Podcast Summary: Top Traders Unplugged

Episode: SI342 - From Trend Following to Super Determinism

Host: Niels Kaastrup-Larsen

Guest: Richard Brennan

Date: April 5, 2025

Episode Overview

This episode of Top Traders Unplugged stands out for its deep, philosophical journey. Host Niels Kaastrup-Larsen welcomes trend follower and science enthusiast Richard Brennan. After the usual market pulse and brief mention of recent events, the pair embark on a profound exploration, starting from the practical realities of trend following, traveling through the science of complex adaptive systems, and ultimately landing in philosophical territory—examining ideas such as causality, randomness, free will, and a scientific theory called "super determinism."

Brennan shares how his fascination with science and trading intertwine, arguing that trend following is not merely a profitable investment approach, but a philosophy rooted in humility, process, and a deep respect for the complexity of the universe. The conversation connects practical trading principles to some of the deepest questions facing physicists and philosophers, making for a thoughtful and unique episode.

Key Discussion Points and Insights

1. Recent Market Dynamics and Uncertainty

Discussion: 02:32–14:55

• Both hosts reflect on their recent travels, noting how time abroad and technological disconnect can fuel creativity and deeper thinking.
• The market environment is described as highly uncertain with equities under pressure. Key drivers of uncertainty include new tariffs, global fragmentation, and changing regimes.
• Niels highlights the passing of Bill Dunn (founder of Dunn Capital), paying tribute to his legacy as a “no-nonsense, investor-focused” pioneer of trend following.

  "The best time to invest in trend following is at the bottom of a drawdown and the second best time is today." — Bill Dunn (quoted by Niels, [04:44])

• Both hosts observe that macro frameworks are shifting: traditional focus on monetary policy is waning, while fiscal policy and geopolitics are re-emerging as market drivers.

  "Does it really matter whether interest rate is 3% or 3.25% compared to these forces that are being unleashed?" — Niels, [07:39]

• The potential for prolonged market turmoil and the unpreparedness of institutional investors for such a regime shift is a theme.
• There's concern about passive flows, concentration in U.S. equities, leverage, and what might be exposed if the tide turns (invoking Buffett’s famous "when the tide goes out, you see who’s swimming naked").

  "I'm thinking of all of these leverage products... and this whisper comes to me, the whisper of margin call." — Richard, [14:07]

2. Q1 Trend Following Review

Discussion: 14:55–19:05

• Trend followers had been net long equities until recent sell-offs necessitated position reductions.
• Bond positions were mixed; currencies (notably long USD) saw sharp reversals.
• Commodities like energy (mainly oil) and precious metals offered some bright spots amidst wider turmoil.

  "For those models who have been able to hold on to some of this short exposure, there was one place of brightness in a pretty dark world yesterday." — Niels, [18:04]

• The “trend barometer” was neutral but creeping upward, possibly indicating model responsiveness to new regimes.

3. Sentiment and Regime Shifts

Discussion: 19:05–25:15

• Richard characterizes Q1 as a transition from complacent optimism to growing acceptance that the “old regime” might not return.

  "This was a world not wanting to let go of this favorable past... characterized by whipsaws, not really favorable for trend following at all." — Richard, [19:50]

• The episode cites recurring political shocks (e.g., U.S. executive orders) that initially prompt selloffs but are followed by retracements—a pattern Richard believes is losing its power to trigger “bounces” in sentiment.

  "It's sort of a bit like the Boy who Cried Wolf. It's happening so frequently now that I think the bounces aren't necessarily going to come anymore." — Richard, [21:46]

• Richard highlights a growing investor realization that we are entering a prolonged, uncertain regime ("the fourth turning"), with precious metals signaling this shift.
• The importance of risk management, adaptive process, and diversification in trend following is emphasized over market prediction.

4. From Trend Following to Super Determinism

Deep Dive: 28:48–72:34

a. Philosophy of Trend Following & Connection to Science

Start: [29:01]

• Richard explains his passion for both trend following and physics, seeing philosophical resonance between them.

  "The whole process orientated method of trend following aligns with my philosophy in the way I see the world. Process trumps prediction, humility trumps certainty." — Richard, [29:43]

• He notes many legendary trend followers (Ed Seykota, Jerry Parker) are “deeply attached to process."

b. Scientific Evolution: From Newton to Quantum Mechanics

Start: [32:07]

• Outlines how science evolved from deterministic Newtonian physics to Einstein’s relativity, and then fractured into different quantum interpretations.

• Brennan laments the “fragmentation” of physics and suggests unifying ideas are needed.

  "If we strip away the notion that the observer is separated from the observed, if we break that relationship... you’re left with this concept called super determinism." — Richard, [37:16]

c. Super Determinism Explained

Start: [40:45]

• Super determinism: A controversial but increasingly discussed idea in physics. It posits that all events (including our observations and choices) are correlated through the entire causal chain of the universe, negating true randomness.

• Complexity and emergence are described with the analogy of traders as “waves on the ocean," each with limited vantage, reacting not predicting.

  "We are aligning with the system. We're not trying to control, overthrow, go our own path. We are agents that are participating in that system. That's the trend following way." — Richard, [39:11]

• The impossibility of true prediction due to the “fractal” nature of systems—patterns repeat at all scales, and nested correlations mean no perspective is privileged.

