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Speaker 1: Brought to you by Bank of America Merrill Lynch, committed

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Speaker 1: to bringing higher finance to lower carbon named the most

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Speaker 1: innovative investment bank for climate change and sustainability by the Banker.

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Speaker 1: That's the power of Global Connections. Bank of America North

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Speaker 1: America member f d i C. This is Masters in

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Speaker 1: Business with Barry Ridholts on Bloomberg Radio this week. On

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Speaker 1: the podcast, I have an extraordinary technician. Her name is

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Speaker 1: Luisia Mada, and she has been looking at markets, sectors,

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Speaker 1: stocks for close to forty years. She spent twenty five

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Speaker 1: years at City Group, eventually becoming their managing director. UM

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Speaker 1: worked with many of the legends in finance, including Alan Shawn.

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Speaker 1: We had a really interesting conversation about how people use

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Speaker 1: technicals to help their investing and their trading. UM. We

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Speaker 1: don't really get as many technicians UH in in the

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Speaker 1: studios as I've liked, as I would have liked. I've

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Speaker 1: previously spoken to Jeff de Graff, whose name basically is

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Speaker 1: refers to technicals, as well as Tom Dorsey, Paul Desmond.

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Speaker 1: Pretty much that's it. For the people who are full

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Speaker 1: time technicians, I know they're out there. They work at

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Speaker 1: various funds. Um, there are a number of people I'd

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Speaker 1: like to get Allen Seawan here, I'd like to get

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Speaker 1: John Broken here. Their number of people I'd like to

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Speaker 1: sit down and talk with. If you are a trader,

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Speaker 1: if you work as a person who is a fundamental

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Speaker 1: analyst and would like a little more insight as to

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Speaker 1: why stocks and sectors and markets sometimes do what they do,

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Speaker 1: then the technical side might provide some insight as to

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Speaker 1: the timing of of how things happen. Um. That was

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Speaker 1: part of my conversation with Louise uh. If you are

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Speaker 1: interested in technicals, if you like anything on the more

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Speaker 1: wonky side, then this is going to be for you.

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Speaker 1: With no further ado my conversation with Luisia Mata. We

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Speaker 1: know each other for a long time. I've been a

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Speaker 1: fan of your work for a while. But for the

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Speaker 1: late person, explain what is technical analysis? Well, technical analysis

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Speaker 1: is really the study of supply and demand in the marketplace,

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Speaker 1: whether a stock is under accumulation, or whether a stock

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Speaker 1: is in an uptrend or under distribution or in a downtrend.

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Speaker 1: So so let's unpack that a little bit under accumulation

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Speaker 1: generally means big institutions are accumulating shares on an ongoing basis,

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Speaker 1: Distribution is the opposite, and simplistically on a price basis,

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Speaker 1: because what we're following is price. We're not following any fundamentals.

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Speaker 1: You're just following the price. Accumulation simplistically looks like a smile,

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Speaker 1: and distribution simplistically looks like a frown. In other words,

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Speaker 1: you've had a stock cell off. It's come down for

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Speaker 1: a while, it's going sideways, and then all of a

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Speaker 1: sudden it starts going higher. Um you also reference the

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Speaker 1: phrase trends. Tell us what a trend is. Once a

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Speaker 1: stock moves out of an accumulation pattern or a distribution pattern,

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Speaker 1: it moves into an uptrend from an accumulation pattern, or

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Speaker 1: into a downtrend from a distribution pattern. And basically a

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Speaker 1: trend up trend is a higher high followed by a

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Speaker 1: higher low, higher low following a series of steps higher

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Speaker 1: than the trend, even the pullback is above previously exactly,

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Speaker 1: and and a downtrend is and that represents demand. Somebody's

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Speaker 1: coming in to buy that stock without letting it fall

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Speaker 1: below the prior low. So it's had a nice move up,

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Speaker 1: it starts to soften the price comes down and someone says,

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Speaker 1: I want more of this, that's a good price. They

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Speaker 1: step in and that creates a floor on the price.

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Speaker 1: The ceiling is the opposite on the down trends. It

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Speaker 1: could rally, but only so far be sellers come out exactly.

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Speaker 1: And is it fair to say what you're describing is

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Speaker 1: just a battle between buyers and sellers, between supply and demands. Absolutely, so,

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Speaker 1: how does this differ from fundamentals, Well, fundamentals doesn't follow

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Speaker 1: the stock price at all, doesn't care about it. Looks

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Speaker 1: at peas, look at earnings, could look at credit, it

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Speaker 1: looks at all those uh fundamental things about the company,

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Speaker 1: the the quality of the company, etcetera. But it's really

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Speaker 1: interesting is that, if you think about it, the difference, well,

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Speaker 1: I think we're going to get to that. But the

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Speaker 1: difference is that, for instance, if you're at a cocktail party,

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Speaker 1: you can guarantee someone that you're never going to buy

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Speaker 1: a stock at the low the day it records record earnings,

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Speaker 1: and you're never going to sell a stock at the

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Speaker 1: high the day it cuts the dividend, because you have

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Speaker 1: this discounting mechanism where people smarter than you and I

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Speaker 1: are taking action on the price of the stock. In

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Speaker 1: other words, markets are somewhat efficient, and a lot of

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Speaker 1: the news that eventually comes out is either partially or

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Speaker 1: fully reflected in the price before the news itself is released.

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Speaker 1: That makes plenty of sense. So Ralph A. Himpora once

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Speaker 1: said something very interesting, and I full disclosure I took

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Speaker 1: the course with Ralph last century is when I did it.

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Speaker 1: Fundamentals tell you what to buy, Technicals tell you when

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Speaker 1: to buy. That's right, discuss that. Yeah, I think that

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Speaker 1: that's particularly valid from the perspective of value investors, because

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Speaker 1: value investors may go in too early. They may go

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Speaker 1: in as a stock is still completing its downtrend and

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Speaker 1: shame stocks get cheaper. Yeah, and then they have to

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Speaker 1: hold it through this entire you know, finish the decline

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Speaker 1: and hold it through the entire accumulation pattern. I always

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Speaker 1: suggest that value investors keep a watch list, and then

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Speaker 1: when the pattern starts to look like there's an interest

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Speaker 1: out there for that stock, is the time to start

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Speaker 1: accumulating it. Well, who is going to be the buyer

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Speaker 1: at the lows of not the value investors aren't they

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Speaker 1: helping form that? But not all of them follow technicals.

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Speaker 1: So some will be early uh and and means that

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Speaker 1: their capital is being put to work and not seeing

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Speaker 1: much of a return for a while. You like being

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Speaker 1: a little later in that smile because you're not tying

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Speaker 1: up capital while it's going sideways are going down. Why

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Speaker 1: do these charts actually work? That's a tough question. It

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Speaker 1: is a tough question. Um, Sometimes they don't and certainly not.

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Speaker 1: But when technolo analysis is making you money, what's the

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Speaker 1: narrative rationalization behind white charts actually are effective? Well? I

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Speaker 1: think because you are watching what other people are doing

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Speaker 1: with their money, basically, and when they stop buying, you

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Speaker 1: start to see a frown developed, so to speak. And uh,

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Speaker 1: and then you see a support broken. I mean, there's

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Speaker 1: the whole seven questions. Has a has a stock um

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Speaker 1: had a move of substance that would reverse We're gonna

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Speaker 1: We're gonna go through all seven questions in a few minutes. Um,

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Speaker 1: let me ask you one quick question. What do most

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Speaker 1: people misunderstand about technical analysis? I think, well, first of all,

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Speaker 1: a lot of people call it voodoo. I mean, it

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Speaker 1: has such names for their patterns as head and shoulders

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Speaker 1: and double tops and flags and triangles. And everybody thinks

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Speaker 1: that that could be just ridiculous, but it should be

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Speaker 1: considered a tool in the investing process, and it's a

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Speaker 1: valuable tool. You have the fundamentals and you have the technicals,

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Speaker 1: and as I said before, you know you the technicals

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Speaker 1: are going to help you when the fundamentals could be

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Speaker 1: fabulous and the price starts going down or breaking through support,

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Speaker 1: and that's a warning that's something to come in the fundamentals.

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Speaker 1: They're not mutual. They're not mutually. I'm Barry Ridhults. You're

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Speaker 1: listening to Masters in Business on Bloomberg Radio. My guest

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Speaker 1: this week is Luisia Mata. She is a technical analyst

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Speaker 1: and runs the research shop Luisia Matta Technical Analysis. Let's

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Speaker 1: talk a little bit about the modern era and and

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Speaker 1: how you. You came to technical analysis sometime last century.

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Speaker 1: I was working for a gentleman named Guy Ortmann who

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Speaker 1: had taken the Technical uh Analyst class at the knee

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Speaker 1: of Alan Shaw, and he urged me to also take

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Speaker 1: the class, which I took with Ralph A. Kampora. You

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Speaker 1: you worked with Alan Shaw for Quoite a while. I

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Speaker 1: definitely did. He was my mentor and um I got

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Speaker 1: into technical analysis because I was picking stocks and watching

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Speaker 1: them go up and watching them come back down. And

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Speaker 1: I finally called a broker and I said, how do

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Speaker 1: you know when to sell? And what was the broker answer?

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Speaker 1: And he said he sent me some newsletters on technical analysis.

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Speaker 1: I think the main one was Grandville at that point.

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Speaker 1: And uh, so I went to the Finance Institute and

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Speaker 1: I took the first class with Ralph A. Kampoor and

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Speaker 1: Alan taught the advanced class in his chart room. And

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Speaker 1: uh during that period he offered me a job. So

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Speaker 1: you must have been one of the better students in

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Speaker 1: the class. Well, let's hope. So the fascinating thing about

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Speaker 1: that era And I heard this from Guy Ortmann, and

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Speaker 1: I heard it from Ralph Acampora, and I've heard this

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Speaker 1: about Alan Shaw, never from his mouth directly. Um, they

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Speaker 1: used to do these charts day by day, by hand,

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Speaker 1: by hand. Point and figure charts. Absolutely we had, and

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Speaker 1: regular charts. Regular supplied them, not just the XS and os,

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Speaker 1: but the regular charts that we see. Honest people used

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Speaker 1: to do those also every single day by hand. I've

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Speaker 1: walked into rooms with people manual charts on the wall. Right,

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Speaker 1: It's amazing. We had a whole library on a on

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Speaker 1: a turntable with all the New York Stock Exchange stocks,

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Speaker 1: which we plotted each one point intra day reversal by hand,

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Speaker 1: and then that got translated into what people call the

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Speaker 1: three point. But what people look at as a three

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Speaker 1: point today is not the classic three point, which is

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Speaker 1: derived from the one point and gives you a much

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Speaker 1: broader sense of accumulation and distribution. So let me ask

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Speaker 1: you um an obvious technology question, how much do we

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Speaker 1: lose now that we no longer do this, or at

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Speaker 1: least most of us no longer do this by hand?

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Speaker 1: Just anyone can punch up a Bloomberg terminal or anything else.

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Speaker 1: What is lost when when we've given up the manual

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Speaker 1: drawing of charts and and can simply call one up

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Speaker 1: anytime we want. What's missing is the degree of a

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Speaker 1: top or a bottom. Now you can obviously see that

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Speaker 1: on a chart, can't you don't? Yes, you can, but

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Speaker 1: you don't necessarily see the same breadth and volume of

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Speaker 1: that's spread. I guess trying to describe the Yes, when

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Speaker 1: you're looking at it day by day, you're noticing things

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Speaker 1: that you don't see if you're just letting the computer

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Speaker 1: draward for you right in nineteen we saw these tremendous

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Speaker 1: two year tops, and in the Bristol Myers and all

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Speaker 1: the drug stocks in in merk we saw it in

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Speaker 1: the consumer goods Capital Coman, Campbell Soup and Hershey Foods.

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Speaker 1: I mean, these were tremendous two year tops that led

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Speaker 1: us to the understanding that something very different was coming about.

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Speaker 1: A lot of people aren't aware of this, but if

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Speaker 1: you're looking at individual stocks and individual sectors, the broad

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Speaker 1: market started rolling over long before technology topped out. Oh definitely,

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Speaker 1: that was the last one. And I gave up the

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Speaker 1: ghost long before the drop in the Nasdack, so that

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Speaker 1: that was an interesting warning sign. So other than just

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Speaker 1: the technology, what is the difference between the modern era

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Speaker 1: of technico analysis and what people used to do years ago.

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Speaker 1: I think that what's happening today is you have more

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Speaker 1: and more traders, and more and more people are extremely

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Speaker 1: short term oriented. I mean they're looking at the trees

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Speaker 1: and not the forest, and I think one of the

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Speaker 1: important things is to understand where that short term price

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Speaker 1: action is taking place in the larger trend of this

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Speaker 1: stock or whatever it is. Your So, so let's talk

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Speaker 1: about time frames. What what do you look at in

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Speaker 1: terms of various time frames, and how the length of

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Speaker 1: the chart, be it minute by minute, daily, weekly, monthly,

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Speaker 1: affects your interpretation. Well, I like to look at all

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Speaker 1: of it. The short term is really is really daily noise.

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Speaker 1: I think. I don't disagree. I find I really don't

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Speaker 1: want to look at anything less than a weekly chart

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Speaker 1: because the day to day action is is so random, yes,

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Speaker 1: and almost almost irrelevant. The weekly is where I start,

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Speaker 1: and then I also like to see how that week

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Speaker 1: is progressing within the longer term monthly profile. And also

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Speaker 1: I watched the mac d's the momentum indicators for this,

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Speaker 1: So define what mac D is I think of the

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Speaker 1: average person listening, Well, it's the difference between two moving averages.

