Pod Insights Michael Covel's Trend Following Ep. 1340: Own the Tails with Michael Covel on Trend Following Radio About this episode Please enjoy my monologue Own the Tails 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 0:00 Speaker 00 I want to share some broad macroeconomic statistics that are important to just about everybody. First, 30-year yield breaks 5%. Bond market's not happy. Bond market is selling off and rates are going up. Number two, 6.5% of borrowers are at least 60 days late on their car payments, the highest level ever recorded. Why? I guess that's interesting. U.S. home price history, 1890 to 2025.
0:40 Speaker 00 Right now, we are at the highest inflation-adjusted home prices ever in America. Number four, Japan's 40-year bond yield just hit its highest level in over 20 years. Japan's prime minister says the situation is worse than Greece. That sounds bad. Bond sell-offs in April, like the highest in 20 years. You want to get a mortgage today? That's like the highest since the Great Recession. On top of that, we also know that the American government has been keeping millions of homes off the market, using taxpayer dollars, of course, to hide this inventory.
1:25 Speaker 00 And we also know that the government has not been forcing tens of millions of students to pay their loans. So around the world, we've got rates going up, we've got equities at all-time highs, Bitcoin at all-time highs, we've got governments that play monkey business with assets and prices. It's hard as hell to know what's going to happen. That's why I've always been a huge fan of trend following. But especially at a time like right now, where rates are signaling shit times ahead, you can only raise rates so much before asset prices take a shit and asset prices go the
2:09 Speaker 00 other direction. I can't predict when that's going to happen. Nobody can. But when you start to get these broad macro stats at extended levels, when you see people like Warren Buffett and Michael Burry sitting on the sidelines with lots of cash...
2:29 Speaker 00 And when you see the young guy who quit his job, and I'm paraphrasing here from a great tweet. When you see the young guy who quit his job at Sizzler's in 2021 to day trade, and he's all gacked up to be long only, it's definitely an interesting time to be alive. What shall you do? What action shall you take? How shall you prepare? If the proverbial shit hits the fan. Another great line terribly important to this conversation today.
3:07 Speaker 00 You want to own the tails and not be owned by the tails.
3:14 Speaker 00 Hey, look, it is the day of AI. So if I say anything today that you don't recognize, if I say anything that causes you to scratch your head like, own the tails and don't be owned by the tails, come on now. Grok will give you an instant elaboration. It's a fantastic world we're living in in terms of understanding. But use these tools. Don't make me slow down. If something's not clear, grab it from AI. Hell, we all know, and as a podcaster, I wish this happened earlier. But all these podcasts, AI is reading them now, so you can find out how many times I've dropped an F-bomb since 2012.
3:59 Speaker 00 I'm not sure I want to hear the count. But across this backdrop we are living in today, 2025. This economic, political, geopolitical instability, uncertainty. Trends are your salvation. Trends are all you got.
4:20 Speaker 00 Again, I'm not going to repeat all those broad economic stats that I just read a second ago. And there's a million more. But what do you do if we are in a point in time? Where there is infinite information, infinite fundamentals, infinite opinions. Price is a truth.
4:43 Speaker 00 Now, price is not your typical fundamental analysis, if that's what you grew up on. If that's what got you educated in school.
4:52 Speaker 00 But price is truth. The traded price at any given point in time is real. Your opinion about Bitcoin, your opinion about Tesla, the economics, the fundamentals about Bitcoin or Tesla. That's not real. That's just a theory. What's real is the price. If you buy something at price level 100 and you hold on while it drops to price level 50, you're down 50%. Now you can hold on and pray it comes back. It might not. You can double down and start to buy in this drawdown, average in. Doesn't that compound the problem?
5:36 Speaker 00 If you're already down 50%, is that a discount for you to buy more? Or is that a signal telling you, uh-oh, we got a problem here? So let me flip it to trend following. The concrete solution, the concrete tonic to the situations that I'm describing. The situations we are living in right now. Now imagine you start the year flat. You have no positions. You don't own a damn thing, including a house. All you got's cash. So what are you doing? Well, first, you might want to think about what markets you follow, what markets you track. Now, from a trend following perspective.
6:20 Speaker 00 This could be commodities like gold, soybeans, oil, wheat, silver, cocoa, pork bellies, corn, rubber. It could be stocks. Tesla, Apple, Nvidia.
