Pod Insights Michael Covel's Trend Following Ep. 1395: It's Never the New New Thing with Michael Covel on Trend Following Radio About this episode Please enjoy my monologue It's Never the New New Thing with Michael Covel on Trend Following Radio. This episode may also include great outside guests from my archive.
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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/
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Hope you enjoy my never-ending podcast conversation!
Transcript 0:00 Speaker 00 What a time to be alive. Markets ripping up and down? Not a damn way to predict anything. Not that there's ever a way to predict anything. But I've noticed since people move on and we don't live forever. This inherent desire to predict is always there. Always being recycled through the next generation. How does prediction work for you when it comes to the SpaceX IPO? Now, if you happen to be a cafeteria worker for Elon and you took that job, you got some options and you did well.
0:42 Speaker 00 If you happen to have been a venture capitalist, you did well. If you waited till the day of the IPO, which most people had to do, you could just buy it lottery ticket style. I can't tell you that's necessarily a wrong strategy. Plenty of people have made bloody fortunes off lottery tickets. But if you want to be pragmatic to some extent and take risks, getting all excited about the daily up and down, the latest market to be excited about, in this case SpaceX, which for all I know could be the biggest company in the history of whatever. I have no idea. And I don't have to know because trend following doesn't require you to know.
1:25 Speaker 00 Trend following just requires you to get on board and go. So in the spirit of trend following excellence, I would like to share an interview, not from yesterday, from a moment ago, let's say, from my archives, with a trader, a trend following trader, famously tight-lipped. But in this interview, you'll hear his mentality, his thinking. And you have to read between the lines a little bit. But the man you're about to hear is currently up in 2026 100%. Now, that piece of information is very interesting. What is even more interesting is how it came to be. Do you know how it came to be?
2:10 Speaker 00 Now, whether you heard the interview I'm about to play when I did it with him a handful of years ago or today, it would be the same. He would say the same thing. He's a trend following trader. He's not going to change his story. The narrative is going to continue. It's timeless. That's the great thing about this podcast compared to some. I shoot for timeless. I've been filtering for timeless since I started. That's why I'm very comfortable giving my listeners an older episode. Older doesn't mean dated. It doesn't mean there's something wrong with it.
2:50 Speaker 00 Because if you program your approach, your podcast from the beginning, to never be dated, to always be valuable, then that brings us to where we are today. My guest, who is up 100% so far in 2026. I have no idea if he will be up that amount by the end of the year, but I hope you can learn something. And I hope you enjoy.
3:31 Speaker 00 I first interviewed my guest today in 2005. We actually had a little bit of a debate about when this first interview took place. He was featured in my book, The Little Book of Trading, which was a nice, compact book about trend following. Since I have launched this podcast, I've been chasing my guest today. Well, not really chasing. I would occasionally ask him and he would say, nah, I'm too busy doing what I'm doing. Actually, he didn't tell me that he was too busy doing what he was doing. That's me just talking. But he always politely declined. My guest today had a great year in 2022. He made 90%.
4:12 Speaker 00 Folks, most of the world did not make 90% in 2022 as a trend following trader. No great buildup, no further delay. Let's jump right into my conversation today with Paul Mulvaney of Mulvaney Capital. And just before Warren, you're going to notice something with Paul. He is a no BS kind of guy. I almost want to say Joe Friday from the old Dragnet Show. Very curt responses. Now, you can't see this on this episode, but we actually did video for this, often with a smile on his face. Look, when it comes to trend following, it is what
4:52 Speaker 00 it is. Paul doesn't beat around the bush. I hope you enjoy this conversation with Paul Mulvaney.
5:07 Speaker 00 I gotta tell you, you are the, how do I want to say this? The hardest trend following man on the planet to reach with one of the most interesting track records, a tough guy to chase down. I've been chasing Paul Mulvaney here and there for a long time. I think you like it that way.
5:27 Speaker 01 I'm just not very inclined to say a lot in public because there's a lot of people already saying too much in public about the markets. I'm a trader, I'm not a commentator.
