This is Trend Following Radio, where great thinking comes alive.

Nobel Prize winners, legendary traders, bestselling authors, and the pros that know what drive us irrational human beings.

I am your host, Michael Covel, not filtered, raw, honest.

That's my passion.

One of my favorite criticisms of trend following trading, especially in the media, which

really doesn't know what the hell they're talking about, is the phrase black box.

Nine times out of ten, when you hear trend following trading discussed, the word black box

is used and as a pejorative, as if somehow or another there's this magical computer

that's doing all these wonderful things these mysterious things secret things no humans involved

and somehow or another that makes it more risky that's what the term black box is used for, to marginalize

those that are successful with trend following trading. It's probably also to protect

all those financial news shows, buy and hold mutual funds, to protect their books, so to speak,

because if they have to acknowledge, if they have to admit that the efficient market hypothesis is wrong,

if they have to admit that models or systems, perhaps, not perhaps, are a hell of a lot more valuable and useful to the average investor.

Well, they won't be getting that big paycheck anymore, will they?

Today I have a few clips that I want to play.

The first clip, actually both clips are from Jim Simons, the chairman of Renaissance Technologies, who generated

for himself around $14 billion.

I think it makes him one of the 100 richest people in the world, all from trading,

all from models.

This first clip, let me let Jim explain his view on the efficient market hypothesis.

There's something called the efficient market theory, which says that there's nothing in the data, let's say price data, which will indicate anything about the future. Because the

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