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Speaker 1: Am I going to get into the formula? So you

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Speaker 1: could take a shorter term moving average in a longer

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Speaker 1: term moving average. It's it's a really a second derivative

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Speaker 1: of a smooth line. Is that a fair way to

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Speaker 1: the short and when one line crosses over under the other,

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Speaker 1: you get a buy signal or a cell signal. Now,

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Speaker 1: there's been some controversy in some quarters that have said

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Speaker 1: the golden cross the death cross. Some of these have

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Speaker 1: really been abused by amateur takes. I'm glad that you

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Speaker 1: brought that up, because you're you're absolutely correct, and from

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Speaker 1: our perspective, we have only considered the very long term

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Speaker 1: crossings as valid. You're going to get the fifty day

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Speaker 1: moving average in the two day moving average crossing back

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Speaker 1: and forth themselves all the time. Even within an uptrend

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Speaker 1: and a little pull back, the fifty day may pulled

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Speaker 1: down below the two temporarily, and I think that that

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Speaker 1: is a it's misleading to the average investor um weekly. Okay,

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Speaker 1: maybe you look at it, but you have the same

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Speaker 1: frequency of turnover. It does warn you that some kind

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Speaker 1: of a correction or consolidation may be coming into play,

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Speaker 1: but again it can be within the context of an

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Speaker 1: uptrend or downtrend. I like the monthly and we've done

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Speaker 1: some back testing historically, and the monthly momentum is has

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Speaker 1: a very good history of pegging the cell signals at

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Speaker 1: tops and getting you in a little more safely in

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Speaker 1: the bottoms. So what to moving average would you use

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Speaker 1: on a monthly Well, for our we use a ten

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Speaker 1: months and a twenty month moving average, and when that

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Speaker 1: cross takes place, that's that's the Golden Cross or the

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Speaker 1: Death Cross. I'm Barry Ridholts. You're listening to Master's in

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Speaker 1: Business on Bloomberg Radio. My special guest today is Luisia Mata.

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Speaker 1: She is the founder of Luisia Mata Technical Research Advisors.

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Speaker 1: She spent twenty five years at Smith Barney, eventually becoming

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Speaker 1: managing director of the Technical Research Group, and has been

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Speaker 1: Institutional Investor ranked for a number of years. Let's talk

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Speaker 1: a little bit about women on Wall Street and what

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Speaker 1: it's like. I've sat with people like Liz Anne Saunders

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Speaker 1: and Michelle Myers Um and they've told the story of

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Speaker 1: how they've actually seen the industry change over the course

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Speaker 1: of their career. What what was it like as a

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Speaker 1: woman doing charts and technical works when when you began, well,

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Speaker 1: when I began, I was really just interested in learning,

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Speaker 1: learning technical analysis and working with the group I had.

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Speaker 1: I have tended to stay out of the political frame,

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Speaker 1: uh and the administrative frame, to be perfectly honest with you.

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Speaker 1: So perhaps I'm not as aware of what was going

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Speaker 1: on in the early years in terms of being a

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Speaker 1: woman an list on Wall Street, but there were many

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Speaker 1: women doing technical analysis. Bernadette Murphy certainly was one and

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Speaker 1: Gail do dex or partial. Yeah, Um and um, it

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Speaker 1: was probably more. As the twenty five years progressed that

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Speaker 1: I realized that to a certain extent, it's very rare.

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Speaker 1: There aren't a lot There weren't a lot of women

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Speaker 1: more today. But still it's a relative. Numerically, it's it's

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Speaker 1: not a big percentage of of technicians are women. So

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Speaker 1: let's talk about how Wall Street has changed over the

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Speaker 1: past thirty forty five years. You've been a Dennis into

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Speaker 1: the Street for a while. How has the the job

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Speaker 1: opportunities and how women are treated on Wall Street changed

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Speaker 1: over the past few decades. Well, I would say we're

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Speaker 1: starting to get certainly in technical analysis, we're starting to

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Speaker 1: get more more women interested. There's a part of the

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Speaker 1: Market Technicians Association that has a group of women that

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Speaker 1: is trying to encourage them and act as mentors to

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Speaker 1: bring them forward. Um. I'm not sure to what degree

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Speaker 1: it's changed. I think one of the things, Um, it

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Speaker 1: can slip. Let's say there can be slippage. Because a

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Speaker 1: classmate of mine at Vassa wrote the book called The

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Speaker 1: Good Girl's Revolt, which was the discrimination suit that women

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Speaker 1: brought against Newsweek in the late sixties early seventies, and

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Speaker 1: when the case subsided, it went back to normal. So

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Speaker 1: as long as there's attention, as long as you can

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Speaker 1: focus on it and continue to to push the careers

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Speaker 1: of some of these women, I think that's great. And

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Speaker 1: as soon as the attention fades, history tells us you're

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Speaker 1: some progress might be allowed. It's gotten into the government

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Speaker 1: hierarchy now, So I think that the future of women

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Speaker 1: now is probably more palatable. And I'm even hearing a

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Speaker 1: possibility that one day we might have a woman president

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Speaker 1: that that's actually a genuine Post's see how that works out. Yeah, Um,

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Speaker 1: so you left, you left the street, you left the

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Speaker 1: business in order to set up your own independent shop.

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Speaker 1: What was that like? Well, City Group in two thousand

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Speaker 1: and five disbanded the entire technical research. Yeah, Kitter had

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Speaker 1: already done it. A lot of the big firms had

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Speaker 1: done it. You know. We can talk about the potential

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Speaker 1: as to why they did it, but the point is

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Speaker 1: they did. So we had a month or two to

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Speaker 1: pack up and get out. We were essentially retired out,

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Speaker 1: which was fine, um, but the clients, um really rebelled

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Speaker 1: and yeah, it was quite an upheaval there and complaints,

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Speaker 1: and one client offered her office as they all said,

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Speaker 1: you know, we want you to stay, we want you

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Speaker 1: to come back, and she offered her offices to us,

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Speaker 1: which we used during the week. And then as we

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Speaker 1: finally got set up, we had a client who gave

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Speaker 1: us a couple of subscriptions upfront, which helped us open

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Speaker 1: our doors. It was it's got to be very gratifying

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Speaker 1: when people say, we know they closed the department, but

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Speaker 1: we think your value added right here, let's do this.

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Speaker 1: It was very gratifying. And the kindness that came through

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Speaker 1: in a business where you don't often see kindness that

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Speaker 1: that that's really quite interesting. So that was how long

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Speaker 1: ago to and we left in February and February March

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Speaker 1: and we started up in October. That's a pretty quick

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Speaker 1: turn around. Six months you're up and running. How much

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Speaker 1: of the thinking behind kitter And City and other groups

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Speaker 1: closing their technical group is that, hey, everybody has, if

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Speaker 1: not a Bloomberg terminal, they have access to Internet charts.

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Speaker 1: Everybody's a technician these days. Yes, that's probably part of it.

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Speaker 1: I think that because you had the financial crisis, there

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Speaker 1: was the money aspect to it as well. I mean,

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Speaker 1: the technical departments were expensive, perhaps two to maintain. I

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Speaker 1: also think that there was, and this is my theory,

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Speaker 1: that there was a problem from the legal perspective of

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Speaker 1: the fundamental recommendations of stocks that we were putting on

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Speaker 1: seals in two thousand and that was that was problematic.

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Speaker 1: I mean, you think about the poor broker. He gets

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Speaker 1: the fundamental guy telling him to buy in the technical

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Speaker 1: guy telling him to sell. What are you're gonna do?

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Speaker 1: You listen to the technical guy and you wait for

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Speaker 1: the fundamentals to to the fundamentals are still good. You

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Speaker 1: wait for the price. Try to tell you it's a

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Speaker 1: when versus a what question. Yeah, I'm Barry Rihults. You're

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Speaker 1: listening to Masters in Business on Bloomberg Radio. My special

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Speaker 1: guest today is Luisia Matta. She is a technical analyst

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Speaker 1: and runs the research shop Luisia Matta Technical Analysis. Let's

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Speaker 1: let's get into the nitty gritty of technicals a little bit.

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Speaker 1: One of the things I noticed in some of your

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Speaker 1: work is you really like ratio. Tell us a little

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Speaker 1: bit about how you use those. Okay, I'd be happy to.

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Speaker 1: For instance, the dial Gold ratio which goes goes all

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Speaker 1: the way back to the twenties, and the Dow or

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Speaker 1: the stock market and gold tend to move inversely. So

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Speaker 1: you have this incredible chart where the peaks in the

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Speaker 1: Dow into seventies two thousand. You had the reversal from

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Speaker 1: Dow out performance into a gold out performance. So the

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Speaker 1: gold out performed while the Dow was in a bear market. Um.

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Speaker 1: But we use it even more significantly in the sector work.

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Speaker 1: We use the monthly sector work and we follow the

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Speaker 1: price of the sector and the relative strength to the

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Speaker 1: SMP five hundred. You can do it. So when we

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Speaker 1: talk about ratio, let's let's say we'll take the health

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Speaker 1: care sector versus the SMP five. When that line is

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Speaker 1: going up, the health care sector is doing better than

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Speaker 1: the Bruin index. And when that line is going down, right,

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Speaker 1: it's doing worse. And you could look at every sector

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Speaker 1: that way. That's exactly what we do. And the concept

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Speaker 1: is you don't go into the market to underperform. So

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Speaker 1: you want to look for those sectors or those stocks.

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Speaker 1: If you want to put any stock versus the s

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Speaker 1: and P five hundred in the ratio to find the

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Speaker 1: ones that are outperforming. Or on the contrary, those that

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Speaker 1: are on the verge of underperforming. And we do that

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Speaker 1: with positive or negative divergences. And if I could give

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Speaker 1: the example, so we define what a divergence is. Okay,

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Speaker 1: a divergence is if the price moves up to a

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Speaker 1: new high and the relative strength fails to move to

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Speaker 1: a new high, you have an indication that somebody is

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Speaker 1: moving away from this sector and the relative strength is

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Speaker 1: no longer outperforming. And in reverse, you can have a

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Speaker 1: positive divergence in which the relative strength does not confirm

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Speaker 1: the new low in price and actually puts in place

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Speaker 1: a higher low, and that's an indication that perhaps the

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Speaker 1: sector or stock is ready to turn up. So, as

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Speaker 1: an example, in two thousand and seven, we had a

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Speaker 1: tremendous six year negative divergence. Six years. Remember this is

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Speaker 1: the bigger the top, the greater the length of price.

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Speaker 1: Evidence that something is on the verge of reversing is

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Speaker 1: very important. Um, So we had in two thousand and seven,

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Speaker 1: the price of the financial sector made a new high,

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Speaker 1: but the relative strength did not. In two thousand and seven,

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Speaker 1: early the relative strength broke a six year support. In

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Speaker 1: other words, the level that had held before now failed

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Speaker 1: to put in place a higher low and actually broke

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Speaker 1: the prior low, which is a big sign to us

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Speaker 1: that something is about to change. And since it was

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Speaker 1: six years, it's an important thing to watch. And if

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Speaker 1: you had gotten out of the financials in two thousand

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Speaker 1: and seven when we got that signal, you would have

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Speaker 1: preserved about of the de line. And the financials really

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Speaker 1: got whacked in that period. They they fell, yeah, they

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Speaker 1: they In fact, that's a big number. We saw the

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Speaker 1: NASDAC drop almost eight percent. We saw the twenty nine crash.

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Speaker 1: It's amazing how something falls eight percent a broad sector.

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Speaker 1: Not a bad time to think about. And you know,

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Speaker 1: when you think about even it wasn't the crash, the

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Speaker 1: original crash that wiped out the wealth. That was, that's correct.

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Speaker 1: And the crash moved price from three eight one to

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Speaker 1: one eight one. But when you broke down, when you

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Speaker 1: broke down thereafter in in thirty one, um, you went

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Speaker 1: from one and that that was even bigger. That's so

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Speaker 1: so let me let me shift this up a little

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Speaker 1: bit on you. Let's talk about some of these secular

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Speaker 1: moves moves and I used the term secular to mean

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Speaker 1: longer term, longer term not just not cyclical. Cyclical is

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Speaker 1: the short intermediate term moves quarters a couple of years.

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Speaker 1: Secular can be dead in term. If you think as

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Speaker 1: a secular bull market from two to two thousand, it

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Speaker 1: had a lot of cyclical bear market interruptions, but continued

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Speaker 1: on that uptrend. Each bear market interruption amazingly, including seven

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Speaker 1: held at a higher low and eighty seven. People always

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Speaker 1: talk about the three day but really eight percent was

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Speaker 1: at plus move from top to bottom. I'm doing that

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Speaker 1: from memory, but that's bull ballpark. Yeah, it really had

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Speaker 1: a huge run and then just rolled over um and

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Speaker 1: we had a we had a structural breakdown and energy

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Speaker 1: in two thousand and fourteen, in addition to which we

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Speaker 1: had the monthly momentum cell signals. So you get cell

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Speaker 1: signals from different indicators for the same sector or the

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Speaker 1: same industry, you have to start paying attention. So so

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Speaker 1: let's talk a little bit about that. You have a

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Speaker 1: monthly breakdown energy. Anybody who's tanked up their car knows

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00:26:03,119 --> 00:26:08,080
Speaker 1: gases really cheap. It's too and change for premium um

430
00:26:08,560 --> 00:26:11,640
Speaker 1: in New York that's very inexpensive. What does this mean

431
00:26:11,800 --> 00:26:14,919
Speaker 1: for oil prices and for how long? Well, that's a

432
00:26:15,000 --> 00:26:17,840
Speaker 1: very good question. I mean, this was a this was

433
00:26:17,880 --> 00:26:20,520
Speaker 1: a relative strength top that had been in place from

434
00:26:20,680 --> 00:26:23,120
Speaker 1: two thousand and eight, and the breakdown was in two

435
00:26:23,119 --> 00:26:28,359
Speaker 1: thousand and fourteen. Now we're starting to see that top

436
00:26:28,640 --> 00:26:33,000
Speaker 1: right and and breakdown. Um, there's some stabilization coming into

437
00:26:33,080 --> 00:26:35,320
Speaker 1: energy right now. Whether it can follow through on this

438
00:26:36,080 --> 00:26:39,200
Speaker 1: year long head and shoulders bottom reverse head and shoulders

439
00:26:39,240 --> 00:26:43,119
Speaker 1: pattern that we're seeing, um, we'll see. But it looks

440
00:26:43,119 --> 00:26:47,080
Speaker 1: as though it could continue to lift a little towards sixty.

441
00:26:47,119 --> 00:26:50,680
Speaker 1: But it's not going to happen overnight. These are times

442
00:26:50,880 --> 00:26:54,240
Speaker 1: long patterns. Yes. So let's talk a little bit about

443
00:26:54,359 --> 00:26:58,199
Speaker 1: the current bull market. Um. I've had a number of

444
00:26:58,240 --> 00:27:00,720
Speaker 1: people tell me, hey, this bull market is really old.

