Pod Insights Michael Covel's Trend Following Ep. 1335: Thinking for a Living with Michael Covel on Trend Following Radio About this episode Please enjoy my monologue Thinking for a Living with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive. --- 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 23,396 words · 3 speakers
0:00 Speaker 00 Given the carnage, the chaos, the uncertainty of April 2025. I mean, seriously, what a time to be alive. Wild times. Some people are ecstatic. Some people have lost their shirt. And the month is not even over. So who knows where markets will go? But in the face of this onslaught, I would say that having a certain mindset is probably the foundation. If you wake up in April 2025 and you have no plan, you might be behind the eight ball a little bit. But if you want to know how to get that plan,
0:44 Speaker 00 it starts with the mindset. It starts with that foundation. And today I want to share back to back two episodes with a favorite guest of mine, a trend following trader. And as I often say on this podcast, if you can't learn something from this man, if you can't walk away with a takeaway, there's something wrong with you. Like give up, like retire. Go to the old people's home and get that intravenous drip of applesauce. Cause you're toast, man. If you can't learn anything from these two episodes,
1:28 Speaker 00 if there's not an aha moment, if the light bulb doesn't appear over your head, if you don't feel like you've moved your life forward in a better direction in some way or another, give up. It's over. Without any further delay, let's jump right in and I'll see you again next week.
2:00 Speaker 00 On the podcast today, one of my favorites, Eric Crittenden of Standpoint Funds, a trend-following managed futures-type trader. Eric brings a very practical, no-nonsense approach to the markets and to life, a perspective I like to think that I have, but I always enjoy Eric's view because he comes at it through angles that sometimes I'm a little fast and furious. And Eric's very thoughtful, gives you the perspective that you might not see, or the perspective you might need to see. You know the base of this podcast, Trend Following.
2:40 Speaker 00 Enjoy a little more of that trend-following perspective with Eric Crittenden.
2:55 Speaker 00 I think when I had you on, I always get to pick the mind of a professor to some degree. And you're looking very professorial these days, by the way. You're falling right into it, huh? It's the gray hair, man. Even though you've got your approach, you know what you want to do every day, you still are having to take care of people and their hopes and their dreams and their savings. And that always brings a little stress, doesn't it? Well, I would say that now is probably the least stressed I've been in living memory that I can recall. So, I mean, on one hand, look, we just do one thing and do it well and do it the way we want to do it. That's the way to live. I would encourage everyone to try to approach that in life. I have just managed to get there. I don't know how well it's going
3:37 Speaker 00 to work going forward. You never do. But I can tell you that my stress level is as low as I can ever remember in my life. You bring up an interesting point because we've talked before and we don't need to go into any prior stuff because right now you guys are on a roll at Standpoint. Things are doing well. People are believing in you and they're believing in you by putting their capital with you. But I guess what's interesting is the foundation, and maybe you can explain how this happened. But the foundation is, and you just alluded to this, you're doing it your way. You put your flag down. You said, this is what we're going to do. This is how we do it. Do you like us? We'll communicate with you. And that's it. You haven't tried to be all things to all people. You decided who you are, and then you've asked people to come join you.
4:23 Speaker 01 That's right. In fact, we use that phrase a lot. Don't try to be all things to all people. Stay disciplined, have realistic expectations, and know what you're trying to do. And we're trying to finish a marathon here.
4:35 Speaker 00 The marathon never ends, though.
4:36 Speaker 01 No, it never ends. It's basically the course of your career. It doesn't do us any good to produce alpha and have great returns five years in a row and then be down 60% in one year. There's enough products in the marketplace that do that. We try to be humble, grind, and do the right thing, manage the risk along the way, and we plan on being there at the end of our careers, which is another 25 years for me. That's just a different philosophy than what you'll see in the marketplace from a lot of different products and funds and firms.
5:06 Speaker 00 When you sit around, you have that conversation with yourself, where you're not talking to me on a podcast that maybe a few people might hear. What's the most important conversation that Eric has with Eric every day?
5:18 Speaker 01 Well, I think there's two. There's the client-focused conversation. Are we doing a good job of connecting potential clients with the reality of what it is we offer? That's always a challenge in our industry for some reason. Are we doing the best job we can? And then internally, are we doing the best job we can at actually managing money? It's kind of a paradox. One of the unsung attributes in this industry is not tinkering and changing things. Don't get in there and let your fear, or your envy, or any of these other counterproductive features of the human mind get in there, mess up your investment strategy.
5:59 Speaker 01 That comes across sometimes as a lack of effort on your part, or a lack of...
6:06 Speaker 01 Continuous improvement. So balancing that where you have to do your research, you need to be aware of what's going on in the markets and don't get caught flat footed or be surprised by anything. But when you have a good system in place with good rules, truthfully, you just don't need to change it very often. And I feel like people err on the side of changing things too frequently. Because they're afraid of feeling or looking lazy.
6:30 Speaker 00 Interesting self-analysis that you could believe that other people. And when they're thinking about you and your type of strategy, that there could be a lack of effort because they might perceive there's not a continuous improvement. But to say that is to really not understand what you do.
6:50 Speaker 01 True. But what I've learned, and now I'm 51 now, been in the industry for over 25 years. And what I've learned is that it's almost impossible to get most people to understand. What it is you and I understand, and it's not really realistic to expect them because they haven't been in the trenches and done it. So they can't really appreciate how counterintuitive a lot of these important points are.
7:15 Speaker 00 But you know what's interesting is you state that you say, okay, all the years that yourself, myself have understood this type of thinking, strategy, philosophy. But even as a young man, I mean, some 20 something year old guy out there could have his eye opener. He could read a book, he could see an article or whatnot, and he could go, oh, I understand this idea of trend and following and quant trading. And they could have that light bulb moment before they even get to having the 25 years of experience you have. But then there are so many people that I will bump into, and you alluded to this, that they go through a career, doctor, attorney, whatnot.
7:54 Speaker 00 And they never get to the point of where that 20 something had that light bulb moment of going like, hold on. Who was this guy Jerry Parker? Who was this guy Tom Bosso? They never have that moment and they get to later on in life. And I think that's the hard part is when they get to later on in life, it's like, how do you fill in that blanks when they never first had that aha moment that there might even be? Some of these achievers and philosophies and strategies out there in the world.
8:22 Speaker 01 I think you could probably say that about most disciplines in life. Look, if you take somebody off the street and you put them in the octagon, mixed martial arts, they're going to make every mistake in the book and they're going to lose. So it takes, in my opinion, at least 10 years. First of all, you have to have the talent to do it and then the commitment. There's going to be losses along the way. There's going to be a cost to learning these things and that applies to almost all disciplines, whether you want to play the piano or be a fighter or be a professional soldier or a doctor or whatever, or a nutritionist. When I talk to nutritionists, they're just aghast at how little the average person understands about nutrition. So I don't think it's specific to our industry, although it is a little counterintuitive that
9:07 Speaker 01 so many participants in our industry spend so much of their time agonizing over things outside of just the term structure, the liquidity and the price movements, which is what you and I look at, and consider more things like fundamentals, as if that isn't already discounted in the marketplace. We could talk about that for weeks. That's one thing where people can go all the way to their end of their career and never see the aspects that we see because they're too mired in the details and the minutia, the fundamentals.
9:36 Speaker 00 And when you're not mired in that minutia, it gives a certain freedom in life that you can never go back to being that way. I just saw this, being in the States for a month over the holidays, I had a conversation with someone, family member, where you could see that pursuit of the fundamentals. If I just talked to the next person, or I heard this, or I heard that, my thought when I have that conversation is like, well, they don't say this, but I'm thinking in my mind, don't you realize you can't get there? There is no there there. There's no ending to the strategy that you're proposing.
10:10 Speaker 01 It's hard to drive that point home. You're up against Wall Street and all the marketing and everything else. What did it for me was because I'm a database guy, double majored in computer science and finance. I was able to collect empirical data and simply make test these assertions. So one of the things I did right before I read your first book, Eternal Trading Rules, maybe a year before I read that book, I worked for a family office and they were absolutely determined to utilize analyst projections and recommendations and all these external factors in their stock selection. So what I did was collect all this data and regress it against outcomes. It was very surprising to me at the time to see that doing the opposite
10:53 Speaker 01 of what the analyst told you to do was more profitable than following them. One of my coworkers here likes to point out, how often does the US stock market finish between, what is it, seven and nine percent gain for the year, which is basically every analyst's prediction at the beginning of every year. S and P is going to be up six, or it's going to be up nine, or it's going to be up seven or whatever. I think you said one time in the past 50 or 80 years or something like that, has it actually fallen in that range? So it's either up 20 or it's down 10 or whatever. There's just more tails, there's more action. The analysts are just empirically wrong about things, especially at key inflection point. Having the luxury of seeing that with my own eyes and being able to test it empirically freed me from the chains of always having to second guess myself
11:37 Speaker 01 and defend why I wasn't following Wall Street research or analyst projections.
11:42 Speaker 00 What's interesting, the way you phrase that experience, you had this internal drive, this desire to prove it to yourself. You hear all these voices, particular analysis, but you say, well, hold on, what does this look like? If I run it through the machine, so to speak, this desire to prove it to yourself, not just to accept what might sound like, well, that was a nice piece of research for JP Morgan and Goldman Sachs. My gosh, that guy's so smart and look at his resume, et cetera, et cetera. But you had this desire to prove it. I think that's what's unique in people that I come across is I self-select these days. I perhaps try to have conversations with people that think like me.
12:26 Speaker 00 That's probably not good only to be like that. But so when I bump into people that don't do what you are laying out, which is this desire to prove it, to not just trust, trust but verify. It's rare.
12:38 Speaker 01 Yeah, I've always been a skeptical person, even as a little kid. I ask too many questions and I like to play devil's advocate and essentially pretend to be an attorney arguing one side and then argue the other side. And then if there is any data lying around, formulate a hypothesis and like you said, run it through the machine and see if the base rate statistics are even remotely close to the assumption. And what I find is that in most aspects of life, it's just not true.
13:02 Speaker 00 Let's go into 2022, an interesting year for people that have a belief set about a certain strategy that you and I have. Do you think 2022 moved the needle at all on the typical 6040 mindset? Or is it just another one of those years and things keep marching on?
13:25 Speaker 01 Time will tell. I mean, it should have moved the needle. That's the data point that you needed at almost the worst possible time as the baby boomers are going into retirement. Pretty much the last thing they needed was a big drawdown on both their stocks and their bonds as they go into withdrawal mode, which is what we've all been talking about and warning about for 15 years. Is it enough? I've seen some interest. I think it's for the wrong reasons, though, most of it and most interest in alternatives that's fear-based is usually for the wrong reasons. But that data point is certainly telling. It shows what can happen. And now people have actually felt it. It's one thing to show them historically, look, you would have had multiple years like this in the seventies before World War II.
14:09 Speaker 01 It's another thing to actually feel it with your own money when you had a portfolio worth 5 million and it went down to 3.7 million or whatever. To see those, to experience those nominal losses will give you a new level of respect for effective diversification. But I think it remains to be seen. I think there needs to be more pain before people say, you know what? I want more diversification than what I have with just stocks and bonds.
14:32 Speaker 00 Let's talk a little linear and nonlinear. I saw the example the other day where I was reading an example about just typical airplane flight, pilot at the controls and within normal operational range. Look, I'm not a pilot, so any of you pilots out there, don't kill me. But look, you can make slight adjustments and things are going to be fine. But if you get outside that range, people don't necessarily understand that you can go from being linear to nonlinear. If you get just a little bit too far outside that range, and too far outside the range might not be to the average person, might say, well, I can deviate, it's going
15:15 Speaker 00 to be okay. But once you get to that nonlinear place, that's where really interesting, unexpected things can happen. Black swans, whatnot. Speak to this. Put your professor cap on and take the baton from me and explain a little bit more. Because I think it's really important for people to, especially if they're interested in having a conversation with someone like you, understanding where your world is. This linear to nonlinear is terribly important.
