Ep. 1415: The Great Bend Over with Michael Covel on Trend Following Radio

Please enjoy my monologue The Great Bend Over 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

  Rock and freaking roll. That's where we are right now. Boy, is it chaotic? And I'm sure some people are absolutely besides themselves. They are not happy. They've lost a ton of money. Other people have quietly made a bloody fortune. You know, sometimes you reach a point in history where things just happen. Perhaps there was too much buildup, markets, society, war, and then shit just happens. No big sales pitch here, but speaking of this shit happening, I do have something that I think most of you will enjoy coming for Black Friday. But that's for another day.

• 0:42Speaker 00

  If you want information on that, send me an email, [email protected]. Let's jump into where I want to go today, though, because it is about arguably the great unwind that we're in the middle of. It's not a prediction. That's what's happening right now. Perhaps it all changes tomorrow and every AI and chip stock continues to go to the moon. Perhaps all of these interest rates that have gone up this year, which have forced around the world, all kinds of problems. Again, they're fine problems if you're making money with rates going up. But if you happen to have real estate,

• 1:23Speaker 00

  maybe you're getting pinched if you're not in all cash on it. And if you're carrying a mortgage, you're getting pinched. But let's be frank here, the world doesn't move necessarily in one direction. Look around. South Korea, China, Indonesia, Brazil, Intel, Oracle, Nike, Bitcoin, oil, government bonds, technology stocks. Pick a market, pick a country, pick a headline. Something is happening. Like I said at the top, some markets brutal declines. Depending on how you're positioned, you're either smiling or not. As I just mentioned, yields, government bond yields around the world, levels that many investors haven't seen in decades.

• 2:07Speaker 00

  Put your historical cap on for a moment. If equities are at all time highs and rates rise, eventually people say, you know what? I'll take that zero risk rate. Is that a prediction from me? No. Can I look at some of these events and moves and ponder them? Sure. Is that how I'm trading them? No. You can only trade them by the price. If this period right now is teaching anyone and everyone any big lesson, it's to trade the price. How the hell can you have traded Trump, Iran, Israel, war?

• 2:51Speaker 00

  How did you trade that unless you had inside information? Maybe some people did have inside information. And now we're on the other side of it. And elections happened in America. A rug pull. MAGA, gone. In comes woke 2.0. Maybe woke 2.0 will push equities to the moon again. Who knows? But a lot of folks are screaming about data centers. But look, everyone's got an expert or an expert opinion, and I'm not trying to be one. Everyone's got that prediction. Really? You know what happens next? I've spent decades in the markets around the best minds,

• 3:34Speaker 00

  interviewing the best minds, understanding the history of speculation. And one thing is damn clear. People are remarkably confident about things they cannot know. And they really love to think in terms of binary. The idea of uncertainty or odds, a percentage chance of something happening. People can't wrap their arms around it. Mike, tell me what markets are going to do tomorrow. Mike, tell me what markets are going to do next week. The entire question is fucked. You're fucked if you're asking that question of me, of anyone.

• 4:16Speaker 00

  If you think there's somebody out there with a magic bell and they can just tell you how it's going to all unfold. Someone told me the other day, after the election, after equities rallied, wow, look at that. And I said, you know, you might not want to try to draw too much of a conclusion from one day. Of course, the next day, equities ripped straight down. I was trying to explain to this person, there are funds out there, very smart, short-term funds, that don't give a shit about the fundamentals. They don't give a shit about up or down. They just want to ride things and move things.

• 5:00Speaker 00

  That's not trend following, but that exists, these big players. And I was trying to tell this regular investor, like, hey, you need to understand that these players are out there and they're operating. And you can't predict what they're going to do. You don't know what they're going to do. But I sometimes think, trying to explain this to people, it's tough. You know, a lot of people have a built-in optimism. They love explanations. They love certainty. They love stories that connect today's headlines to tomorrow's prices. Tomorrow arrives, the market does something different, they find another explanation. Nobody ever runs out of explanations, do they? What about your capital, your money in the bank?

• 5:43Speaker 00

  Oh, that's not unlimited. Think about it this way, a business can succeed while its stock goes down. Why? Don't ask why. If you've studied the markets for any amount of time, you know, asking why is pointless. Now, that doesn't mean people are not going to do it. I mean, for example, China. For decades, property was central to household wealth, economic growth and investment. Rising home prices became part of the expectation of prosperity. Then the market changed. Not necessarily any single dramatic event, just a steady trend down.

