Michael Covel - Trend Following Mindset: The Genius of Legendary Trader Tom Basso

Trend Following Mindset

The Genius of Legendary Trader Tom Basso

Mich ael W. Covel

Contents

Also by Michael W. Covel

Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets

The Complete TurtleTrader: How 23 Novice Investors Became Overnight Millionaires

The Little Book of Trading: Trend Following Strategy for Big Winnings

Trend Commandments: Trading for Excepti onal Returns

Living with Mr. Serenity Foreword by Brenda Russell-Basso

I met Tom one week after he had retired, when we both attended a two-step dance lesson in Scottsdale, AZ. This was not in some upscale venue; it was in a cowboy dive bar. Upon leaving, I noticed that Tom drove a rather unremarkable SUV, which he later described as a utilitarian, 12-year-old vehicle. After seeing each other intermittently over a few months of lessons, the two of us had more conversations. I soon learned that Tom was avidly putting together, with dedication and energy, a retirement life to include all his many interests. I later realized this dedication and energy was a carry-over from his long career. The interests are many. Besides dancing there is golf, singing, cooking, painting, fishing, landscaping, reading, and wine-making. Such a combination of time use may put a question mark on any type of serenity, but as I got to know Tom, I began to understand.

Fast forward to one of Toms recent seminars on trading, where I was the moderator. At a break, one of the participants casually asked me what it was like to live with Mr. Serenity, that famous moniker bestowed on Tom by Jack Schwager. After a couple of comments, we had drawn a small crowd. Apparently, this topic is of more interest than I would have thought. If you read interviews with Tom and study his methodology and long success in trading, you would probably accurately think, I dont want to be in that head. Retirement could be hectic and stressful, trying to conscientiously include all the elements. Delving further, though, you would understand that he applies that same focused but non-stressed attitude in retirement that he applied in his work life. He constructs his movie of life to suit himself, and each interest is compartmentalized and enjoyed in a rela xed fashion.

There is, however, evidence of his analytical, engineer mind that he applied so meticulously to designing trading strategies with detailed execution. When Tom was 12, he bought a book on hypnotizing oneself to sleep. I am a witness: he can put himself to sleep in about six seconds. Once when working on his golf swing, he remarked, I think I need to get 30% more weight on my left side. And when people ask about the kind of dog we have, our chill rescue Banjo, Tom answers every time: 25% miniature poodle, 25% miniature schnauzer, and 50% terrier mix with probably a lot of wheaten due to his color. (Mixed breed, rescue migh t suffice.)

A recipe he invents has a pinch of this, a dash of that, and some varied and unexpected components that usually result in a tasty concoction most could not imagine. (I am the lucky sampler.) He is a compendium of information on 70s rock and roll, and can recognize most hits and the artists in the first few seconds. (I prefer Beethoven myself.) And imagine my surprise when I found out he had a detailed list of 20 traits he would look for in a possible mate. (Luckily, I somehow hit 19.5 of those. The other half point? I will never be 59 tall.) His mind does focus on details. A friend of ours is fond of saying, Dont ask Tom what time it is, because he will tell you how to bui ld a watch!

But lets go back to the serenity topic. I dont often ask how our portfolios are doing. I handle our real estate investments and dont cross over into trading. On occasion though, I will say, Did we make any money today? A response could be, No. We lost ____ dollars. I feel I need to choke and pound my chest, but the news is delivered in a matter-of-fact, non-emotional manner. Likewise, if the answer is that we made a rather large profit, I feel like applauding and perhaps clicking heels. However, again the response from Tom is the samematter of fact with no discernible reaction. I have learned that he truly lives one of his favorite sayings: The market will do what the mark et will do.

The answer to that students question is that living with Mr. Serenity is serene indeed in every aspect. I get to see up close how Tom moves through his to-do lists with calm purpose. We dont have volatility in our life together. Basically, we just enjoy the ride every day.

Brenda R ussell-Basso

Preface

S o bad. Ranting nonsense. This is brutal. This guy has issues and uses this podcast as a therapy session. Pure, pu re garbage.

This is one of my all-time favorite reviews of my Trend Following podcast ( www.trendfollowing.c om/podcast ).

The podcast is now at 1000+ episodes, 10 million listens, and includes six Nobel Prize winners, multiple billionaires, and an untold number of world-class entrepreneurs and academics. But I am honored that one guy felt compelled to write his anger, because a podcast like mine is not for everyone (more on that in a second).

You want to start listening now? That will take you over four weeks of continuous liste ning, 24/7!

What have I learned from all of these great podcast guests? What are some common themes? Six c ome to mind:

1. Do the right thing, and let the chips fall where they may.
2. Talking about a guests natural talent is undermining their hard work and dedication to their craft.
3. Know the difference between skill and luck.
4. A lot of people dont like the truth.
5. Process over outcome is how you get ahead.
6. There is a good chance you wont ever know why , so follow the trend.

Now I might not have Joe Rogans or Tim Ferrisss mega listens (yet), but I am always amazed that a podcast gives such reach. A guy, a microphone and Skype or Zoom broadcasting from parts unknown with word of mouth viral as the driver? Amazing. What a fun time to be alive.

Whats the craziest way someone found my podcast? I can thank comedian and Seinfeld co-creator Larry David:

Its funny how I started listening to you. I was looking for podcasts with Larry David and I found the one you did about Curb Your Enthusiasm . From that, my investing has taken a major change of course. I now have my kids checking you if I listen to a podcast I think they would relate to. But I dont force it on them. They will figure out what is bes t for them.

Isnt that awesome? The small world in action.

So how does a podcast like this start? Great guests. And I am lucky to have those. But it did not start out of the gate with great guests. It was a slow buildliterally years. However, one guest in particular helped put my podcast into motion back in 2012. Let me let another reader introduce that guest as he talks about my episode 400:

I said to myself, Theres no way in hell Im listening to a four-hour episode with Tom Basso And then I got to hour three and said to myself, I owe you an apology, holy **** this i s amazing.

Let me back up.

Tom Basso was originally featured in Jack Schwagers Market Wizards series and is most famously known as Mr. Serenity. Now retired from managing client money, Tom was president and founder of Trendstat Capital Management. He became a registered investment advisor in 1980 and a registered commodities advisor in 1984. He has deep experience in trend following trading. Hes a li ving legend.