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Ep. 1286: Mike Dever Interview with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
Euphoria Fosters Belief; Belief Fuels Euphoria
The pattern of investor behavior reveals a cycle of euphoria and total belief in market opportunities, leading to significant wealth accumulation during speculative booms. Investors often ride the momentum of high-performing assets, such as Tesla or Bitcoin, driven by unwavering confidence despite previous opportunities for loss. This 'total belief' can resemble a cult-like mindset, making it challenging to dissuade individuals from their positions, even in the face of market downturns. Historical parallels, like the 1999 NASDAQ boom, illustrate that human emotional response to market dynamics creates repeating patterns, with participants consistently raising their price targets based on perceived potential rather than fundamentals. Ultimately, this reinforces behavior that overlooks risks and can result in dramatic market corrections.
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