5:41 Speaker 00 Well, that kind of defines it right there, doesn't it? You're a trader, not a commentator. And in a way, when you say that, you're pretty much telling people how the world really works, at least from your perspective, the commentating doesn't play a role at all.
5:54 Speaker 01 No, definitely not. It's important to remain detached from what's happening in the markets, not be drawn into the social contagion and the hurting behavior.
6:07 Speaker 00 I mean, you're not mysterious in the sense that everyone can see your track record. They kind of know what you've been up to, at least in terms of performance. There is a feeling, and given that I met you a very long time ago for the first time, there's a feeling that you do try to keep, I'm assuming for assorted reasons, you do try to keep the world at bay. Is that a fair assessment that you try to keep the world at bay in the sense that a lot of what's going on in the regular world doesn't really play a role with you and your trading?
6:36 Speaker 01 The system is. Purely rules based. The only inputs to the system per se are price feeds. There's absolutely no debate or discussion or analysis of the fundamentals. None of that impacts the trades that we take. Absolutely, everything we do is based on a set of rules derived from historical simulations on as much futures data as we could with our hands on.
7:12 Speaker 00 I get the impression from you that you'd be very comfortable if that was the sum total of the interview. I wish people could see your face right now. What's so interesting, even for me, who is someone who's been in this industry for a long time, I know there's other people out there, peers of yours, and even people that came before you, that really, really love your bluntness. They love your lack of words. They love that you stick to your guns.
7:41 Speaker 01 That's good. I'm glad somebody loves something about what we do.
7:46 Speaker 00 Somebody recently, they were talking about your performance. Their immediate thought, with probably really not understanding what you do, they said, well, even though he did really well in 2022, the preceding bunch of years were not that good. Therefore, he just got lucky in 2022. My perspective would be, well, in many ways, trend filing performance is always going to be a little bit of luck in the sense that you don't know when it's going to happen exactly. Why don't you try to explain to the person that really wants to learn out there, and this is a really big question, why a track record like yours, that's been assembled over two decades, can look like it does?
8:29 Speaker 00 People just have this natural human tendency for consistency. So I think when they see your track record, the consistency filter in their mind just blows up. They can't wrap their arms around it.
8:41 Speaker 01 The story with this business is a marathon, not a sprint. Big trends, the sort of trends that we try to exploit, which may run on for years, don't come along all the time. A big part of it is just patiently waiting until the major trends emerge. How many turns in the interest rate cycle of the magnitude we've seen in the last 18 months is anyone going to see in a career? Not that many. We had to spend the period from around 2015 to 2019, waiting for trends to emerge, and eventually they did.
9:23 Speaker 00 Let me take you back in time. Because for the way that you're talking, the way that your track record has unfolded, you have a certain amount of confidence in what you're doing. Give me the first moment. I have an idea of where this question might go, but the audience might be new. Give me an idea of how you started, your lightbulb moment, that led you down the path to where you could be giving me the answers that you're giving me right now, which are just Joe Friday, no nonsense, just the facts. Where did this come from? How did it start?
9:58 Speaker 01 Well, in the 1990s, I read about the trend followers who were active at the time that sparked interest. And then I started researching futures data. The key point really, creating realistic simulations and avoiding all the pitfalls of designing simulations. I did put an awful lot of effort into cleaning historical data or outside of it, people probably outside the industry completely underestimate. It's very difficult to find raw, clean data.
10:38 Speaker 01 A lot of focus has to go into that. And then there are this series of methodologies that can be applied to creating realistic simulations. And that's what I did. When I finished the research, I was able to convince myself that the work that I'd done was realistic, even though there is no guarantee of what might happen in the future. At least I had an accurate idea of how my rules would have performed in the past. And I just moved on with that sort of underpinning my confidence.
11:18 Speaker 00 If I keep you at a moment for a young Paul, you mentioned just generally seeing other performance, seeing other names that were doing something similar. Was that enough for you just to jump in? Was there any mentor in play or any guidance? Or is this just the software developer programmer guy hearing about it, jumping in? This meshes with my personality. This meshes with how I see things. I'm going to give this a try.
