The most important lesson of the new film Moneyball (see Chapter 5 of my book Trend Following) is not the concept of using numbers to field a baseball team. The critical lesson is the idea of using numbers only to make investments–otherwise known as trend following.
We have now moved from buying the rumor, to buying the rumor of the rumor. Is this another reason for stocks to bounce? Or just admitting that EFSF is too confusing in its present form, and cannot do enough, and has so little support that we might as well move to ESM? Maybe the EU members have decided that if anyone was going to spend more money in Europe, it should be something they control directly and not this super CDO? Maybe they finally realized that the EFSF was supposed to be replaced by ESM in 2013, but EFSF was going to issue 30 year bonds? Maybe the German approval vote is more questionable than we are being led to believe? Who is this employee who left his briefcase open at a bar with a Bloomberg reporter? Or is someone sending out leaks, waiting to see how the market, responds, and if it’s not good enough, they send out another leak? It sounds bizarre. There is no longer any point watching this. Those that are bullish will be cheered by each and every step, and believe it is a sign of more to come. Those that are bearish will view each headline with derision, until something big and real happens one way or another.
None of those traders do what Zero Hedge describes. Zero Hedge often is dead on after the fact, and they correctly point out the travesty that is current monetary and fiscal policy, but how do you reasonably bet off all that in the context of a trading system? You don’t. The great ones don’t. As Seykota sings, file the news.
This one felt like a Dot Com era stock all along. The fundamentals of Netflix? Yeah, right. Some of those folks in love with Netflix, who at one time were syncing their belief in Netflix along with the share price (“I love it, a great service, and it’s going up! How could there ever be a problem?”), are licking wounds (and learning lessons) now.
Note: Here is why even with the right fundamental call (short Netflix), you can still mess up. Solution: trend following.
I am a 51 year old Software Architect who has design and managed the creation of such systems as “[name]” for the city of New York or the [name] system for [major bank]. My most recent work was for [name] as an Enterprise Architect (that job left me). I am expert in Java and Business Rules Expert Systems programming.
Since 1992 I have been an Investor. I followed Warren Buffett but I have recently seen my portfolio return to break even losing $90,000.00 in value. My knuckles passed white about three months ago.
I am currently unemployed and heavily invested in IRobot, Apple and Berkshire Hathaway. The 30K was generated by selling Apple.
I am looking to become financially independent so I don’t have to accept working for some else again.
Thanks for the feedback. I wonder if your type of dissent is allowed at the annual Berkshire Kool-Aid fest in Omaha? Your feedback is another great real life example of the scam that is buy and hold.
Public employee pensions are one of the most unfair (and crooked) concepts in modern America. From the USA Today front page today:
The American political system, the graft system, is so hopelessly out of whack that worrying about it, or trying to vote it out, is virtually impossible. Solution? Make your own money, enjoy life, and be passionate. The pension system will eventually implode one way or the other without outside efforts.
Mr. Covel, I have been thinking about getting into trading commodities, but I’m hesitant. I’m sure you have followed lately what Senator Bernie Sanders from Vermont has been saying and doing regarding oil speculation and, specifically, speculators (#1 and #2). I am copying two fairly recent articles that I am sure you are familiar with. I would like for you to tell me, as a professional trader yourself, where Mr. Sanders is wrong. Obviously, he rails against corporate America and, regarding the high prices of oil and gas that we pay for at the pump, the speculators, that is, the speculators being largely responsible for the high prices we pay at the pump.
Please, if you could, explain to me as one who is “on the fence” about getting into trading, why Mr. Sanders is wrong. Could it actually be good what speculators do in driving up the price? How is it good for those average citizens – other than for speculators and those oil and gas companies profiting greatly (I’m not against making money or profits, far from it).
Thanks for your response, which I look forward to receiving.
Mike Kline
I did not read the articles in question. Do I really have to? A quick question instead, as responding to politicians who want to eliminate speculation makes me hurt in the head: if there is no speculation what are we left with? Second question: do all speculators win?
Since 1996 my firm has delivered trend following education in a unique manner to unique students. To say this investing/trading strategy is counter-intuitive would be one massive understatement. The deal? If you want to learn trend following it’s going to be different. What’s a good prerequisite for all would-be trend followers? Watch:
Smart woman. Her philosophy is the foundation of my books–especially Trend Commandments.
“Principles are concepts that can be applied over and over again in similar circumstances as distinct from narrow answers to specific questions. Every game has principles that successful players master to achieve winning results. So does life. Principles are ways of successfully dealing with the laws of nature or the laws of life. Those who understand more of them and understand them well know how to interact with the world more effectively than those who know fewer of them or know them less well. Different principles apply to different aspects of life—e.g., there are “skiing principles” for skiing, “parenting principles” for parenting, “management principles” for managing, “investment principles” for investing, etc—and there are over-arching “life principles” that influence our approaches to all things. And, of course, different people subscribe to different principles that they believe work best.”