6:32 Speaker 00 It could be currencies, the yen, the dollar. It could be crypto, bitcoin. It could be those far out markets, Colombian interest rates, California carbon emissions, Chinese methanol, European electricity, whatever big trend is coming out of Turkey. It doesn't make a difference, honestly, where you get your profits from. You don't care. So, as you start the year with this broad tracking portfolio, call it a watch list. You're waiting for the action. You're waiting for the moment where you now take a position. A long position or a short position. And this is based on price action alone.
7:18 Speaker 00 Price action is movement, is momentum. So when you get the momentum, you get the movement, you're taking a position.
7:29 Speaker 00 Now, if you're at price level 100, and you get a signal to get in at price level 105, and you're in, now what? You don't know what's going to happen. You have no idea. I have no idea. You have simply made an entry into, for example, Chinese methanol.
7:52 Speaker 00 What do you know about Chinese methanol? Not a damn thing. What do I know? Not a damn thing. What do the billion-dollar-fund trend followers know about Chinese methanol? Not a damn thing. Do you have to know a damn thing about Chinese methanol to trade it? Nope, you do not need to know a damn thing about it. That includes oil, or soybeans, or Tesla, or crypto. Again, you are in at price level 100. It goes to 105. You don't know much. You're in the waiting game now. You're waiting to see if the market keeps going your direction. If it doesn't go your direction, you're getting out with a fixed stop loss. Now, you're not doing this on some day trading bullshit.
8:38 Speaker 00 Those out there that think they're going to do the day trading bullshit, have you really considered who your competition is? When you're trading your five-minute bars or your one-hour bars? And beyond competition and beyond the lunacy of it all, why don't you just compare it honestly to trend following? Why don't you compare it to the legendary names that have come before? Where are the legendary day traders? It's an entire industry propped up by anonymous pump and dumpers hiding out on the internet. That's who you believe in. Now, I get it. If somebody's new, your first thought is, I don't want to take any risk. Now, you usually keep this to yourself.
9:21 Speaker 00 You don't admit to anybody that you're going to start day trading because you think you're controlling your risk.
9:28 Speaker 00 That's why you're doing it. You're not doing it because you think it's a great opportunity. You don't know anything about the damn markets. But if you think you can trade something in and out on a given day, well, the market can only move so much and you won't lose so much and whatever the logic is. But that's not trend following. That's not true price action trend following. True price action trend following is something where you're looking at a daily bar, perhaps even a weekly bar, looking at one price, one data point per week to make your decisions. You are lengthening your time horizon. You are spreading that chart of data points way out.
10:14 Speaker 00 And you're not getting fixated on the day-to-day. The day-to-day where you have the latest inverse Kramer signal, the latest viral post on X. I mean, I get it if you want to do it. I get it. It's psycho. It doesn't make any sense. It's basically gambling. But if you have that urge inside of you to go down the path of the scientific method, to investigate, to dig. I mean, I rattled off the names of all these markets. They're not similar, except for price, except for the price action.
10:48 Speaker 00 But what other strategy can you imagine that would essentially make you a venture capitalist for all world markets and that gives you the chance to participate in markets that you have no idea what the fundamentals are? That's amazing. It's been amazing to me since I first heard about it. It's never lost its amazement. And if we go back to what I started this episode with, the broad macro statistics, those rubber bands are stretching. They're not going to not break. At some point, they will break.
11:32 Speaker 00 And the issue becomes, are you ready for the break? Or will you accept the 30% or 40% haircut on your house? Will you accept the 50% to 75% drawdown on your stocks? With no guarantee they'll come back immediately. I mean, let's play this through. Clearly, the bond market is saying, we don't believe in the fundamentals of the American economy. And if rates keep going up, we know what has happened historically. If rates keep going up, asset prices will get shit kicked out of them. Why?
12:12 Speaker 00 Well, if they're willing to give you 5%, 6%, 7% on your money, quote, "risk-free," and equities are at a level that's not risk-free, that's often the trigger. I'm not making a prediction, I'm just telling you how the world works. You have to imagine, as I have this chat with you today, on the right hand of the ledger are all these broad, fundamental macro stats. Clearly, something is wrong in the economy, the global economy. On the left-hand side of the ledger is a strategy called trend following, how to navigate the uncertainty of the right-hand side of the ledger.