11:48 Speaker 01 The key point is that other people were already producing returns and trend following. So at least I knew it could be done. That makes a huge, huge difference. I wasn't searching for something that might not have been there to discover. In fact, I wasn't discovering anything new. I was just producing my own recipe to capture returns in the way that other traders already were. That's really very, very important. If there'd been no solid evidence that trend following worked as a strategy, then it would have been a lot more difficult to
12:34 Speaker 01 maintain focus in the research phase. Then beyond that, I mean, academically, I had a quantitative background. So when it came down to actually looking at numbers, looking at historical time series and analyzing them and writing codes to analyze them, I had that training. And I suppose when I started reading about. Other trend followers, I instantly thought, well, I should have a look at that. Maybe I could do that as well and take it from there.
13:10 Speaker 00 Taking it from there, the way that you have, and I think it's a fair description to say that you have a trend following style that's about absolute returns, as far as I can tell, you can correct me if I'm wrong, give me some observation or some feedback on the idea of developing a trend following approach for absolute returns, especially contrasted against many in the industry in the last 20 years that were attempting to perhaps capture a piece of this trend following return, but maybe change the risk profile or squeeze it into some kind of mold that didn't look like absolute returns.
13:53 Speaker 00 Speak to me about the idea of absolute returns from your perspective and why you chose that. Maybe contrast the pros and cons compared to maybe other firms that were not really going for absolute returns, even if they called themselves trend following traders.
14:07 Speaker 01 Going back to day one, when I started researching the system in the 1990s, I'm not sure if I really understood enough of the factors I'd have to balance to do anything other than just go for high absolute returns. When I started writing the simulations, I tweaked the rules to try to produce returns, but the only risk or volatility measure I looked at was the maximum cumulative drawdown. I didn't bother with any other sort of volatility measure.
14:52 Speaker 01 The questions attributing more understanding to me than I had in the 1990s.
15:00 Speaker 01 I just started with a very simplistic objective to design a system that could generate 20% quorum in trading profits. I didn't pay a lot of attention to the volatility side of the equation.
15:17 Speaker 00 Back at that simulation period, when you're just kind of investigating things, jumping in and working in the trend-following kitchens, so to speak, to make your souffle, what type of max drawdowns were you thinking were possible at that moment in time that you were willing to live with?
15:37 Speaker 01 Categorically, the biggest drawdown that's feasible is 100%. I mean, it's possible to lose all the capital with any strategy. Nobody should be deluded about that. We have to approach trading with that in mind. I didn't have a preconceived idea around the size of drawdowns I'd be willing to live with. Clearly, from the work that I did, in excess of 20% was pretty much guaranteed to happen, given the sort of average that I was using in the program. And ultimately, after I started trading, that blew out in
16:22 Speaker 01 practice to a couple of occasions when we drew down 45% roughly. Would it be psychologically a lot more difficult on a 50-plus percent drawdown? I suppose it would. That's a big psychological barrier, but it hasn't happened in this program to date. But if we keep trading the system for long enough, one day it will. Something important to bear in mind is that when we look at simulations, not my trading simulations, but simulations of abstract
16:57 Speaker 01 games with very, very favorable win-loss ratios and percentage of wins, that type of analysis. So we might postulate a fantastic system that has an average winner that's 10 times the average loser, and it makes money on 70% of its trades, something absolutely ridiculously good like that. Simulate that for long enough. And one day we'll have a 90% drawdown. And yet it will recover from the 90% drawdown to eventually deliver those high returns that we're looking for.
17:42 Speaker 01 So that's very important then. What can actually happen even with a very, very good system is much worse than people are willing to contemplate. So drawing down 90% doesn't tell you that the system's broken. No, because there are theoretical systems with much better risk reward ratios than any kind of the active CTA program is demonstrated. And in simulations, they almost blow up.
18:16 Speaker 00 Let me get you to talk about yourself for a second, if you will. Pretend to be the person analyzing Paul. What do you think it is about your personality that has done so well with your strategy? Is there something inherent in you? Personality, perspective that worked so well when you came into this style of trading? Or is it something you've learned? Speak to me about you and the you part of running your strategy.