15:44 Speaker 01 Yeah, I find that that concept is hard for people to relate with unless you put it in real world terms. I studied meteorology before finance, and I'm from the Midwest, from Kansas, where you're going to get some of the most violent weather in the world. And the reason is because all that cold, dry air comes out of Colorado and Canada and mixes with that warm, moist air from Houston and Austin and Baton Rouge. And that is a toxic brew for incredibly violent weather. In Kansas, they have a saying, if you don't like the weather, just wait 10 minutes. And I remember a day where it was 83 degrees and sunny, and an hour later, it was below freezing and there was hail. And then it snowed and we had a thunderstorm in the snow and a tornado. And I went without power
16:29 Speaker 01 for five days. So we went from a linear to a nonlinear in a heartbeat. Now, anybody from the Midwest is going to understand. That where everything seems fine. As soon as something changes, though, everything goes off the rails. Surfers understand this too, with respect to, everything can be going great, but the tide is moving. And when the tide goes out far enough, a certain sandbar starts triggering the waves and the waves become much more powerful and hollow and fast. Or if the swell direction shifts from west to northwest, well, then a certain reef will start picking up the swells. If the wind direction changes, minor changes can completely change the system and how it works. So financial markets are very similar. There's parallels
17:09 Speaker 01 to meteorology and surfing, where if interest rates just hit a certain level, that's the level at which hundreds of billions of dollars worth of projects flip from black to red. And then you get all this group think domino effect of decisions being made. And then credit agreements get shut down and swap facilities get overwhelmed. And you don't know where that level is because you don't know where everyone's at with respect to how much money they've committed and whatnot. Eighty percent of the time, things can be range bound and they can feel normal, lulling people into a false sense of security. But as soon as one thing gets outside of the normal boundaries, it can trigger other things to quickly get outside the normal boundaries. And then those linear relationships that
17:50 Speaker 01 you've built your risk management plan on, that you've built your day to day behaviors on, a lot of the rules change and some of them can even invert and start doing crazy things. And we've seen this time and time again, over the last three years. I was on several podcasts before COVID and people were asking me if crude oil prices could go negative. And I thought about it and I realized, well, yeah, the futures price can definitely go negative if the cost of storage exceeds the salvage value of the asset, the crude oil itself. And I got tremendous amount of hate mail. People saying, how could prices go negative? That's absolutely insane. And then two months later, sure enough, they went negative because there was too much crude, not enough storage. So you had to
18:32 Speaker 01 actually pay people to take that toxic substance and go do something with it. So things happen that are counterintuitive and that you feel like you couldn't have prepared for. But I feel like you can prepare for them if you're open minded enough and you think in a nonlinear manner.
18:48 Speaker 00 Imagination, having some imagination, given those examples on the plains of Kansas to looking at crude oil, this is just imagination at play.
19:00 Speaker 00 Nerdy guy who may be a little introverted, who just likes to analyze things. But this type of persona is great for just saying, hold on, what can happen? Anything can happen.
19:13 Speaker 01 But the real power is not put yourself into a position where you have to predict it right. And that's why having a trend following philosophy and a risk management method in place allows you to not worry about getting the timing right. So when crude oil went negative, we were already short and had been short for six weeks because a trend following model essentially said, this thing's not going up. And you've lost the risk that you budgeted for this position. So you're going to get out. And then it went down a little bit more. And it's like, well, now it's in a downtrend. You're supposed to be short. So we shorted crude oil, Brent crude, natural gas, heating oil, gas oil, all of them.
19:52 Speaker 01 Not knowing that all hell was going to break loose and entire energy asset class was essentially going to go negative equity. But then ended up being on the right side of that because of the discipline that a trend following model forces you to have.
20:06 Speaker 00 I could think back to 99, 2000. I could think back to 06, 07, maybe early 08. I don't remember the exact timing of when the Fed started raising rates, but during those two periods that I just mentioned, the Fed was raising rates. When they started raising rates, equity markets were, hey, it's a party, baby. Let's go, let's go. But eventually, as you state, there are triggers that take place that I don't know what the magic number is where the Fed could raise rates to. Where equities say, see ya, we're going the other direction. But there is a number going back to the early 80s. Maybe it's over 10%.
20:43 Speaker 00 But I think what's interesting is that you're not trying to make a prediction as to, okay, whatever the Fed does with rates and when could possibly all hell break loose. Your system is taking that into account. But for the average person out there that doesn't yet understand Eric, doesn't yet understand your system, your approach. Just looking at rates alone and past history in the last 25 years. Can at least, if people want to be honest with themselves, offer a little bit of fear.
21:15 Speaker 01 What end though? What do they do with it? If you don't have a plan that you're really comfortable with, that you believe in, that you're willing to stake your reputation on, it's hard to take something like that and catalyze it into action. Cause like you said, you don't know when people sell too early and then watch the market go up for another two years. And they feel like they're left behind and then now they're panicking and it just leads to bad behaviors. It's not enough to just be a good, critical thinker. I would say that's the least important part. It's a necessary component, but it's the least important. It's actually having a plan and the discipline to stick with it such that you're prepared is more important than having a high IQ.
21:54 Speaker 00 When you sit down and you're inside your strategy, you're inside your philosophy, your machine, so to speak, what are you trying to do? What's the goal of the machine from your perspective? The one that you've assembled.
22:08 Speaker 01 The goal of the machine is to combine asset classes that have scale, reasonable tax efficiency and durability into one portfolio that I think is the best compounding machine that I can commit to over decades. I say that because I'm a database guy and I've been looking at hedge funds, UCITS, mutual funds, ETFs, every futures market on the planet, forward markets, equities, convertibles, options, all this stuff going back to the 1970s. As much data as I can possibly get. Computers are so convenient and powerful now. You can just unleash them on all this data and you can test pretty much anything you can come up with.
22:53 Speaker 01 I've spent thousands of hours of my time over the past 25 years, trying out every conceivable combination that I could come up with. What always came back as being the most durable was simply equal risk contribution from global equities and this thing called trend following. Just trend following on a diversified global portfolio of futures. Met all my criteria, good tax efficiency, incredible scale, reasonable turnover, and a nice path traveled and able to handle pretty much everything that I've seen the market throw at us since World War II, basically. I thought, well, if I can pull all this together
23:32 Speaker 01 into one holistic strategy that can be run in a relatively simple, very durable and stable manner, that would be a great product that I don't really see anyone doing a good job of that's available to the masses. I don't want to say that no one's doing a good job, but I'm saying something that's available to anybody who wants, that can invest in a mutual fund or an ETF. And then that happens to be in my personal portfolio. In fact, I just, at the end of the day, before we started Standpoint, just made the decision that, well, if that's good enough for me, I know I can defend it and I know I believe in it. So we're just going to launch that as our product and we're just going to have one product. Our philosophy is do one thing and do it well, and it's that. So the goal is to just be a
24:15 Speaker 01 really good, disciplined, long-term investor that sources all the realistically available diversification around the globe.
24:24 Speaker 00 It's interesting how you describe the opportunity that you see to deliver to, let's say, the, quote, "the average person on scale," and acknowledging that other folks have come before you. But many of the folks in the world that you and I are fascinated by, the structures in which they came along, you know, let's say 70s and 80s, the typical Wall Street world gave them a lot of hoops to jump through, so to speak. It was difficult to get their product to the masses. And/or, a lot of them had enough interest from a minority of participants and such a nice fee structure.
25:06 Speaker 00 So many of the legendary names could just make a fortune. But now what's interesting is while some of these great names that you and I respect have been in these silos with these structures. Here we are now in 2023. It gives a guy like you the opportunity to say, well, hold on. That silo structure, the fees have changed in a lot of ways and I'd like to reach more people. It's interesting how it's evolved to where I guess if it was always a level playing field, going back in time, without assorted regulatory operations, creating this and creating that. It would have been interesting to play it forward to see if strategies could be chosen by the individual
25:45 Speaker 00 without assorted barriers, what would have happened. But it's interesting how you now in 2023 get to see a different opportunity. Because perhaps some of the legendary guys that came before you did not really have that opportunity. They had a great opportunity. It did well with it. They got to buy professional baseball teams. No cry from the Argentina, but interesting how things shake out, huh?
26:05 Speaker 01 Yeah, it was surprising to me also because I started out in the, well, family office, but then in the hedge fund industry. And then to see the regulations change. I don't want to say they got more liberal, they got harmonized. And the opportunity to do what we do in a transparent manner and offer it through just a regular old mutual fund vehicle. At first I wasn't super enthusiastic about it because you can't charge a performance incentive fee. And you don't buy a baseball team unless you're charging a performance incentive fee. And that's how you make a hundred million bucks in a year deal. But that's not really a good fit for my personality anyways. I don't need to make a hundred million dollars in a year. I just need people to trust me
26:46 Speaker 01 and my team to run this marathon. And we make good money just charging a regular management fee. But we're not excitable people trying to get rich quick. That's not consistent with our personalities or the product either. So ultimately, I realized that that is a great opportunity to actually make it available to everyday investors. And if you look at our product and our asset base, our clients are regular, everyday Americans investing in mutual funds. We have almost no institutional money. That's just a different area. Those people want managed accounts, hedge funds. We just run mutual funds.
27:24 Speaker 00 Speak to your openness to being wrong. You could probably talk about that particular issue from a psychological perspective for hours upon hours. But in your world, my world. The openness to being wrong is a superpower.
27:39 Speaker 01 I completely agree with that. So my philosophy on that is it's okay to be wrong. It's not okay to stay wrong. The most overlooked valuable thing on the planet, in my opinion, and I am strong in this opinion, is people overlook the opportunity to learn from failure. I've learned more by studying failure, probably by 10 or 20 to one ratio than I ever learned from studying success. Survivorship bias, analyzing firms that failed, funds that failed, business plans that failed. That's where all the hidden gems are because no one's scouring through those. No one's doing a postmortem. They don't write books about failures. A little
28:22 Speaker 01 bit nowadays, if the failure is spectacular, like an amaranth or something, but 99% of the books out there are romanticized about successes. I'm sure you know, a lot of the success that ends up in movies and books was the result of being in the right place at the right time. There are not that many valuable lessons in there. Otherwise, you'd have these people that go to all these seminars and read all these self-help books and whatnot. It would be making a bigger difference. The real valuable information is in studying failure and learning vicariously through the experiences of others. That should be a whole major at every university, but it's not. I don't know why or where I picked up on that. I think it was the data science component of analyzing data and just seeing
29:05 Speaker 01 how many of these conventional wisdoms out there just are not true. And then inferring from that, that, okay, well, if it's not true and it's wrong, and this actually leads to failure net-net, then maybe doing the opposite would be successful. Just like a good baseball hitter doesn't bat 650, he bats 280 or 290 or 310. It means he's striking out two times out of three. And the most valuable baseball players strike out most of the time, the power hitters. So, understanding that, and like a trend following system, the best ones have about a 35 to 40% success rate, which means they're failing most of the time. And by failing means admitting you're wrong, taking your losses, keeping
29:48 Speaker 01 them small, moving on to the next opportunity. There's no shame in that. The shame is in staying wrong.
29:54 Speaker 00 Survival is such an interesting idea. People don't think about it as much because a lot of people are fortunate enough to have a roof over their heads in the modern world. I find last fall, the example with the guy down there at FTX, Sam Bankman. And I find it so fascinating that you can lay out this pragmatic perspective that you just laid out. On the other side of the country, down there on the islands, you got a young guy, this guy Sam Bankman, taking every step polar opposite in terms of what you're describing. Everything is high octane, shoot for the moon. And what's so fascinating about now that that's been proven as another example of
30:39 Speaker 00 not the right way to go, but people still clamor for it. They still want more of it. They're sitting there, ready to rehabilitate him. I mean, I know you, if you would have been in that position, everything would have gone to hell in a handbasket. You're not coming back. You just would have gone away and be like, okay, I tried that. I don't want to talk to anybody else the rest of my life. That's it, I'm gone. But there's another type of individual out there, and I know you don't necessarily want these types of folks to be your clients, but there's another type of individual out there that they just keep taking high octane. Car crash? Give me another car. I don't care, let's go. And there's a whole army of people that are willing to go along with that.
31:17 Speaker 01 Well, there's a whole army of people like Bankman Fried. For every one Sam Bankman Fried you see that got onto the magazine covers, there were 50,000 that failed right out of the gate. They just have an insatiable appetite for risk and prestige and attention. And there's never a shortage of those people, so they will always come. And they will write books about them and they will make movies about them. And some will go on to be wildly successful, some will learn their lessons later in life and they won't blow up. But how they got to be famous, quick and fast. It's actually a losing formula net-net. Out of say 50,000, one of them will make it. That's actually a bad bet. Back when I was a teacher, my first job out of college, I taught
31:59 Speaker 01 intro to computer science at a junior college and a lot of my students didn't care about the class. They all thought they were going to the NFL or to the NBA or Major League Baseball or whatever. And I remember going over the statistics with them, like how many people actually play Pee-wee football and then junior high and then high school and then junior college and then D1 college. I think it's like 400,000 for every one person that actually gets drafted. And of the people that get drafted in the NFL, only about half of them actually make the team. And out of those, only about one out of 10 get a big payday where the present value is worth more than what else you could have done with your life. Going through it all and seeing just how much of a lottery effect is actually happening
32:42 Speaker 01 there was instrumental. And the same thing is happening in the risk-seeking people in our industry, but we only see the winners. We don't see the losers until there's a huge blow up. So people get the wrong impression and think, oh, all right, well, the way to get ahead is to swing fast and loose with the risk. And that can be true in very rare circumstances, but it's never the way to stay ahead.