445
00:27:00,840 --> 00:27:03,240
Speaker 1: Used to go back to oh nine, and here we

446
00:27:03,280 --> 00:27:07,320
Speaker 1: are it's seven years later. But I always learned that

447
00:27:07,480 --> 00:27:11,440
Speaker 1: a new secular bull market starts from new highs and

448
00:27:11,520 --> 00:27:14,360
Speaker 1: the O eight oh nine drop and then the eight

449
00:27:14,400 --> 00:27:16,879
Speaker 1: O nine reversal, Well, that just gets you back to

450
00:27:16,960 --> 00:27:20,640
Speaker 1: square one. Are we in a new secular bull market

451
00:27:20,880 --> 00:27:24,439
Speaker 1: since since the new highs were made? Or is this

452
00:27:24,520 --> 00:27:27,399
Speaker 1: a seven year old market that both Well, it's a

453
00:27:27,520 --> 00:27:31,879
Speaker 1: seven year old cyclical market. For sure. UM. We certainly

454
00:27:32,600 --> 00:27:36,600
Speaker 1: argued that the breakout in was suggesting that we were

455
00:27:36,600 --> 00:27:40,160
Speaker 1: in a new secular bull market advance and if we

456
00:27:40,240 --> 00:27:43,080
Speaker 1: at some point get a correction here, it could be

457
00:27:43,280 --> 00:27:46,959
Speaker 1: one that simply pulls back toward the breakout or doesn't

458
00:27:46,960 --> 00:27:50,359
Speaker 1: have to pull back that far. UM, I think we're do.

459
00:27:50,640 --> 00:27:53,400
Speaker 1: I mean, this is the longest advance that we've had

460
00:27:53,440 --> 00:27:56,280
Speaker 1: in a in a bull market since the nineties. Now,

461
00:27:56,320 --> 00:27:59,919
Speaker 1: didn't we have a near correction late last year earlier

462
00:28:00,359 --> 00:28:02,800
Speaker 1: for some of the indicators, for some of the indexes,

463
00:28:03,080 --> 00:28:06,240
Speaker 1: but not not all of them. Right, So we're speaking

464
00:28:06,240 --> 00:28:10,440
Speaker 1: with Luis shia Mata of Yamata Technical Research Advisors. UM,

465
00:28:10,520 --> 00:28:12,960
Speaker 1: let's talk a little bit about technology. How has the

466
00:28:13,000 --> 00:28:17,520
Speaker 1: advancement of all this computing power played into the world

467
00:28:17,560 --> 00:28:22,119
Speaker 1: of technical played into it. It's made things happen faster,

468
00:28:22,680 --> 00:28:26,520
Speaker 1: It's been more frustrating. So are things really happening faster?

469
00:28:26,680 --> 00:28:29,919
Speaker 1: Is and is technology at fault or I don't know

470
00:28:29,960 --> 00:28:33,120
Speaker 1: whether you call it a fault. But the degree that

471
00:28:33,200 --> 00:28:37,679
Speaker 1: the high frequency trading is what of the volume of

472
00:28:37,680 --> 00:28:41,640
Speaker 1: the volume, that's very different from individual investors, UM having

473
00:28:41,680 --> 00:28:45,920
Speaker 1: control over what's happening to the price um. Now we've

474
00:28:45,920 --> 00:28:49,360
Speaker 1: had quantitative trading, we've had people crunching numbers to make

475
00:28:50,080 --> 00:28:54,040
Speaker 1: buying and selling decisions for a long time. This is

476
00:28:54,200 --> 00:28:57,800
Speaker 1: this is really very different in a qualitative way, computers

477
00:28:57,920 --> 00:29:03,640
Speaker 1: making instantaneous buys and cells, and it's not like it

478
00:29:03,760 --> 00:29:07,720
Speaker 1: was when people were manning the terminals. And so what

479
00:29:07,760 --> 00:29:11,120
Speaker 1: does that mean in terms of of price signals? How

480
00:29:11,440 --> 00:29:14,480
Speaker 1: does it change things? I'm not sure we have the

481
00:29:14,480 --> 00:29:18,720
Speaker 1: answer to that yet. We're certainly monitoring the price changes

482
00:29:19,040 --> 00:29:22,800
Speaker 1: as we always have as classic technicians, but I will

483
00:29:22,840 --> 00:29:25,240
Speaker 1: say that we have been seeing more and more false

484
00:29:25,280 --> 00:29:28,360
Speaker 1: breakouts and false breakdowns. And by that I mean you

485
00:29:28,440 --> 00:29:32,720
Speaker 1: have a stock in prices going sideways, say between ten

486
00:29:32,720 --> 00:29:34,960
Speaker 1: and fifteen, ten and fifteen, ten and fifteen, and then

487
00:29:34,960 --> 00:29:37,400
Speaker 1: it goes to twenty and then it comes right back

488
00:29:37,440 --> 00:29:40,240
Speaker 1: down into the ten to fifteen range again. So that

489
00:29:40,280 --> 00:29:43,360
Speaker 1: would have qualified as a false breakout. And sometimes those

490
00:29:43,400 --> 00:29:48,080
Speaker 1: consolidations can continue and maybe eventually you get a valid breakout,

491
00:29:48,120 --> 00:29:51,360
Speaker 1: but sometimes we've seen them break to the downside and

492
00:29:51,560 --> 00:29:53,480
Speaker 1: enter a bear market. And so the h f T

493
00:29:53,680 --> 00:29:57,760
Speaker 1: guys are are generating, possibly generating a lot of signals.

494
00:29:58,200 --> 00:30:00,959
Speaker 1: So that's what we're looking at because that's what's different

495
00:30:01,080 --> 00:30:05,200
Speaker 1: this decade than two decades ago. And that's a possibility.

496
00:30:05,360 --> 00:30:09,000
Speaker 1: It's it's frustrating to say the least. That's that's fascinating.

497
00:30:09,080 --> 00:30:12,000
Speaker 1: So let's talk about customers of yours who are on

498
00:30:12,040 --> 00:30:16,040
Speaker 1: the bye side. Tell us about generally the value that

499
00:30:16,360 --> 00:30:20,280
Speaker 1: technicians bring to a bye side shop. Well, I think

500
00:30:20,360 --> 00:30:22,880
Speaker 1: that most people in a bye side shop are looking

501
00:30:22,880 --> 00:30:25,480
Speaker 1: at fundamentals, so if they don't have an in house

502
00:30:25,520 --> 00:30:28,480
Speaker 1: technician per se. And I think more and more firms

503
00:30:28,520 --> 00:30:33,360
Speaker 1: are having individual technicians. We've we've been certainly certifying more

504
00:30:33,400 --> 00:30:36,600
Speaker 1: and more of them, and the big houses don't necessarily

505
00:30:36,640 --> 00:30:40,560
Speaker 1: have them. Um, they can use us without having to

506
00:30:40,640 --> 00:30:45,640
Speaker 1: hire somebody to do specifically technical analysis. We have been

507
00:30:45,680 --> 00:30:49,960
Speaker 1: speaking to Luisia Mata. She is the manager and owner

508
00:30:49,960 --> 00:30:53,720
Speaker 1: of Luisia Mata Research Advisors. Be sure and stick around

509
00:30:53,760 --> 00:30:56,800
Speaker 1: for the podcast extras where we keep the tape rolling

510
00:30:56,840 --> 00:31:01,120
Speaker 1: and continue chatting about all things technical. Read my daily

511
00:31:01,160 --> 00:31:04,440
Speaker 1: column on Bloomberg View dot com or follow me on

512
00:31:04,480 --> 00:31:09,320
Speaker 1: Twitter at Rich Halts. We love your comments, feedbacks and

513
00:31:09,480 --> 00:31:14,960
Speaker 1: suggestions right to us at m IB podcast at Bloomberg

514
00:31:15,040 --> 00:31:18,600
Speaker 1: dot net. I'm Barry rit Halts. You've been listening to

515
00:31:18,760 --> 00:31:24,920
Speaker 1: Masters in Business on Bloomberg Radio, brought to you by

516
00:31:24,920 --> 00:31:28,160
Speaker 1: Bank of America Merrill Lynch seeing what others have seen,

517
00:31:28,400 --> 00:31:31,960
Speaker 1: but uncovering what others may not. Global Research that helps

518
00:31:31,960 --> 00:31:35,920
Speaker 1: you Harness disruption Voted top global research firm five years running,

519
00:31:36,160 --> 00:31:40,000
Speaker 1: Merrill Lynch, Pierce, Fenner and Smith Incorporated. Welcome to the

520
00:31:40,000 --> 00:31:42,880
Speaker 1: podcast portion of our conversation. Louise, Thank you so much

521
00:31:42,960 --> 00:31:45,480
Speaker 1: for doing this. It's been a pleasure. Thanks. So. I

522
00:31:45,560 --> 00:31:48,400
Speaker 1: know Louise for a long time, and and I kind

523
00:31:48,400 --> 00:31:52,360
Speaker 1: of consider myself a jack of all trades, master of none,

524
00:31:52,360 --> 00:31:56,160
Speaker 1: and I have found technicals to be very helpful to

525
00:31:56,280 --> 00:31:59,640
Speaker 1: my way of looking at the world, looking at the markets,

526
00:32:00,040 --> 00:32:02,280
Speaker 1: if for no other reason, I want to have a

527
00:32:02,320 --> 00:32:05,600
Speaker 1: sense of what are the big institutions doing, and you

528
00:32:05,640 --> 00:32:09,760
Speaker 1: see their footprints in the charts. So let's let's talk

529
00:32:09,800 --> 00:32:11,800
Speaker 1: a little bit about some of the things we didn't

530
00:32:11,840 --> 00:32:16,760
Speaker 1: get to before, and then I'll do my favorite UM questions.

531
00:32:16,880 --> 00:32:19,480
Speaker 1: On the broadcast portion, we were talking about the relationship

532
00:32:19,600 --> 00:32:26,320
Speaker 1: between different markets, and uh we started talking about gold

533
00:32:26,440 --> 00:32:31,600
Speaker 1: and and bonds. Tell us about that long term relationship

534
00:32:31,680 --> 00:32:36,800
Speaker 1: between the two. Here when did gold and interest rates

535
00:32:36,920 --> 00:32:40,160
Speaker 1: top out? Well, the thing that's really interesting, As I said,

536
00:32:40,200 --> 00:32:44,560
Speaker 1: interest rates have very long cycles, and um, the ten

537
00:32:44,680 --> 00:32:50,400
Speaker 1: year um was in a very severe down down trend.

538
00:32:50,480 --> 00:32:55,680
Speaker 1: Interest rates race, we're going higher exactly, and gold started

539
00:32:55,720 --> 00:32:59,360
Speaker 1: a new bull market as the end of that interest

540
00:32:59,440 --> 00:33:04,360
Speaker 1: rate cycle came into being. And once again here we

541
00:33:04,440 --> 00:33:09,360
Speaker 1: have interest rates top out and around then gold topped

542
00:33:09,360 --> 00:33:12,520
Speaker 1: out right and uh, and then you saw a long,

543
00:33:12,600 --> 00:33:15,920
Speaker 1: long down trend. But the gold started to come up

544
00:33:16,280 --> 00:33:19,240
Speaker 1: in the mid seventies, which is when interest rates, which

545
00:33:19,280 --> 00:33:21,880
Speaker 1: is when interest rates started going up. So it was

546
00:33:23,120 --> 00:33:26,080
Speaker 1: the bull market and goals started as you moved into

547
00:33:26,120 --> 00:33:30,000
Speaker 1: an inflationary environment, makes sense rates are going higher. There inflation,

548
00:33:30,080 --> 00:33:33,240
Speaker 1: the price of gold is worth more. However, as race

549
00:33:33,360 --> 00:33:39,440
Speaker 1: were coming way down, gold also started to lift into

550
00:33:39,440 --> 00:33:43,840
Speaker 1: a bull market. Um, so it was arguing that it

551
00:33:43,920 --> 00:33:47,960
Speaker 1: was protecting against the deflationary environment. We did have a

552
00:33:48,000 --> 00:33:52,600
Speaker 1: people forget I'm sorry two thousand and one to the

553
00:33:52,760 --> 00:33:57,719
Speaker 1: dollar lost its value. Anything priced in in dollars like

554
00:33:57,760 --> 00:34:00,320
Speaker 1: gold obviously is going to do well. And we had

555
00:34:00,360 --> 00:34:04,120
Speaker 1: pretty robust inflation in the two thousands up until the crisis.

556
00:34:04,480 --> 00:34:07,080
Speaker 1: That's a pretty good way to put a cap on inflation.

557
00:34:07,720 --> 00:34:12,920
Speaker 1: Have the entire financial world collapse. Probably kills It kills

558
00:34:12,960 --> 00:34:16,520
Speaker 1: the disease and the patient at the same time. So um,

559
00:34:16,600 --> 00:34:19,000
Speaker 1: let's talk a little bit about what you're doing now.

560
00:34:18,719 --> 00:34:21,520
Speaker 1: How do you what do you look at on a

561
00:34:21,600 --> 00:34:24,600
Speaker 1: daily basis? What do you think about each day when

562
00:34:24,640 --> 00:34:28,680
Speaker 1: you sit down at your desk, Well, I look at

563
00:34:29,440 --> 00:34:31,879
Speaker 1: I look at all these sectors. Number one, I'll look

564
00:34:31,920 --> 00:34:35,040
Speaker 1: at them from a relative perspective, from an absolute perspective,

565
00:34:35,120 --> 00:34:38,680
Speaker 1: from a momentum perspective. I'll look at stocks every week

566
00:34:38,960 --> 00:34:42,960
Speaker 1: or weekend. I will look maybe through the entire SMP

567
00:34:43,040 --> 00:34:46,600
Speaker 1: five to just get a gist of what we're seeing

568
00:34:46,640 --> 00:34:48,800
Speaker 1: in terms of are we seeing more and more tops?

569
00:34:48,840 --> 00:34:53,160
Speaker 1: Are we seeing company by company, sector by sector? Yeah, exactly.

570
00:34:53,560 --> 00:34:56,680
Speaker 1: And because you think of the equity market at least

571
00:34:56,680 --> 00:34:59,520
Speaker 1: Alan Shaw always did as a triangle with the market

572
00:34:59,600 --> 00:35:03,120
Speaker 1: at the and groups on one side, or sectors and

573
00:35:03,280 --> 00:35:05,319
Speaker 1: stocks at the other. And he always used to say,

574
00:35:05,360 --> 00:35:07,319
Speaker 1: if you didn't have any you didn't have enough time

575
00:35:07,360 --> 00:35:10,120
Speaker 1: to cover all three. The one you could eliminate was

576
00:35:10,200 --> 00:35:12,960
Speaker 1: the market at the top, because if your sectors were

577
00:35:12,960 --> 00:35:15,799
Speaker 1: showing strength, you knew which way the market should be

578
00:35:15,840 --> 00:35:19,759
Speaker 1: going in the same thing for stocks. Makes makes perfect sense. Um.

