Content Library

Covel Podcast – March 2023

Here’s a clip from Eric’s conversation with Michael Covel on his podcast Trend Following Radio. You can listen to the entire discussion here.

Key Takeways

Standpoint is neither bearish nor bullish, our strategy is designed to take advantage of opportunities without relying on prediction.
Since the start of Standpoint in December 2019, markets have experienced a wide variety of conditions, especially compared to the nearly undisrupted bull market of the 2010s.
A disciplined plan allows investors to navigate surprises and hostile conditions.

Transcript

Michael Covel: How do you speak with people when it comes to whether you perceive elevated risk or not?

Eric Crittenden: It's hard to get around that one because it's something pretty much everyone wants to talk about all the time. The word useless keeps flying around in my head. I think it's useless to agonize over that if you have a plan and you're prepared, because there's really no way to know. In 1998, no one was prepared for long-term capital management. I don't know anyone who was prepared for that. No one was prepared for what happened in 9/11. No one was prepared for the meltdown in 2008. Then evidently, no one was prepared for what happened last year in 2022.

There's no shortage of hundreds of thousands of man-hours, and hundreds of millions of dollars have been spent on research, of people trying to prepare for these things. Yet no one ever seems to really be prepared. That, to me, is a failure, so I'm not going to follow that model. Instead, I'm going to have a plan that I believe in that's empirically sound, and I'm going to commit to having the discipline to stick with that plan. That plan is going to have rules in place to allow us to deal with any kind of market condition that I can conceive of.

Now, that doesn't mean we're going to thrive in all the market conditions. That's not possible. You can't have something that thrives regardless of what the market does, but you can put together a plan that reflects your intentions and your desires to not take too much risk, because all you can do is through your position sizing and whatever hedge you have on when disaster strikes. You can't wait for the disaster to strike. Everyone thinks you can, that I'll just be faster and smarter than everyone else, but that's not possible.

At the end of the day, I look at it and say, "I don't think there's a lot or any value." It's actually negative value for sitting around agonizing over, is the market risky right now, will it be risky tomorrow. Just have a plan that you believe in and stick with it and try to always be prepared. That's the best I can do, and I think that's better than what I see most people in the marketplace actually doing.

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