up about education. And it made me think about my early math experiences in college. My first semester of calculus, I wasn't paying attention. I didn't really care. I have to admit, I got the big flag, the big F, which that was a motivation for the next two semesters where I got As in it, to figure it out and get into it. From your perspective, for a young man out there that is interested in trading or investing or whatnot, from my perspective, I still think it's the bread and butter, math, computer
11:04 Speaker 00 science. You can go do these other things, liberal arts degrees, which I did, which was a waste of time, or even an MBA in some respects. I found there was a ton of classes that were just, never should have existed. Going back to your point, math, computer science, if one wants to get ahead, it's still that.
11:22 Speaker 01 I would agree with you, especially as an individual trader. I would go in the order of computer, math, in that order. You're going to have to process a lot of data and computers can process it more efficiently. The simple math that's necessary to do like a moving average, doesn't require that you take boundary value theorem and for your series analysis or something. So the math skills would be useful, but you don't need integral calculus to be able to trade. But you do need to move the data. And then I would add, because I get a lot of questions from a lot of new traders that want to get into the business. They want to manage other people's money. I did it for 28 years and retired
12:07 Speaker 01 and don't miss it. They want to take it on and become a billionaire. For those folks that want to do that, I would argue that it would be useful to also take some of the base level stuff that you would use to run a business. So accounting is useful because you're going to have people come in and audit you. You're going to have to put out disclosure documents, calculate performance summaries, comply with the law and all that. I think another useful skill would be just to be able to talk about, not necessarily use for your trading, because I don't use it at all. But it just is like we morphed into a little behavioral economics here. I have done a lot of reading and thinking about behavioral economics, and I think that
12:52 Speaker 01 would be very useful in the business because your client expects you to be knowledgeable in that stuff, even if you don't use it for your trading, strangely. So it's good to be fluent in forms of economics so you can carry on a conversation with your clients.
13:09 Speaker 00 How did you figure out the personal stuff though, early on? You're a very easygoing personality. Was there a stage in your life where you felt like, okay, I'm pretty good at communicating. I can share my ideas. People understand me. They get along with me. They like me. Okay, this is an asset on my side. How did that first start to happen? And when did you know you were good at that?
13:32 Speaker 01 It happened in my twenties. I got out of school and I took a course in public speaking, which was very interesting to me. The lady that was teaching it had a great way, and this is way before Zoom calls, where I could watch what I look like talking to you right now because we're on a Zoom call. Back in the day, to have a video of you speaking and be able to analyze stupid you looked while you were doing it, that was a little bit of a rare occurrence. You could give a speech in front of your bathroom mirror, but other than that, there wasn't a whole lot of way of critically stepping back and looking at it and saying, yeah, that would be better. I could do this better. You can really critically analyze yourself.
14:17 Speaker 01 So that was a very helpful experience.
14:21 Speaker 00 Were you nervous or about it at that point in time? And so that class helped you?
14:25 Speaker 01 Oh, they helped me a lot. You saw me at an M A R conference give a talk. Before I took that course, this was a course that went on for like 12, 15 weeks. We'd meet, I guess, once a week or twice a week. I can't even remember. But it was after work. I was doing chemical engineering and then I'd stay after and do this course for another hour and a half. I learned a lot. I went from being okay trying to get through a talk in front of a group to I think when I got done with that, I really felt like Ward Barrett's back in the day could have come up to me and said at an M A R conference, Tom,
15:06 Speaker 01 we just had so and so not make his plane and we've got a spot, we've got a fill. Can you get up and just talk about the markets or strategies or whatever? With about 10, 15 minutes, I could jot down a few things and do a half an hour talk. Be totally comfortable with it.
15:26 Speaker 00 I love that feeling. That's a great feeling to have that.
15:29 Speaker 01 There was one other related incident or period right in the late twenties for me. I had to start marketing. And because of the nature of the business, everybody wanted to talk to me. I had to get on the plane and go to California, Florida, wherever the clients were. Arizona back in the day, I would carry on one on ones, one on ones with these people. And a lot of times I'd have a broker introducing me to the client. We did a lot of tag teams with brokers. What ended up happening is I was always the sort of the nerd engineer in the meeting and knew the math and could answer all the tough questions.
