Walter Williams goes after the enemy I go after in my film ‘Broke’: the face in the mirror. His simple point, all politics aside, is that people are responsible.

My film Broke: The New American Dream is around #6000 on Amazon. If you have not yet seen it, and you want a honest take on what to do next with your thinking and your money, please give it a view. Guarantee your time will not be wasted. Plus, a concerted effort will move this outsider film up the bestseller list and force a wider conversation!

Here is a case study for why fundamental analysis ain’t such a hot bet. When a CEO declares his firm to have a “God-like” view of the market (at 6:44) you have to just smile and toast the guy!

Via Ritholtz, via Gaping Void.

One reader writes on my Facebook [BTW, feel free to friend me]:

Michael, the problem I have with trend following is that it is successful only if – surprise! – markets are trending. You make it look as if you have the foolproof way of extracting money out of markets when in fact trend following CTAs / traders can easily suffer enormous losses, too. I also think you finally produced enough books for a while – no need to send out the same message in book after book.

All market participants only make money if markets are trending–surprise! You are welcome to your opinion, but clearly I disagree. If you don’t like the messages, don’t read. Further, an examination of the performance data of many trend followers is included in all of my books–the ups and downs. There it all is in black and white. Is that performance easy? That choice has to be made by each person, but at the end of the day too few people actually know of trend following–still. If you know about it, and you think it is hard, and you think somehow I misrepresent it–not here to sway you.

Bottom line, it should be clear by now that I polarize. I smile ear to ear when someone is frustrated with themselves and takes it out on me. That is a good day. Productive day. Make no mistake: trend following is not for everyone. Some will never get it, and some can’t be reached:

From Der Spiegel:

The enemy looks friendly and unpretentious. With his scuffed shoes and thinning gray hair, John Taylor resembles an elderly sociology professor. Books line the dark, floor-to-ceiling wooden shelves in his office in Manhattan, alongside a bust of Theodore Roosevelt and an antique telescope.

Taylor is the chairman and CEO of FX Concepts, a hedge fund that specializes in currency speculation. It’s the largest hedge fund of its kind worldwide, which is why Taylor is held partly responsible for the crash of the euro. Critics accuse Taylor and others like him of having exacerbated the government crisis in Greece and accelerated the collapse in Ireland.

People like Taylor are “like a pack of wolves” that seeks to tear entire countries to pieces, said Swedish Finance Minister Anders Borg. For that reason, they should be fought “without mercy,” French President Nicolas Sarkozy raged. Andrew Cuomo, the former attorney general and current governor of New York, once likened short-sellers to “looters after a hurricane.”

The German tabloid newspaper Bild sharply criticized Taylor on its website, writing: “This man is betting against the euro.” If that is what he is doing, he is certainly successful. While Greece is threatened with bankruptcy, Taylor is listed among the world’s 25 highest-paid hedge fund managers.

A well-read man, Taylor likes to philosophize about the Congress of Vienna and the Treaties of Rome. But is this man really out to speculate the euro to death? And does he have Greece on his conscience?

Taylor grimaces and sighs. He was expecting these questions. “The big problem is that in some cases these politicians are looking for the easy way out and want to blame somebody else and say speculators are taking Europe apart, taking the euro down and ruining the prosperity of our country,” he says, characterizing such charges against hedge fund managers as “nonsense.” “My capital isn’t the capital of the Rothschilds,” he says, insisting that he is working with the “capital of the people,” and that his goal is to protect and increase this capital. Taylor points out that no one from any of the German pension funds that invest their money with him has ever called him on the phone to tell him not to bet against the euro. Rest of article…

That last sentence says it all.

Note: Thanks to Larry Tentarelli for article find.

The short version:

Note: Shout to Jim Byers for the find.

A fun comic found at Ritholtz.com:

Remember when Peter Lynch, formerly of Fidelity, made it all so easy:

[Peter Lynch's] most famous investment principle is simply, “Invest in what you know,” popularizing the economic concept of “local knowledge”. This simple principle resonates well with average non-professional investors who don’t have time to learn complicated quantitative stock measures or read lengthy financial reports. Since most people tend to become expert in certain fields, applying this basic “invest in what you know” principle helps individual investors find good undervalued stocks.

Lynch uses this principle as a starting point for investors. He has also often said that the individual investor is more capable of making money from stocks than a fund manager, because they are able to spot good investments in their day-to-day lives before Wall Street. Throughout his two classic investment primers, he has outlined many of the investments he found when not in his office – he found them when he was out with his family, driving around or making a purchase at the mall. Lynch believes the individual investor is able to do this, too.

There might trouble with the technique upon which millions of boomers bet their retirement? It appears so:

Aging baby boomers may hold down U.S. stock values for the next two decades as they sell their investments to finance retirement, according to researchers from the Federal Reserve Bank of San Francisco. Americans born between 1946 and 1964 are beginning to retire as the U.S. stock market is still recovering from the financial crisis that began in 2007 with the collapse of the subprime-mortgage market. The timing is ‘disconcerting’ and, since stock prices have been closely tied to demographic trends in the past half century, “portends poorly for equity values,” adviser Zheng Liu and researcher Mark Spiegel wrote in a paper released by the bank today.

Ah, the nostalgic days of wandering the local mall and going through Spencer’s “Adult only” section as investment panacea. Life used to be so much easier when you didn’t have to think…

More: http://www.frbsf.org/publications/economics/letter/2011/el2011-26.html

Feedback in:

“Years ago, famed Chicago bond trader Tom Baldwin put trading in a phrase: “Everybody wants the money, but whose willing to do the work?” I know a few. One of them is Michael Covel. Michael did the yeoman’s duty no one else would do: bringing together the principles, practices and track records of trend following. In his now numerous books, courses and programs, he solidly demonstrates trend following is a viable trading and investment strategy; moreover, one that can be learned and mastered. Something many so-called trading and investment strategies have yet to do.”
Charles Faulkner
Market Wizard Trading Coach,
Mental Edge Trading Associates

Thanks!

Note: Faulkner is in my film and my new book The Little Book of Trading.