Michael Covel: News & Info.

Opps!

A perspective I share. That doesn’t mean I am predicting anything, but the rate cuts, rate increases and rate cuts have driven the last 6-7 years.

An example (article) of something we all have known instinctively, but were probably sometimes embarrassed to admit for lack of “data”. I am sure many think they are more productive surrounded by others.

Feedback in responding to this recent podcast:

Michael: Oi..vey. You want to go at it again. From December 18, 2007, through January 14, 2008, there was a constant rising trend in the currency pair EUR/GBP, seen on a daily chart, amounting to 497 pips, from the low of the range on the first date to the high of the range on the last date. At that time the pip cost on the spot market was at 2.0 so this was actually a gain of twice the 497 pips, or 994 pips. I routinely review and investigate my log of past trades, and saw this wondering why I did well in this pair over this period, although I did not gain anywhere near the total pips offered. Investigating further, I found reports from Thomson and Reuters confirming that during this period there was information from traders and economists, and other “news”, that the BOE would need to reduce their rate, and the ECB would probably stand pat or raise their rate. Ergo, EUR is in demand as against GBP. Would you agree that this is a fundamental reason for price movement,…or not? Despite this fundamental force, I followed what you might call the trend following method, depending on price movement and technical analysis to make the yes or no transaction decision, and time entries and exits. Would you call this “Trend Following”? If not, why? If so, then is this not a blend of using Fundamentals with Trend Following? If not, could you please answer with specific details, and if I am convinced, if I have no further argument, I will admit to you that the two cannot be used together, that they are separate. Michael, it is not nice to call people ignorant as you did in your podcast of February 25th referring to me. I believe you are a very insightful writer and researcher, and I would not at any time call you ignorant although I am sure I have more university degrees than you (including a post grad degree) all from one of the big 5 or 10 universities (as in Harvard, Yale, Princeton, etc.). Now what? Regards, Rose.

A follow-up shortly after:

Michael; I see on re-reading the email I sent some minutes ago that I left out a pertinent fact. I knew at the time of the trades that there was this market force creating the demand for EUR vs GBP, every day I was reading Thomson, Reuters and other news, so I felt I could use the technical analysis backed up by this fundamental market force. I was not trading just from this fundamental scene, but heavily dependent on following the trend. Rose.

Feedback in tonight:

Hello Michael, I’ve just finished reading The Complete TurtleTrader with great pleasure. I traded on the floor of the Mid-Am from the last few months it was located at the Fisher Building until 1976, when (having made my entire, if modest, living with about $2,000 of capital for a few years) I finally got too worried about possible out-trades (only one of which could have wiped me out) and sold my seat. I was, and remain today, an extremely conservative but fairly consistently profitable trader, by commodities standards. Of course Rich Dennis was something of a legend even back at the old Fisher Building location by the time I’d arrived. It was generally known that he engaged in inter-market spread trading, mostly in grains in those days, since he could then get reduced margins. Then, when Dennis started trading what seemed to be really bizarre inter-market spreads, such as wheat and silver, the old-timers scoffed mightily. But his strategy of buying the stronger of two trending markets had obviously worked - that was clear to anyone who’d been watching his career at that point. Soon after MACE moved to Jackson Blvd,, of course, Dennis moved across the street to the BOT, though he kept his MACE seat for quite some time after that. I well remember the MACE secretary accosting Dennis, who’d come on the floor from the BOT one afternoon after closing, loudly complaining that Dennis never deposited his daily clearing house checks. A few of us gathered around as a slightly chastened Dennis went to his trading desk, pulled open an unlocked drawer, and retrieved something like $50,000 in undeposited checks. He just didn’t seem to pay much attention to his MACE business by that time. At any rate, your book was both informative and entertaining. Thanks! [Name withheld]

Nice piece of insight. Thanks!

A perspective on behavioral finance.

I was forwarded this article with this comment:

“Sue because you lost money in your 401k?”

Is that what the article says? I don’t read it that way. The suit issue revolves around negligence, not losses.

An excerpt from The CATO Institute (full article and video):

In his new book, The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics, Michael Shermer examines such questions as: How did we evolve from ancient hunter-gatherers to modern consumer-traders? Why are people so irrational when it comes to money and business?

Note: Richard Dennis, father of the Turtles, is still on the CATO Board of Directors. A CATO paper from Dennis.

Momentum investing in equity markets delivers “striking” and “remarkably persistent” excess returns, according to the most comprehensive study (PDF of article) to date of the phenomenon. Great line from article:

“Every investor we have come across has, explicitly or implicitly, used a momentum or counter-momentum strategy,” said Prof Marsh. “[Consequently] people can look like a genius by accident or they can look a fool when they are quite smart.

Note: Full study here (PDF Download). Prior research from Blackstar Funds.

The background of the author of this article says something about WHO the people ARE who have the ability to SCARE the public. He did break the story where “what happened at one company when a male executive became a female.”

Great. Awesome.