579
00:35:19,800 --> 00:35:24,759
Speaker 1: I actually met Alan Shaw at a event was it

580
00:35:24,840 --> 00:35:30,640
Speaker 1: Bill Deaner was being honored not too long ago? And

581
00:35:31,120 --> 00:35:34,560
Speaker 1: uh I begged him to come on here. Yeah, yeah, yeah,

582
00:35:34,640 --> 00:35:36,400
Speaker 1: talked to me later and that was the last I

583
00:35:37,120 --> 00:35:40,919
Speaker 1: heard him. I have two two guys I've been hunting down.

584
00:35:42,040 --> 00:35:44,640
Speaker 1: He's one of them, Alan shows one of them, and

585
00:35:44,680 --> 00:35:47,320
Speaker 1: then Bob Farrell is the other. Oh, and they're both

586
00:35:47,440 --> 00:35:51,160
Speaker 1: very secretive at this point. They've pretty much well, they've

587
00:35:51,160 --> 00:35:55,640
Speaker 1: always been well known amongst certain folks on Wall Street,

588
00:35:56,080 --> 00:35:59,600
Speaker 1: and I don't want to say press shy, but they

589
00:36:00,320 --> 00:36:03,920
Speaker 1: this isn't necessarily their audience. I always try and convince them,

590
00:36:03,960 --> 00:36:06,719
Speaker 1: we need you to have this conversation for posterity's sake,

591
00:36:06,800 --> 00:36:10,120
Speaker 1: because my goal. You asked me how this came about.

592
00:36:10,920 --> 00:36:15,280
Speaker 1: My goal is to create a library and basically say, okay,

593
00:36:15,320 --> 00:36:18,800
Speaker 1: here are the five people. Just learn everything these people

594
00:36:19,160 --> 00:36:21,719
Speaker 1: did and how they became that way. And Alan's a

595
00:36:21,719 --> 00:36:26,880
Speaker 1: wonderful storyteller. Wonderful storyteller, Alan, please make make an introduction.

596
00:36:28,120 --> 00:36:30,120
Speaker 1: I will try and email him to get him out

597
00:36:30,120 --> 00:36:33,640
Speaker 1: of Shelter Island. I'll I will go to Shelter Island.

598
00:36:33,840 --> 00:36:36,319
Speaker 1: I'm happy to for him, I will, I will take

599
00:36:36,360 --> 00:36:39,360
Speaker 1: the trip. Aside from the fact that Shelter Island is delightful,

600
00:36:39,880 --> 00:36:41,680
Speaker 1: happy to stay at the Ram's head in or whatever,

601
00:36:41,760 --> 00:36:44,520
Speaker 1: but I'm happy to do that. I listen, I went

602
00:36:44,520 --> 00:36:48,120
Speaker 1: down to Valley Forge to Vanguard. I'll go out to

603
00:36:48,120 --> 00:36:50,759
Speaker 1: Shelter Island for Yeah, Well that way I'm sure he

604
00:36:50,760 --> 00:36:53,960
Speaker 1: would do it. Really, I think, so done. Okay, Charlie

605
00:36:54,239 --> 00:36:58,120
Speaker 1: make a note, will go into Shelter Island. Um. So,

606
00:36:58,120 --> 00:37:01,759
Speaker 1: So you go through minor digression. So we you go

607
00:37:01,880 --> 00:37:06,239
Speaker 1: through the sectors, you go through individual stocks. How much

608
00:37:06,239 --> 00:37:09,000
Speaker 1: do you pay attention to the news? How what are

609
00:37:09,000 --> 00:37:10,839
Speaker 1: you reading the papers? What do you watch on TV?

610
00:37:11,480 --> 00:37:17,720
Speaker 1: How important is the background noise to what you do? Well,

611
00:37:18,000 --> 00:37:20,279
Speaker 1: there was a long pause right there. Yeah, it was

612
00:37:20,320 --> 00:37:22,480
Speaker 1: a long pause because I tend to read the news

613
00:37:22,560 --> 00:37:25,719
Speaker 1: late in the day and so's already happen. I read

614
00:37:25,800 --> 00:37:27,640
Speaker 1: the Times in the Wall Street Journal on the train,

615
00:37:27,800 --> 00:37:31,959
Speaker 1: not that I'm trading actively began my career, but I've

616
00:37:32,000 --> 00:37:34,040
Speaker 1: always read it on the train on the way home,

617
00:37:34,120 --> 00:37:36,200
Speaker 1: on the way home, never on the way into the Yeah,

618
00:37:36,360 --> 00:37:39,320
Speaker 1: I find that my mornings are too busy doing looking

619
00:37:39,400 --> 00:37:41,440
Speaker 1: or I don't want to be influenced by stuff I

620
00:37:41,480 --> 00:37:46,480
Speaker 1: know is old anyway what it affects you. So so

621
00:37:46,520 --> 00:37:51,880
Speaker 1: that raises a related note. How important is psychology to

622
00:37:52,000 --> 00:38:00,319
Speaker 1: technico analysis? Well, I think that the psychology is on

623
00:38:00,360 --> 00:38:03,959
Speaker 1: the part of the investor, and what you're seeing him

624
00:38:03,960 --> 00:38:08,600
Speaker 1: do is telling you where he stands if he's frightened,

625
00:38:08,640 --> 00:38:10,880
Speaker 1: and you end up with a black hole. If we

626
00:38:11,040 --> 00:38:14,480
Speaker 1: call these multi year multi point drops, which we've been

627
00:38:14,520 --> 00:38:16,800
Speaker 1: seeing with some of the bad earnings again, I remember

628
00:38:16,840 --> 00:38:21,440
Speaker 1: them in two thousand, like mad um and uh, and

629
00:38:21,520 --> 00:38:25,840
Speaker 1: the same thing for for the reverse. So so let's

630
00:38:25,880 --> 00:38:30,160
Speaker 1: talk a little bit about resistance and support. So that

631
00:38:30,280 --> 00:38:32,879
Speaker 1: was always explained to me in in what I took

632
00:38:32,920 --> 00:38:38,400
Speaker 1: at psychological terms. So why does support exists? All right?

633
00:38:38,600 --> 00:38:41,560
Speaker 1: If you have a stock that is trading between ten

634
00:38:41,600 --> 00:38:46,360
Speaker 1: and fifteen, Basically the implication is that each time the

635
00:38:46,400 --> 00:38:51,240
Speaker 1: price gets up to fifteen, somebody fundamentally perceives that company

636
00:38:51,320 --> 00:38:55,439
Speaker 1: to be fully valued and it sells off. And when

637
00:38:55,440 --> 00:38:59,520
Speaker 1: it gets down to ten again, somebody out there perceives

638
00:38:59,560 --> 00:39:03,520
Speaker 1: this come company as now at the point of value

639
00:39:03,680 --> 00:39:06,440
Speaker 1: where they'd like to buy it, and that can continue

640
00:39:06,520 --> 00:39:10,520
Speaker 1: for an extended period of time now as the price,

641
00:39:11,320 --> 00:39:15,399
Speaker 1: and if the price moves up through fifteen, basically, it's

642
00:39:15,440 --> 00:39:20,399
Speaker 1: suggesting that somebody out there perceives something positive about this

643
00:39:20,480 --> 00:39:23,239
Speaker 1: company and is willing to pay more to own it,

644
00:39:23,960 --> 00:39:26,960
Speaker 1: and that initiates the uptrend. We call it a breakout,

645
00:39:27,400 --> 00:39:30,239
Speaker 1: and it initiates the uptrend by the same token. If

646
00:39:30,280 --> 00:39:32,759
Speaker 1: you've had a trading range of top, top can take

647
00:39:32,760 --> 00:39:35,359
Speaker 1: on many configurations. It can be a v topic, can

648
00:39:35,360 --> 00:39:37,640
Speaker 1: be a head and shoulders top, which looks exactly like

649
00:39:37,680 --> 00:39:40,160
Speaker 1: a head and two shoulders. You can have a double top,

650
00:39:40,239 --> 00:39:43,120
Speaker 1: or you could have a horizontal top. And if the

651
00:39:43,239 --> 00:39:46,680
Speaker 1: ten dollar level of our example trading between ten and

652
00:39:46,680 --> 00:39:53,560
Speaker 1: fifteen is violated, that suggests that somebody out there is

653
00:39:53,600 --> 00:39:58,000
Speaker 1: willing to accept less to get out, and that's an

654
00:39:58,040 --> 00:40:03,120
Speaker 1: important psychological message that we're getting in that price. So

655
00:40:03,480 --> 00:40:08,640
Speaker 1: here's how I recall having this explained to me when

656
00:40:08,640 --> 00:40:11,480
Speaker 1: I was a young and you have a stock trading

657
00:40:11,520 --> 00:40:14,920
Speaker 1: in that range. Let's use ten and fifteen, and people

658
00:40:15,880 --> 00:40:19,920
Speaker 1: who bought a fifteen stock now goes to ten and

659
00:40:19,960 --> 00:40:23,280
Speaker 1: they say, God, if I can only get back to fifteen,

660
00:40:23,280 --> 00:40:25,680
Speaker 1: If I can only get to break even, I'll sell.

661
00:40:26,200 --> 00:40:28,440
Speaker 1: And so when the stock gets up back to fifteen,

662
00:40:28,480 --> 00:40:31,759
Speaker 1: all those previous buyers are sellers there because they have

663
00:40:31,800 --> 00:40:35,279
Speaker 1: a memory price, as memory is the expression, and when

664
00:40:35,320 --> 00:40:38,040
Speaker 1: all those sellers are exhausted with there is nobody left

665
00:40:38,040 --> 00:40:40,480
Speaker 1: who wants to sell it fifteen. That's how you get

666
00:40:40,520 --> 00:40:44,520
Speaker 1: the breakout, and that's why there's no overhead resistance. The

667
00:40:44,520 --> 00:40:47,000
Speaker 1: flip side of that was people who have been buying

668
00:40:47,040 --> 00:40:50,080
Speaker 1: a ten and being rewarded. Hey, I boughted the tenant

669
00:40:50,080 --> 00:40:52,799
Speaker 1: went to fourteen, I sold it, it it came back. I

670
00:40:52,840 --> 00:40:54,799
Speaker 1: bought it it went to and I began on a

671
00:40:54,840 --> 00:40:58,480
Speaker 1: trading desk. So everything I learned took me a long

672
00:40:58,480 --> 00:41:02,000
Speaker 1: time to unlearn it. But everything I learned about technicals

673
00:41:02,080 --> 00:41:05,680
Speaker 1: and trading was in that context. Hey, at ten dollars,

674
00:41:05,719 --> 00:41:09,479
Speaker 1: I'm rewarded. Therefore, my muscle memory is by the dip,

675
00:41:09,560 --> 00:41:12,680
Speaker 1: by the dip, by the dip, and therefore, when the

676
00:41:12,719 --> 00:41:15,200
Speaker 1: stock price comes back to ten, i'm a buyer. And

677
00:41:15,440 --> 00:41:18,279
Speaker 1: once that's violated, oh this doesn't work anymore, and I'm

678
00:41:18,280 --> 00:41:21,200
Speaker 1: done now. I don't know if I'm creating a narrative

679
00:41:21,360 --> 00:41:24,960
Speaker 1: on what you described, or if that's consistent with I

680
00:41:25,000 --> 00:41:28,279
Speaker 1: think all three are consistent. You've got the fundamentalist who's

681
00:41:28,480 --> 00:41:32,040
Speaker 1: you know, perceiving that something's changed in the company, either

682
00:41:32,120 --> 00:41:34,080
Speaker 1: for the better for the breakout or for the worst

683
00:41:34,080 --> 00:41:37,440
Speaker 1: for the breakdown. And you've got the person who maybe

684
00:41:37,560 --> 00:41:40,000
Speaker 1: bought it at fifteen it went to ten and panicked

685
00:41:40,000 --> 00:41:42,200
Speaker 1: and said, oh my gosh, hope it gets back to fifteen.

686
00:41:42,239 --> 00:41:44,040
Speaker 1: I want to get out. And then you have the

687
00:41:44,080 --> 00:41:49,080
Speaker 1: professional trader who sees this range developing and says, gee,

688
00:41:49,160 --> 00:41:51,000
Speaker 1: this is a great way to make money. I'll buy

689
00:41:51,080 --> 00:41:54,160
Speaker 1: it at ten and shorted at fifteen, and that goes

690
00:41:54,200 --> 00:41:57,000
Speaker 1: on and until the breakout of the breakdown. One of

691
00:41:57,000 --> 00:42:00,920
Speaker 1: my all time best trades was a was a loser

692
00:42:01,480 --> 00:42:03,960
Speaker 1: in Google, and I want to say it was it

693
00:42:04,000 --> 00:42:07,440
Speaker 1: was range bound between one eight and two hundred, and

694
00:42:07,480 --> 00:42:09,400
Speaker 1: you boarded one eighty and sold it a two hundred

695
00:42:09,400 --> 00:42:11,880
Speaker 1: and bought and shortly at two hundred. And this was

696
00:42:11,920 --> 00:42:14,880
Speaker 1: going on for a while, and I remember being short Google.

697
00:42:15,480 --> 00:42:17,799
Speaker 1: It broke out over two hundred and I covered it

698
00:42:17,840 --> 00:42:20,200
Speaker 1: like two oh two or two oh three, and it

699
00:42:20,520 --> 00:42:23,239
Speaker 1: just never looked back. And I was so pleased with

700
00:42:23,320 --> 00:42:27,080
Speaker 1: that trade, not only because I was disciplined, but Wow,

701
00:42:27,120 --> 00:42:30,319
Speaker 1: this really did what it was supposed to do. You know,

702
00:42:30,360 --> 00:42:32,360
Speaker 1: it broke out of the range. I didn't station I

703
00:42:32,400 --> 00:42:34,840
Speaker 1: had made it. You know what is two or three percent?

