Ep. 1403: The Meteor Strike with Michael Covel on Trend Following Radio

Please enjoy my monologue The Meteor Strike 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 https://twitter.com/covel Facebook: @trendfollowing https://www.facebook.com/trendfollowing/ LinkedIn: @covel https://linkedin.com/in/covel/ Instagram: @mikecovel https://www.instagram.com/mikecovel/ Hope you enjoy my never-ending podcast conversation!

• 0:00Speaker 00

  I want to talk about expectations. It seems to be maybe the number one thing in the modern world. Because with nonstop social media, everyone's expectations are what you see. If you see somebody who looks good, if you see somebody who's making a lot of money, well, your expectation is, why the fuck not me? Now, you don't even perhaps question whether or not what you see on social media is fake. Could be, or if it's real. And if it is real, how did they get there? People don't think like that. I mean, overall, they don't. They just say, that's my expectation too. I deserve it.

• 0:45Speaker 00

  I demand it. Now, here's where it gets strange. I just saw that a college professor at Cambridge, a gentleman who looked like he had many issues just from appearance alone, was promoted into the highest echelons of Cambridge. The youngest professor or something like this? His resume was nonsensical. All these athletic feats that were just impossible. Apparently, nobody at Cambridge vetted him because they were so excited to have this supposedly oppressed person be this high professor, so they don't care. It's just all a big game. The guy also plagiarized the hell out of his work, and nobody checked that either.

• 1:29Speaker 00

  And let me go off on a side tangent when it comes to writing and work. Because I've faced this. I mean, if you look at a book like Trend Following and look at the sourcing, it's crazy. Now, I've done that for two reasons, because I want to be honest about it. But number two, I want to give credit to where credit is due. The people that came before me. My value is to take what Ed Secoda said and connect it to all these other people to create an entirely different understanding. And I think that's what I'm good at. Of course, I've got strong opinions on things, but you got to do your sourcing. You got to give credit where credit is due.

• 2:10Speaker 00

  Now, look, I'm sure a lot of the most famous people of the late 20th century, the traders, and when you hear their maxims and their aphorisms, they sound a lot alike if you open some of the trading books that you can find on Google Books from the 1800s to the early 1900s. These trading maxims have been around forever. David Ricardo, what was he, the 1700s? Let your winners run, cut your losers short. And where did he get that idea from? Did he hear it from somebody else, or did he just invent it himself? We'll never know. But in this modern age, to bring it back to this professor at Cambridge, you got to do your sourcing.

• 2:53Speaker 00

  And if you don't, someone's going to know. This is the challenge. Now, especially with AI, because AI is just a shit show. So this professor that I'm speaking of, who had a fabricated CV, had all this plagiarism. He took the way out and resigned sometime in the last couple of weeks. And as I woke up today, I saw the headline that he, I assume he killed himself. He's gone, he's dead. And I thought to myself, wow, this is a much bigger issue because it's easy to imagine that this becomes normal. Because if you take people who don't have the merit,

• 3:38Speaker 00

  and you prop them up, and you give them rewards, and they're made to feel like they're big man on campus. They are the man. But they didn't do shit. They lied, they cheated. Or perhaps they were a completely fine, normal person who was just thrust into unreal expectations. And so whether or not you're a fraud or not a fraud, if your expectations are fucked up, you are sitting there like a time bomb, waiting to blow up. Now, where am I going with this? Well, look at a situation like right now.

• 4:22Speaker 00

  Now, of course, my perspective is trend following. It's all baked into the price. We can't know the fundamentals. That's the way to trade it. But we are inundated. The average person is inundated before they understand something like trend following, if they ever do. They're inundated with the fundamentals. The storylines come at them 24 and 7. They are rewarded for this. Their expectations are something like, it can only go up. Because everybody tells me every day, it can only go up. And smart people can start to believe these stories.

• 5:05Speaker 00

  They lose that check on reality. They don't imagine that something can go bad or something can go wrong. The numbers of people that I talk to that don't think about the worst case scenario, off the hook. It's crazy to me. I still remember sitting in Salem Abraham's office in Canadian, Texas. And he gave this kind of long-winded presentation about a meteor hitting. Because he was talking with his kids about imagining the unimaginable. And he's like, you know, something can come out of nowhere that you think you've thought through everything. And then the meteor hits. And you didn't think about that.