18:47 Speaker 01 I think originally it was fairly unemotional. It was just a case of doing the research rigorously. When I started showing the simulated performance to potential investors, people did say it's too volatile to be commercially viable. But I plowed on anyway. Stuck to the same system. What we trade today is a system that hasn't changed since 2005 in terms of the long-term trend following components. And over time, as I watched the system.
19:23 Speaker 01 I think I gained a better understanding of why it works, how important it was not to place unreasonable expectations on the system. Big drawdowns would come unavoidably, but that was all within the bounds of what I knew could happen and had happened in the past. And I stuck with it. I'm not sure if that's really answering your question, but I think the kernel of the answer really it's about rigorous research and ensuring that emotions are completely eliminated from the training process.
20:03 Speaker 00 Do you do anything different or special in your life or your lifestyle that enables you to keep this singular focus that you have? Or are you just a normal guy? And this is what you've chosen to do for your profession. Everything else is just kind of a normal lifestyle.
20:24 Speaker 01 I think I'm very, very routine oriented, a creature of habits. And I'm happy to just keep doing the same thing again and again and again. That's really what the system's about.
20:39 Speaker 00 As a kid, did you enjoy the routine?
20:41 Speaker 01 Not sure. That's a difficult question.
20:44 Speaker 00 I'm good at this, man. A thousand episodes, you avoided me. I've been practicing for 10 years to get to you.
20:50 Speaker 01 I was interested in numbers from an early age. Geometrical and numerical structures were something that drew my attention. I'm not really sure where the routine kicked in, but at some point it did. So to keep running the system for thousands of days without really getting bored with it, I think that was important, but I have no idea why it played out that way.
21:20 Speaker 00 Let me shift you into something that I think for people that know about your work, and especially for me, stands out. And of course, you can see this in other trend-following track records, but it's terribly interesting that since, let's say, the implosion of the dot com bubble, it's terribly interesting that there's this UK trader named Paul Mulvaney, running a company called Mulvaney Capital, that seems to have magically figured out 2008, 2022, when so much of the rest of the world did not. And of course, we both know a lot of it goes to the system. You didn't make a prediction. You didn't make a fundamental
22:03 Speaker 00 call. That's not what you do. It's terribly interesting that this has happened. Do you think about that in the sense that you can't help but see a newspaper, or hear a news program here or there, or somebody talking, that for two of the most eventful years in our lifetimes, your trading approach got it right? That's a pretty cool achievement, in my book.
22:29 Speaker 01 I think you're overstating the uniqueness of it. It wasn't by any means unique. Lots and lots of trend followers made big money in 2008 and 2022.
22:43 Speaker 00 Maybe they didn't make on the same scale as you? Is that a fair assessment?
22:47 Speaker 01 We need to look at the league tables. We were probably quite near the top of the table both of those years. The fact is, we're using generically similar techniques to dozens of other people who also made big money. From my perspective, I don't see it the way you're describing it at all. There's nothing magic about 2008 or 2022. We just applied common sense techniques that had been developed by researching historical data. The techniques appear to work. Because other participants in the market are subject to biases.
23:31 Speaker 01 And in both of the years that you mentioned, the chickens came home to roost. There were major fundamental developments that drove markets. And trend following systems were able to capture major returns. There's nothing magic about it. Anyone who put in the work could have done the same thing many days.
23:53 Speaker 00 If I keep it to this idea of these two particular years, as you mentioned, of course, I see many, many track records and yes, other people did very well in 2008 and 2022. But when you were first doing your simulations, were you thinking about these trend following approaches from just an absolute return standpoint and what they could do over time? Or were you thinking about when these types of moments or years or months happen in the future? When those that have the biases have their particular fundamental strategies? When those things go south or sideways?
24:37 Speaker 00 That your approach that you were doing simulations on would have the chance to perhaps do well during those periods? Was that part of your thinking? Or was it just, hey, I'm shooting for absolute returns? You weren't really analyzing when those absolute returns might happen in terms of? The curiosity question that I'm pointing out about these two particular years.
24:58 Speaker 01 Well, if we look at the basket of markets that we trained, there have been big trends at some point in the last 24 years. There are certainly all of them. There's no single market that has produced a big trend at some point over that period. In fact, it was a similar story over the previous quarter century, which constituted the original simulation. It's more a case of knowing from historical analysis that even if there are long periods where not very much happens, eventually historically trends have always kicked in.