704
00:42:34,960 --> 00:42:38,239
Speaker 1: Who really cares about that? But I find that the

705
00:42:38,400 --> 00:42:42,080
Speaker 1: nice thing about charts is it gives you a place

706
00:42:42,160 --> 00:42:45,880
Speaker 1: to know for sure where you're right or wrong. It

707
00:42:45,880 --> 00:42:49,760
Speaker 1: it's a error correction mechanism. If you don't like something

708
00:42:49,800 --> 00:42:53,160
Speaker 1: and it's over a certain price, you're wrong. There's no

709
00:42:53,400 --> 00:42:56,799
Speaker 1: arguing with the story. There's now no coming up with excuses.

710
00:42:56,920 --> 00:43:00,520
Speaker 1: The prices the final arborter and I Voe has found

711
00:43:01,400 --> 00:43:04,200
Speaker 1: not only that, but the risk management side of it

712
00:43:04,280 --> 00:43:07,080
Speaker 1: really fascinating. And that's the thing. A lot of people

713
00:43:07,120 --> 00:43:12,200
Speaker 1: hold onto their losers and sell their winners. Classic rookie mistake. Hey,

714
00:43:12,280 --> 00:43:14,960
Speaker 1: the old One of the things I learned early on

715
00:43:15,560 --> 00:43:18,320
Speaker 1: that is wrong is, Hey, no one ever went broke

716
00:43:18,360 --> 00:43:22,040
Speaker 1: taking a profit. Actually, you do go broke taking a profit,

717
00:43:22,520 --> 00:43:26,200
Speaker 1: especially because you're not having big enough profits, and especially

718
00:43:26,200 --> 00:43:28,880
Speaker 1: if you refuse to admit error and hold the losers

719
00:43:29,480 --> 00:43:32,000
Speaker 1: all the way down. It's a it's a classic mistake.

720
00:43:32,640 --> 00:43:35,360
Speaker 1: So so let's let's jump on some of the questions

721
00:43:35,360 --> 00:43:38,279
Speaker 1: that we missed UM earlier, and then we'll do our

722
00:43:38,320 --> 00:43:43,560
Speaker 1: favorite questions. UM. So let's talk a little bit about

723
00:43:43,600 --> 00:43:47,480
Speaker 1: the markets from a structural perspective. How do you, other

724
00:43:47,520 --> 00:43:50,080
Speaker 1: than h f T, how do you see the structure

725
00:43:50,200 --> 00:43:57,080
Speaker 1: of the market having changed. I don't think the structure

726
00:43:57,120 --> 00:43:59,600
Speaker 1: of the market has changed, So it hasn't, I don't

727
00:43:59,640 --> 00:44:04,239
Speaker 1: think so. So what is different today except for the

728
00:44:04,320 --> 00:44:06,839
Speaker 1: high frequency trading that's the big one to get into.

729
00:44:06,840 --> 00:44:09,239
Speaker 1: The plunge protection team, which maybe we don't want to

730
00:44:09,239 --> 00:44:12,160
Speaker 1: get into. No. I love talking about that because I

731
00:44:12,200 --> 00:44:15,360
Speaker 1: think that you know, George Carlin used to tell a

732
00:44:15,440 --> 00:44:20,200
Speaker 1: joke about Indian fighters, and he would say, and it's

733
00:44:20,200 --> 00:44:24,600
Speaker 1: George Carlin, not me. It's not that Indians are bad fighters.

734
00:44:24,640 --> 00:44:28,120
Speaker 1: Just because they started out defending Boston and ended up

735
00:44:28,120 --> 00:44:30,760
Speaker 1: in San Francisco doesn't mean they're bad. So I always

736
00:44:30,800 --> 00:44:33,439
Speaker 1: say the same thing about the plunge Protection team. Hey,

737
00:44:33,480 --> 00:44:36,840
Speaker 1: just because the NASDAC rolled over at five thousand and

738
00:44:37,000 --> 00:44:40,520
Speaker 1: ended up at doesn't mean the plunge Protection Team doesn't exist.

739
00:44:40,960 --> 00:44:45,040
Speaker 1: They're just really bad at their jobs. How and here

740
00:44:45,200 --> 00:44:50,760
Speaker 1: look at oh eight o nine, the market down fifty seven. Wow,

741
00:44:50,800 --> 00:44:52,720
Speaker 1: imagine how bad it would have been without the plunge

742
00:44:52,719 --> 00:44:56,800
Speaker 1: Protection team. That's pretty bad. So is there a plunge

743
00:44:56,880 --> 00:45:02,520
Speaker 1: protection team and what are they doing? Well, it's an

744
00:45:02,520 --> 00:45:09,480
Speaker 1: official entity. I forget the exact committee to ensure financial stability.

745
00:45:11,080 --> 00:45:13,959
Speaker 1: That's right, Regan set it up, and I would say

746
00:45:13,960 --> 00:45:17,200
Speaker 1: that probably they realize that they can't prevent some of

747
00:45:17,200 --> 00:45:22,759
Speaker 1: those large downs, but they can hold up something that

748
00:45:22,880 --> 00:45:28,080
Speaker 1: isn't necessarily got an enormous amount of selling pressure. In

749
00:45:28,120 --> 00:45:30,080
Speaker 1: other words, we have these days that will you know,

750
00:45:30,200 --> 00:45:33,160
Speaker 1: start down and end up or go down and end up.

751
00:45:33,200 --> 00:45:37,280
Speaker 1: Maybe they're in there trying to um make everybody feel

752
00:45:37,320 --> 00:45:40,200
Speaker 1: better than it hasn't gone lower. I have no idea.

753
00:45:40,560 --> 00:45:42,439
Speaker 1: When they come in, we don't know, but they buy

754
00:45:42,480 --> 00:45:47,960
Speaker 1: futures I understand. Are wouldn't we see the footprint of

755
00:45:48,000 --> 00:45:51,520
Speaker 1: what they're doing and wouldn't there be a giant paper trail?

756
00:45:52,320 --> 00:45:55,480
Speaker 1: One would think, right? I mean, someone does insider trading

757
00:45:55,520 --> 00:45:58,520
Speaker 1: for eight hundred dollars worth of options and it shows

758
00:45:58,600 --> 00:46:02,000
Speaker 1: up on an SEC screen. I can't, you know. I

759
00:46:02,040 --> 00:46:05,520
Speaker 1: am not a I tend to be a skeptical person

760
00:46:05,560 --> 00:46:08,520
Speaker 1: by nature. And when I hear people saying, well, you know,

761
00:46:08,560 --> 00:46:11,240
Speaker 1: the FED is propping up, you know the plunge Protection

762
00:46:11,239 --> 00:46:15,000
Speaker 1: team is propping up the market. How would they keep

763
00:46:15,080 --> 00:46:19,719
Speaker 1: that quiet? I I I can't imagine that not a

764
00:46:19,719 --> 00:46:25,600
Speaker 1: single person would leak it. There's just a million examples

765
00:46:25,800 --> 00:46:29,160
Speaker 1: of things people try and keep quiet and it eventually

766
00:46:29,239 --> 00:46:32,239
Speaker 1: gets out. I mean, forget it. Today the Russians are

767
00:46:32,239 --> 00:46:36,799
Speaker 1: hacking everybody in the Chinese are hacking everybody's email. If

768
00:46:36,840 --> 00:46:40,880
Speaker 1: something like this was out, wouldn't somebody having a vest

769
00:46:40,920 --> 00:46:44,239
Speaker 1: and interest in if for no other reason fame and

770
00:46:44,320 --> 00:46:47,880
Speaker 1: fortune um for being the one who proved the plunge

771
00:46:47,920 --> 00:46:51,480
Speaker 1: Protection team is in there doing what they're doing. So

772
00:46:51,520 --> 00:46:54,680
Speaker 1: you don't buy that they're a big influence in the markets. Now.

773
00:46:54,760 --> 00:46:57,480
Speaker 1: I think that they probably have an influence in the market,

774
00:46:57,560 --> 00:47:03,839
Speaker 1: but I think they're probably selective. Now. In Japan, they

775
00:47:04,000 --> 00:47:07,719
Speaker 1: there is no secret plunge Protection team. Their central bank

776
00:47:08,040 --> 00:47:12,160
Speaker 1: is literally in the market buying stocks and they've publicly

777
00:47:12,200 --> 00:47:15,200
Speaker 1: said we're going to go buy stocks. What does that

778
00:47:15,320 --> 00:47:19,680
Speaker 1: do to to markets and charts and what keeps the

779
00:47:19,760 --> 00:47:22,160
Speaker 1: prices up? I mean, the Swiss Bank is doing the

780
00:47:22,200 --> 00:47:27,120
Speaker 1: same thing. Huge positions in these apple and the Swissies

781
00:47:27,200 --> 00:47:31,280
Speaker 1: are buying a lot of the government banks are buying

782
00:47:31,680 --> 00:47:34,879
Speaker 1: stocks US stocks and what does that do for them?

783
00:47:35,000 --> 00:47:37,160
Speaker 1: What does that do for everybody else? Maybe it gives

784
00:47:37,160 --> 00:47:40,960
Speaker 1: them a currency hedge. I mean, I mean, I have

785
00:47:41,080 --> 00:47:47,400
Speaker 1: to ask the question whether inflation as they're not measuring

786
00:47:47,400 --> 00:47:51,319
Speaker 1: it correctly, that well, we can we can talk about

787
00:47:51,360 --> 00:47:53,920
Speaker 1: food and everything else. We wrote about this in the nineties,

788
00:47:53,920 --> 00:47:56,560
Speaker 1: looking for inflation in all the wrong places. But I

789
00:47:56,560 --> 00:47:59,479
Speaker 1: wouldn't be surprised as long as interest rates stayed load

790
00:47:59,520 --> 00:48:03,799
Speaker 1: of negative of that. There's an interest in getting everybody

791
00:48:03,840 --> 00:48:06,879
Speaker 1: into the stock market, and that that's where we'll see

792
00:48:06,920 --> 00:48:11,000
Speaker 1: the inflationary pressures in asset prices. In asset prices, well,

793
00:48:11,040 --> 00:48:16,120
Speaker 1: haven't we seen markets up two? It's getting nosebleed territory,

794
00:48:16,560 --> 00:48:20,239
Speaker 1: isn't isn't that um? And the same with bonds. So

795
00:48:20,360 --> 00:48:23,440
Speaker 1: my argument about bonds has been there's a shortage of

796
00:48:23,520 --> 00:48:28,080
Speaker 1: fixed income sovereign quality paper and you have a ton

797
00:48:28,120 --> 00:48:32,920
Speaker 1: of buyers. That's what's been driving it lower. But is

798
00:48:32,960 --> 00:48:36,320
Speaker 1: it really a currency hedge for the Swiss to buy?

799
00:48:36,360 --> 00:48:38,880
Speaker 1: I mean, they must really like the new Apple seven,

800
00:48:39,520 --> 00:48:43,480
Speaker 1: the iPhone seven. What advantage do they get buying individual

801
00:48:43,520 --> 00:48:46,200
Speaker 1: stocks or in the seats? You don't you know, I

802
00:48:46,239 --> 00:48:48,799
Speaker 1: don't have a I don't have an answer for that.

803
00:48:48,880 --> 00:48:52,399
Speaker 1: I wish I did. So let's talk about inflation. It's

804
00:48:52,440 --> 00:48:56,160
Speaker 1: been said there's inflation in the things we need and

805
00:48:56,280 --> 00:49:00,800
Speaker 1: deflation in the things we want, meaning TVs, techno anology, phones.

806
00:49:00,880 --> 00:49:05,520
Speaker 1: They just keep getting faster, better, cheaper. Food went up

807
00:49:05,560 --> 00:49:10,239
Speaker 1: appreciably last decade. The qust of housing went up. All right.

808
00:49:11,080 --> 00:49:15,200
Speaker 1: We wrote about this in the nineties and it was,

809
00:49:15,920 --> 00:49:17,960
Speaker 1: you know, question of looking for inflation in all the

810
00:49:18,000 --> 00:49:21,800
Speaker 1: wrong places, and it was not occurring in the capital goods.

811
00:49:21,920 --> 00:49:25,960
Speaker 1: It's not occurring anymore in the capital goods arena because

812
00:49:26,000 --> 00:49:28,560
Speaker 1: there's what we defined at the time is old tech

813
00:49:28,600 --> 00:49:31,920
Speaker 1: and new tech. And the new tech is what you're

814
00:49:31,960 --> 00:49:34,920
Speaker 1: seeing in all these technologies and the huge breakout in

815
00:49:34,960 --> 00:49:39,879
Speaker 1: the information technology sector which took place in You've had

816
00:49:39,920 --> 00:49:43,200
Speaker 1: this huge relative strength and now the prices, you know,

817
00:49:43,320 --> 00:49:46,440
Speaker 1: close to a new high, this time perhaps with earnings,

818
00:49:47,160 --> 00:49:50,480
Speaker 1: which is telling very different. Yeah. I think technology is

819
00:49:50,520 --> 00:49:54,800
Speaker 1: the new industrial complex. No, I completely agree. You reference

820
00:49:54,880 --> 00:49:59,560
Speaker 1: something off air. I want to talk about that. Microsoft, Right,

821
00:49:59,680 --> 00:50:02,799
Speaker 1: So Microsoft one of the biggest companies still one of

822
00:50:02,800 --> 00:50:05,960
Speaker 1: the top ten, what are they three or two these days?

823
00:50:06,239 --> 00:50:10,400
Speaker 1: It's Apple, Microsoft, x On Mobile and Amazon are pretty

824
00:50:10,400 --> 00:50:14,960
Speaker 1: consistently in the in the top ranks. Microsoft is one

825
00:50:15,000 --> 00:50:19,239
Speaker 1: of the few companies today that was also one of

826
00:50:19,280 --> 00:50:25,640
Speaker 1: the giants in the nineties. Explained that, well, it fits

827
00:50:25,760 --> 00:50:28,239
Speaker 1: the concept of the bigger that dropped, the longer the

828
00:50:28,360 --> 00:50:33,000
Speaker 1: need for repair. It had run up enormously, had an

829
00:50:33,160 --> 00:50:36,239
Speaker 1: enormous drop along with all the other technology stocks. So

830
00:50:36,360 --> 00:50:38,799
Speaker 1: you had this huge drop from two thousand into two

831
00:50:38,800 --> 00:50:42,799
Speaker 1: thousand and two. And basically the technology arena went sideways

832
00:50:43,440 --> 00:50:47,800
Speaker 1: um for ten ten years before it broke out. And

833
00:50:47,960 --> 00:50:51,279
Speaker 1: so that was enough of an accumulation that you know,

834
00:50:51,360 --> 00:50:53,840
Speaker 1: steel ball, record and crane, and then then then plumber

835
00:50:53,840 --> 00:50:56,680
Speaker 1: and the electrician and the and the carpenter came and

836
00:50:56,680 --> 00:51:00,239
Speaker 1: did their work and the stock was of a to

837
00:51:00,280 --> 00:51:03,440
Speaker 1: move out again. Now you mentioned didn't tell looks similar.