33:04 Speaker 00 My nephew is in the middle of his freshman year at the University of Virginia. He's on the football team. He's a skinny white kid who runs like the wind. When I was talking to him over the holidays and I said, okay, UVA is probably top 50 school. We're not talking Alabama. They've been top five and 10 before, but these days they're probably top 50, something like that. But I said to him, I said, John, how many of the guys, and there's going to be some guys from UVA that will play professional. I said, John, how many of the guys right now at UVA think they're going to play professional? And he's like, all of them. You're not tracking or following these kinds of football statistics, but you as a learned guy. Could probably with some educated guesses,
33:48 Speaker 00 determine in a few minutes, few seconds as to how wrong they are and to probably what the numbers really are. But when you're in the middle of it, it feels so close because there's one guy on the team that everybody thinks is going to be a first round pick and you're standing next to him and you could be him too. That's not the way the world works.
34:10 Speaker 01 No, the tails are fat and there's just not a lot of data points in the tails and you gotta be way out in the tails to make it to pro sports. He may know two people to end up in the NFL and then not only do you have to be amazingly talented, you have to not get injured. That part's out of your control. So it's just a bad bet all the way around. I once calculated the net present value of somebody trying to go to the NFL. I came up with a number, I can't remember what it was, but it was a deeply negative number. And that applies to all professional sports. But Mike, you can see why at parties, I don't talk about this. This is not the kind of stuff that gets people excited.
34:47 Speaker 00 I try to, they don't listen to me either.
34:49 Speaker 01 No, no, they want to hear the opposite of this. The hero that came in and just knew to be there at the right place at the right time. That's what people want to talk about. That's human nature. But it's not the way to win in the markets. The way to win in the markets is realistic expectations, a plan and discipline. And it's not exciting. And I don't want it to be exciting. I'm not an exciting person, but that's the formula for success. Risk managed trend following is absolutely the most contrarian, unexciting thing you'll ever do on a day to day basis.
35:20 Speaker 00 Just to add a little more football story to it, I was thinking about it in the middle of sharing our stories here, but the new football coach at the University of Colorado is Deion Sanders, famous Hall of Fame player. And I saw an interview with him the other day. Okay, he's got more money than God. He's done exceptionally well. Everyone knows him. And they were doing an interview with him now as the coach of the Colorado football team and he's sitting on the training table and someone's massaging his leg and there's these insane scars up his leg. He's missing his big toe. He's missing another toe. All these surgeries. He's had to have from playing the game. And that's another issue too, is we can go beyond football here quickly. But what kind of quality of life does one want?
36:05 Speaker 00 What type of risk does one want to take? And maybe you are that outlier that gets the bag, so to speak, in whatever the profession might be. But then if you get the bag, have you also destroyed something about yourself just to get the bag?
36:21 Speaker 01 Well, I was just looking at some pictures of some of the heroes from the mixed martial arts back when I used to watch it, which was probably 15 years ago, and I didn't believe the pictures. A friend of mine sent them to me and I accused him of photoshopping these pictures. I mean, they're horrible. These people were at the pinnacle of the game 12, 15 years ago, undefeatable. And you wouldn't even recognize them today. They literally look like people that belong in a hospital. That's the cost, but you don't realize it until it's too late. We romanticize these things and give people a vision that is very inconsistent with final destination in a lot of cases.
37:00 Speaker 00 As a young kid, were you always able to delay gratification?
37:05 Speaker 01 Yes, and I don't know if that's something that can be learned or if it's just inherent in your personality. But I always had an intuitive understanding of the power of delayed gratification and the trade off, the risk reward. In fact, you just reminded me of my first economic exchange. I was a little kid, probably six years old in Kansas, and we were going door to door selling Christmas cards to people. I don't know how I got onto that. It was just somebody came around and talked some kids into selling Christmas cards. And me and some of the other neighborhood kids went around and this nice old lady came out and she bought probably $25 worth of Christmas cards. Being the idiots that we were, we're like, okay, well, we've met our quota. And this is in the 1970s, so we could take the rest of the day off. The very first person bought cards from us.
37:50 Speaker 01 And then it only took about 10 minutes for the other kids to say, hey, we've got $25 in cash. We can go spend it. And back then, you know, $25 worth of junk food and video games was like winning the lottery. It was amazing. And I remember being terribly uncomfortable with it. And I was thinking like, how are we going to deliver the Christmas cards to this lady? And the other kids looked at me and said, that's six months away. Why do you care about that? And I remember being terribly uncomfortable and looking at these kids, like I was outside my body, looking at the situation, asking myself, why am I so different from the other four kids that are already spending this poor old lady's money? And I didn't stand up to them. I let them spend the money. And then I don't remember exactly what happened. I remember Christmas came and there was a lot of disappointment
38:35 Speaker 01 and the other kids were nowhere to be found. And it's kind of a boring story, but it reminds me of that delayed gratification. It's kind of a close cousin to that is analyzing the risk reward of your decision and worrying about what's going to happen in six months when you can't come up with the product that you promised.
38:51 Speaker 00 I know you don't have the ability, I don't have the ability to forecast events, but is there something in your strategy or philosophy that allows you to look at a moment in time, for example, right now, and think about that moment in time as either elevated or not elevated? If I allow myself to go onto Twitter and I follow a diverse group of people, it's amazing that you can see, for example, I guess this week, the headlines were Kramer was yelling buy and Michael Burry was yelling sell. Do you allow yourself, or is it any part of your philosophy or strategy that you allow yourself to when you're speaking on a podcast or speaking to clients, that we are in an elevated risk
39:36 Speaker 00 moment or not? Again, given that you don't have the ability to predict the next big event, the next crisis coming down the pike, but how do you speak with people when it comes to whether you perceive elevated risk or not?
39:52 Speaker 01 It's hard to get around that one because it's something pretty much everyone wants to talk about all the time. The word useless keeps flying around in my head. I think it's useless to agonize over that if you have a plan and you're prepared because there's really no way to know. I have a saying that we're always one missile launch away from a massive bear market, always. Unless you can predict when that's going to happen, then you really don't have anything. I was thinking about you the other day because I was having a debate with one of my coworkers. And we were talking about how in 1998, no one was prepared for long-term capital management. I don't know anyone who was prepared for that. No one was prepared for what happened in nine 11.
40:35 Speaker 01 No one was prepared for the tech blow up in oh two. No one was prepared for the meltdown in 2008. And then evidently, no one was prepared for what happened last year in 2022. But there's no shortage of hundreds of thousands of man hours and hundreds of millions of dollars have been spent on research of people trying to prepare for these things. And yet, no one ever seems to really be prepared. So that's the kind of base rate statistics I pay attention to. I look at it and say, all right, well, that to me is a failure. So I'm not going to follow that model. Instead, I'm going to have a plan that I believe in, that's empirically sound. And I'm going to commit to having the discipline to stick with that plan.
41:15 Speaker 01 And that plan is going to have rules in place to allow us to deal with any kind of market condition that I can conceive of. Now, that doesn't mean we're going to thrive in all the market conditions. That's not possible. You can't have something that thrives regardless of what the market does. But you can put together a plan that reflects your intentions and your desires to not take too much risk. Because all you can do is through your position sizing and whatever hedge you have on when disaster strikes. You can't wait for the disaster to strike. Everyone thinks you can, that I'll just be faster and smarter than everyone else, but that's not possible. So at the end of the day, I look at it and say, I don't think there's a lot or any value. It's actually negative value for sitting around agonizing over, is the market risky right now? Will it be risky tomorrow?
41:59 Speaker 01 Just have a plan that you believe in and stick with it and try to always be prepared. That's the best I can do. And I think that's better than what I see most people in the marketplace actually doing.
42:09 Speaker 00 Did you get a chance to give that answer on other interviews? Or do you have to give some semblance of playing along to say something where I know you fully enjoy just giving the answer you just gave?
42:21 Speaker 01 I'm not sure. I don't think that particular question comes up, but the concept I just went over, I don't recall saying that in such a concise manner on previous podcasts, no.
42:32 Speaker 00 As you were laying out all the events of the last 25 years, it made me think all the people that would have had rose colored glasses on saying something to the opposite. Is there going to be the ability with some of these AI creations to easily go back in time and grab all these headlines? Give me all of the headlines, some XYZ names that were saying this kind of rosy scenario. Cause then that becomes such an interesting piece of work. It's very difficult to find all that information. I feel somewhat lucky having gathered information over such a long period of time. But if I was to wake up today and say, oh, let's put together 220,000 words of a trend following book.
43:15 Speaker 00 Oh my God, it's too damn hard to figure it all out and put it all into one somewhat concise book. It's difficult to find the data.
43:25 Speaker 01 I've been working with a bunch of different AI programs recently, just out of curiosity. And what I've found, well, first of all, they're evolving very quickly. Six months ago, they seemed to be pure. Now they've learned to become more, I guess I would say politically correct. They're starting to put disclaimers in there. I mean, I don't know where they're getting this information from, whether they're some human beings are telling them, hey, hey, don't talk like that. Or if they're actually learning through feedback or more consumption of information that's out there, I'm not sure. But I'll tell you this, having spent considerable time messing around with these different AI systems. At the end of the day, what they give you is the consensus view.
44:08 Speaker 01 Chat GPT, the rest of them, they're giving you a really thorough distilled version of whatever the consensus view is of all the information out there on the internet. And that's super powerful for certain things. It's the end of the world for other things, though. Still, a human being has to delineate between where do I want the consensus view? And where do I want anything but the consensus view?
44:33 Speaker 00 I've seen some of the headlines too. I've not logged into any of them yet, but I've seen some of the output posted on Twitter and some of the output alone causes me to say, why am I lifting a finger to even play with this? Why do I even want to be involved? It feels like more than a waste of time, but I guess it will be interesting to see the evolution. And ultimately, these are programmed by people.
44:56 Speaker 01 It's true, but I think more than that, it's they're getting information that was produced by people. They're coming to conclusions that other people have come to. It meant what I said, a consensus view, but I would encourage you to play around with them because they're incredibly powerful. There's a few topics and I won't go into detail that have befuddled me for six, seven years now. Technical topics having to do with different time zones and correlations and cumbersome stuff, but it helped you. It helped me to get to the consensus view, which when it comes to trigonometry and calculus, I'm going to agree with that. If it's hard sciences and you want to get to the consensus
45:37 Speaker 01 view of the moving parts, not the conclusions, because those are subjective. Should you do this? That's a different question. But if you want to learn about how to do something, these AI tools are magnificent. Six years? It took me 45 minutes to get all the answers I was looking for after six years of banging around on Google and reading books. If this was a video stream right now, you'd see my library behind me and this is just 10% of the books that I've read over the past 20 years. 45 minutes, I was able to get all my questions answered. That's kind of amazing.
46:07 Speaker 00 It will be interesting to see the various investment products that come out of AI, at least the marketing lingo of AI. I would think those are going to be coming down the pipe quite quickly where some enterprising future Sam Bankman will be telling us all about how nothing can go wrong because this came from the AI.
46:29 Speaker 01 Well, let me share with you my philosophy on that because I am not a proponent of using AI for the key aspects of investments. So because these markets are discounting mechanisms, if you get an edge over other people that is structural, that edge will go away once you exploit it. It's what bedevils the arbitrage guys. As soon as they find something that works and they start to do it, they close the gap and then other people see what they're doing and they copy them. The gap gets closed further and whatnot. Because of my philosophy, and I can't claim to be 100% right about that. It's not provable. It's circumstantial. But I personally believe that there are three or four structural risk premium in the world that you're entitled to a return. If you exhibit behavior X, you will get return Y.
47:14 Speaker 01 And Y is variable. It could be 20%. It could be 2%. It could be negative some year, but over time, you'll get some compounded return if you do this accretive thing to the marketplace. And I believe there are three or four, some people believe there are five or six structural risk premium in the world, and they're probably right. I just can't get the sixth one. It requires some sort of a structural advantage like Renn Tech or Millennium or Market Making type stuff that I just can't do from Arizona. But I can certainly do a good job of capturing those three. Now, I turn around and look at the marketplace and most of the products, 90% of the money in the world is focusing on the first two and totally ignoring the third. And the third is actually more important. It's the key ingredient. Then when you blend
47:56 Speaker 01 it in with the first two, you get something that's fantastic and that's what everyone needs. And Standpoint's job is to convince them to want what they need. AI, the way people are using it from an investment perspective is typically trying to give themselves an edge over other people that are focusing on the first two risk premiums. And I think that is not necessarily a waste of time, but it's just not interesting to me because that war is being fought for 200 years. Smarter, faster, better fills, all that stuff. They're in the shallow water with all the other sharks fighting over chum. I want to go out into the blue ocean and collect those other risk premiums that they're ignoring that are incredibly valuable. And that's a philosophical difference that I think is key to understand it because that's where the real opportunity is.