12:54 Speaker 00 Because as the right-hand side of the ledger continues to stretch, it sets itself up for major market dislocations.
13:05 Speaker 00 What strategy benefits when there are major market dislocations? Typically trend following. Is that a guarantee? Come on, man. You want a guarantee, go buy a toaster. I'm just telling you what I've seen, what the research shows, what you can see across the legendary trend following traders. Back to what I said at the beginning. You want to own the tails and not be owned by the tails. Tails, meaning the outliers, the black swans. There's your hint. You can go dig a little bit deeper. When the tails hit, the outliers roll in, the black swan swims in.
13:49 Speaker 00 Trend following historically has done fantastic. Because when the major players that are in typically buy and hold strategies, they're long stocks. They are, as of right now, selling bonds. But when you're long stocks, people start selling stocks and then currencies start to move. What strategy has made more money from currencies? Whether you want to call that FX or Forex or whatever the hell you want to call it. What strategy has made more money from currency trends? In the last 50 years, maybe the last 100 years, maybe longer? Drum roll, please. You know the answer. It's trend following.
14:30 Speaker 00 Someone wrote me the other day. They said, what about April, Mike? This happened in April. That's the wrong way to think. You need a system that deals with all eventualities at all times. If you are just fixated on some one market in some one month, you're not a trend following trader and you're asking me for a prediction and I sure as shit can't give you a prediction because I don't know. And frankly, nobody knows. So again, on the right-hand side of the ledger, you have the broad economic statistics. Globally, they're a mess. You know it and I know it. Can I tell you when it's all going to snap? Can't tell you that.
15:14 Speaker 00 The left-hand side of the ledger is a strategy to deal with all that shit on the right-hand side of the ledger. And I'm talking about trend following. And I suspect, and this happened a long time ago for me as well, I suspect a message like trend following will not be fully understood by the current generations until there's a break. Until the current system, which is based on for the last 15 years, very low interest rates, and government spending to the moon, and government hiding things off the books so we don't have proper price discovery, against that backdrop, we should all be nervous.
15:59 Speaker 00 We should all know this is an unusual time. I want everyone to be ready for it. Now, you might say to yourself, Mike, I want to come to trend following with half my assets. Fair enough. Do it. Do something. But don't just trust that these playboys and playgirls all around the world in leadership positions that have allowed spending to go unchecked, that have allowed millions upon millions of people to exist inside developed countries, living on the dole, not doing anything, dead weight, all that spending, all that excess, all that irresponsibility, not to mention on the cultural side of things.
16:43 Speaker 00 What a disaster. Name me a Western city where you would feel safe having a female in your family walk alone at night. You can't. Because the West has a bad case of suicidal empathy. So here we are at the fun house, waiting for, we know it's coming, we just don't know when. And if you know it's coming, and you don't know when, get a strategy for that. Get a strategy for the uncertainty. Get a strategy that gives you some sense of, damn it, if this all goes the wrong direction, I'll still be somewhat whole.
17:26 Speaker 00 Or for the more aggressive of you, you might be a lot more than whole, you might make a freaking fortune. So as I go off this week, I want to give one warning to all you grandmas out there and grandpas out there. Maybe that's also the 19-year-old. Turn off the six monitors. Stop with the five-minute bar, the one-hour bar stuff. Come on. If and when the shit hits the fan, you will get killed. You will get run over like a freight train. And that risk that you thought you were protecting yourself from? No. It will come back to bite you hard. And until next week, have a good one.
18:15 Speaker 00 I see a time when those awake will understand how to make money in up, down, and surprise markets. Whether a new trader or experienced, college student or financial advisor, protecting against a crash or just trying to make a lot of money, trend following offers everyone an answer in uncertain times. To get started immediately, send me an email, [email protected] . I will send you the right trend following steps to take, along with my free video. But if you want to buy and hold, trust the government and trust Wall Street. This is absolutely not for you.
Previous Ep. 1339: Must-Listen Master Classes with Michael Covel on Trend Following Radio Next Ep. 1341: Turtle Talk with Michael Covel on Trend Following Radio Page updated November 7, 2026 · transcript and summary are machine-generated