838
00:51:03,719 --> 00:51:07,160
Speaker 1: You mentioned of all the big tech companies from the nineties,

839
00:51:08,000 --> 00:51:11,360
Speaker 1: most of them have not regained their prior glory or

840
00:51:11,400 --> 00:51:15,040
Speaker 1: anywhere near it. That's true, but they do have incredible bases,

841
00:51:15,080 --> 00:51:17,440
Speaker 1: and I suspect they're trying. Cisco is another one that

842
00:51:17,440 --> 00:51:21,200
Speaker 1: you've got this long, long base. Um, they're buying some

843
00:51:21,239 --> 00:51:25,080
Speaker 1: of the smaller companies, They're buying into new technology perhaps,

844
00:51:25,600 --> 00:51:29,520
Speaker 1: and UH, I think that you know that it's just beginning.

845
00:51:29,560 --> 00:51:32,839
Speaker 1: You're not buying an nvidio, So we're early stages of

846
00:51:32,960 --> 00:51:38,160
Speaker 1: the next bullmarket and technology. Those for those companies, Microsoft, Cisco,

847
00:51:38,239 --> 00:51:41,040
Speaker 1: and tell who else in that space is uh is

848
00:51:41,080 --> 00:51:43,319
Speaker 1: building a base that looks like it's getting ready to

849
00:51:43,320 --> 00:51:45,880
Speaker 1: break out. Those are the three that come to mind,

850
00:51:46,440 --> 00:51:52,280
Speaker 1: and those were all giant companies. Um, alright, so I

851
00:51:52,280 --> 00:51:54,080
Speaker 1: I know I only have you for so much time.

852
00:51:54,680 --> 00:51:57,600
Speaker 1: Let's um. Oh, you asked me a question before, before

853
00:51:57,640 --> 00:52:02,440
Speaker 1: I get to my favorite questions. You asked me a

854
00:52:02,520 --> 00:52:05,319
Speaker 1: question on the way in. How did you get into this?

855
00:52:05,520 --> 00:52:08,360
Speaker 1: How did this come about? Yes, so I've told it

856
00:52:08,480 --> 00:52:11,960
Speaker 1: on air before. But the short version is I've been

857
00:52:12,000 --> 00:52:17,360
Speaker 1: a critic of financial media and television and press for

858
00:52:17,400 --> 00:52:21,360
Speaker 1: a long time, and the criticism has always been, don't

859
00:52:21,480 --> 00:52:24,239
Speaker 1: tell a person what, don't give them a fish, teach

860
00:52:24,280 --> 00:52:27,160
Speaker 1: them to fish. When you say by the cell that

861
00:52:27,160 --> 00:52:30,080
Speaker 1: that recommendation is good for eight seconds and as soon

862
00:52:30,120 --> 00:52:33,040
Speaker 1: as the next piece of news comes along, it's bad.

863
00:52:33,920 --> 00:52:38,279
Speaker 1: So I kinda when when Bloomberg said to me, hey,

864
00:52:38,320 --> 00:52:40,560
Speaker 1: we have these great facilities, what would you like to do.

865
00:52:41,640 --> 00:52:45,959
Speaker 1: My answer was, I want to sit down with experienced, successful,

866
00:52:46,160 --> 00:52:49,080
Speaker 1: interesting people and find out how they got that way,

867
00:52:49,600 --> 00:52:51,960
Speaker 1: and hopefully we all have something to learn from that.

868
00:52:52,560 --> 00:52:56,520
Speaker 1: And besides, nobody else is doing long form deep dives

869
00:52:56,600 --> 00:53:01,719
Speaker 1: into what makes someone successful, who were their mentors, what

870
00:53:01,760 --> 00:53:03,879
Speaker 1: do they read, what do they do, how did they

871
00:53:03,880 --> 00:53:08,000
Speaker 1: become successful? And to my surprise, Bloomberg said, go ahead,

872
00:53:08,080 --> 00:53:11,200
Speaker 1: go do that's try not to hurt yourself, kid pretty much.

873
00:53:11,520 --> 00:53:13,640
Speaker 1: And it was a skunk works project for a long time,

874
00:53:13,680 --> 00:53:17,520
Speaker 1: nobody was paying attention to it, and when no one

875
00:53:17,640 --> 00:53:22,799
Speaker 1: was looking at suddenly became the most downloaded Bloomberg podcast

876
00:53:23,719 --> 00:53:25,640
Speaker 1: I have. It's I say, it's the most fun I

877
00:53:25,680 --> 00:53:27,760
Speaker 1: have all week. I get to sit down with people

878
00:53:27,760 --> 00:53:33,920
Speaker 1: like you and ask questions. Um. Last week was Bill McNabb,

879
00:53:34,080 --> 00:53:37,800
Speaker 1: the week before that was am when damadoran at n

880
00:53:37,920 --> 00:53:40,280
Speaker 1: y U. You know how often you get to grab

881
00:53:40,320 --> 00:53:42,560
Speaker 1: these people and say, give me ninety minutes of your time.

882
00:53:42,600 --> 00:53:45,920
Speaker 1: It's it's the single greatest scam in all of finance.

883
00:53:45,920 --> 00:53:49,160
Speaker 1: And they're probably please. Well they also they all say, hey,

884
00:53:49,200 --> 00:53:51,560
Speaker 1: nobody ever asked me these questions. But the fact that

885
00:53:51,719 --> 00:53:56,040
Speaker 1: somehow I've managed to convince people to do. This is

886
00:53:56,840 --> 00:54:00,960
Speaker 1: I call it the greatest scam I've did. Damn it

887
00:54:01,040 --> 00:54:04,319
Speaker 1: all well, because if anybody really knew who I was,

888
00:54:04,840 --> 00:54:09,960
Speaker 1: they would say, how did this idiot get you? I

889
00:54:10,000 --> 00:54:12,560
Speaker 1: am but having nothing to do with any of this.

890
00:54:12,560 --> 00:54:16,239
Speaker 1: This is just fun for me. I genuinely enjoy this

891
00:54:16,360 --> 00:54:20,279
Speaker 1: and hopefully that that comes across. I'm still hunting my

892
00:54:20,360 --> 00:54:23,600
Speaker 1: White Wales. So I have Alan Shaw and Bob Farrell

893
00:54:24,040 --> 00:54:27,759
Speaker 1: and then Ray Dalio and Jim Simons are also on

894
00:54:27,920 --> 00:54:31,640
Speaker 1: my So. I went undergraduate to Stony Brook from mathematics

895
00:54:31,719 --> 00:54:35,320
Speaker 1: and freshman year of visit the campus. The chairman of

896
00:54:35,360 --> 00:54:38,799
Speaker 1: the math department is Jim Simons. So I met him

897
00:54:38,840 --> 00:54:40,960
Speaker 1: a hundred years ago. And by the way, if you

898
00:54:40,960 --> 00:54:44,520
Speaker 1: would have met him in you would wouldn't give him

899
00:54:44,520 --> 00:54:47,319
Speaker 1: forty two cents. He just looked like a you know,

900
00:54:47,360 --> 00:54:50,000
Speaker 1: a chain smoking, bearded hippie. You would never give him

901
00:54:50,040 --> 00:54:53,719
Speaker 1: a dime. And Ray Dalio, every time I watch him

902
00:54:53,760 --> 00:54:56,080
Speaker 1: on the media, all I can think is that is

903
00:54:56,120 --> 00:54:59,799
Speaker 1: a terrible format for him. Ray please come in. I

904
00:55:00,040 --> 00:55:03,879
Speaker 1: promise it'll be fantastic. It's huge. I'm you Joe all

905
00:55:03,880 --> 00:55:07,680
Speaker 1: over the country. He um, he's a really sharp guy.

906
00:55:08,040 --> 00:55:11,479
Speaker 1: Love his philosophy. I love his philosophy and how he's

907
00:55:11,560 --> 00:55:17,440
Speaker 1: thought out the importance of transparency and responsibility. Really, it's

908
00:55:17,480 --> 00:55:20,600
Speaker 1: a it's a hedge fund. Why is this philosophy? How

909
00:55:20,600 --> 00:55:26,160
Speaker 1: did this develop? Nobody gives him time to extract anyway,

910
00:55:25,800 --> 00:55:31,400
Speaker 1: I'm digressing. So I've I like the format because I

911
00:55:31,440 --> 00:55:36,200
Speaker 1: get to ask people like you questions like tell us

912
00:55:36,200 --> 00:55:38,759
Speaker 1: who your early mentors were, And you mentioned Alan Shaw?

913
00:55:38,920 --> 00:55:42,880
Speaker 1: I did. He was really probably my only my only

914
00:55:42,920 --> 00:55:46,080
Speaker 1: mentor because as I said, I stayed I was pretty

915
00:55:46,160 --> 00:55:48,800
Speaker 1: much of a cocooner. How long did you work with

916
00:55:48,800 --> 00:55:53,800
Speaker 1: with Shaw for? Oh? Really? So that's really he retired

917
00:55:53,840 --> 00:55:56,520
Speaker 1: and I took over the department. It was a very

918
00:55:56,560 --> 00:56:01,399
Speaker 1: smooth transition. That was two and two. Yeah, so he's

919
00:56:01,400 --> 00:56:04,600
Speaker 1: already he's been retired for fifteen years already. Huh. And

920
00:56:04,680 --> 00:56:08,800
Speaker 1: you ran the department for five years and then independent exactly,

921
00:56:08,880 --> 00:56:12,680
Speaker 1: and that's worked out pretty well. Yes, it's fine, Yeah, okay,

922
00:56:12,760 --> 00:56:16,520
Speaker 1: not you know, it's it's satisfactory. Let's put it that way. So,

923
00:56:16,760 --> 00:56:19,600
Speaker 1: as you mentioned Shaw as a mentor, what other what

924
00:56:19,680 --> 00:56:27,040
Speaker 1: other investors influenced your perspective? Investors not so much, Gail

925
00:56:27,120 --> 00:56:30,040
Speaker 1: do dek was this traders economists that doesn't have to

926
00:56:30,080 --> 00:56:35,760
Speaker 1: be investors. Um really just m hm alan really yeah

927
00:56:36,360 --> 00:56:39,319
Speaker 1: and um so let's talk about books. What what are

928
00:56:39,360 --> 00:56:42,160
Speaker 1: some of your favorite book? I read your book, of course,

929
00:56:42,560 --> 00:56:44,800
Speaker 1: I don't know about favorite, but I read the Rheinhardt

930
00:56:44,840 --> 00:56:49,000
Speaker 1: and Rogoff book. This time is Different Years of Financial File.

931
00:56:50,160 --> 00:56:53,000
Speaker 1: Really a little dry bit of a slog, but filled

932
00:56:53,040 --> 00:56:57,719
Speaker 1: with fascinating decating Yeah yeah, and fascinating conclusions too. And

933
00:56:57,960 --> 00:57:02,120
Speaker 1: Bretton Woods I'm getting into. I can never remember everything

934
00:57:02,160 --> 00:57:05,560
Speaker 1: I've read. I love mysteries. Give us a mystery, by

935
00:57:05,560 --> 00:57:08,680
Speaker 1: the way, Bill McNab and I walked out on science fiction,

936
00:57:09,080 --> 00:57:12,120
Speaker 1: So don't feel the obligation to give me any mysteries.

937
00:57:12,200 --> 00:57:14,759
Speaker 1: Somebody gives me a book, I'll read it ferristeen and

938
00:57:15,400 --> 00:57:18,200
Speaker 1: I remember, who can any mystery? You like? Mistress? Like

939
00:57:18,280 --> 00:57:20,200
Speaker 1: myster you try and guess the end. How good are you?

940
00:57:21,040 --> 00:57:24,000
Speaker 1: My wife is? My wife is always halfway through a

941
00:57:24,040 --> 00:57:25,600
Speaker 1: book and she's like, yeah, I know who did it.

942
00:57:25,640 --> 00:57:28,440
Speaker 1: I'm done. It ruins it for her if she if

943
00:57:28,440 --> 00:57:30,720
Speaker 1: she could see it coming too soon. You gotta you

944
00:57:30,760 --> 00:57:33,880
Speaker 1: gotta hide that. So give me, give me a mystery

945
00:57:33,960 --> 00:57:36,320
Speaker 1: or two that you really liked. Well, they are all

946
00:57:36,440 --> 00:57:39,120
Speaker 1: series that I'm trying to think of the names of

947
00:57:39,160 --> 00:57:47,280
Speaker 1: the authors, Barry, I can't remember stuff anymore. Okay, let's

948
00:57:47,360 --> 00:57:51,200
Speaker 1: let's do another one. Um, how about on finance side,

949
00:57:51,200 --> 00:57:55,560
Speaker 1: any books particular to finance that you like. I have

950
00:57:55,680 --> 00:58:00,920
Speaker 1: read a lot of them, but okay, email them to

951
00:58:01,000 --> 00:58:04,480
Speaker 1: me and I'll come up with a list. Um, I

952
00:58:04,520 --> 00:58:07,160
Speaker 1: know you read McGee and let's talk. Yes, all the

953
00:58:07,480 --> 00:58:11,800
Speaker 1: all the technical book, right, McGee and Hicky is the standard.