• 5:50Speaker 00

  And Salem did it in a kind of a folksy way, but it was great. It was great. And we don't have that today. We don't have that today. So that's how you get the Cambridge professor, who had no credentials and was essentially lying, elevated to some upper echelon position. Then he's gone, then he kills himself. And then everyone forgets about it. But can this happen in the broader market? As an example, as a tangential example? I mean, if we are in the middle of a massive AI bubble, and it's hard to imagine that we are not, think about the numbers of people that are all in.

• 6:33Speaker 00

  What is the AI investment part of the S and P now, 40, 50%? The numbers of people who have bet their nut, they've bet their life, whether they knew it or not, on AI being some Shangri-La, some solve-all, some change the world to, I don't know what. It's going to eliminate people's jobs? So then you're going to have an unemployed population doing what? Does anyone think about the worst case scenario? No. We don't, overall, we don't. Because we are reinforced every day with shiny, happy people bullshit. I mean, it's a fascinating time to be alive.

• 7:17Speaker 00

  It really is. But what's going to happen? Because it hasn't happened for a long time in the markets. What's going to happen in a day and age where we've got elevated home prices around the world, elevated stock prices, interest rates going up, credit cards maxed out, governments maxed out, welfare payments to the moon? And so much of it is predicated on capital gains tax bennies that government gets from the market being so high. I'm not saying that's going to happen. But you have to be able to imagine it can happen.

• 8:00Speaker 00

  And if you can imagine it can happen, how the F do you prepare for it? How do you plan for it? How is that built into your system? Because if it's not built into your system, you're just the person that's sitting there saying, you know what? I'm okay if we repeat the process of the NASDAQ going down 70, 80% and sitting there with everyone else. Are you okay with that? I mean, most people would not be okay with it, but most people will never think about it or never prepare for it. Because they're right there at the moment, right now, where everything looks perfect.

• 8:40Speaker 00

  You know, I saw a piece the other day, an old clip from football coach, Nick Saban and football coach Brian Kelly. Both, long careers, both successful. Saban, a lot more successful. And both happened to have coached at LSU. And a side fun point, my nephew is currently finishing his last year of college football at LSU. So give him a root on, let's hope he can get some playing time. I mean, that's a tough place to go as a white guy's safety in the Southeast Conference football. That's legendary stuff. But anyways, in this clip, Saban is talking, I think after a game.

• 9:23Speaker 00

  And he says, look, we won the game, but our process was terrible. Now, this is a clip from when Saban was an LSU football coach, the LSU football coach. And he essentially says, look, we won the game, but our process was terrible. And we can't keep doing that. And that's not going to be the way to win. And he was tempering expectations, telling the audience, telling the fans, I know you want to win the big ones. But we're not good enough right now. We had a good outcome today, but our process is bad. Can somewhat sound like the markets, right? Well, at the end of this clip,

• 10:06Speaker 00

  Brian Kelly gives his perspective as LSU football coach. And Kelly is no longer there. But he had a perspective after a big win, and I'm paraphrasing for both of them. But Kelly instead was like, hey, we got a big win. Don't you complain about the process. It's really hard to win. The win is important. You're spoiled. Wow, two different perspectives, huh? One's worried about the process and one is worried about the outcome. We don't think about that enough. If all you think about is the outcome and you've got a shit process,

• 10:46Speaker 00

  one day you're gonna wake up and you're gonna have trouble. You're gonna have trouble. Things will not be what you want. It's tough, though. How do you get people over the roadblocks, the obstacles in their understanding? I try all the time. It's not easy. I had somebody text me recently and they wanted to know where to start in trend following. I think it's kind of a strange question, not because I'm cocky or arrogant, because if you type any kind of a search into AI, Google, whatever, it's pretty clear what I do. It's pretty clear what I can offer. It's pretty clear what I've done.

• 11:29Speaker 00

  So if you ask me a question, where do I start? Why don't you just fucking start? Like, you always know when people ask these kinds of questions. They're just fucking around. They're not really serious. But I humor this guy very nicely and I said, look, here's where you start. He asked another question. And I said, you didn't follow my instructions the first time. Here is where you start. And he asked another question. And I finally said, look, I'm telling you exactly what to do. No more questions. Go do what I'm telling you to do. You asked me for the direction. You asked me for a path.