16:13 Speaker 01 And somebody wants to throw heavy duty due diligence at me. It's not a problem. I know the answer. Or I can develop an answer quickly. The broker, on the other hand, is sort of the guy that shakes hands, introduces people and the salesman. I got a lot of experience listening to how the salesman did their thing. And I also got a little bit of advice from some of these folks or even from the clients. Hey Tom, don't talk about stochastic, don't talk about kurtosis in your normal curve. Don't talk standard deviations, don't use those words.
16:52 Speaker 01 Be able to describe all that in a generic way that the way I looked at it, my dad could understand. He was a postman. He delivered mail. If I could get my dad to understand it, that's the level you gotta get it at. I really worked hard at trying to say things about how I traded and how to manage risk and how to deal with volatility and I did that all with very simple language and that's probably served me well in a lot of interviews.
17:21 Speaker 00 Whatever one's domain expertise is, having it, there's like a natural confidence because the moment you're not thinking about being on stage, so to speak, and you're just in the flow state, you just feel comfortable because you know something and you know you can share something with other people, then it's quite easy to communicate.
17:43 Speaker 01 It is, really is. When I was given a book report in senior year of high school, I was trembling in front of 20 kids that I had grown up with all my life in a small village on the west side of Syracuse. I was a basket case. I came from that all the way to, I could be in front of a thousand people, that wouldn't bother me. I've been on telecasts where there's tens of thousands of people watching.
18:09 Speaker 00 My trial by fire was aged 21 on the communication aspect and that was running for political office and running for mayor of the community that I lived in outside DC. The first thing you had to do was go around with a petition to get your name on the ballot. And so I was 21, running against a guy who was 72, who had been the mayor for 24, 28 years straight. That was an amazing experience because all the local ABC, NBC, CBS affiliates, Washington Post, you're on video. I have some VHS tapes buried somewhere of these interviews and whatnot, but it was an experience. It was the trial by fire. It was like, wow, if you can throw yourself into that, no one can be prepared for that.
18:55 Speaker 00 And then if you can come out on the other side, you're like, oh, wow, that was an experience to just that whole communicating with and seeing how the media works. And you know this too, anyone listening right now, if you ever have the opportunity to deal with media, the first thing you should be thinking in the back of your head is they do not want to make you look good. That's usually not what they want. They want to find something to make you look bad.
19:19 Speaker 01 You've even noticed along the lines of what you were just saying, if you've noticed that Elon, after the bullet grazed Trump and Elon sort of came around and said, this guy is for real. Fight, fight, fight. He's really got his act together and I'm going to join the fray. He was thrust into this massive media thing. He's kind of definitely a nerd. He's a brilliant guy. I don't know where his IQ is, but he's probably you and me combined or something. You notice that when he first started, it was a little halting and it wasn't smooth. And he'd say a few little things and then he'd wave goodbye and go off the
19:59 Speaker 01 stage or something. And now he's hanging out at the UFC fight with Trump and he's putting on glasses to look like a nerd, just to poke some fun at Mark Cuban.
20:12 Speaker 00 We're watching him in real time, learn how to do it.
20:15 Speaker 01 Exactly. He's now becoming comfortable. He just figures, hey, he's going to be in Doge. Yeah, you got Vivek Ramaswamy, who's the smooth tongue orator.
20:27 Speaker 00 He was a professional speaker already, though. He was a pro already.
20:30 Speaker 01 Oh my God, he is unbelievable. He can rip off sentence after sentence that are so clear, so articulate. If the two of them ever have to give a press release from Doge, Vivek ought to do it. But I have to say, Elon's coming on and he's getting a lot better now at being able to do an interview or get up in front of a crowd.
20:53 Speaker 00 What's interesting about where you're kind of going with this with Elon and for people that are observing this conversation is the lack of fear. Okay, yeah, he's the richest guy in the world, but does the richest guy in the world want to look bad? He still gets out there and tries in public. That's a great lesson for everybody. You can't think your way through trying to be a speaker. You have to get into it and do it. You can't just imagine it.