• 6:28Speaker 00

  Or do you think the average Chinese investor has themselves now? I mean, how are they feeling? Let me share a funny story. Years back, I want to say 2009, 2010, met a lady in San Diego, Chinese national. Nice lady, very attractive lady, very smart, too. And we got into a conversation, and this must have been, like I said, a couple of years after the Great Recession in America. And she was telling me how much real estate she was buying in China. And I was saying, well, you know, yes, I agree, if the trend is up, you can do it. But I said, look at what's happened in America.

• 7:10Speaker 00

  Real estate has just come down for the first time, frankly, ever. I said, you don't think that could possibly happen in China? We must have argued for six or seven hours that day at a coffee shop. I think we both lost track of time. I was not trying to tell her that I knew what was going to happen with Chinese real estate. But she was trying to tell me she knew what could happen. She had no concept of uncertainty. She had no concept of things going down. What she had seen on the ground at that moment in time, five or six years into the really big boom of it, was there was no way things could ever go down.

• 7:54Speaker 00

  Now, here we are, 16, 17 years later, after that conversation, and Chinese real estate is essentially gone backwards 20, 25 years to lower levels than when she was telling me it can never go down. I have the same conversation with people all the time about AI stocks. Look, I think AI is a fantastic tool. Does that mean AI stocks will go to the moon? Does that mean Sam Altman will run our lives? I don't know. I hope not. He's kind of a twit, but what does my opinion matter? What does my opinion matter? If OpenAI goes public and it goes to the moon for five, 10, 15, 20 years,

• 8:36Speaker 00

  you can dislike Sam Altman all you want. But you better have been on that trend if it definitely unfolds. Look at Nike. How the hell does a company like Nike collapse? Well, no long explanation. Go woke, go broke. But guess what? You didn't have to know a damn thing about woke to know you either want it to be out of Nike or short Nike. Go look at the chart. I mean, that's what I'm ultimately talking about here today, right? We can sit around and have all kinds of debates and opinions about Trump, the war, socialism in America, gender battles. This company is going to do that. This company is going to do this. I don't know.

• 9:20Speaker 00

  But if you go to my website, if you go to trendfollowing.com and you start poking around and you start reading, perhaps you pick up a book, perhaps you listen to a couple of podcast episodes with the likes of Ed Cukada or Jerry Parker or Tom Bosso. You're going to start to understand it's not just Mike Covel. It's not just me. There is an underground network of people that have this thought process where we say, we don't know what's going to happen tomorrow, but we're ready with a plan. We know the markets we want to track. We know how much we want to bet when we enter. We know when we want to exit with a loss. We know when we want to exit with a gain. Let me throw something out. The election did not surprise me.

• 10:03Speaker 00

  And this is kind of a non-trading perspective, but I think it's important because it shows at least the way you can go about having an open mind. When the war started, I went on Facebook and I said, hey, this doesn't feel like a good idea. Especially given all of the Middle East wars in my lifetime. I had MAGA people come out of the woodwork screaming and hairy carry, man. I'm telling you what, the fact that I could question. I literally had people saying, oh my God, those guys, they took our hostages in 1979. And I thought to myself at that moment in time, we're in trouble.

• 10:46Speaker 00

  I can't predict when the trouble's gonna happen, but we're in trouble. And this was a group of people that were generally on my side about life perspectives. But the fact that they were willing to go all in on war, not question it, just go, believe, and a handful of months later, one of the biggest election routes ever. What does it say? It says something about decision-making. It says something about comprehending information, comprehending people, comprehending behavior. If you can't do that, there's a very good chance at some point in time in your life, you're gonna get the rug pull. Something bad will happen.

• 11:31Speaker 00

  I think that is the most magical thing about trend-following trading. It doesn't promise to make you money every day, every week, every month, every year. But it puts you in a position to be ready when the shit hits the fan. If you're not ready when the shit hits the fan, if you think you can prescribe how you want life to unfold for the next one year, two year, five year, 10 year, 20 year, you think you can predict that or write it down, or make the world and the markets correspond to your belief set, to what you want to happen?

• 12:09Speaker 00

  I mean, America right now is in a situation where we have AI stocks to the moon, AI companies that are obviously eliminating jobs, left and right. I mean, why would anybody ever need a bookkeeper or a CPA again? At the end of the year, you take your bank statements, you take your tax documents, your whatevers, you drop it into AI, you say, hey, prepare my taxes. What does it take, five minutes? Now, what is the ramifications of that? Well, we now had an election. People don't want data centers. People don't want data centers for perhaps environmental reasons, too much electricity, too much water.