48:41 Speaker 01 And I'm glad that very few people agree with me in the industry.
48:45 Speaker 00 So you don't wake up every day thinking to yourself, I must get a server closer to the exchange than Rintec.
48:53 Speaker 01 No, I go the exact opposite direction. So the strategy we're running today, I could have run it exactly the same way in 1970. That's crucially important to me because the structural risk premium that I want has to be something that's enduring and endogenous to the markets themselves. It has to be something that actually makes the markets function better and makes them more healthy. And that's why I always talk about the hedgers. I feel like if I'm not providing liquidity to hedgers, then I'm not really earning a risk premium. It doesn't mean that I won't make money over some period of time, but it's not anything I can truly believe in. But if I'm providing liquidity to hedgers, and that's what trend followers do in the futures world, they just, most of them don't know it. That's accretive because it's providing liquidity so that hedgers can hedge, which allows them to massage and increase their production
49:38 Speaker 01 on outputs or inputs as well for a short position. So that's just a different philosophy. You don't need an AI to learn that lesson. It's one simple lesson. You learn from observing how the ecosystem works and realizing these guys make money because of X. These other guys make money because of Y. And these guys over here make money because of Z. I understand how it all works. Is there enough room for me too? If there is, I'm going to go in there, collect my risk premium, pay my dues, case closed.
50:05 Speaker 00 I think it was David Drews who told me he learned trend following through the hedging mechanism, seeing the hedging money going to the speculators. That was where his light bulb went off. I thought that was the only person I've heard say that he came into this world that way.
50:21 Speaker 01 Dave is smarter than I am because I saw the same thing and just didn't put two and two together. I saw the same thing back at Wichita State University during the nineties where I had to set up a club. And a lot of guys that worked on hedging desks around town, whether it was Coke Industries, Cargill, a lot of money in Wichita, a lot of corporate hedging and farming and agriculture and energy too. And when I realized these guys working on the hedging desks, we were sharing computer code and teaching each other stuff and we had a Bloomberg terminal. And when I looked at what they were doing, I thought, aren't you losing money? And they looked at me like I was crazy. And they said, well, yeah, of course we're losing money. I thought, well, why would you want to lose money? I didn't understand what their motivations were. Look at their compensation packages and what on the hedgers lose money on their
51:04 Speaker 01 hedges because their hedges are negatively correlated to their core business and they need that negative correlation to smooth out their cash flows. When I really dove into, and it was years later that I kind of put two and two together, around the time that I read your book, The Turtle Trading Rules, which is a great mathematical way to understand what's actually happening. I realized that this is basically the inverse of those hedging models. You're providing liquidity to them. They like to buy markets that are down and sell markets that are up. Trend following does the opposite. It's a zero sum game. If you look at the, for every long futures contract, someone else has to be short. It just clicked for me. And then I really started to dig into it and thought, well, how much can they lose? And then looking at the leverage levels of the trend followers and saying, all right,
51:46 Speaker 01 that kind of makes sense. Why would the hedgers who have more information about the fundamentals lose to trend followers? Because it lowers their cost of financing if they're hedged and that's their biggest expense. I could go on for weeks about it, but just thinking things through and seeing where you fit in the ecosystem and whether that's sustainable or not is more important than getting good fills or having an AI pick which assets most oversold.
52:13 Speaker 00 Back to when you were mentioning the strategy, working in 1970, the tech of 1970 would work for you today.
52:24 Speaker 01 Is that a question?
52:25 Speaker 00 Well, I mean, it's true, right? Your strategy today could utilize, not that you want to, because things are easier with some of the fancy new devices, but the tech of 1970 could be utilized for your strategy of today.
52:39 Speaker 01 Yeah, that's a true statement. It's not going to convince anyone to trust us.
52:44 Speaker 00 We're in the weeds with that one. People are going to really have to go unpack that as to why that's an interesting rabbit hole to go down as to why the tech of the 1970s could be used by Eric today to operate your trading part of your business.
52:59 Speaker 01 Yeah, and I mentioned that that's actually very important to me because if we're reliant on speed, that makes me uncomfortable because we're not always going to have speed. Sometimes the markets are closed. You could have something like what happened with nickel. You know, when they closed the market down, you could have another terrorist attack. You could have a cyber attack. I mean, we just had a cyber attack in Europe a couple of days ago that shut down a lot of the futures industry for a day. So if you're reliant upon speed, when you don't have it, what happens then? And I saw no advantage to the speed. In fact, there's a benefit from participating more slowly. You put some of the short-term mean reversion on your side. And I think that a lot of these guys that run firms that have been successful for 20, 30 years, like Charlie
53:44 Speaker 01 Munger, Warren Buffett, and then the futures industry to AHL type. I think that if you looked at what they actually did, and they were being honest about where the real bulk of the profits come from, that not much has changed over the past 20, 30, maybe even 40 years. I really do believe that. The rest of the stuff, the marginal stuff at the edges is more for marketing purposes and that continuous improvement mentality.
54:11 Speaker 00 I love that you just asked me. Was that a question? Because these days I find myself, I like not asking questions these days. I just like making a statement and letting other smart people pick me apart. This guy Covel just said something. What does he want me to do with it? Is it a question? Or do I just dive in? Just dive in. And I'm finding more and more people just dive in. Some people are petrified by that approach, but you seem to do okay with it.
54:36 Speaker 01 Yeah, I think I'm okay with it. I have the luxury of having a simple business model and a simple product that I believe in. Impromptu conversations don't bother. My answers aren't going to change structurally. We use different analogies and metaphors from time to time, but my answers haven't changed in years and they're not going to change going forward. They just, they are what they are.
54:55 Speaker 00 When I do this podcast, I'm not trying to do Mike Wallace 60 Minutes. My objective is, okay, I get to select who I want to have come on. So if I select XYZ group of smart people, my objective is to Let them teach me something. And then if they teach me something, if I learn something from them and everyone else wants to listen, then we've got winner winner chicken dinner. That's the approach.
55:18 Speaker 01 I think in our industry, futures based trend following, guys like me that are running product and then people that invest in them focus on all the wrong stuff. There's just three or four moving parts that make all the difference. One is capital efficiency. How often do you talk to people about the capital efficiency of using futures, which just require a small margin deposit and then you're free to do what you want with the rest of the cash? How often does that come up?
55:43 Speaker 00 You just brought it up. Thank you. I don't even have to think today. Next time you're writing the questions. I don't have any questions here. I actually doodle most of the time when I'm asking questions because I'm not saying I'm the greatest interviewer or anything like that. But how many times per week do you get a chance to have the conversation where you get to really say what you want to say as opposed to you're having to cater to the audience or you're having to dumb it down or whatever? I hope you don't dumb it down with me. I don't think you do. You could probably go a lot deeper, but you know where I'm going.
56:15 Speaker 01 Yeah, I do. It's like once every year do I get to have just a no holds barred conversation?
56:20 Speaker 00 Is this no holds or is this some holds? I can't tell.
56:24 Speaker 01 It's pretty much no holds. We haven't done anything crazy, but yeah, I would say that this is the most open format.
56:30 Speaker 00 I can't get anything crazy out of you. I don't even try. Why would I try to get something crazy out of you? It's not you.
56:35 Speaker 01 Well, I don't have much crazy to say. Managed futures is a very frustrating asset class for people. And you talked about this in the beginning, you know, are people changing their minds now after a year like 2022? My answer is pretty much not. I think people have realized that holding pure managed futures is very difficult for them because they don't actually want that level of diversification. They need it. And sometimes they want it, but they don't want it when it's not paying off. Here in the managed futures industry, we tend to shy away from addressing that topic head on. We shy away from telling it like it is. And that's just the legacy of the frustration of alternative investments
57:16 Speaker 01 and individual investors. I mean, what do you hear from people that are in my shoes talking about why people don't use more managed futures or trend following in their portfolios?
57:26 Speaker 00 People are batshit crazy. I mean, that's the bottom line. From my perspective, for people to look at the last 25 years and to not be able to imagine something even worse when it comes to the equity market meltdowns, to not have that ability to imagine something worse just seems like some type of a mental disease. How can one not? This is not a trend following sermon, what I'm about to say, but if you just look at the players, the way the Fed does things, the bubbles that have burst, you throw in the Big Short movie, you throw in long-term capital management, you throw in 9/11, you throw in a pandemic, and for anybody to sit in the middle of that and go, oh, I just trust the 60/40 split, I trust Wall Street, yes, sir, can I bend over and have another?
58:10 Speaker 00 I mean, my God, people are nuts.
58:13 Speaker 01 Let me play devil's advocate for a minute then. Well, what if their response was, I can't keep my clients if I bring trend following in a meaningful way into the portfolio?
58:24 Speaker 00 If we get one of those mother of all mother kicks in the butts, they won't have any clients.
58:30 Speaker 01 That's true, but the relative performance envy is so strong. And this is what I pick up on. If you underperform the US stock market for three years in a row, even by just a little bit, the financial advisors don't have any answers for that. The appearance of higher fees, there are more taxes associated with a managed futures program than just the pure equities, but less than bonds. There's more to it than they're just all batshit crazy.
58:57 Speaker 00 I was at a cocktail event in Ho Chi Minh City, Vietnam, last fall with a bunch of the big swinging you-know-whats and a lot of hedge funds there, a couple over a billion, and one guy with one of these quote billion-dollar funds. He came up to me and he knows about me and he knows about my work and he said, how's it going? Da-da-da. I said, hey, how are you guys doing this year? Da-da-da. And he said, oh, well, you know, relatively. And I just looked at him. He caught himself. He goes, yeah, it's not going to work with you.
59:25 Speaker 00 I hear that word relative and I'm like, oh, come on, please stop, please stop. Don't make me go through the torture. I can't take it.
59:32 Speaker 01 So what we did at Standpoint was acknowledge that that's an uphill battle. I fought that fight. Even if you convince people to put enough managed futures in their portfolio to make a difference, they can't convince their clients to stick with it. They just can't. I've seen all the evidence I need to see. It was a couple of team members that I have at Standpoint that said, your personal portfolio, Eric, is basically equal risk contribution from global equities and managed futures or trend, our own system that we designed. Would people be able to stick with that? And I thought, let's find out. So in a roundabout way, trying to get someone to put, say, 5% into pure managed futures is excruciatingly difficult.
1:00:14 Speaker 01 Trying to get them to put 10% into a blended product is actually quite easy, but mathematically, they're the same thing.
1:00:21 Speaker 00 Well, congrats on that particular way of skinning the cat because I see some of the numbers here and there. So far, you guys seem to be growing quite nicely. So congrats to that. And where can people check you out at Standpoint? Where's the best place to go?
1:00:36 Speaker 01 Yeah, it's super simple. Just go to standpointfunds.com, scroll down to the bottom, type in your email address and you'll get our monthly update. I'm very proud of our monthly update. We don't have a bunch of junk and filler in there. It's just the facts. People find it very interesting. We don't spam the heck out of you. We just send you the monthly update and people have been happy with that. And you can see the comparisons. Also on our website, we've got a library of all of our content. So you can see all the videos we've created and papers, some interesting articles that we think are relevant.
1:01:05 Speaker 00 I think I might do the best job of getting you to, the Eric persona is the Eric persona, but I can feel sometimes I get you to the edge a little bit where you can laugh about some of the crazy stuff in this world. To get you to that point, it's fun, but uh, thanks for coming on and sharing today.
1:01:22 Speaker 01 I try to find solutions. Don't get me wrong. I have my cathartic conversations with coworkers from time to time. But really, I want to get to solutions and find good fits. So that means trying it this way. If that doesn't work, then you cut your losses and you move on. But at the end of the day, to have a successful business, there needs to be demand for what you're doing in the marketplace. It's incumbent upon us to get people the trend managed futures that they need, but in a format that they actually want. And that's all we're trying to do. And it just so happens that coincidentally, that happens to be the personal portfolio that I believe in. So I feel lucky in the sense this kind of fell on my lap and I can do that for a living. I would do that for free.
1:02:03 Speaker 01 So may as well go ahead and do it for a living and trying to not be frustrated with people is easy this way because if someone passes on that, that's fine. But I can understand why a lot of people pass on peer managed futures. They need it, but their clients don't want it. So it's an uphill battle and I get it.
1:02:35 Speaker 00 My guest today is Eric Crittenden. Eric is a trend following trader. He runs a firm called Standpoint Funds. Tom Bosso happens to be chairman at that firm. Eric is a repeat guest on this podcast, a guest that I love to have on this podcast. We're both Gen X guys and today we cover all kinds of territory, not just trading, life, all the social change going on, all kinds of stuff. One of those easy breezy conversations that you may or may not like, but at least it's authentic. It's two men sharing their perspectives, their points of view. And damn it, that's kind of rare these days. I hope you enjoy this podcast with Eric Crittenden.