21:20 Speaker 01 It's almost like a bit of a system is what we were taught in that class. And it made so much sense to me. And then there's all sorts of variations on the theme. I think you can get to try to keep things simple and be focused. So much better at doing this than I was when I was in my twenties.
21:38 Speaker 00 I think the one time that I either met you or sat next to you at an event, and I think it was in Germany, I just remember you as being kind of tall and a little intimidating. Jet black hair intimidating, is that right? Yeah, a little bit.
21:50 Speaker 01 Yeah, I was tall. I still am 6'3". As I remember, you were a little shorter than 6'3". I don't know that anybody's ever called me intimidating before. Back when I used to grind steel for a summer vacation in a steel mill, I had put on some muscle. I probably bought as intimidating as I could get at 205 and 6'3". Had some muscles to deal with some of those other basketball players I went up against senior year of college.
22:19 Speaker 00 There's a quote that I saw, and I know you already know this is going to happen with me. I'm going to bounce you around and just try and find things with you. This guy, Naval Ravikant, VC and early founder in many things. You would recognize him, I think. You might not recognize the name. He had a line about leaders come and go, but don't change the rules of the game. And what we saw perhaps in the last five to 10 years, the rules of the game, for example, censorship, lawfare, importing voters. Now, these things might sound political to somebody. They're not really political in the sense because they're changing the rules of the game. For example, as you as a trader, if all of a
22:59 Speaker 00 sudden, they said, well, Tom, you are in one particular group of traders, but there's another group of traders that we think, for whatever reason, deserve a spot ahead of you. Or they deserve some kind of discount that you don't deserve. All these types of things, once the fairness goes away, and back to my original point of equal opportunity versus equal outcome. If you start to have things like censorship, or lawfare, or importing voters, the whole system kind of disintegrates. And we could easily make parallels to trading. The moment the structure of the CME would change, the moment the futures exchanges would change. That's what 100 plus years of goodwill built up.
23:45 Speaker 00 If that all changed, the whole system fractures. Sometimes we, as human beings, we think we're improving something, we think we're making something quote fair. But in reality, we could be destroying the entire thing that got us here.
23:57 Speaker 01 You say the structure changed. I would even argue maybe that it tried to change and maybe was attempting a change over about a four year period that we just went through. And now it's changing right back to sort of common sense, the structure in reference to your VC guy. Good leadership and good organization skills and running a company or doing great marketing campaigns and all that. I don't know that that's doing it well. Maybe hasn't changed all that much. And every time you try to go away from it, you find yourself down the road. Somebody comes in and moves it back to where it was in the first place, sort of.
24:39 Speaker 01 Or at least embraces those concepts so that they can make it successful again. To some extent, we're seeing almost just a reversal of going back to what makes sense.
24:50 Speaker 00 Looking behind you, and I see that Market Wizards book behind you. What's so interesting about the first two in particular, I think you're in the second one. What's so interesting about those books is that the timeless nature of.
25:05 Speaker 00 Those books, the timeless nature of what has been put down on paper. And so many young people, when they want to come into the world that we're in, I think they say to themselves, there's got to be something else. There's got to be something new. There's got to be this. There's got to be that. Those basic principles that you and many people put down so many moons go, they don't change.
25:32 Speaker 01 I'm still using some math that I created for ourselves back at Trend Stab days 45 years ago. Still using it today. Things change. Sure. Data is coming in faster. Volatility is much higher. The computer ability to move vast quantities of orders and data is one thousandth of the speed that we moved it back in the seventies. But in reality, it's kind of like which directions the work can go and go with it. Manage your position size, move your stops when you can. Nothing changes. It's the same. I've been doing it every afternoon for as long as I can remember.
26:12 Speaker 00 How do you address the young person? Not that you care necessarily, but I know you like to persuade people to good insights, persuade them to good education. I'm sure there's plenty of young people out there that will watch this or listen. And they hear you say, well, I'm using math, systems, thoughts that I put together philosophies from 45 years ago. If they're 25 years old, they'll just glaze over and say, oh, that's just Tom. He's retired. Talk about the good old days and they just completely miss the point. If you have as a young person, a certain arrogance to where somebody with more experience and more time
26:55 Speaker 00 says something, no ambiguity, 45 years ago, I'm using similar pieces. And if you as a young person immediately say to yourself, that's got to be wrong. Versus saying, let me find out why he said that. A lot of people will choose the immediate, he's got to be wrong part. Unfortunately.