• 12:52Speaker 00

  I think the real reason people don't want data centers is because they know what's coming. They know the hammer is coming. They know it's coming for them. People are scared shitless. I mean, if some dude can come on and use an AI and create the entire Adobe line of software products in a weekend, and they work, what does that say about software? We were having this conversation, they said, well, you know, we've been down this road before, you know, like when computers first came around. And I'm thinking, the scale of AI is entirely different than that. The scale is off the hook. Now, there is a nice, well-rounded kind of thought process about what we're facing.

• 13:36Speaker 00

  Now, what can you do with that information to trade? Are you gonna take what I just said and plug it into your fundamental trading system? And you're gonna make buys and sells off that? I don't think so. I mean, look, the reason I bring some of these topics up, it's important for all of us to be aware of chaos in general. Because we could one day have a situation where, God bless the gold bugs, maybe they're right, the only thing we... I mean, we could have a situation one day, God bless the gold bugs, where, and maybe they're right, the only thing that works is a hunk of gold in your closet. Now, I think the odds of that are probably pretty small.

• 14:18Speaker 00

  And building your life around the idea that all currencies are gonna just evaporate one day is tough for the average person. But then again, who the hell thought a McDonald's Happy Meal times two was gonna be 30 bucks in 2026? Again, none of this is a trading perspective, but we do have to be human and look around and say, man, it's a really chaotic time. And guess what? When it is a chaotic time, when there is a possible unwind underway, when there is a potential black swan coming in to the harbor, there is only one strategy that can protect you. I mean, because this is what it comes down to, right? Two things.

• 15:03Speaker 00

  Protect your capital and potentially make more capital. Now, someone who's made a bunch already, they really don't want to hear from me about how much more they can make. They've already made a fortune. But trend-following is the way to protect what you have. On the flip side, the young guy or the young girl who has not yet made the fortune, trend-following is a way to get there. They're not mutually exclusive. They're the same thing. Protecting your downside with trend-following only happens because trend-following is making money typically when the crisis, or the implosion, or the chaos unfolds. That's why you want it in your portfolio. Let me be clear, though.

• 15:48Speaker 00

  All the markets that I'm talking about today, the examples that I'm bringing up, I cannot tell you what's gonna happen. And anyone who tells you what's gonna happen, they're flipping a coin. Can you live with that? Can you live with that uncertainty? If you can't, we're back to the rug pull. Who the hell wants the rug pull? The fall of 2002, and I know plenty of people, very smart and successful, who were not trading at that time because they were too young. But in the fall of 2002, the NASDAQ went down 77%. I think 82% entered day.

• 16:29Speaker 00

  If you have enough perspective, and you look at when the dot-com era started, essentially the summer of 1995 with Netscape going public, Marc Andreessen's first company, I think it was his first company, obviously his most successful start company. But if you take that point in history, summer of 1995, and roll it forward to right now, the fall of 2026, yeah, it's about 30 years, over 30 years. It's connected. If you look at the technology, if you understand the technology, it's been a continuous iterative type progression. And here we are now.

• 17:14Speaker 00

  What does any of it mean? Back to my big point in this conversation, you can't know. You can observe, you can look at that NASDAQ in the fall of 2002, you can see that huge drop, you could ask your friends and family, can you imagine your current stocks going down 80%? I've asked this of people. They look at me like I'm crazy. They cannot imagine tech stocks going down 80%. But less than 25 years ago, they did. They absolutely went down over 80% entered day. And look, I gotta tell you, I sleep pretty good.

• 17:53Speaker 00

  It's a crazy, fun, stressful, anxious, everyone's got their own adjective for what we might describe right now. And if you have no fortune, and you want to try and get there, this is the kind of point in time in history where you can. So I know that sounds a little pessimistic and a little optimistic, but isn't that life? If you take pessimism and optimism and throw it into the same blender, you got volatility. And here we are now, entertain us, as Mr. Cobain sang. If you're ready, I'm here to help you. I could help you in a lot of different ways.

• 18:35Speaker 00

  You know the books, or at least you should know of the books, easily found. This podcast, this podcast, and it's so many trend-following interviews, timeless, are easily found. If you want even more, more handholding courses and systems, I'm there too. And back to what I said at the very top, Black Friday, I have something for this crisis moment that we are living through. If you want the pre-release information, my email is easy, [email protected]. See you again next week.

• 19:20Speaker 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.