Ep. 648: Thinking Clearly with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
00:00
The Differences Between Finance and Physics
Most financial models don't predict the future. They usually take a model and calibrate it to liquid current prices, then use it to estimate in the present the value of less liquid things. So that's one big semantic difference. A lot of finance is really glorified in circulation. That's not an insult. It's just a fact. I like to say that all financial models are really short volatility - they're going to do badly when volatility increases. When you think about Nissim Taleb and Mark Spitznagel, and thinking about the trend-following world, my world has a lot of long volatility.
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