1:03:28 Speaker 00 So what have you been doing to lose all this weight though? What's the workout?
1:03:31 Speaker 01 I took, well, I changed my diet dramatically. I tried to get rid of anything that human beings didn't eat before the Civil War. Pretty much all processed foods.
1:03:41 Speaker 01 Get rid of soda, get rid of alcohol, get rid of wheat, corn. So a lot of cheese, a lot of vegetables, only drink water now. And I enjoy it. Actually, it feels really good. You're in Vietnam and when you look around, you don't see any obese people.
1:03:58 Speaker 00 The short answer is yes, you don't, but you definitely can start to see post COVID. You're seeing what I might perceive as a chunkiness in some people that I did not see before.
1:04:09 Speaker 01 Okay, that's fair. Yeah. But it's fascinating to me. One of my pastimes is to go onto the internet and look at pictures of places I used to live. Seal Beach, California, Wichita, Kansas, Seattle, Washington, different places. And then go back in different decades and just punch in a year. And they'll show you like, you know, women with their kids and the dads at the beach or someplace else. In the seventies, in the sixties, you didn't see anybody who was obese. It was just almost impossible to find a picture of someone who was morbidly obese. Fast forward to today and it seems like more than half the people now would meet the definition of morbidly obese. And it seems like it was the mid eighties when something dramatically changed. And we don't need to get into it, but a lot changed.
1:04:51 Speaker 01 Our food supply system was bought out by former tobacco companies. Processed foods became very popular. People stopped cooking at home, started eating out a lot. And basically we went from semi healthy diet, which everyone thought it was unhealthy. And like eggs and cholesterol and steak and cheeseburgers and whatnot. You didn't have any fat people back then. Now, no matter how hard people diet and exercise, they just can't seem to lose weight. So this for me was an experiment. If I just go back to eating what I think resembles what humans ate before the civil war and just try to keep everything else out of the diet, will it make a difference? And it did dramatically. I also took up swimming, so that helped as well.
1:05:34 Speaker 00 So I'm Gen X, you're Gen X. I'm starting to notice as Gen X guys are having their voices heard more and more. There is definitely a Gen X male attitude. And it is cut to the chase, cut through the bullshit. Don't try any of the nonsense. I'm not buying it. I'm very lucky to do this podcast to get pitched all these interesting people. And the last week I was pitched, well, I had him on my podcast, another Nobel Prize winner in chemistry. I had an astronaut on the podcast. But those same pitches that came from there, I also got pitches for just crazy woke stuff. It was interesting when you bring up what you brought up at the beginning of this conversation
1:06:19 Speaker 00 because I was thinking, well, I know I'm going to talk about trading with Eric, but I'm thinking, I wonder if he wants to talk any social issues today. Right out of the gate, the Gen X is put on the plate.
1:06:30 Speaker 01 Well, I'm glad you brought up Gen X because we are the smallest generation. I think I'm 51, I might be 52. Gen X, we're a tiny generation, bookended by the obnoxious baby boomers and then the obnoxious millennials and then who knows what's coming after them. We've been silent for a long time because we're stoic. We were the latchkey kids. Mom was working, dad was working. It was pre-internet. We went to school. We were the last generation to do stuff outdoors and you got home and you got home. There was no iPhone to track, none of that stuff. So the next generation after us, I feel like they've been surveilled their whole life and they lacked privacy. They lacked a certain risk-taking that we were able to get away with and that is perhaps
1:07:14 Speaker 01 gone forever. There's unintended consequences when you change a society and a culture that radically in that short of a time period. And I think we're seeing that, this lack of motivation, accountability, that word doesn't even mean anything to people anymore. They can't even give you a definition of it anymore. And that's the other thing I noticed too, is that words mean different things today than what they meant if you read them out of a dictionary even 15 years ago. Yeah, something's changed and the social issues I think are a big deal. I don't know how you fix them. I think our silent generation, you know, the money went over us, the politics. How many politicians do you see that are our age? They're all either 80 or 37. We have no representation.
1:07:57 Speaker 00 I mean, I guess you would have social media presences like Musk and Tucker Carlson, but they're not politicians, but they carry weight like politicians in a way.
1:08:06 Speaker 01 That's true. They do carry weight, but they're not lawmakers, they're not legislators. Do they make a lot of noise? I mean, Musk is definitely changing the world.
1:08:16 Speaker 00 You said perhaps. I want to go back to that. Perhaps never to be experienced again, talking about the other generations. I actually had this exact text message with a friend the other day, and I posited that post 1975, until Netscape going public in 95, and potentially you could argue up into the advent of the iPhone, that there's this unique two to three decade window that will never be repeated again, and that people that came from that window will always have this different perspective and different experience, because you're right about the risk taking. Me and my friends, we did crazy ass shit. I can think back to one friend.
1:08:58 Speaker 00 He died in high school and was a car accident, whether he was going crazy or not, or was just an accident, I don't know, but I could have imagined other friends dying by the way people drove and crazy stuff that happened. But there was a certain risk taking that taught you something. And I'm not saying everyone needs to be drag racers and stuff like that. That's not my point. But you're right. Now we've got kids wrapped like the Michelin Man, unable to do anything, not getting driver's license till over age 20. Everybody wanted to get a driver's license at 16. There was no ifs, ands, and buts about it. You did it. It is an interesting period, and I do look at this 20 or 30 year window. It's not going to be repeated again, and primarily because of their surveillance. There is a camera on everything.
1:09:43 Speaker 00 That's just weird. To get back to your point to perhaps, there's no going back from it. The cameras are going to only get worse.
1:09:50 Speaker 01 Yeah, there's no going back. As you were talking, what occurred to me is that what we had that kids today don't have is we had the ability to fail and learn from it. We had the ability to fail before it was fatal, small, medium sized failures along the way. Now in society, if you actually make it to the point of failure, it's literally terminal. Or you can't get a job, you have a record, stuff like that. So this inability to learn through pleasure and pain and take risks. And get feedback from the real world, the real environment about, oh, that hurt, or there's consequences, or my reputation is stained, or these people won't talk to me now. That seems to be gone. And I think it really interrupts the learning, the cognitive development of kids between the ages six and 20.
1:10:35 Speaker 00 You could look at a situation, I don't think it really is relevant to any particular group, but you look at these college presidents that just testified in front of Congress. And it's like, you could take any group and you're going to get that kind of response from them. And the response is not really important, but it's just you watch these people and you realize, you and I are having this back and forth, talking about taking risks and stuff. But there's a whole other side of the coin. They're not taking risks. They're just licking the boot. They're just joining the team. They're just signing on and they don't care to think. They're not curious. They could care less. They just want the McMansion. They just want the guaranteed job. They'll do anything for it. And they won't think outside the box and they're never going to be you. They're never going to be me and they don't care.
1:11:19 Speaker 01 Which is why I'm glad I'm not any younger than I am. I mean, sometimes I'd like to go back to my twenties and do some things differently. But then I look around and say, the bureaucracy has become so front and center in every aspect of life now, that all you can really aspire to do is be a fringe disruptor. Very few number of Elon Musk types that's going to be a cutting edge, bleeding edge disruptor. Or you have to lick the boot of the bureaucracy. Those are your only two options anymore. And I'm generalizing and there's a little hyperbole there, but that's the direction that we're headed into at a very fast pace. I sometimes feel like the window of opportunity for me to do what I do, pretty much closed after I got in.
1:12:03 Speaker 01 First of all, inflation's amazing. I don't care what CPI says. My cost of living has doubled in three years. My cost of living is pretty low. I'm a single guy and I don't have a lot of interest outside of. My job and swimming, but still just the staples, everything has doubled and all my vendors have raised prices for my business. Compliance workload has more than doubled in the past five years. So I just think that the barriers to entry from the bureaucracy's organic growth have gotten to the point where entrepreneurship is almost impossible and the cost of capital has gone way up too.
1:12:37 Speaker 00 Yeah, I think it's a fair point because most people that call themselves an entrepreneur today, younger people, if you listen to them closely, their idea of being an entrepreneur is to create videos and get YouTube or TikTok advertising dollars. And I was listening to Tim Poole the other day and he said something to the effect that I want to say maybe it was on X and it was a couple hundred million views or something and he's like got city got like three to $5,000 a month. I mean, you and I could spend years and years and years to try to get to the level of eyeballs where a guy like Tim Poole is. And then it's like, whoa, for three to five grand?
1:13:20 Speaker 00 Of course, that's not his business model. That's just an extra for him. But wow, the young kids today, there's one Mr. Beast and that's it.
1:13:28 Speaker 01 Yeah, it really is a winner take all system that confuses people and misleads people. It's like when I was a teacher, I taught at an inner city school in Wichita, Kansas. It was a rough place to teach and I taught business math and Microsoft Excel and database design, some classes that the kids that had tattoos on their necks and, you know, they wanted to be lifting weights and playing football and not learning Excel. I remember one of the only ways I could get through to the kids was to be able to relate to them. If I wanted them to learn how to write a macro in Excel, I had to make it relatable to their own life. And one day I asked them, how many of you think you're going to play in the NFL? And I think it was like two thirds of the guys raised their hand. So I just put it in Excel, the statistics.
1:14:10 Speaker 01 Six hundred thousand active football players in college for high school. And then it goes down to college. It's like only one out of 10 go from high school to college and only one out of 20 go from college to the NFL. And only one out of six actually make the team. And only one out of five of those actually is still in the league after four years. I did a net present value calculation of that to show them that winning the lottery was probably a better bet than you making it in the NFL. And I did the same thing. I asked them about, you know, how many do you think you're going to play in the NBA? We had three out of 12 guys thought they were going to make it to the NBA. And I said, well, that that getting hit by lightning twice is higher probability than you going to the NBA. Winner take all system has now permeated up out of that area into every aspect of life.
1:14:54 Speaker 01 And everyone looks at social media and they think I can do that too. What they don't realize is that that's one out of 17 million people and they were all trying and only one made it.
1:15:06 Speaker 00 Years ago, when I did this documentary film, we went to the lottery office in the state of Virginia. And we just interviewed people, men on the street. I remember interviewing one guy that told me he was playing the lottery because that was his retirement. He was like 25, he was serious. And I remember having a battle with the legal counsel for the Virginia State Lottery, the government office, because they had released a commercial with a Jim Cramer look alike. And I wanted the file, your freedom of information. You're not some private whatever. I want this thing you produced, give it to me. And they went round and round and round and we're not going to give it to you, threatening suits. It's the craziest thing. I mean, here we got the lottery, which is literally a scam, literally a state sponsored scam.
1:15:51 Speaker 00 And then they reach into CNBC and steal from CNBC their scam to help the lottery scam. Yeah, a lot of people, the lottery is a big deal. It's not going away.
1:16:02 Speaker 01 It's human nature. There's two things that conspire against us psychologically as human beings. We're attracted to negative expectancy lottery like payoffs.
1:16:13 Speaker 01 But also negative expectancy arbitrage like payoffs, the two N.
1:16:17 Speaker 00 Who's this we?
1:16:18 Speaker 01 All humans.
1:16:18 Speaker 00 You're not, I'm not.
1:16:20 Speaker 01 Well, I know, we're the weirdos.
1:16:22 Speaker 00 You're controlling it in some way and there are other people controlling it. I'm controlling it to some way. So what is the hack that's allowed you to not swallow the cyanide and go down the wrong rabbit hole and believe all this stuff? What hacked you around it?
1:16:35 Speaker 01 It's when you convert knowledge into wisdom through insight. For me, it was when I learned how to design databases and collect data. You remember, I think I told you this a long time ago, maybe 10 years ago. When I was in college, we had to do stock trading. A program for the whole semester where you sign up online. This is probably in 96 or 97. So it's the beginning of the internet. You get this paper trading account, you can buy and sell stocks throughout the semester. Whoever has the best risk adjusted return at the end of the semester gets an A on the project or whatnot. I built a system for buying and selling stocks based upon 52 week highs and lows. But I was doing the opposite of trend following. I was buying 52 week lows and selling 52 week highs because the back tester said that that was very profitable.
1:17:19 Speaker 01 And this was actually two semesters long, a full year long, same teacher. It was part one, part two investments class. By the time we got to the end of the second semester, I was forced to confront survivorship bias where my back tester said I made money. But my account, which was paper trading, says I lost money. And that's because there were bankrupt securities in there that no longer showed up in the back tester because they got delisted. And I was buying those as they were going bankrupt and seeing in all my accounting statements that I'm losing shit tons of money in these things. But because they're left out, once they get delisted, they no longer show up in the back test. So the back test is no, buying 52 week lows is great because we're only retaining the stocks that bounced, not the ones that went to zero. That's when I realized that you gotta think this stuff through and actually go do it.