27:16 Speaker 01 Some young kids will have a little bit of a back and forth on X and try to debate me a little bit on certain things.
27:24 Speaker 00 You're not saying you're trying to be perfect. You're just saying there is a certain amount of timeless wisdom that comes with markets and trading.
27:31 Speaker 01 With all due respect, you and I shouldn't trade like each other because our situation, you're over in Vietnam, I'm here in Phoenix. We've got different sizes of assets we're managing, different skill levels and different things. Why would it make sense for you and me to trade exactly like each other?
27:48 Speaker 00 But the overall approach, if you're in trend following headspace, it's going to be similar. There might be the structure of how one.
27:54 Speaker 01 Yeah, similar, yes, but perhaps tweaked like trend following could be done on a three day indicator. It could be done on a 21 day indicator, still trend following, completely different parameter set, completely different types of transactions you're going to get, trends you'll catch.
28:11 Speaker 00 You were never known to be, for example, a guy that I've had on this podcast who was inspired by Bill Dunn, Paul Mulvaney, who Paul shoots for the moon, right? That was never your approach. You never wanted to shoot for the moon. Did you ever have the thought of it though? Cause back in the day, you're getting started. Bill Dunn had been in business for a long time already. You're a keen observer. You look at that and you said, he's making a lot of money with that. But you say to yourself, I can't go that direction.
28:40 Speaker 01 While I was running money for other people, the thought never crossed my mind because my attitude was the clients would not put up with it. And I did not want to try to do one thing for the clients and another thing for me. There's too many potential legal conflict of interest, accounting nightmares that you get into. You got to make sure that you're not jumping in ahead of your client orders and your front running. And you got all sorts of problems with the auditors coming in. I always ran my client money like I ran my own money. So now I retire. Well, then I take a year off, then I come back and I start managing our portfolios. I've got a new wife. She's not familiar with what I'm doing at all.
29:25 Speaker 01 And so little by little, I'm bringing her up the education curve and explaining her account to her and the statements that come in so she can read them and understand what's going on. Little by little, I would say the only time that the thought crossed my mind of why don't I go for it a little bit more than I do, was probably about right around COVID time. I did have a 103% year that year and it was just basically trend down, caught it, trend up, caught that. And there was a lot of trends. It wasn't just stocks going down and going back up. There was big moves in
30:05 Speaker 01 all sorts of commodities and everything else. Oil went negative. My God, that was a huge trend. And then it turned around and went up. There was a lot of money to be made on those trends. Right around in there, I was starting to think to myself, if I could diversify away the risk somehow and get a little more leverage in it, but protect myself using a lot of other sort of tricks. Blend in some short-term strategies with some long-term strategies. Maybe bring in a counter trend. It's a trend following, but done on a very short-term basis against a major trend. Do that intentionally to try to buffer that first part of a drawdown that happens invariably when you hit your equity high.
30:46 Speaker 01 And then all the markets reverse on you and start heading back to the stop-loss point. And your drawdown starts then. All the allocators and even your own psychology starts realizing, I'm in a drawdown now. I looked at ways of trying to modify that. So keep the line a little smoother. And if I could do that, what would be wrong with trying to leverage that up just a little bit to get the returns higher? Never, never really pulled the trigger on that. That was the only time it crossed my mind.
31:17 Speaker 00 Let me take it back to something you brought up earlier with the young people looking to be fund managers and it kind of fits with where you're going right now, too. Back in the day, when you started, you surely looked around and you saw the fee structures were six and 25. Maybe even higher for some, right? Probably not exceeding six, some might have exceeded 25. I don't know if young people understand today that that fee structure is not going to be around for them today. Nothing in life is impossible, but it does seem that there were some first mover advantages in the fund management space to put your shingle out in the mid to late seventies, early eighties. Big difference.