• The narrative of market participation mirrors the scientific principle of coherence: every action, every agent, is causally linked back to the start of the universe (the “causal braid”).

  "I am the product of having my discussions with Niels. He's influenced me. ...I keep on going back, and I cannot disconnect myself from the coherent train of causality that stretches... back to the birth of the universe. I am stardust." — Richard, [43:25]

d. Causality, Meaning, and Free Will

Start: [51:08]

• Super determinism challenges the notion of free will as total autonomy; instead, our actions are part of a causally coherent whole, even while we experience agency.
• Information, not just matter and energy, is primary in this framework—reminiscent of physicist John Wheeler’s “it from bit.”
• The limitations of subjective perspective ("the brain can only resolve so much") are both a practical (for trading) and philosophical constraint.
• This resonates with trend following’s humility: acknowledging that we never have the full story; hence, the only robust approach is to align with the unfolding process rather than to try and outsmart or predict the system.

5. Tying It Back: Trend Following’s Philosophical Edge

Discussion: 58:10–66:45

• Niels relates the idea of ever-expanding correlations to advances in technology and connectivity, underlining how our complex systems grow more interwoven ("layer upon layer; the Russian doll").

• They reflect on humility and discipline in trend following—acting like “monks,” following process, embracing detachment and learning.

• The role of noise and emergence: trend followers wait for structure to emerge from “noise” because true randomness is an illusion; rather, it’s complexity we can’t resolve.

  "We need a process that aligns with the system we are in. ...We will never understand all of that causal logic. ...The seed of a trend emerges from noise and then it materializes with our models." — Richard, [59:22]

• Trend followers are humble because they know they are not “cleverer than the system,” and prediction is futile for embedded participants.

• The conversation elevates trend following to a worldview:

  "It’s certainly a philosophy that matters much more than Sharpe Ratio." — Niels, [63:40]

6. Meaning, Coherence, and the Need for Process

Discussion: 66:45–72:34

• The importance of process—and enjoying ordinary moments (like throwing a ball for a dog)—is connected to “meaning” in a coherent universe.

• The famous quantum double-slit experiment is discussed as an illustration of correlated, not independent, events—demystified under super determinism.

• The failure of physics occurs, Brennan argues, when it “loses coherence” by positing a separation between observer and experiment.

• Meaning is found in narratives and correlation; consciousness arises from coherence, not isolation.

  "We are recognizing that as trend followers, we are observing process, taking the time to observe the detail. Because in the detail the ordinary we find joy." — Richard, [64:25]

Notable Quotes & Memorable Moments

• On Bill Dunn’s legacy:

  "The best time to invest in trend following is at the bottom of a drawdown and the second best time is today." — Bill Dunn (quoted by Niels, [04:44])

• On humility and process:

  "We don't dare to assume we're cleverer than the system we're embedded in. That's where the predictor comes in. ...But I will align with that system and I'll follow the trend full stop." — Richard, [61:14]

• On the nature of randomness:

  "There is no room for randomness, because randomness breaks the chain of causality." — Richard, [42:48]

• On markets and the universe:

  "Trend following is a deep expression of my wonder of this universe and science, they cannot be separated." — Richard, [47:33]

• On adapting to uncertainty:

  "The models are uncertain, the markets aren't uncertain, the markets are very definite." — Moritz Seibert (relayed by Richard, [22:55])

• On meaning and coherence:

  "Meaning is through the story. The word alone doesn’t have meaning, it’s got to be inserted in a story, a context, to have meaning." — Richard, [63:45]

Timestamps for Key Segments

• [02:32] — Market uncertainty, Bill Dunn tribute, macro shifts
• [14:55] — Quarterly trend following perspective
• [19:05] — Changing market sentiment, emergence of regime shift
• [28:48] — Introduction to today’s philosophical journey
• [29:01] — Brennan’s worldview: trend following and science intertwined
• [32:07] — History of scientific models: Newton, Einstein, quantum mechanics
• [37:16] — Fragmentation in science and super determinism
• [40:45] — Super determinism, causality, and complexity in markets
• [51:08] — Agency, free will, and information in the universe
• [58:10] — Technology, complex adaptive systems, and trading humility
• [59:22] — Noise, emergence, and alignment with market process
• [63:40] — Philosophy of trend following, meaning, coherence
• [66:45] — Joy in process, coherence vs. randomness, the double-slit experiment
• [72:34] — Closing thoughts, Richard on his upcoming book, gratitude

Summary

This episode moves well beyond typical market commentary. It embodies Top Traders Unplugged at its most reflective—exploring how deep scientific and philosophical thinking can inform and enrich the practical discipline of trend following. Through Richard Brennan’s thought leadership, listeners are invited to reframe market participation as a humble, process-driven engagement with an unfolding, causally coherent universe. In a time of regime shifts and deep uncertainty, the message is that meaning and resilience come from humility, process, and the acceptance that we are agents embedded within—never above—the complex systems we seek to navigate.

For more on these topics, follow Richard Brennan on Twitter/X and LinkedIn, where he is publishing chapters of his forthcoming book on these themes, or visit toptradersunplugged.com for all episodes.