1:18:04 Speaker 01 Either simulate it or do it with your own money or real money in some fashion to find out how life really works. There are no shortcuts. As you mentioned, we're not like that. We're not chasing lottery like payoffs that have a negative expectancy. And we're also not getting stuck in the arbitrage trap. Well, that's my answers. But that was the beginning of my critical thinking epiphany. Where I'm like, no, I've got to figure this stuff out on my own. I can't just read it out of a book and expect it's gonna work. Same thing with the diet. There's the whole 6,000 fat diets out there, none of which were, none of them ever worked for me. I've never seen them work for anyone else, but they get all the press and the fame. I actually had to go learn, what did humans eat before the Civil War? Try it myself and after a year,
1:18:44 Speaker 01 conclude that that works. Now they're not writing any books about it. No one's paying me for advice, but it does work.
1:18:50 Speaker 00 I would be amiss as a person who likes to ask questions, to not pick your mind for the quick and dirty, pre-Civil War diet that you're gonna tell us that you are following. Give me the top down. What are we looking at? What is your daily eating routine now?
1:19:06 Speaker 01 Well, let me tell you what I used to eat. So in the morning, I would get up and I would make a huge bowl of cereal with milk. And then I did an analysis of what was in that. One fun thing to do is just take the box, turn it over, read all the ingredients and see if you can pronounce any of the words. And I couldn't. I found a doctor who is a functional medicine doctor. I sat down with him and I went over my whole diet. And he said, well, basically 80% of what you're eating isn't really fit for human consumption. Coca-Cola, Pepsi, like these things aren't fit for human consumption. And a lot of the stuff you're eating is illegal in Europe and in certain parts of Asia. It's actual toxic poison. So they'll have the same box over there, but if you turn it over and look at the ingredients,
1:19:50 Speaker 01 most of the ingredients you're reading are not in Germany and other places because they won't let their people eat that stuff. And then he had told me the stuff to go read about. How many food companies are there in the world? There's basically eight that control about 96, 97% of the food supply. There's a theory out there and I can't prove this, but tobacco companies bought up food companies and I think it was the late 80s or the early 90s and brought their addiction model over into the food place and really aggressively marketed this stuff towards kids, the placement and the shelves and the grocery stores and all the sugar and all the preservatives and the bright colors and whatnot. I just took stock of everything I was eating and I got rid of almost all of it. And I changed my breakfast to one apple. I eat one apple in the morning.
1:20:34 Speaker 01 And then for lunch, I eat one piece of cheese, some walnuts, sometimes some cashews, cucumbers, lots of fresh vegetables, but uncooked that I prepare myself. And then for dinner, almost every night of the week, I just mix a bunch of stuff together. Black olives, cheese, tomatoes, cucumbers, jalapenos. I do eat bacon. I don't shy away from meat or cheese. I just don't eat as much of it as I used to. And I mix this stuff up and I try different things all the time. Gluten free tortillas, wrap it up and eat it. I go out, I eat a lot of fish. There's a couple of fish market type places here in Phoenix. Somehow they get fresh fish here. Eat that. I cut out the rice, cut out bread, pretzels, grains, beer.
1:21:18 Speaker 01 Beer was a real killer and I love my beer. I love Irish beer and German beer, but I just can't do it anymore. I'm too old. And yeah, the weight just started falling off. Also, for the first time in my life, I lay down at night, I go to bed, I sleep in 15 minutes. I've been an insomniac my whole life. Two hours is normally what it took for me to fall asleep. Now I'm asleep in 15 minutes and I sleep the whole night through for the first time in my life. So this past year has been very kind to me. You listen to what I'm saying and you think, oh, that sounds really hard. It wasn't hard at all. I feel great. Everything feels great. Like I'm not foggy mentally. I'm not hungry all the time. And then when I do cheat, like on Thanksgiving, the next day I feel terrible and I'm starving and I don't sleep well.
1:22:01 Speaker 01 And that's the other thing, I've had a heartburn in over a year and a half until Thanksgiving, when I had some turkey and some bread.
1:22:07 Speaker 00 Why do you think people flip the switch? I've been generally in the same range for a long while, but during the first year of COVID, I gained too much weight and I lost it all that same year. I mean, I work out seven days a week. I still have cheat foods that I will touch, but overall I don't do anything like the cereal in the morning or anything like that. What do you think it is beyond just saying the food companies have addicted us?
1:22:35 Speaker 00 What do you think was the exact flip of the switch for you? Because you know, you didn't care for some long period. You just didn't care. You didn't do it. You weren't the worst case situation that goes on in most of America right now. So when you look at these worst case situations in America, the morbid obese. I just wonder psychologically what's happened. Do they just look around and say, well, my neighbors are like that too. So I don't care. Or I think I look good in a bathing suit on the beach, even though I've got rolls everywhere and everyone else does. I can't figure out the logic of it, but I will say, having been outside of America,
1:23:14 Speaker 00 where I don't see that, that has changed me in a way to where I don't really give a shit if Americans have lost their minds. I really don't care if they explode like the girl in Willy Wonka and the Chocolate Factory. I'm in an environment where that doesn't really exist. So it's terribly complicated to try and analyze because I feel like I'm an outsider. Now I look at you and I see you on screen and it's like, oh shit, something changed in this man's life. He went full on fit. You just see it and it's like an instant no, no, you know, I know what's going on. But I can't have this conversation with most people in America. And when I go back to America, I was there in September. What do you say to people? You can't say anything. It's their life.
1:23:56 Speaker 00 A lot of people that I know in America, they've got a decent chunk of money. They got their house. They got this and that, but they're just woofing down alcohol like it's going out of style. They're just gaining, I just can't wrap my arms around it. And it's not spoken about honestly as to what's really going on. And maybe we really don't know.
1:24:17 Speaker 01 There's lots of fault to go around, lots of blame. One, our healthcare industry in the U.S. just does not care. That's why I found a functional medicine doctor, because everyone else I talked to is just like, oh, yeah, statins, injections, pills. Don't you even care what I eat? Don't you care how I spend my time? You don't care about root causes. And they're like, well, I mean, yeah, that's important if you want to talk about it. I'm like, what? Okay. And then you talk to a functional medicine doctor and the first thing they want to do is do a full diagnostic on your blood and your food allergies. And they ask you, how do you sleep? What do you think about at night? How's your life? What do you want to fix? What do you want to change?
1:24:55 Speaker 01 They want to know whether you're your own worst enemy in your lifestyle choices before they start talking about surgery and statins and pills and all kinds of other stuff. So there's that. I think to answer your question, perspective is important. My mom moved back to Oklahoma near where we're originally from. I think that was three years ago and I finally got out to visit her last August and she'd already been there for two and a half years. I love the Midwest. I really like the people. That's where I was born and half grew up. But I was horrified when I got there because there's absolutely nothing to do but eat greasy foods and watch sports.
1:25:38 Speaker 01 There's no gyms and I had taken up swimming. I tried to find some place to swim laps and people looked at me like I was from a different country. They're like, what's that? There's no swimming. There were no gyms. Nobody does anything outdoors unless they're fishing or hunting. It's just a very sedentary lifestyle. And then I looked around for some healthy food to eat. There were no grocery stores, Mike, none. It was just Walmart. There were no grocery stores left and I drove all over the county into other places. You go to Walmart or you go to Dollar General. That's it. And I went to Walmart. I went to Dollar General and I looked around. It's all processed foods, sugar, sodium, just absolute trash, the kind of food that so you're just surrounded by it. It's like living in a place that has lots of air pollution and complaining that I just, I have asthma.
1:26:23 Speaker 01 Yeah, you do. You're breathing in pure air pollution on a daily basis. You have to get out of this environment. So I forced my mom to move back to Arizona and bought some real estate down in Southern Arizona, in a green area where there's plenty of healthy food around and lots and lots of outdoor activities. But that perspective, I just didn't know that the Midwest had devolved into such a state. And it's not just the Midwest. I'm sure it's other places too, the South, the Rust Belt and whatnot. It's just really hard to be healthy when there's no opportunity around you to be healthy. I probably used far less analysis than you when I landed in a place like Saigon.
1:27:00 Speaker 00 It was just a simple heuristic. Women are thin, women are hot. Women are thin, women are hot. Okay. I don't need to know what's going on, but I will just do the simple heuristic. Thin women. Okay, I should stay here. It's not complicated.
1:27:14 Speaker 01 I get it. There's something to be said too, where you go around the world and you look, where are people thin? It's places that haven't adopted our food model and our food distribution system. It's not China anymore. I think the last stat I saw there is they have a 51% obesity rate in China now. Cause they adopted our food model back in the mid 90s. And now there's a KFC on every corner. So Vietnam evidently hasn't done that. There are parts of Europe that haven't done that. Parts of South America that haven't done that. The evidence is right there in front of you. Our food model, our sedentary lifestyle and our reliance on prescriptions and drugs to deal with our symptoms. That mentality is wrong.
1:27:55 Speaker 00 Let me shift you. I want to bring up because people might be thinking, well, hold on, this guy Eric was running a trend following fund. I posted something the other day. Well, someone asked a question on X. And they said, describe Bitcoin in three words or less. And I said, momentum either way. Because if you look back on it now, after all these years, all the fanboys and stuff telling me about it's going to be a currency and it's this and it's that. And I think, no, it's just momentum either way. What is it? It doesn't matter what it is, does it? I mean, really?
1:28:30 Speaker 01 Yeah. What went through my mind is it's the savior or goat. It's either going to be a savior or a total failure.
1:28:36 Speaker 00 But from a trading perspective, does it really even matter?
1:28:38 Speaker 01 No, it doesn't. People ask me that all the time. When are you going to add in crypto assets into your fund? And my answer is, well, it's a tough question to answer. He's like, I have my clients saying, don't you ever put that crap in the fund? And the other half saying, why is it not already in the fund? What is wrong with you? And I have a great answer for both of them. As soon as it becomes liquid enough to be a risk transfer market, it'll get added in and we'll trade it according to its underlying liquidity like we do everything else. So if it actually becomes something useful and accretive to society, which I suspect that it very well might, it'll be in the fund in its proper form and size. Until that day, I'm not going to screw around with it. I'm going to let the pioneers pioneer it. I'm a settler, so it has to work and has to be established. And then I will go in there and provide liquidity to hedgers.
1:29:24 Speaker 01 Follow the trends, manage by risk and be happy that it's in there. But if it doesn't make it, it doesn't make it.
1:29:29 Speaker 00 Here's the interesting thing for me when I look at it. I don't know if working is even part of it anymore. It just seems like we've created a way for people to bet. Almost like some of the descriptions, it's not a derivative, but some of the descriptions that they would have explained in the Big Short movie. Well, we're making a bet on this bet. It seems like with Bitcoin in particular, there is no there there. It's just, I guess some people have got an imagination about it becoming something. But it sure looks like to me that a significant portion of that capital could care less. It's just, hey, if I'm long up, I'm down short or I'm out or whatever. So to me, it doesn't seem like it's anything other than just an opportunity for people
1:30:11 Speaker 00 to bet, which is quite different, of course, if one understands the futures markets, because the futures markets, there was a purpose behind these contracts that were created. There was a fundamental purpose for why they exist, starting with the hedging and the hedging needing speculators to play too. So Bitcoin, if it is just something to bet on, it's quite different. It's a scale it's starting to unfold and the numbers of people that are getting involved, where it doesn't really seem to have any economic purpose. Does it?
1:30:41 Speaker 01 Well, it could. In order to sustain and thrive and scale up to a level where I'm adding it into the program, I think it does have to catch on on some level.
1:30:50 Speaker 00 Catch on in what way? What do you mean catch on?
1:30:53 Speaker 01 Well, it's gonna have to become popular and accepted by the actual business community in order to scale up such that the liquidity on the futures exchange is going to be high enough for me to add it to the portfolio. So just like every other futures market, you're old enough to remember all the futures markets that launched in the eighties and nineties that never made it. There just wasn't enough demand from hedgers or speculators. Speculators don't matter. If the hedgers want it and they're going to use it, it'll be liquid and the speculators will start to pursue it. If they don't want it, it'll die on the vine, like 60% of all the futures contracts that have ever existed in the past. Rice and lumber and some of these other markets just don't have any demand for them. And that's why they're so small and probably on their way to going out of business, whereas
1:31:37 Speaker 01 the fixed income markets are enormous. The currency markets are enormous. So it's supply and demand for risk transfer.
1:31:44 Speaker 00 Can Bitcoin just exist as the grand continual pump and dump? Is there enough people to just keep buying in? And from a trend following perspective, why care?