32:00 Speaker 01 No doubt about it. I can cite a perfect example of Trendstat, which was in the end, a single manager, multi-strategy approach to trading. Compare it to Standpoint, which is Eric Crittenton, and I'm the chairman of the board of the Mitchell Fund here in Scottsdale. Standpoint is a single manager, multi-strategy fund. We started that up roughly 20 years after I closed Trendstat down. In that 20-year period, maybe give it 25, 30, you went from Tom Basso being able to basically start up in his office at his house, put the shingle out, as you said,
32:43 Speaker 01 attract some attention, have a good track record. People say, hey, that's kind of interesting. This guy is doing a good job. It's getting to be two, three years. He's got a few million under management. Maybe we can give him another million or two. And you build your assets and all of a sudden you hit 10 million and you made other criteria for other allocators. And they're willing to give you five million and then all of a sudden it just kind of accelerates. You blink and you're at 100 million or something. And that's back in Trendstat days. Standpoint, out of the gate, had to raise $2 million of capital, have a three-year negative cash flow. Assuming it would take that long to get to break even, we broke that
33:26 Speaker 01 record and got there a little quicker. But that was the plan. Three years to break even, not making money, break even. Five people out of the gate. We had compliance and accounting. We had trading. We had a computer department. We had Eric, who is the chief investment officer, marketing and operations. Each one of these people are still with the firm. And now they've added a sixth person on staff and we're adding a seventh clerical position coming up, maybe first quarter of this next year. You can't start a company today, in today's world, without kind of that sort of mentality. Raising huge
34:11 Speaker 01 capital, having an office space right out of the gate. You can't have it out of your home. You gotta have backups. SEC is going to come in and review you. You gotta have all the compliance up to date or they're going to cite you for this and that. That means you gotta have somebody working on that all the time. It's a different world. You can't just start up out of your basement like you could back in the day. So, different world.
34:34 Speaker 00 Taking it back to our political election conversation, but bringing in the markets, so to speak. During an election campaign, you have everybody, both sides, opinions. You have consultants, opinions, media, opinions. And then there's something called the betting markets. We have all these people out there that are like, "Hey, I'm a pollster. I can tell you what's gonna happen." Well, they've missed twice on Trump. "I can tell you what's gonna happen." And they get immediate opinions and we think this is gonna happen. But the people that are putting their money down and betting. Isn't it interesting how that unfolds?
35:13 Speaker 01 It's very interesting. One of the reasons why you and I are trend followers, I guess, would be, is that when people put up money to buy or sell, they both agree to the price. They both are at least agreeable to the transaction that occurred. Some may feel better about that transaction or not, the other side, but in the end, they both agreed to it. With all the force of the buying and all the force of the selling, pushing prices up, down, sideways, isn't that in the end telling you the reality of where that market needs to be? Right there. It's unambiguous. It's a number.
35:48 Speaker 00 It's telling you the bettors, what are the real beliefs of the bettors. For example, if you turn on CNN or you turn on Fox during an election season, they've got opinions. Do you know those opinions are even real? We don't know if they're real. It could just be a dog and pony show, right? But if you've got to put money down, then it's real.
36:10 Speaker 01 It's real. That's very interesting that he nailed it or the poly market nailed it. Somebody these other pollsters, this poor lady out in Iowa, that was the gold standard in polling. Mrs. The thing in Iowa buys some 16 points. And she's supposed to be the gold stand and she retired. Turns out she was going to retire after the election anyway. This was her last go around, but she kind of ended on a sour note with that last poll that came out about a few days before the election. It's really hard because I don't know about a lot of my friends, but you call me with a poll. Not only do I not answer the poll, the number gets blocked. You're never going to get my opinion in a poll.
36:53 Speaker 00 There was another guy in the DC area, professor, I think at American University. His name's Alan Lichtman. He was a far left guy, but he'd done this prediction of the presidential race. I think in the last 10 or 11, and he was correct. And then he lost this one. So he blew out. But you can find traders all over that have a strategy. They might win 10 times in a row due to luck. And then they bust out on trade number 11 and they don't necessarily assess what even happened. This guy Alan Lichtman, he's trying to say that Elon did something nefarious. His system is fine, but Elon did something nefarious. No, no, no, no, your sister was wrong. You busted out. That's no good.