• 12:10Speaker 00

  You can go verify whether my path is a good idea or not. All of these AIs and search engines will tell you whether or not my wisdom is worthy or not. You can check that. Are you lazy? What's the story? I didn't say all that, but I just said, look, here's the path. No more questions. Very next email, he asks another question. What is wrong with people? And is it related to generations? Are older generations of a different mindset? Are younger generations being influenced more and more by social media in a negative way? It's a tough, tough path that we're all in the middle of. How do you know what the right steps are when you're in the middle of nonstop information

• 12:54Speaker 00

  flowing at you? From a trading perspective, trend following is great. It solves that. It says, we don't have to know all these fundamentals. We don't have to know whether or not this social media voice is right or wrong. We just follow the price of the market and that's it. It's so beautiful. But there is an undercurrent where I'm going today. And it starts with merit. Maybe it starts with merit with me these days on almost everything. And I know Christopher Nolan has a new film out. I've not seen it. I don't know if I'll see it. It sounds like a DEI monstrosity. I mean, when you have to make a film that follows rules, like the rules that have to be followed to get considered for accolades,

• 13:39Speaker 00

  like the Oscars and stuff, it's kind of crazy. But he was being interviewed by a Chinese interviewer. He might have been in China for this interview. And essentially, the lady asked him, why are you apologizing for greatness? Now, I'm paraphrasing a little, but that's essentially what she said. Why are you apologizing for greatness? Why are we appeasing weakness? I think about this every day. Why are we apologizing for greatness? I don't care what fucking color you are. I don't care what your fucking religion is. I don't care what sex you are. Merit is merit.

• 14:23Speaker 00

  I mean, back to basic Martin Luther King speech stuff. I have a dream where people aren't going to judge each other by all these things. And we've lost that. We have lost that. So not only do we have this expectations problem where people are bombarded daily by voices on social media, creating unreal expectations. And the problem that exists, if the markets perhaps imploded in some way, that so many people would probably take the damn same step that that Cambridge professor took and just off themselves. So not only do we have that sitting on one shoulder,

• 15:06Speaker 00

  on the other side, we have a system, at least in the West, that has run away from merit. And now we just reward people for one group feeling sorry for them. It's all fucking crazy. And then what does that do when you bake that into the system? Because that's all part of the market system, too. Those people that feel sorry for those people and for those people that are being propped up, they're all invested in the markets, too, with their mindsets, whatever those mindsets might be, as wacky as they might be. Thinking is not clear. Doesn't that kind of sum it up? Thinking is not clear.

• 15:50Speaker 00

  People aren't clear. They're scared. They've seen their Happy Meal at McDonald's go to 20 bucks plus. Young people can't buy a house. They've inflated it away because they kept interest rates at zero for, what, 15 years? And then you've got everybody telling everybody on social media, you're great, you're wonderful. And the moment they get exposed, I think what happened to that Cambridge professor, that's pretty easy to imagine happening on a wider scale. If you prop up millions of people, if you prop up society with false hope and false expectation,

• 16:35Speaker 00

  and those people don't have a system or a plan for if and when that might all break, and then they're sitting there after it breaks, realizing they lived a life believing in the lie, believing in it all, and not preparing for, as Salem Abraham said, the meteor striking. Probably not a happy place for the world to be in. Now, of course, from my perspective, I'm a happy guy. I don't really, I don't think about the negative too much. I try to keep my best zen perspective at it. Because I can imagine the worst case scenario.

• 17:20Speaker 00

  And this is like Stoicism 101. What's the worst thing that you can imagine happening? Imagine it happening. Deal with it already in your head. And then when bad stuff happens, you're kind of not surprised. And that's the beauty of trend following. Everything I've said today is handled inside of a trend following trading system. Because you don't have to second guess yourself. You could actually be the liar with the faulty CV and the fake accomplishments and be a trend following trader. Anybody can. You just got to be smart enough to say to yourself, I don't know what the fuck's gonna happen tomorrow?

• 18:03Speaker 00

  So therefore, I will trade a system that doesn't know what the fuck is gonna happen tomorrow. That is a pretty smart damn move. See you again next week.

• 18:19Speaker 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.