1:31:53 Speaker 01 Yeah, so our role in the ecosystem is to not care about that. It's just to participate and provide liquidity. But if you scale your participation to the liquidity, the only way it'll be meaningful is if it actually does catch on and people start using it. Actually, in the economy in some form, whether it's a currency or a store of value or whatever it ends up being, it needs to solidify and grow in order to start showing up in the futures markets enough for me to add it to the portfolio. And that's to be determined. I don't know if that's going to happen. I'm starting to suspect that it will. But the governments are a formidable opponent. And if they don't want it, it's not going to catch on. So there's going to have to be some mechanism by which the government says these things serve a purpose and we're going to allow them.
1:32:36 Speaker 00 I could imagine it getting bigger than almost any other asset or any other stock. And I could imagine it having no economic purpose other than the grand casino where everyone's just betting. We're 10 plus years into it and that's all it is.
1:32:51 Speaker 01 The people that are truly passionate about it would push back on that and say, no, there's a lot more to it. They have a whole ecosystem that solves all kinds of societal problems regarding trust, bureaucracy, politics. All of these things can be addressed with it. And I'm certainly not an expert. They try to tell me their stories all the time. And I say, hey, look, now my job is to trend follow on futures markets and combine that with traditional assets, try to offer an all weather experience for investors. So I don't have time or even the skill set to make a judgment call on whether this stuff's going to work. The futurists, you're going to do your job. You're pioneers, I'm a settler. So go pioneer, figure it out, make this thing work. I will participate, but it won't shock me at all if they're right.
1:33:36 Speaker 01 Things don't usually last this long unless there's some structure to it. To answer your question, can it just be a perpetual pump and dump? We'll look at some of these stocks that have no fundamentals that people have been pumping and dumping. I don't want any tickers or whatnot. You know that there's some of these meme stocks and theme stocks. How long can they go on? It's been dragging on for what, five, six years now? But I haven't seen it go on historically for much longer than that. You know, the things eventually go bankrupt and get delisted and someone else takes their place. So I don't know what to think about crypto other than my job is to trade it if it's liquid. So far it hasn't gotten there, but it's getting close.
1:34:14 Speaker 00 Yeah, I'm not trying to give any kind of negative. Fundamental perspective, I don't know either, but to me, it just looks like something it's the price action just says up and down, up and down. If I just look at the price action, that's the only conclusion I can draw because as of right now, there's no use case for me that I can easily access and easily use in my life.
1:34:33 Speaker 01 Well, what do you think about the fiat currencies right now with the amount of money printing and spending being debased? How much longer do you think that they could do that indefinitely? I mean, the laws and physics of finance, what's your recourse? Tangible assets, the Bitcoin and the crypto people would say, well, that stuff's dying. This is the future. The government can't print more Bitcoins, so you need to come over here.
1:34:56 Speaker 00 That's what they're saying, but
1:34:57 Speaker 01 Yeah.
1:35:00 Speaker 00 If it's going up, then what they're saying, well, that makes sense. But if it's going down, that's the hard part about the fundamentals of it. Let me ask a trend following, big picture question. Is trend following is as fringe today as when you and I first met close to 20 years ago?
1:35:20 Speaker 01 In practical terms, yes. There are a few firms have rolled out products. You see more options. There's more accessible product, but I don't think that they've actually made a dent in the world. So maybe, let's say a quarter of a percent of managed money was trend following when you and I first started talking said 15 years ago. Maybe that's doubled. It's changed. There's a little bit more acceptance, but nothing meaningful in my opinion. So it is just so counter to the way humans experience life. I have a saying, and I haven't said this in a while, but in practice, trend following is as contrarian as anything you'll ever do.
1:36:06 Speaker 01 Ever from the way you're buying strength, you're selling weakness. Maybe you're adding to winning positions. If you just take a person off the street and give them some money at a terminal and tell them to start trading, they're like a cat. You know exactly how they're going to react to certain stimuli. If you bring in a cat and I bang two symbols together, it's going to run off. Bring me another cat, he's going to run off. The thousandth cat does the same thing. Humans are the same way with their money when they're trading. Not exactly, but I mean, it's very similar. They add to losing positions. They sell their winners too early. They take more risk on losing positions. They double down. We call that the principles of professional trading. They just do everything wrong. Trend following is essentially taking that like a sock and turning
1:36:48 Speaker 01 it inside out and saying, I'm going to do everything right. But psychologically, there's a reason people do everything wrong because it feels better in real time. It may not feel better at the end when you look at your account balance after a few years, but in real time, it feels better. Kind of like eating that pumpkin pie on Thanksgiving like I did a few weeks back. It feels good in real time, not so great at the end.
1:37:09 Speaker 00 The Wall Street system doesn't make their money by and large from trend following. They make their money by and large from fees on rather sedate mutual fund type buy and hold strategies. That's where the vast majority of assets are. There's no real incentive for Wall Street to do something good. Their goal is to make money. I would argue that's part of the disconnect is the average person doesn't realize what the average fund manager is up to, what their goal is and what they're motivated by. It's not them.
1:37:41 Speaker 01 Yeah, something I say that pisses off the trend followers from time to time when we get into this topic is I tell them, not everyone can be a trend follower. It's not possible. The trend following community has to be a pretty small minority of the assets in order for it to work. Imagine if everybody in the world wants to sell soybeans because it's hitting a 52 week low. It's not going to work. You need more people on the other side actually economically able to absorb that risk when you want to get rid of it. Likewise, you need them to sell it to you when it's at a 52 week high. You need more than 50% of the pressure on the other side in order for it to work, for it to be in balance over time. I manage a lot of money and there's people on the other side of the trade. I don't think they're dumb.
1:38:26 Speaker 00 They have other motivations. There could be hedging motivations, etc. Let me shift into something else. I think it's one of the favorites for Jerry Parker pushes on a lot, which is the notion of volatility and targeting volatility. It's interesting for me because I guess when I first started to understand trend following, it didn't appear to be a thing. But I guess at some stage of the game, when for the very large trend following funds, and there have been some very large ones, I guess when some of them agree to accept assets from very large allocators, there's strings attached, perhaps. I'm just theorizing. They look at these trend following return streams. They imagine, how can we carve
1:39:07 Speaker 00 this up and present it in a way that is more palatable to us? They lose sight of how it even happened. They want to make it conform to what they imagine is the great investment. Whereas the trend following return streams that got them that money to begin with came in an entirely different way, and they want to bastardize it. What's your perspective if you hear someone like me just rattle all that off?
1:39:36 Speaker 01 I think it's mostly right. We're a little too harsh, I think, on the allocators, maybe.
1:39:44 Speaker 00 I've met some of these ones that run these public pension funds. And I'm telling you, I don't want to keep saying bad things about them. But I could say a lot of bad things about them. They're not impressive people, a lot of them. When you meet them in person, they're apparatchiks. They're bureaucrats. They're in political positions.
1:39:56 Speaker 01 I'm not going to disagree with that. It is a bureaucracy. Need to be diplomatic first and foremost. And they're stuck in between the board, and they have the investors and whatnot. And that's not a position I would want to put myself into. So there's also the illusion of progress phenomenon, where you have to always look busy. You're always doing research, always coming up with new stuff, and you got to justify, you know, alpha and all this other stuff. I got out of that game a long time ago, because there's just so many misincentives. And I told people the truth. And they're like, look, you can't be that. You can't be that blunt. And I said, well, I'm going to. So eventually, I said, I'm just going to do my own thing and find advisors and individual investors that want to invest this way. And just because I never conformed to the politics. It's rough when you don't, when you don't network into the bureaucracy.
1:40:41 Speaker 01 You can't really benefit from the bureaucracy. So I know Jerry Parker, he's a good guy, a smart guy. He's been doing this a really long time and he's got really strong opinions on these topics. Most of my opinions align with his because he's just generally right. On this particular topic of like vol targeting and stuff like that, I'm not as passionate about it as he is. I think there's five, six, seven different ways to get to the same destination without doing anything crazy. I personally don't like vol targeting and that stuff. I like risk targeting. My philosophy on it is volatility is not risk. Volatility is a symptom of risk. So if you're going to position size or manage to a certain level of volatility, well, you're prioritizing symptoms.
1:41:25 Speaker 01 I prefer to ignore that and go straight to the risk and say, how much am I going to lose? If everything goes wrong on all these positions, I want to regulate that number. And volatility is just the extra step that somewhat convoluted in my opinion. Am I vol targeting? No. Am I maintaining some sort of a risk budget? Absolutely. And so is Jerry Parker. So some of this is semantics. I think what rubbed Jerry the wrong way is that I think he got a lot of pushback during his years at Chesapeake from allocators saying, we need the most sophisticated vol targeting crap out there. And he's rolling his eyes saying, it doesn't make a difference. If you manage your risk, if you're doing fine and they just wouldn't buy into it. They needed the buzzwords and he didn't have the buzzwords.
1:42:06 Speaker 00 There's something else interesting as I bring up Jerry's name and okay, people are listening to you. You're not shy about personal opinions either. What's interesting about both of you, and okay, I'm not running a fun, but I have no problem sharing personal opinions either. But if I share personal opinions, I remember saying something to somebody on a podcast once and some professor, I said something about, go woke, go broke. And they go, what does that mean? And I was like, well, what do you mean? You don't know what that means. But how do you think you have evolved to the place where it's like? You are a trend following fund manager. You will, assuming it's a legit client, you're not discriminating against accepting clients.
1:42:49 Speaker 00 But if you put certain views out there like, hey, this is the way I see life. I mean, you might attract only a certain type of investor. Same thing with a guy like Jerry. Same thing even in my world. Some people might turn on my podcast. They might hear some F bombs. They might've just been to church and they're like, okay, that's the last time I listened to that guy. So how do you connect the dots there in the sense of? Cause I don't think when I first met you, you would have been so open about your personal philosophies, but you are now.
1:43:20 Speaker 01 Well, I'm older, I'm wiser and I realize authenticity matters a lot. And you can't make everyone happy. So whereas I had to be more diplomatic really in life. When you don't really want to be that diplomatic, it wears on you. So I'd rather just tell it like it is. And if I lose clients over that, then so be it.
1:43:40 Speaker 00 On the flip side though, you might gain clients because you are presenting that point of view as well.
1:43:45 Speaker 01 Yeah. And I think that's actually what's happened. So maybe I'm just overconfident because I've gained clients by just being more candid with my views.
1:43:53 Speaker 00 You also have a chairman, I believe, who's pretty open on his views too. Tom Basso is not shy about points of view.
1:43:59 Speaker 01 Yeah, Tom's not shy. He's got the American flag shirt and the cowboy hat on, so he's not shy. And he celebrates the 4th of July and yeah, he's, he's not holding back. I don't know. I just got more comfortable. My views are a little bit different than they were when I was younger because I'm older and wiser now. And I'm just not ashamed of my views and I'm willing to defend them. A lot of people aren't. You talk about the woke crowd, they just scream. I don't see them actually defending any of those views. I'd listen, but they just scream and try to intimidate because it's worked. But they have incoherent views in a lot of cases, not all of them. I mean, some of their gripes are grounded in reality and I'm more than willing to acknowledge those. But the behavior that I see on college campuses today is nuts.
1:44:44 Speaker 01 Maybe if it cost me every client I've ever had, I'm not going to agree with that stuff. Just can't do it.
1:44:49 Speaker 00 I find fascinating that what people would generally call liberal comedians, Jerry Seinfeld, Bill Maher, refuse to do college campuses now. And that's fascinating.
1:45:00 Speaker 01 It is. It's getting to the point where I was just chatting with someone before I got on this podcast. It's like a circle shoot now. You got a lot of billionaires pulling their money from college campuses, liberal billionaires. And wait a minute, these people are actually attacking each other now. I spent a lot of time when I was younger studying revolutions.
1:45:18 Speaker 00 Can America have a civil war again? I want one.
1:45:21 Speaker 01 I don't.
1:45:23 Speaker 00 Eric's like, hold on, I gotta get off this call with Mike. If he's gonna start talking about civil wars, I gotta bow out of this one fast.
1:45:29 Speaker 01 I gotta live here, man. If you talk to people that came here from Iran or former Soviet places, they're fatigued and they all have the same story and all with the same thing. Just give me some freedom and the ability to earn a living and I will not disappoint you. Listen to those people because they've actually been through hardship. I think part of the problem in America is we've had multiple generations who have experienced pretty much zero true hardship in their life. But they still gotta fill all that emptiness in with negativity. So they create hardship, psychological hardship, where they just have no empathy for what hardship really looks and feels like around the world. And I think they struggle with that and it's no less painful for them psychologically.
