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Episode 53 – How Michael Covel "Makes Trends His Friends"
Michael Covel, author of Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets, joins Porter and Buck to demystify trend investing and reveals why mastering this will change your entire concept of what bull and bear markets mean for you.
Buck and Porter talk risk management, the latest false starts with North Korea, and Porter reveals three "battleship businesses" that in his mind are so reliable, entrenched, and permanent, the typical rules of risk management just don't apply.
Brandon from Dallas asks Porter how to distinguish from "good debt" and "bad debt" when it comes to determining which companies will go under in the coming corporate debt meltdown.
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01:00 Porter reveals this week's Stansberry Investor Hour guest: Michael Covel, a global expert at trend investing. His trend-monitoring podcast has racked up seven million listens, and he's the author of Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets.
02:31 Are we at war with North Korea yet – or are we finally best friends? It seems to Porter like this is an elementary school spat, where two tough guys can drop the act on a dime and become best friends. Buck explains why it will be months before we know.
07:45 Michael Covel tells Porter why he's dialing in from Vietnam and what he's doing there, and why he spends 80% of his time in Asia these days.
09:34 Porter asks Michael how he, as an investor who thinks of buying shares as owning a part of a business, can connect that mentality with a trend-follower who doesn't see value so much as numbers on a screen. Michael explains how trend-crunching quick hits and long-term value investing are compatible.
13:17 Porter asks Michael how his trend-trading strategy would apply to a well-known giant like Microsoft, and Michael explains how earnings, acquisitions and potential deals are utterly irrelevant in the face on just one thing.
17:26 Porter asks about the one aspect of trend following that he can't get his head around….it doesn't seem to play any part at all in the missions of using capital as a creative force that markets ultimately exist for.
22:52 What's the best market that Michael has followed as a trend trader? Porter asks if, looking over his 30 years of trend-following, there's been any sector that's especially lucrative or easy to get right. Michael explains why currency trades underlie his entire strategy.
30:05 Porter goes back to the August 2017 essay he wrote warning a market correction was inevitable, months before February's crash – and what the market indicator he relied on then is saying now.
36:25 Buck asks Porter a philosophical question about "buy and hold" vs. "buy and fold." Let's say you buy into something you expect could soar in 12-18 months on a catalyst – and it gets hammered in the meantime. Can you ignore your stop losses? Porter says you can, under these two conditions.
39:45 Porter reveals the kind of company – "battleship businesses" – where the ordinary rules of risk management just don't apply.
42:15 Brandon from Dallas asks about Porter's thesis that debt is about to crush dozens of iconic companies, and asks if there's any kind of benchmark regular investors can use to determine whether a company's debt is at sustainable levels or not.
46:10 Craig from the mailbag asks if there's a way to check mutual funds for exposure to the coming corporate debt meltdown, or if these mutual funds should be avoided in general. Porter explains why most mutual funds won't be at the epicenter of the corporate bond crisis –and reveals which funds you want to be wary of anyway.