954
00:58:12,560 --> 00:58:15,600
Speaker 1: What about any of the Well, I think that John

955
00:58:15,680 --> 00:58:19,520
Speaker 1: Murphy's book on technical and books on technical analysis are

956
00:58:19,600 --> 00:58:23,600
Speaker 1: very good primmers. What about stuff market magic? What about

957
00:58:23,640 --> 00:58:27,080
Speaker 1: your market magic? Well, that was something specific to the

958
00:58:27,280 --> 00:58:30,280
Speaker 1: to the age in the beginning to want to order

959
00:58:30,320 --> 00:58:32,160
Speaker 1: that on Amazon and I couldn't get it. Oh, you

960
00:58:32,200 --> 00:58:33,720
Speaker 1: should be able to get it. I haven't made a

961
00:58:33,720 --> 00:58:37,640
Speaker 1: penny out of it. Last I looked, it was three

962
00:58:37,720 --> 00:58:42,080
Speaker 1: dollars or something for the paperback. Um, that was really

963
00:58:42,320 --> 00:58:47,240
Speaker 1: showing how we I developed, you know, the concept that

964
00:58:47,280 --> 00:58:50,000
Speaker 1: we were in a structural bull market. The second part

965
00:58:50,640 --> 00:58:54,440
Speaker 1: asking questions is still very applicable. I had a huge

966
00:58:54,480 --> 00:58:56,960
Speaker 1: thing on water and how water was going to be

967
00:58:57,120 --> 00:59:02,280
Speaker 1: a commodity of the century. I remember John Manley came

968
00:59:02,280 --> 00:59:03,880
Speaker 1: in and gave me a bottle of water. He thought

969
00:59:03,880 --> 00:59:07,960
Speaker 1: it was such a joke. Meanwhile, meanwhile, that's what we're

970
00:59:08,000 --> 00:59:12,560
Speaker 1: looking at California. People don't realize. You buy a bottle

971
00:59:12,560 --> 00:59:15,200
Speaker 1: of water in the store, think about it. So one

972
00:59:15,280 --> 00:59:18,720
Speaker 1: turned on a tap and maybe they reverse us most

973
00:59:18,840 --> 00:59:22,640
Speaker 1: purified it reverse us mosis that cost more than a

974
00:59:22,640 --> 00:59:26,280
Speaker 1: gallon of gas, then than equivalent amount of gas. In

975
00:59:26,320 --> 00:59:29,000
Speaker 1: the mid nineties when I got all the statistics from

976
00:59:29,040 --> 00:59:33,200
Speaker 1: the United Nations, I mean the Ogalala aquifer that supplies

977
00:59:33,240 --> 00:59:36,880
Speaker 1: our entire green belt was part of the country. Yeah,

978
00:59:36,920 --> 00:59:41,000
Speaker 1: it was already you know, half gone, and not even

979
00:59:41,000 --> 00:59:44,840
Speaker 1: talking about the the water mains from there to here

980
00:59:44,840 --> 00:59:48,160
Speaker 1: are are falling apart. I mean in Vermont the summer,

981
00:59:48,160 --> 00:59:51,160
Speaker 1: a lot of people they're wells dried up. I'm sure

982
00:59:51,240 --> 00:59:54,080
Speaker 1: that's not just in Vermont, but some of the other

983
00:59:54,320 --> 00:59:57,320
Speaker 1: aspects where looking for inflation and all the techno in

984
00:59:57,400 --> 00:59:59,479
Speaker 1: all the wrong places. And then I did this whole

985
00:59:59,480 --> 01:00:06,880
Speaker 1: formula on technology and why the intangibles have increased productivity.

986
01:00:06,920 --> 01:00:09,720
Speaker 1: I don't think they're measuring productivity. Let's talk about that

987
01:00:09,760 --> 01:00:12,479
Speaker 1: because you're you're preaching to the choir here. I think

988
01:00:13,040 --> 01:00:17,280
Speaker 1: you know, I love I love George boxes line. All

989
01:00:17,360 --> 01:00:20,400
Speaker 1: models are wrong, but some are useful. When I look

990
01:00:20,440 --> 01:00:23,120
Speaker 1: at some of the models, and be it employment and

991
01:00:23,200 --> 01:00:30,280
Speaker 1: unemployment or um or productivity, it seems like as technology

992
01:00:30,360 --> 01:00:34,440
Speaker 1: has gotten more and more integrated into society, the models

993
01:00:34,520 --> 01:00:37,320
Speaker 1: are just completely diverging from reality. You can't look at

994
01:00:37,360 --> 01:00:40,600
Speaker 1: the productivity of the old industrial sector or the old

995
01:00:40,640 --> 01:00:43,800
Speaker 1: industrial worker because they're all being replaced by robots. What

996
01:00:43,840 --> 01:00:47,480
Speaker 1: I did was come up with the first law of

997
01:00:47,560 --> 01:00:55,160
Speaker 1: thermodynamics really fits this whole argument. Energy equals heat minus work. Okay,

998
01:00:55,440 --> 01:00:59,400
Speaker 1: energy equals heat minus work. The energy work minus heat

999
01:00:59,480 --> 01:01:02,480
Speaker 1: or heat mind heat minus work. If energy is the

1000
01:01:02,520 --> 01:01:07,400
Speaker 1: equivalent to economic productivity, heat would be the intangibles the

1001
01:01:07,480 --> 01:01:12,200
Speaker 1: knowledge based technology advantage, okay, and which are not measurable,

1002
01:01:12,280 --> 01:01:15,720
Speaker 1: so we call them intangibles. Um, the faster the chip,

1003
01:01:15,800 --> 01:01:18,400
Speaker 1: the more heat that kind of thing, and work represents

1004
01:01:18,440 --> 01:01:23,760
Speaker 1: the tangibles, okay. So now we have productivity equals intangibles

1005
01:01:23,840 --> 01:01:27,760
Speaker 1: minus tangibles. So we know in this new technological era,

1006
01:01:28,040 --> 01:01:31,320
Speaker 1: the work or the cost component are the tangibles, and

1007
01:01:31,400 --> 01:01:35,120
Speaker 1: that's much smaller because you have less than the industrial

1008
01:01:35,800 --> 01:01:39,880
Speaker 1: sector that we've been familiar with, and the technologically efficient

1009
01:01:39,920 --> 01:01:43,840
Speaker 1: corporations have fewer employees, they need lower costs, fewer in

1010
01:01:43,880 --> 01:01:47,800
Speaker 1: different raw materials, alt of technology. And that was the

1011
01:01:47,840 --> 01:01:50,520
Speaker 1: other thing we said. You know, technology is sand, air

1012
01:01:50,560 --> 01:01:55,080
Speaker 1: and light. You know there are no old fashioned raw materials.

1013
01:01:55,560 --> 01:01:59,760
Speaker 1: The heat component, which I call the antimatter or the intangibles,

1014
01:01:59,840 --> 01:02:03,840
Speaker 1: is rising exponentially as a result of technology. So if

1015
01:02:03,840 --> 01:02:07,400
Speaker 1: we subtract something getting smaller the tangibles of the work

1016
01:02:07,520 --> 01:02:12,320
Speaker 1: from something getting bigger, the intangibles than the total energy

1017
01:02:12,720 --> 01:02:16,600
Speaker 1: rises exponentially. In other words, were just completely measuring this.

1018
01:02:17,200 --> 01:02:20,840
Speaker 1: We're not accounting for. Look, my office is fourteen people.

1019
01:02:21,360 --> 01:02:25,040
Speaker 1: What we do with fourteen people today, years ago, I

1020
01:02:25,040 --> 01:02:28,160
Speaker 1: would have needed a hundred people to do it exactly exactly.

1021
01:02:28,240 --> 01:02:30,760
Speaker 1: So that's ten years ago was forty. But the one

1022
01:02:30,760 --> 01:02:32,920
Speaker 1: thing we have in factored in here is time. So

1023
01:02:32,960 --> 01:02:36,760
Speaker 1: we take another formula velocity equals distance divided by time.

1024
01:02:37,280 --> 01:02:40,080
Speaker 1: So the productivity that we just solved from the last

1025
01:02:40,120 --> 01:02:45,120
Speaker 1: formula becomes the numerator or the distance in our economic equivalent.

1026
01:02:45,440 --> 01:02:48,200
Speaker 1: And we know from the first equation that the technology

1027
01:02:48,280 --> 01:02:53,640
Speaker 1: benefits of increased productivity significantly, and that technology has splintered

1028
01:02:53,640 --> 01:02:58,800
Speaker 1: the time factor, so you have the numerator gets dramatically

1029
01:02:58,880 --> 01:03:01,440
Speaker 1: larger from the reason aldo the prior formula, and the

1030
01:03:01,480 --> 01:03:04,520
Speaker 1: denominator becomes a fraction of the whole. So you're the

1031
01:03:04,640 --> 01:03:07,760
Speaker 1: time element is very small and your productivity is soaring.

1032
01:03:08,080 --> 01:03:14,000
Speaker 1: But up it up. Yeah. And there have been numerous

1033
01:03:14,160 --> 01:03:18,080
Speaker 1: attempts to rationalize the old way of measuring, and it's

1034
01:03:18,160 --> 01:03:22,480
Speaker 1: just totally you know, you look at the total productivity,

1035
01:03:22,520 --> 01:03:29,240
Speaker 1: the total output of the country and the number of workers.

1036
01:03:29,280 --> 01:03:36,160
Speaker 1: Somehow they're missing the fact that this number of what

1037
01:03:35,920 --> 01:03:37,960
Speaker 1: what what are we coming up on an almost seventeen

1038
01:03:38,000 --> 01:03:45,160
Speaker 1: trillion dollar economy. Somehow this is not being appropriately. I

1039
01:03:45,200 --> 01:03:48,960
Speaker 1: don't know if it's the model, the conception, the execution,

1040
01:03:49,440 --> 01:03:52,200
Speaker 1: whatever they're doing. Something is wrong. And the other thing

1041
01:03:52,320 --> 01:03:54,880
Speaker 1: is I don't think that we can expect inflation to

1042
01:03:55,000 --> 01:03:57,600
Speaker 1: rise in the same way because it's not a demand

1043
01:03:58,280 --> 01:04:04,360
Speaker 1: pull for the product. It's this incredible technological efficiency that

1044
01:04:04,800 --> 01:04:08,120
Speaker 1: side steps inflationary pressures. At the same time, you have

1045
01:04:08,280 --> 01:04:13,040
Speaker 1: global arbitrage between salaries, so that's a natural cap on

1046
01:04:13,160 --> 01:04:18,000
Speaker 1: people's salaries rising and inflation used to be something caused

1047
01:04:18,000 --> 01:04:21,040
Speaker 1: by rising salaries and too much money chasing too few goods.

1048
01:04:21,480 --> 01:04:24,040
Speaker 1: That doesn't exist anymore. You know, you've got you've come

1049
01:04:24,080 --> 01:04:26,680
Speaker 1: to the you've come to the mean. I remember when

1050
01:04:27,000 --> 01:04:33,360
Speaker 1: they did the Clinton did the Mexican Canadian thank you

1051
01:04:33,400 --> 01:04:36,920
Speaker 1: the worst trade deal. So we we did a little

1052
01:04:36,960 --> 01:04:40,000
Speaker 1: picture of of a of a seesaw and we said,

1053
01:04:40,040 --> 01:04:44,920
Speaker 1: you know, with these trade agreements, we as in the

1054
01:04:45,000 --> 01:04:47,000
Speaker 1: United States, were at the high end of the wage

1055
01:04:47,000 --> 01:04:49,680
Speaker 1: and price scale. We're the only ones that had anything

1056
01:04:49,680 --> 01:04:54,080
Speaker 1: to lose. And so so now we've had this equalization.

1057
01:04:54,360 --> 01:04:56,040
Speaker 1: Where where do you go? Now, where do you go

1058
01:04:56,160 --> 01:05:00,560
Speaker 1: for them? We have arbitrage the wage differences, right, that's right.

1059
01:05:00,640 --> 01:05:04,200
Speaker 1: So maybe Africa, maybe we started. I got I picked

1060
01:05:04,280 --> 01:05:08,520
Speaker 1: up something yesterday and it was made in Ethiopia. I'm

1061
01:05:08,520 --> 01:05:13,000
Speaker 1: gonna tell you all all those outsourced jobs, they're all

1062
01:05:13,360 --> 01:05:16,120
Speaker 1: all those manufacturing, they're all going to come back to

1063
01:05:16,200 --> 01:05:18,560
Speaker 1: the United States to save on shipping. I hope so.

1064
01:05:18,920 --> 01:05:20,960
Speaker 1: But but it's not going to be people. It's going

1065
01:05:21,000 --> 01:05:26,360
Speaker 1: to be where robots nation. You know, the big problem

1066
01:05:26,480 --> 01:05:29,720
Speaker 1: China is facing. And I've had this conversation with a

1067
01:05:29,720 --> 01:05:33,520
Speaker 1: handful of prior guests. They have a billion something people,

1068
01:05:34,000 --> 01:05:35,720
Speaker 1: half of whom are still on the farms, and they're

1069
01:05:35,720 --> 01:05:38,640
Speaker 1: trying to move them into the cities. What happens when

1070
01:05:38,720 --> 01:05:44,439
Speaker 1: automation replaces these giant fox con and other factories. They're

1071
01:05:44,480 --> 01:05:47,520
Speaker 1: looking at a real You think social unrest is potentially

1072
01:05:47,560 --> 01:05:51,080
Speaker 1: an issue here, look at the issue that they're going

1073
01:05:51,160 --> 01:05:53,280
Speaker 1: to hitch. It's kind of hard to imagine. We have

1074
01:05:53,320 --> 01:05:56,040
Speaker 1: a population coming up that's the same size, if not

1075
01:05:56,200 --> 01:05:59,680
Speaker 1: larger than the baby boomers are a million, and there

1076
01:05:59,680 --> 01:06:02,160
Speaker 1: are no jobs for them. Right The millennials are now

1077
01:06:02,240 --> 01:06:05,440
Speaker 1: bigger than the baby boomers, which is which is impressive.