1:46:14 Speaker 01 I think that's why people drink too a lot because when you consume a bunch of alcohol, all it does is it creates artificial exhaustion. That's what that is. And that's the reason I drank alcohol at the end of the day. Because I wasn't exercising. I wasn't out working in the fields or hunting or fighting or any of that stuff. I was working on a computer and reading books. And then at the end of the day, I'm not properly exhausted like a human or a mammal is supposed to be. So I consume four or five Sam Adams or German beers or whatever. And I'm artificially exhausted and it just didn't occur to me that this is not natural until later in life. So I think a lot of these people that don't have any adversity growing up, we talked earlier about our generations, these coddled generations, they haven't achieved anything in life. They haven't learned anything in life.
1:46:58 Speaker 01 They haven't gotten that natural pushback from the environment about don't touch a hot stove. Don't fall off of a two-story building. They weren't able to take the risks that you and I took and get that feedback. And now they're just confused and they're filling that emptiness in them with negativity and coming up with a narrative that I'm so oppressed in every aspect of life that I need to lash out. Maybe that's just a theory. I honestly don't know. Sometimes I feel like this is an experiment or I'm living in a simulation because I do not understand the people around me anymore.
1:47:29 Speaker 00 Yeah, I mean, obviously, you and I have talked quite a bit on camera and off camera. I didn't plan to quote, "live off the grid," live off the American grid. That was not my plan. I stumbled into it. But as I've said to many people over the last decade, a significant number of Americans, if they experienced what I experienced, would have made the same choice because it was an obvious choice. It was just painfully obvious. I was writing something the other day, working on a project, and I was thinking about this very issue.
1:48:08 Speaker 00 It reminds me the feeling, the collegial aspect amongst people, this nice feeling. And I'm not saying there's perfection in any country, any one country. But there's no doubt that when you're in a place like Asia, you feel something a little bit different. Again, I'm not saying every Asian country is perfect. But there is something sweeter that maybe reminds me of grandmothers. And I joke with women in their twenties and thirties. I'm like, "Look, I know you're not a grandmother, but you've got a grandmother attitude." And that's a nice feeling. And so then sometimes when you're in a place like America, and everything feels like the exact opposite of that. The sweetness has been removed from society, and it's anger, and it's vitriol, and it's combative.
1:48:53 Speaker 00 When you walk away from that and you stumble into a world where that doesn't exist, you're like, "Oh, wow." It's easier to sleep. It's easier to do everything. Just sharing back with you in this collaborative conversation. Try to get people to understand these different points of view and to think about things differently. And so I just share my, maybe one day I'll have to write a book about this. I think it'd be a very popular book, actually.
1:49:17 Speaker 01 I'll share my perspective on that. Envy and malice are in high supply these days. I've noticed that. And I think malice is the child of envy, or can be. I just see a lot of envy and resentment and skepticism and suspicion. Where I didn't see that before, when I was growing up, if you saw someone walking towards you on the sidewalk, you weren't defensive. Now, people are, especially with me, I don't look like a very nice person when people see me on the street and I got the facial hair, a little stocky. So I have to go out of my way to be nice to people. And you can just see the surprise on their face because they can tell the way I'm speaking that I'm articulate and thoughtful. And they're just taken by surprise that someone will go out of their way to
1:50:01 Speaker 01 say hi. I do it all the time now, just almost just for fun. I just say hi to people and they're like surprised. And I noticed there's a lot of people here in Arizona from California and they tend to be the most standoffish. People from Minnesota and Wisconsin are all friendly. And if the Midwest, they're all friendly. These people in California, very skeptical and very standoffish at first. Now, they're not lost causes, though. You talk to them a little bit and they lighten up and they open up and they become and they offer to help, you know, they want me to walk your dog, stuff like that. But at first, they're just very suspicious and skeptical. And it's sad that our society has gotten to the point where baseline level of trust is no longer the default.
1:50:38 Speaker 00 You brought up envy. It made me think to when I was having this conversation with a friend the other day, the opening scene of the film Patton, in that to paraphrase, he is giving that speech, he says something to the effect of Americans loving the champion marble shooter. Obviously, no one plays marbles today, but anyways, he's essentially making the case that Americans love merit. We like a winner. We look up to a winner. We strive to be the winner. Whereas today, I don't think it's going out of my way to say this, that isn't there as much. It's there for a significant part of the population, but a significant other part of the population starts from the baseline of,
1:51:23 Speaker 00 oh, no, I don't have to lift a finger. I'm already equal by my existence. That has no upside psychologically at all.
1:51:34 Speaker 01 Let's talk about why that happened because I'll play devil's advocate now and take the woke argument. Because I talk to these kids. I go to coffee shops. I go to the most liberal coffee shops in town. I overhear their conversations. Nice people always treat me with respect. They're nice. So I'm like, what is actually happening? Are we mortal enemies? And if so, why? A couple things I'll point out. When I was growing up, when I was in high school, after school, I could go make Sixteen, eighteen bucks an hour doing construction work. And did, I did demolition, not with explosives, but with sledgehammers and stuff. I did tile work, I did roofing, painting, stuff like that. I remember thinking, man, I can't get ahead in life.
1:52:16 Speaker 01 I need to get a white collar job because yeah, I could make eighty grand a year or something like that if I really dug in and became good at this, got an apprentice job. And that was all true, you get up to like twenty-five bucks an hour or something like that. Today, those kids don't make any more. They don't make any more than that. I know, I talked to them. The cost of living is four X what it was in the early nineties when I was in college. Are we being unreasonable by thinking we wouldn't have become entitled brats if all of our hope was gone? Meaning if our cost of living, we were growing up, was four times higher. Merit no longer made any sense to us, or at least we just gave up on it because it's so out of hand now.
1:52:57 Speaker 01 That went to college in San Jose, California, a studio apartment now is three grand a month, something like that. Back then it was six hundred a month, but they're not making any more today than the construction worker was making back then, or maybe a little bit more. In other words, real wages have not kept up with the cost of living. And I think a lot of these kids have just given up and they assume that the system's rigged. No matter how hard you try, you're just not going to be able to get ahead. So let's all become commies.
1:53:23 Speaker 00 The baby boomers have all the wealth, statistically speaking, in America. And they were and have been in the last twenty-five years, bailed out twice. The dot com crash was never really allowed to happen because then we re-flated in another bubble and then another one. This group that's seventy-five years old have got all the money, but maybe society would have been a lot better off than instead of creating the quote, big short bubble. That started off in the fall of oh two, instead of creating that bubble, maybe we would have been better off letting people, especially the older people that made these decisions to invest in all
1:54:03 Speaker 00 this dot com scam crap to not be saved because they didn't save everybody. They just saved a particular generation. That particular generation has all the wealth now. And so you do make a fair point in the sense that this younger generation, they're not being saved from anything. And the numbers bear it out. All the generations below the boomers don't have the capital. Fair point. Complicated stuff.
1:54:27 Speaker 01 It's a perspective that is thankless, though. And I've noticed this, that I say this over and over. I'm listening to their argument and I'm like, yeah, but you know, that's what I'm thinking. Communism is not the solution. Subsidies don't solve anything. They just prolong it, but they don't understand the root cause of why they can't get ahead. And they're tired of hearing from the baby boomers. I walked uphill in the snow, two ways with no shoes and I worked for 10 cents an hour. They don't care. No one else is doing it. It's not an opportunity for them. They're tired of hearing it. Cost of living is soaring and it's not even as bad as it is in other countries. So I just imagine how much worse it could get. But they do have a point in that I think that their hope has just been extinguished. They're bombarded with images from social media of how easy it is.
1:55:12 Speaker 01 Now everyone else is getting ahead and everyone else is partying and they've got a yacht and an airplane. And I think it just wreaks havoc on their spirit.
1:55:19 Speaker 00 But I think also the other option that people do have is if you are alive, you can make choices. If a young person's alive, they're looking at the playing field and they feel like, damn, it's not the same. I'm not getting the same hand that these older folks got. Then they gotta take evasive action at some stage because if they don't, five, 10, 15 years are gonna roll by and they're gonna be crying in their milk even more. I can't recommend evasive action for everyone in every situation, but if things aren't working, there's no trust in the system. It is a form of pull your bootstraps up. It might not be the walk up the hill, no shoes in the snow. The boomers supposedly did, but young people just sitting still, waiting for the white
1:56:04 Speaker 00 knight to arrive is probably a bad strategy.
1:56:08 Speaker 01 It is the responsibility of the generation that has the luxury of wisdom to help the next generation not screw everything up. And we got that part wrong, I think, this time around. And it could be that the technological change after, say, 95 interrupted that such that the baby boomers couldn't pass on wisdom to our generation and the next generation. Sometimes when you have a fourth turning, it's because the demographic transition is so violent and weird and there's so much change that you can't pass the baton of wisdom off to the next generation. So they're full of resentment and anger because they can see that you have all the wealth with no idea how to invest it in them. The point I was gonna make earlier
1:56:53 Speaker 01 when I talked about revolutions is that every revolution gets hijacked, whether it was the Iranian revolution, Bolshevik, whatever, they always get hijacked and they end up being a perversion of what the original intention was. If we're going through one right now, that has to be the default assumption that it's in the process of being hijacked for nefarious purposes. The Iranian revolution wasn't about religion. It was about the fact that the Shah and his henchmen had 99% of the money and everyone else was living way below the poverty line. Gotta be very careful in times like this because it can go either way.
1:57:29 Speaker 00 Well, the audience listening that are looking to perhaps find a nice, rational fund manager who does not want civil war, they've got you. For the audience that wants to read some books, listen to a podcast, get a little training and fully supports the upcoming civil war, then they have me. So.
1:57:53 Speaker 01 Well, the beautiful thing about trend following is that it's disciplined and it's opportunity seeking and it's able to manage risks. So if we get really bad times going forward, trend following, I think, is the place to be. And if you get good times going forward, trend following generally, if it's done correctly, you can get on the right side of positive trends. And that's how I prefer to live because I realize that we live in a time of flux and great change that could. Lead to great things. AI and other stuff could change the world radically. We could have a good outcome out of this. I'm just saying it's not the eighties. It's not the nineties. There's plenty of things that could go wrong, so it makes sense to be open minded and be flexible, but also disciplined. Being flexible doesn't mean being undisciplined. It means having the discipline to change
1:58:36 Speaker 01 when change is warranted. So trend following I like because it allows you to evolve as needed to survive in a changing ecosystem. And I feel like we're definitely in for some change.
1:58:49 Speaker 00 I hope so. I vote civil war. Hey, Eric, where can people come find you if they want to check you out? Check your firm out. Where's the best place to go?
1:58:57 Speaker 01 It's super easy. You just go to standpointfunds.com. What I would do is just scroll down a little bit and type in your email address. And you'll get our monthly updates. Just got all of our stuff in there and you'll learn more than you ever wanted to know, but we don't spam you. We don't sell your stuff to other people. We're not in that kind of business. We're just going to send you the stuff that we think is meaty and important and you can sift through it and see if anything's interesting to you.
1:59:18 Speaker 00 It is one of those conversations for you where you are right now, at least the way I read it in your life, where it's like, hey, this is how I look at the world. These are my perspectives. And I happen to run a fund that might be able to help you. We can connect if you want. We can be friends if you don't want to connect in that way, too. That's how I read you.
1:59:41 Speaker 01 I think that's fair. I'll take that. The other thing I would point out is that you and I, we're Gen X. So we think our generation's the least crazy out there, but it actually might be the youngest, the actual teenagers now, 12 to 16 year olds that I talked to have actually surprised me. They're not like the millennials. They're actually very, and I'm generalizing, but they tend to be introverted and they take care of business. They're like little mini Gen Xers potentially. So don't lose total hope on America. I'm not. This phase of, I don't want to put a label on them, but you know who they are, self entitled complainers and agitators. They need to either run out of energy or go find something to do, but all is not lost. I think the next generation after them actually has some hope.
2:00:23 Speaker 00 So Eric gives the diplomatic response. I think all is lost. I think civil war is coming, batting down the hatches. Get ready, guns and butter, baby.
2:00:33 Speaker 01 It won't be guns. It'll be dumb.
2:00:36 Speaker 00 I hope it's guns.
2:00:37 Speaker 01 It'll be algorithms.
2:00:40 Speaker 00 Eric, have a good one, man.
2:00:41 Speaker 01 All right, man. Thank you. Take care.
2:00:48 Speaker 02 I see a time when those awake will understand how to make money in up, down, and surprise markets.
2:00:57 Speaker 02 Whether a new trader or experienced, college student or financial advisor, protecting against a crash, or just trying to make a lot of money, TrendFalling offers everyone an answer in uncertain times. To get started immediately, send me an email, [email protected] . I will send you the right TrendFalling steps to take, along with my free video.
2:01:24 Speaker 02 But if you want to buy and hold, trust the government and trust Wall Street, this is absolutely not for you.
Previous Ep. 1334: Markets Whipsaw with Michael Covel on Trend Following Radio Next Ep. 1336: Enough with Michael Covel on Trend Following Radio Page updated November 7, 2026 · transcript and summary are machine-generated