25:42 Speaker 01 Then just being patient enough to wait for that to play out. Before I started trading the system, I worked as an auctions trader. I was colored by that experience in terms of realizing that the tails of the distributions were fat, but I might have to wait a while before a really fat tail came along. So that's how I look at trend following. The major trends are a few in number, but can be huge, unlimited in magnitudes. They just don't come along very frequently.
26:22 Speaker 00 Do you love this game?
26:24 Speaker 01 Yes, definitely. Yeah, it's fascinating.
26:27 Speaker 00 Building on that, assuming good health, assuming you still love, could you imagine any reason other than perhaps that 100% drawdown that you spoke of? Any reason why you would stop?
26:39 Speaker 01 No, definitely not. I'm able to continue going.
26:44 Speaker 00 That's the strongest I've got you in this conversation so far.
26:49 Speaker 00 I mean, it's tough to pull it out of you, but man, I got it. No way am I stopping.
26:54 Speaker 01 No, I intend to continue trading for as long as I'm able to trade.
26:59 Speaker 00 Why do you love it so much?
27:01 Speaker 01 Oh.
27:02 Speaker 00 Oh, good one.
27:03 Speaker 01 Well, we're constantly looking at what's happening in the real world, seeing that play out through market prices. I suppose for me individually, I turned out to have a skill set that was applicable to qualitative trading. These are all very interesting questions, but they're not things that I've necessarily thought about a lot. I do what I do, but I haven't necessarily analyzed why I do it, what drives me.
27:32 Speaker 00 That's why they pay me the big bucks to ask the questions you've not thought about.
27:36 Speaker 01 Yeah.
27:38 Speaker 00 You must get a lot of requests, though, and I'm sure people have wanted to talk to you a lot over the years. So I appreciate you giving me some time to chat. I think when people are listening, or if they could see, there's a lot to be learned in just watching your mannerisms and watching how you answer questions. Hey, Mike, you already know this. It's just the system, damn it.
27:57 Speaker 01 I think that's just the way it is. Yeah. A big part of my philosophy was driven by the work of various authors in the fields, including yourself. You indoctrinated me.
28:13 Speaker 00 I don't know about that. Well, I guess I probably had a website up starting 96, 97, but you were already looking at things then, too, though. I find what you do and your personality, you remind me a lot of somebody I'm about to say. I met him several times. You remind me a lot of Bill Dunn. Bill carried himself in a very similar way, in my opinion. It was just the facts. This is what I do. There wasn't a lot of fluff, so to speak.
28:43 Speaker 01 Bill Dunn was one of the first CTAs I read about. And if there ever really was a single moment that inspired me to start the research, it was reading a Target magazine article in the mid 90s about Bill Dunn.
29:00 Speaker 00 For me, I guess it was probably the turtle story and Bill Dunn, perhaps John Henry, those types of stories were also, for me, the influence. It's a fascinating world to be involved with in some capacity.
29:12 Speaker 01 Yes.
29:13 Speaker 00 Let me keep you at the idea of being a fund manager, having a track record that now is exceeding two decades. People will see the good years and perhaps the phone rings more. And maybe if they see the bad years, the phone doesn't ring as much. Speak to me about how you have been able to manage. Outside pressures, because even though you can be very blunt and very straightforward about what you do, you know that the managed money industry, especially the sales side, it's often about excitement, getting people worked up. That's not your track record, that's not your personality. But of course, people are going to have an interest in you
29:58 Speaker 00 over time. Have you had to manage that particular issue in any way to stay grounded and stay, frankly, Paul?
30:07 Speaker 01 I think short-termism is one of the main pitfalls around trading and investments. This system isn't short-term, it's extremely long-term. As I said before, I see it as a marathon, not a sprint. What that means is often there are exciting things happening that don't necessarily impact our program. Investors may look somewhere else, that's just a fact of life, we have to live with that. And then hope that eventually the longevity of the track record will carry weight. But yeah, I mean, dressing up a product for
30:50 Speaker 01 commercial reasons is probably going to lead away from a rigorously optimal trading strategy of our shorter term with probably too much emphasis on keeping the volatility down and keeping the drawdowns under control.
