He’s the author of five books, including the international best-seller Trend Following: Learn to Make Millions in up or Down Markets (named best trading book of the last 15 years) and his investigative narrative The Complete TurtleTrader: How 23 Novice Investors Became Overnight Millionaires. He has helped more than 7,000 clients in over 70 countries learn how to make money with trend following. Michael Covel has been teaching trend following strategies to individual traders, students, hedge funds, pensions and family offices for the past two decades. Please send me your comments to I’d love to hear your thoughts. That’s the key, to know when to jump back in. You need to be ready with a plan of action when that happens. Of course, the trend will change at some point. In fact, across commodities markets only gold and gold stocks are in “buy mode.”įor that reason, it makes sense to avoid “long” commodity investments, except gold and gold stocks. Then, and only then, you can follow the trend.īased on my proprietary system, long-term trends in many commodities remain down, despite recent short-term rallies. The best we can do now is to watch the trend. Batista had been swimming naked.Īfter such a big crash in the price of commodities, I have no doubt we could see a directional change again in the near future. Major trends in many commodities changed in 2011. Well, whenever the trend turns, “buy and holders” are always the ones swimming naked. Warren Buffett once said: “When the tide goes out, you learn who’s been swimming naked.” My Brazilian ex-billionaire friend only needed a few rules to save his fortune, but hubris sank him instead. At a minimum, you would have avoided the meltdown. If you had followed that signal, you could have profited from the collapse in commodities by shorting them. If you’re using a trend following system, it’s relatively easy to capture the big trends.įor example, my proprietary trading system triggered a sell signal in August of 2014. You have to know when to get in and get out with concrete rules. Yes, over the last twenty years there have been some incredible trends in commodities.īut you can’t profit from those trends if you’re simply buying and holding or taking tips from watching CNBC. Does that look like a good opportunity to use a “buy and hold” strategy? Take a look at the 20-year CRB commodity index chart below. This is especially true for commodities, since they’re very cyclical. You must know the right moment to get in and out of certain sectors and asset classes. When it comes to investing, timing is everything. I like to call it the “braindead” way of losing money. I’m telling you his story because the collapse of his empire teaches a powerful investment lesson…īuying and holding commodity-related investments is a clueless strategy. Bottom line, these stories of super leverage and one-way bets are pretty typical across the history of markets. He got what he wanted-a roller coaster ride of chaos. He went from a net worth of $32 billion to more than a billion in debt. Today, he’s known as “the negative billionaire” because he owes creditors $1.2 billion. In fact, four of his companies went bankrupt as falling gold and iron ore prices destroyed his “long only” commodities empire. So when commodities started to crash in 2012, Batista’s wealth evaporated. He put all his money in a leveraged bet that commodities would go up.Īll of his companies were commodity-based businesses, including an oil driller, a mining company, an electricity producer and a port operator. What was his brilliant strategy to achieve this? In 2012, when he was worth $32 billion, he made international news headlines saying: “I will be the world’s richest man.” Guess what his net worth is today? You won’t believe it… In 2012, he was the seventh-richest person on the planet, worth an estimated $32 billion, according to the Bloomberg billionaire index. Well, one option is to pile $32 billion in cash into a giant mountain, and burn it.Īnother is to invest it all in commodity-related investments with a “buy-and-hold” mentality.īrazilian businessman Eike Batista went for option #2. What’s the quickest way to lose $32 billion?
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