37:37 Speaker 01 Elon's got to get blamed for all sorts of things the next decade, I'm sure.
37:41 Speaker 00 I'm sure this is controversial as I say this. To me, so far, I guess things can change. He seems to be a genuine person. He seems to be an okay guy, even if you think to yourself, he's not an okay guy. He's a bad guy. But then you still at least have to admire and be inspired by SpaceX, Tesla, PayPal. Those are just amazing. He is the Howard Hughes of the day, isn't he?
38:09 Speaker 01 He's a critical thinker and he reads voraciously. And I think what happens when you do that is one part of your brain's got perhaps some math on it. Another part might have some business acumen in it. It's sort of like artificial intelligence, but in his case, it's in a human brain where he's just absorbed vast quantities of data. I've read a lot of stuff, talked to a lot of people I've been around the block a few times. I have times where my wife will say something to me and I'll say, well, that doesn't sound right. I think it's this. But I'm thinking to myself, how do I know that? I don't remember how I would ever know that. Somewhere in my brain, I heard something or I connected it to this and it's
38:54 Speaker 01 built in there. And I think he has that on steroids. He can sit there and say, let's see, we can only get to Mars in a window. So we're going to have to launch like 250 rockets almost simultaneously to have all of those loads in the air on the way to reach the window so that when we get there, it all hopefully lands fairly successfully. We unpack all this stuff, we build a city. That's the only way you can do it. You can't send just five rockets and then wait for the next 250 days or whenever the window comes around again. The poor people are going to be starving to death on Mars by the time the next load of rockets comes in. He just thinks of stuff like that. We're going to have to have a rocket
39:39 Speaker 01 factory that chucks out rockets like crazy. Oh, we probably should try to catch those suckers when they try to land so that if they don't smash themselves, that way we could reuse them. Wow, there's a concept. He just comes up with that stuff and then he probably goes to his engineers and say, "See if he could figure this out." So you make progress.
39:59 Speaker 00 He had a book recommendation or group of books he recommended the other day, and I bought 13 out of the 14 that he recommended. And those 13 out of 14 were all military or military history. The one that I didn't buy was the Designer of the Video Game Doom. I didn't buy that one because I actually interviewed the guy on this podcast. So I said, "I already know that story."
40:20 Speaker 01 You've interviewed some very interesting people. I loved your Steve Burns interview the other week. I listened to that myself and I just enjoyed it. I like listening to him. He's a straight shooter, a great trader, and I love hearing what he has to say.
40:34 Speaker 00 He's got a little bit of Southern accent. I have a little bit of Southern accent sometimes too, but I think sometimes the Southern accent feels down to earth and a little bit pleasing to the ear sometimes.
40:42 Speaker 01 Yours is Southern DC. His is Alabama.
40:46 Speaker 00 My grandmother did not call me Michael. She was from Southern Virginia. She said, "Mackle?" There you go. There's your Southern right there. I never got as deep as she did. "I will mess up on the yawl or the water. It's as bad as I go." Well, listen, Tom, I appreciate it. Great stuff.
41:01 Speaker 01 Whenever you feel the urge to talk, I'm happy.
41:05 Speaker 00 I will see you again soon.
41:07 Speaker 01 Yes, sir. I'll do it.
41:14 Speaker 02 I see a time when those awake will understand how to make money in up, down, and surprise markets. Whether new trader or experienced, college student or financial advisor, protecting against a crash or just trying to make a lot of money, TrendFOLLOWing offers everyone an answer in uncertain times. To get started immediately, send me an email, [email protected] . I will send you the right TrendFOLLOWing steps to take, along with my free video. But if you want to buy and hold, trust the government and trust Wall Street, this is absolutely not for you.
Previous Ep. 1316: Zen Man with Michael Covel on Trend Following Radio Next Ep. 1318: A Christmas Education with Michael Covel on Trend Following Radio Page updated November 7, 2026 · transcript and summary are machine-generated