31:12 Speaker 00 How do you manage the issue of change in your approach? We can call them critics. Perhaps some outside critics might say, and this gives you the full chance to respond to why those critics are wrong, some outside critics might say, well, gosh, okay, great, you've got this approach, you did all this research, you've got this track record, you don't make a lot of adjustments, if any. How do you know it's going to keep working?
31:42 Speaker 01 You know, there could be a major event next week that puts us out of business.
31:47 Speaker 00 The follow-up question, and maybe put some math to it if you want. Your expectations are for that not to happen. There's always a percentage chance it could happen. But your expectations are not for that to happen. I mean, look, we could have the dinosaur blast again. That's going to do a lot more than take out Malvany Capital, that's going to take out me and Saigon, it's going to take us all out. There's all kinds of stuff that could happen. I don't think that's your expectation that you are taking risks right now in terms of your trading approach, that you're taking risks that are out of line based on how you understand your approach. Can you clarify that a little bit more? Things don't have to continue, but can you put a little more flesh on those bones?
32:29 Speaker 01 Well, theoretically, we could get a move in a single market tomorrow that would break the funds. The way I look at it is if we start to get really severe changes in markets, then the system will be competing against people more widely in the markets who are not using any rigorous techniques and are going to make all sorts of off-the-hit decisions during crises. I'm not sure if I'm really explaining it very well, but ultimately
33:10 Speaker 01 I feel reasonably confident that when that starts, the system will be able to latch on to developments and then claw back the money it loses at the beginning of the onset of a crisis.
33:27 Speaker 00 Over time, your modifications, if any, your changes, if any, have been minimal. Did your homework, did your research, did your simulations, started your trading, stick to your knitting, stick to your guns, that's been your approach.
33:45 Speaker 01 Yeah, very few parameters. That's important. So people talk about markets changing. Of course, they evolve and they change. But I think somebody suggested that we should be modifying our system, probably underestimates how few parameters and how simple it is to start with. When we boil our market activity to very, very few parameters, then that doesn't change. But the markets will be changing enough in the medium term to undermine a system with too many bells and whistles. It's a big problem for us to be.
34:27 Speaker 00 I know the answer to this question because I know your track record. I have a sense of you. You don't spend time comparing yourself to other people, your firm to other people. I don't see that in anything you do, that you appear concerned about what another firm is doing or what the industry is doing. You seem to have developed a loyal stable of clients who like what you do. Again, you stick to your knitting. Fair description?
34:56 Speaker 01 I think that's true. Yeah. We have to be detached. We don't want to be looking over our shoulders at what other people are doing. That's not the road to riches in this business.
35:08 Speaker 00 Do you even allow yourself to engage? What kind of filtering system? I mean, look, gosh, since you started your firm, you started your firm right there during the dot com era. Then we've got phones. It's information all the time. And I know it doesn't play a role in your trading approach. I understand that. Has there been any modifications in how you run your life with the ever increasing information flow to keep distractions away?
35:38 Speaker 01 I do. I feel information overload for sure. Very thankful I'm running a system so the information overload.
35:48 Speaker 01 Doesn't permeate the training. Yeah, I find email a nightmare. I increasingly find journalism a nightmare. Basically, what's happened is over the last generation, there's been a proliferation of low-quality journalism, opinions rather than facts or news. Not all opinions are born equal. The problem is, there's just so much material being churned out. To get to the good stuff, we have to navigate an awful lot of material that's maybe not so useful. That's all a challenge for sure.
36:33 Speaker 01 Just dealing with email is something I find very difficult. Sitting in front of news feeds, which I do, and trying to devote time to reading the valuable stuff. That's a challenge. Television news. I've gone through various cycles, watching different sorts of news programs and eventually reached a saturation point with each of them and then gave it up.
37:02 Speaker 00 The idea that a younger Paul, twenty-five years ago, had developed and latched on to something that now even the older Paul, perhaps, I'm assuming, appreciates a lot more. That this world came into your purview and you could go down this path. Quite interesting to see a significant portion of your lifetime to be immersed in this and that you made a decision a long time ago that was a correct decision, as far as I can tell.