1078
01:06:05,520 --> 01:06:07,480
Speaker 1: And now if they could start working and putting some

1079
01:06:07,560 --> 01:06:10,960
Speaker 1: money away and you know, then maybe things get back

1080
01:06:11,000 --> 01:06:14,160
Speaker 1: to normal. But the problem is the jobs. The interesting

1081
01:06:14,240 --> 01:06:19,760
Speaker 1: conversation I had Um I'm drown a blank on his name,

1082
01:06:19,840 --> 01:06:22,520
Speaker 1: speaking of no memory, who wrote He's an n y

1083
01:06:22,560 --> 01:06:25,520
Speaker 1: U professor who wrote the Sharing Economy. It was on

1084
01:06:25,640 --> 01:06:28,560
Speaker 1: he was on our show a few weeks ago. Um

1085
01:06:28,720 --> 01:06:33,240
Speaker 1: are Run. I'm trying to remember his last name anyway,

1086
01:06:33,280 --> 01:06:39,000
Speaker 1: it rhymes with maroon aroun Um. He had suggested that

1087
01:06:39,320 --> 01:06:43,640
Speaker 1: this current generation is increasingly aware of the fact that

1088
01:06:44,480 --> 01:06:48,960
Speaker 1: they are solo practitioners. They're free agents. And the gig

1089
01:06:49,000 --> 01:06:54,320
Speaker 1: economy is something that everybody is sort of embracing because

1090
01:06:55,480 --> 01:06:58,520
Speaker 1: you're only if you're only making X as a job,

1091
01:06:58,600 --> 01:07:01,520
Speaker 1: that may not be your long term career goal. Well,

1092
01:07:01,600 --> 01:07:04,360
Speaker 1: you could sell stuff on very, you can drive a car,

1093
01:07:04,520 --> 01:07:06,880
Speaker 1: you can rent down an extra room, you could sell

1094
01:07:06,920 --> 01:07:12,840
Speaker 1: stuff on you. See, there's there's a entire new sharing

1095
01:07:12,840 --> 01:07:16,360
Speaker 1: economy that is being used to supplement regular people. There's

1096
01:07:17,560 --> 01:07:22,880
Speaker 1: no there's zero security. It's a very different type of job. Um,

1097
01:07:23,960 --> 01:07:26,800
Speaker 1: except there's still demand for products and there's still demand

1098
01:07:26,840 --> 01:07:31,120
Speaker 1: for services, and as long as that demand continues, an

1099
01:07:31,160 --> 01:07:34,040
Speaker 1: economy is going to exist. It's just different than the

1100
01:07:34,080 --> 01:07:36,640
Speaker 1: one you and I are used to. And that transition

1101
01:07:37,200 --> 01:07:40,800
Speaker 1: always looks scary. Go back a hundred years, half the

1102
01:07:40,800 --> 01:07:45,640
Speaker 1: country worked on a farm. Now it's what that transition

1103
01:07:45,760 --> 01:07:50,120
Speaker 1: was also very very scary. Uh, It's easy to get

1104
01:07:50,160 --> 01:07:53,480
Speaker 1: into a really pessimistic circle of it's all going to

1105
01:07:53,520 --> 01:07:56,960
Speaker 1: be robots, it'll it'll look like Wally and nobody, it

1106
01:07:57,000 --> 01:08:01,120
Speaker 1: will have jobs. Um, I'm hoping that that's not the

1107
01:08:01,160 --> 01:08:04,959
Speaker 1: final outcome. But but I digress. So so let's jump

1108
01:08:05,000 --> 01:08:09,040
Speaker 1: back to some of our UM other questions you had

1109
01:08:09,040 --> 01:08:12,360
Speaker 1: mentioned h F t S as a structural change. What

1110
01:08:12,440 --> 01:08:18,760
Speaker 1: other shifts do you see coming along? Let let me

1111
01:08:18,760 --> 01:08:21,320
Speaker 1: ask you the question that's in my mind these days,

1112
01:08:22,120 --> 01:08:25,920
Speaker 1: the move from active trading to passive, the rise of ETFs.

1113
01:08:26,680 --> 01:08:31,000
Speaker 1: What has that done to the way people invest and trade.

1114
01:08:31,200 --> 01:08:33,680
Speaker 1: I've been trying to figure that out because if you

1115
01:08:33,760 --> 01:08:36,280
Speaker 1: have a basket of stocks and in E t F

1116
01:08:36,520 --> 01:08:41,680
Speaker 1: you are essentially preventing the individual movement of each of

1117
01:08:41,680 --> 01:08:46,439
Speaker 1: those component members. And to what effect that's going to

1118
01:08:46,560 --> 01:08:49,479
Speaker 1: have on the overall market is very hard to tell.

1119
01:08:49,520 --> 01:08:52,559
Speaker 1: I was speaking with a portfolio manager friend of mine.

1120
01:08:52,560 --> 01:08:55,920
Speaker 1: We were together at Smith Barney way back, and she said,

1121
01:08:55,960 --> 01:08:58,920
Speaker 1: what they're doing is looking for companies that are not

1122
01:09:00,000 --> 01:09:03,360
Speaker 1: in any of the e t f s because they're

1123
01:09:03,479 --> 01:09:06,600
Speaker 1: very interesting. So you're screening out you're screening out the

1124
01:09:06,600 --> 01:09:11,040
Speaker 1: big ETFs. Anyway. Yeah, Yeah, that was a very interesting

1125
01:09:11,080 --> 01:09:15,320
Speaker 1: point because I'm not sure that I can give you

1126
01:09:15,880 --> 01:09:18,200
Speaker 1: a reason why the e t f s might have

1127
01:09:18,280 --> 01:09:22,640
Speaker 1: a very different effect on the market. The Vanguard CEO

1128
01:09:22,680 --> 01:09:28,000
Speaker 1: told me that when you look at UM, when you

1129
01:09:28,000 --> 01:09:32,360
Speaker 1: look at e t f s, they're about fifteen percent indexes.

1130
01:09:32,400 --> 01:09:41,920
Speaker 1: Passive indexes are are something like fifteen of the i'm sorry,

1131
01:09:42,320 --> 01:09:45,760
Speaker 1: of the U S market of the global market as

1132
01:09:45,760 --> 01:09:49,840
Speaker 1: purchased by institutions, and five percent of the investible assets.

1133
01:09:50,240 --> 01:09:55,360
Speaker 1: It's smaller then then people realize. But in terms of

1134
01:09:55,400 --> 01:09:58,919
Speaker 1: how money is flowing in the direction, it's going. Clearly

1135
01:09:59,240 --> 01:10:01,840
Speaker 1: it's moving in the direction and has been for years.

1136
01:10:01,920 --> 01:10:05,000
Speaker 1: We've had huge outflows from the mutual funds, but right

1137
01:10:05,040 --> 01:10:09,880
Speaker 1: now they're starting to see that much money going into

1138
01:10:10,040 --> 01:10:11,880
Speaker 1: e t F. So it's moving out of the funds

1139
01:10:11,920 --> 01:10:14,320
Speaker 1: and moving into the e t F, which is really interesting.

1140
01:10:14,360 --> 01:10:18,280
Speaker 1: That's just begun to start to equate. First it was,

1141
01:10:18,640 --> 01:10:22,720
Speaker 1: you know, pulling out completely um I. You have to

1142
01:10:22,760 --> 01:10:26,960
Speaker 1: wonder whether it provides a cushion under the market. It's certainly.

1143
01:10:27,200 --> 01:10:30,639
Speaker 1: My colleague Josh Brown calls that the relentless bid. It's

1144
01:10:30,680 --> 01:10:34,320
Speaker 1: that there is always a buyer in in the UM,

1145
01:10:34,560 --> 01:10:38,760
Speaker 1: in the asset allocators in the passive vanguard. Again Bill

1146
01:10:38,840 --> 01:10:43,719
Speaker 1: McNabb said, it's not passive versus active. Where the changes.

1147
01:10:44,360 --> 01:10:48,120
Speaker 1: It's high cost to low cost, and you look at

1148
01:10:48,520 --> 01:10:51,519
Speaker 1: you want to on the sp you buy it on

1149
01:10:51,560 --> 01:10:55,719
Speaker 1: the Admiral Funds at at Vanguard it's six basis points.

1150
01:10:55,720 --> 01:10:59,880
Speaker 1: It's practically free. When you look at a lot of

1151
01:11:00,000 --> 01:11:03,519
Speaker 1: active mutual funds are one one and half two percent

1152
01:11:04,400 --> 01:11:11,559
Speaker 1: um that that is a huge drag on performance. And

1153
01:11:11,680 --> 01:11:13,800
Speaker 1: people have figured out, hey, I'm not a great stock

1154
01:11:13,880 --> 01:11:16,320
Speaker 1: pick or a market timer. I might as well be

1155
01:11:16,360 --> 01:11:20,080
Speaker 1: passive and save on the cost. And that realization and

1156
01:11:20,120 --> 01:11:22,280
Speaker 1: it took the dot com crash, the housing crash, and

1157
01:11:22,280 --> 01:11:24,720
Speaker 1: then oh eight oh nine to sort of force a

1158
01:11:24,720 --> 01:11:27,519
Speaker 1: lot of people into throwing their hands up in the

1159
01:11:27,520 --> 01:11:30,120
Speaker 1: air and saying, all right, I'll just do this. We'll

1160
01:11:30,160 --> 01:11:33,680
Speaker 1: see if it lasts. I assume this is a secular

1161
01:11:33,800 --> 01:11:36,160
Speaker 1: change that has a way to run. But what what

1162
01:11:36,240 --> 01:11:38,920
Speaker 1: do I know? You're probably right? No, you're probably right.

1163
01:11:39,040 --> 01:11:43,040
Speaker 1: So so let's talk about you a little bit. Um.

1164
01:11:43,080 --> 01:11:46,200
Speaker 1: What do you do to relax outside of the office

1165
01:11:47,360 --> 01:11:51,720
Speaker 1: other than read mysteries? Yeah? I well, now that I'm

1166
01:11:51,760 --> 01:11:55,240
Speaker 1: semi retired, I have more time. It's not seven week,

1167
01:11:56,080 --> 01:11:57,880
Speaker 1: so I do. I go to the museums, I go

1168
01:11:57,960 --> 01:12:00,719
Speaker 1: to the theater, I go to a movie. I dance,

1169
01:12:00,800 --> 01:12:03,559
Speaker 1: so I take dance lessons and there are several dance

1170
01:12:03,560 --> 01:12:06,640
Speaker 1: groups that I participate. Help you stay physically fit, physically

1171
01:12:06,680 --> 01:12:09,200
Speaker 1: fit lots of exercise that has to be good mentally

1172
01:12:09,400 --> 01:12:14,840
Speaker 1: sort of exercise. Wow, that's pretty interesting. Um, So our

1173
01:12:14,960 --> 01:12:19,000
Speaker 1: last two questions my favorite questions. If a millennial or

1174
01:12:19,040 --> 01:12:21,960
Speaker 1: a recent college grad came to you and said, I'm

1175
01:12:22,000 --> 01:12:25,479
Speaker 1: thinking of going into technicals as a career, what sort

1176
01:12:25,479 --> 01:12:30,920
Speaker 1: of advice would you give them. Well, it's a great

1177
01:12:30,960 --> 01:12:35,040
Speaker 1: talent to have if you have any any If I

1178
01:12:35,080 --> 01:12:37,400
Speaker 1: don't know, you'd have to find a place for yourself,

1179
01:12:37,479 --> 01:12:40,400
Speaker 1: which would mean working with the money manager, I would think.

1180
01:12:41,160 --> 01:12:43,920
Speaker 1: Um Otherwise, I would say, if you had any interest

1181
01:12:44,000 --> 01:12:48,439
Speaker 1: in doing fundamental work, learn the technicals and take it

1182
01:12:48,479 --> 01:12:50,640
Speaker 1: with you to any part of the financial world that

1183
01:12:50,720 --> 01:12:55,559
Speaker 1: you go. That's a fair answer. And and my last question,

1184
01:12:55,560 --> 01:12:58,080
Speaker 1: you said, you've been doing this for forty plus years.

1185
01:12:58,760 --> 01:13:01,720
Speaker 1: What is it that you know a about investing and

1186
01:13:01,960 --> 01:13:06,479
Speaker 1: technicals today that you wish you knew ten years, forty

1187
01:13:06,520 --> 01:13:09,720
Speaker 1: years ago, whatever years ago? There years ago? Um, well,

1188
01:13:09,760 --> 01:13:12,360
Speaker 1: I didn't have any money thirty years ago. I just

1189
01:13:12,560 --> 01:13:14,760
Speaker 1: wasn't doing much and you couldn't trade when you were

1190
01:13:14,760 --> 01:13:18,480
Speaker 1: in research, so I never learned how to trade. Basically,

1191
01:13:18,520 --> 01:13:21,920
Speaker 1: I didn't do much of anything. But I think the

1192
01:13:22,040 --> 01:13:25,920
Speaker 1: what I would want to learn from the years that

1193
01:13:26,000 --> 01:13:28,640
Speaker 1: I've been in the market is to hold on to

1194
01:13:28,760 --> 01:13:31,280
Speaker 1: the major trend. My son always says to me, Mom,

1195
01:13:31,320 --> 01:13:35,080
Speaker 1: why don't you follow your own advice? And and so

1196
01:13:35,160 --> 01:13:38,960
Speaker 1: you were selling you winners too soon? And I know

1197
01:13:39,000 --> 01:13:41,639
Speaker 1: you weren't holding onto your losers, but you were selling

1198
01:13:42,680 --> 01:13:46,040
Speaker 1: too soon. That's UH. I had Netflix for two points

1199
01:13:46,120 --> 01:13:50,759
Speaker 1: and that was that. How has it done since? Huge? Huge? Winter? Huge?

1200
01:13:51,040 --> 01:13:55,240
Speaker 1: Missed it? Follow your own advice? We have been speaking

1201
01:13:55,280 --> 01:13:59,960
Speaker 1: to Luisia Mata. She is the UH manager and owner

1202
01:14:00,080 --> 01:14:04,400
Speaker 1: of Luisia Matta Research Advisors. If you enjoy this conversation,

1203
01:14:04,479 --> 01:14:06,120
Speaker 1: be sure and look up an inch or down an

1204
01:14:06,160 --> 01:14:09,479
Speaker 1: inch and you'll see on iTunes and you could see

1205
01:14:10,000 --> 01:14:16,520
Speaker 1: nearly all of the other hundred and somewhat previous conversations

1206
01:14:17,320 --> 01:14:20,160
Speaker 1: we have had. I would be remiss if I did

1207
01:14:20,200 --> 01:14:23,240
Speaker 1: not thank Taylor Riggs are Booker and Michael bat Nick,

1208
01:14:23,560 --> 01:14:27,759
Speaker 1: our head of research, for helping us put this conversation together.

1209
01:14:28,400 --> 01:14:33,720
Speaker 1: Be sure and send us your comments, suggestions and ideas

1210
01:14:33,960 --> 01:14:39,160
Speaker 1: at our email address that is m IB podcast at

1211
01:14:39,160 --> 01:14:43,320
Speaker 1: Bloomberg dot net. I'm Barry Ridhults. You've been listening to

1212
01:14:43,479 --> 01:14:49,680
Speaker 1: Masters in Business on Bloomberg Radio brought to you by

1213
01:14:49,720 --> 01:14:53,280
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1214
01:14:53,360 --> 01:14:56,400
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1215
01:14:56,479 --> 01:15:00,160
Speaker 1: climate change and Sustainability by the Banker. That's the hour

1216
01:15:00,240 --> 01:15:03,840
Speaker 1: of Global Connections. Bank of America North America member f

1217
01:15:03,960 --> 01:15:04,320
Speaker 1: d i C