37:35 Speaker 01 Well, it was after I got started. It developed positively enough. It was feasible for me to continue, so I just continued doing it. Working in my own small firm gave me a lot of flexibility.
37:51 Speaker 01 Even though I was very process oriented, I was able to just keep doing what I wanted to do patiently, waiting for the returns to emerge.
38:02 Speaker 00 Let's see, I'm looking at the years here, I'm guessing 2015, 16, 17, 18, 19. Did you feel like in that period of time, that five-year window, did that period of time try on you more than other periods of time? Or were you able to stay the same person, do you think?
38:23 Speaker 01 I don't think it made a difference psychologically because by 2015, the system and I had been through various cycles. The original simulations traded through various cycles. I was well aware it could be very lengthy, fable periods, perhaps in the past, that would be again. The onset of the great financial crisis, it all set a violent drawdown with psychologically more difficult to deal with than that meandering sideways period that we went through.
39:02 Speaker 01 And the 15 to 19 period was punctuated by some big gains or events, even though at other times we lost money, there was always the sense that something big could happen. And sometimes over that period, it did, only for the markets to fall back again. But then eventually, Covid came along, a major regime change.
39:30 Speaker 00 You were kind enough back in the day on one of my additions from my book, Trend Following, to share with me the fall of 2008 as it unfolded from your trading perspective. And I always thought that was a terribly interesting story that you shared, trading the style that you did and the length that you did and how things unfolded. To this day, I will still hear people, and I think there was a commentator named Ben Stein who famously said it. He said that if you made money in October 2008, you were doing something wrong. You and I understand this particular industry. We understand other players in this industry,
40:14 Speaker 00 but the vast majority of people, even people on so-called Wall Street, do not realize, except for perhaps some of the investment banks that had information or this or that. But most people don't think that there were people that were profiting in October 2008. They don't think that was possible. They don't think it happened.
40:34 Speaker 01 Well, I mean, it sounds as if that's the perspective of somebody who would only ever buy stocks. It's the main reason we made money in October 2008 is because stock markets collapsed.
40:49 Speaker 00 Let me frame a question this way. There's plenty of young people out there that want to observe success stories. They want to go in a similar path, just like you were at one point in time. At one point in time, you're like, hey, wow, that magazine article is really cool. Oh, that guy Bill Dunn seems interesting. I've got some coding skills. Let me give it a shake. Let me give it a try. This is not necessarily even a trading question because you are an entrepreneur as well in the sense that your business is an entrepreneurial business. What kind of insights would you share with young people that want to go down these types of, I'm going to go make it happen myself businesses, which is what you've done?
41:32 Speaker 00 What can you share, do you think, is important other than people observing you and knowing how you think and seeing your track record? Is there anything in particular you might want to share with young people from your perspective? You were just talking about the journalism and that's gone downhill and stuff like that. What might you share with young people in terms of getting started going down a path that could be like your path in a way?
41:55 Speaker 01 A generic entrepreneurial path. I don't know really. To answer that, I'd have to step back from it, analyze myself. What was important to me? What happened was I just got on and did it without really too much introspection, without really thinking about what was motivating me. That's a very difficult question. I did it. I followed a certain career path. I don't really feel like I've got a huge amount of guidance to offer to anybody else because I just haven't thought about it. I was in the midst of it, not observing and analyzing it.
42:39 Speaker 01 About systematic trading in general, I started off in the 90s naively believing that if I developed a system that could generate 20% per annum in gross profits, then I would be able to raise assets very easily. That proved not to be the case. I would see the business development side of running a hedge fund as being a lot more difficult than the actual trading strategy.
43:14 Speaker 00 You thought, hey, if I have 20% returns, people will come knocking. And you're saying that's not how it's turned out exactly.
43:21 Speaker 01 That's it. I underestimated how important it would be to have the right people working on marketing in a hedge fund, but I wasn't that person. Asset raising is more fundamental than trading in a hedge fund.
43:42 Speaker 00 At one point in time, if I look back to the history of this industry, perhaps in the 70s, I think there was a lot more of, hey, if the returns are the driver and people were attracted to the returns, maybe when the industry was smaller. I can understand your perspective in many ways. It is kind of unusual. You know Wall Street. Wall Street likes to whisper sweet nothings to people. And they can tell them about FTX. You could be rich overnight. You're competing with that kind of stuff. And that kind of stuff, those people will say anything.
44:19 Speaker 01 Yeah.
44:20 Speaker 00 The efficient market hypothesis is still something where the vast majority of investors, traders, etc. will at least give it lip service. If you were to give...
44:34 Speaker 00 We're trying to give a way to understand why people should not give the efficient market hypothesis so much of their time and energy. How do you bring them into the perspective that you have?
44:48 Speaker 01 The way I would look at it is that fundamentals change and market prices move. But the market prices definitely don't adjust instantaneously to changes in the fundamentals or the perceived fundamentals. Those changes happen gradually over time, and that's why we see trends in markets. The fact that the trend plays out gradually is a form of inefficiency that we can exploit. We get a chance to jump on the train as it's fully out of the station.
45:28 Speaker 00 You are in the heart of London still?
45:29 Speaker 01 Yes, we're new to Bank Station, the heart of the city, yeah.
45:34 Speaker 00 You mentioned it at some point in time, but if you can ever find your way out of the city to, I don't know if there's any direct flights to Saigon, perhaps?
45:43 Speaker 01 Probably, yeah.
45:45 Speaker 00 You've been to Asia, though, haven't you? Yeah.
45:47 Speaker 01 Oh, yes, of course, yeah. The most likely places for me to go business-wise would be Hong Kong, Singapore, and Tokyo. If I do make another trip to the Far East, then I could easily stop over in Vietnam.
46:08 Speaker 00 I would guess, because when I go into, there's a famous bookstore in Singapore on Orchard Road, Japanese bookstore, and every time I go in there, they've got my English books, at least three of my English books prominently displayed. Having been in Asia for a long time, I would say that Singapore, maybe I'm wrong, Singapore as a country, as a group of people, seem to be the most open group in Asia to trend following. Japan always translates my books first. There's clearly a desire there as well.
46:44 Speaker 01 Well, they probably have critical mass in terms of translators.
46:48 Speaker 00 Yeah, someone's buying the books.
46:50 Speaker 01 Singapore, what would they translate them into?
46:53 Speaker 00 Oh, it's just English in Singapore.
46:54 Speaker 01 Yeah.
46:55 Speaker 00 Yeah.
46:56 Speaker 01 That's it?
46:57 Speaker 00 But I find Singapore as a group. And I've given a bunch of presentations there over the years. There's a group Singapore is seems to be in tune with the concept of trend following.
47:06 Speaker 01 Yeah, well, I mean, it's a trading conscious society, isn't it? Around bookie, you have those statues of traders, historical traders, people trading physical commodities in the 19th century. That's how you think. It's a crossroads, isn't it?
47:26 Speaker 00 One day they'll have it, but they don't have it in Vietnam yet, though, even though Vietnam is a huge rice exporter. They don't have rice futures here yet. It's basically small farmers, not large concerns yet. There's real price discovery issues they've not yet solved. I got to figure at some stage of the game, Vietnam will have rice futures as another market to potentially trade.
47:52 Speaker 01 That would be interesting.
47:54 Speaker 00 Well, sir, listen, let me let you go. I've kept you long enough. I appreciate you coming on. People can find you and more about you and your company at Mulvaney Capital quite easy. I'm going to check you out, see what you were up to there. I don't think they should expect anything but just the facts.
48:11 Speaker 01 That's it.
48:12 Speaker 00 I appreciate you coming on today.
48:14 Speaker 01 No problem. Thanks for asking me.
48:22 Speaker 02 I see a time when those awake will understand how to make money in up, down, and surprise markets. Whether new trader or experienced, college student or financial advisor, protecting against a crash or just trying to make a lot of money. 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.
48:58 Speaker 02 But if you want to buy and hold, trust the government and trust Wall Street. This is absolutely not for you.
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