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Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.

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Speaker 1: Hey this week on the podcast, I have a special guest,

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Speaker 1: and I should say that less often, but I have

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Speaker 1: a special guest. He's somebody who I have been reading

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Speaker 1: for a very long time. Very early in my career,

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Speaker 1: I started out reading Tom Dorsey. He's the co founder

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Speaker 1: and CEO of Dorsey Wright, which runs a few billions

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Speaker 1: of dollars in ETFs and was recently bought by NASDAC

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Speaker 1: for a couple of hundred million dollars. If you are

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Speaker 1: technically oriented, if you are a technician, chartist, plant anything

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Speaker 1: along those lines, you will find this conversation quite fascinating.

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Speaker 1: Dorsey Wright is not the sort of technical newsletter that's

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Speaker 1: read by the lay person or the investing public. It

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Speaker 1: really has been a how to guide for some of

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Speaker 1: the savvier people in the brokerage world and sells ID.

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Speaker 1: I recall visiting other people's offices and laughing saying, hey,

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Speaker 1: this Dorsey right on the desk. Anyway, we spoke to

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Speaker 1: almost two hours. Uh. It ranged far and wide. If

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Speaker 1: you're at all interested in in relative strength, portfolio management,

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Speaker 1: technical analysis, port and figure charting, you will find this

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Speaker 1: UH conversation to be a tour to force. So, without

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Speaker 1: any further delay, my conversation with Tom Dorsey. This is

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

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Speaker 1: My guest is Tom Dorsey. He is the founder and

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Speaker 1: former CEO of Dorsey Wright and Associates, a technical research

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Speaker 1: and advisory daily read that I recall spending lots and

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Speaker 1: lots of time with the early part of my career.

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Speaker 1: It pretty much was a regular on my desk. Last

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Speaker 1: year this was sold to the NASDAC for almost a

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Speaker 1: quarterbillion dollars. Dorsey Wright is based on an idea called

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Speaker 1: point and figure charting, which will get into but the

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Speaker 1: underlying concept is you must have a clear strategy based

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Speaker 1: on objective, unemotional data. Welcome to bloom Bark. It's pleasure

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Speaker 1: to have you, Thanks Barry. So I want to start

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Speaker 1: out with a quote of yours and and have you

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Speaker 1: respond to that. Strict modern portfolio theory has driven a

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Speaker 1: commoditization of financial analysis to the detriment of analysts and investors.

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Speaker 1: What does that mean? Well, when you're thinking about modern

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Speaker 1: portfolio theory, it's something that goes back. UH. Probably thirty

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Speaker 1: forty years ago, and it's it's it's it's fundamental buy

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Speaker 1: and hold. A person comes into an office, takes a test,

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Speaker 1: determines that he's a moderate investor, immediate goes into a

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Speaker 1: into a moderate pie and uh, that's rebalanced twice a

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Speaker 1: year and you stay that way as long as your

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Speaker 1: risk level doesn't change. So you've got to come in

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Speaker 1: and retake a test to make your risk level change

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Speaker 1: before anything will change there. So it can miss a

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Speaker 1: lot of changes in the overall market. But it's something

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Speaker 1: that you'll probably find that nine percent of advisors use.

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Speaker 1: Makes a lot of sense. So we talked earlier. I

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Speaker 1: mentioned objective on emotional data is key to a strategy,

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Speaker 1: but you have noted that a lot of people don't

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Speaker 1: really have much of a strategy. No, that's the thing.

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Speaker 1: People are human, you know. Well, it's like Mike Tyson said,

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Speaker 1: you walk into a ring with it with all all

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Speaker 1: kind of plans and a strategy until you get hit

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Speaker 1: one time. Right, everybody has a plan until the're hit

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Speaker 1: in the face, until they're hit in the phase it

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Speaker 1: And that's exactly what happens here. The strategy is great

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Speaker 1: until all of a sudden you feel sick to your stomach.

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Speaker 1: The market is going down and it's let's get out,

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Speaker 1: and it's getting out exactly at the wrong time. So

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Speaker 1: that's the hard part. Is what we have done at

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Speaker 1: Dorsey right is we've taken the emotion out of it

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Speaker 1: and made everything rules based. So when it feels the

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Speaker 1: feels the worst, you have to understand that the systematic

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Speaker 1: approach is going to do it job. Sometimes it doesn't

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Speaker 1: feel so good, like right now, but most of the

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Speaker 1: time it works fine. So one of the things you

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Speaker 1: would send along these lines, um studies have shown investors

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Speaker 1: tend to achieve subpart performance when they allow those emotions

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Speaker 1: to take over and when they fail to adhere to

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Speaker 1: a consistent said a rules. So if you have these

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Speaker 1: rules that will prevent you from engaging in emotional behavior,

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Speaker 1: how does an investor find the discipline to stick to

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Speaker 1: those rules. Well, that's a good question, Barry. How do

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Speaker 1: you know, because again, like I said, you're dealing with

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Speaker 1: human emotion. When you embrace. When you sit down with

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Speaker 1: your advisor and he's using a rules based system and

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Speaker 1: explains the rules to you and you embrace those rules,

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Speaker 1: that's where you need to step back and just let

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Speaker 1: it happen. When things feel bad, that's the time typically

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Speaker 1: in that type of a program, to add money to

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Speaker 1: the to the portfolio, not take money out. Take for instance,

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Speaker 1: what we do is probably gonna underperform maybe once every

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Speaker 1: four quarters somewhere in that nature. You'll feel bad. You're

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Speaker 1: gonna a position one way in the market's going the

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Speaker 1: other way, precisely exactly, And typically what happens there Really,

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Speaker 1: when you're looking at a rules based program like ours,

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Speaker 1: which is relative strength, the it's like shifting a car.

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Speaker 1: It's trying to find traction. So you go from first

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Speaker 1: gear to second gear, you let off the gas, you

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Speaker 1: push in the clutch, you change it from first to

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Speaker 1: second gear, you put let the clutch back out, you

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Speaker 1: put the gas back on. You've lost momentum. And then

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Speaker 1: once you catch second gear, that's when you found the direction.

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Speaker 1: But when nothing's when there's no direction whatsoever, like like

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Speaker 1: lately exactly, that's when it underperforms. So how did you

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Speaker 1: become a technician? How did you find your way to

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Speaker 1: looking at price as opposed to looking at the fundamentals? Well, Barry,

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Speaker 1: it was absolutely accidental because I was a stockbroker Maryland's

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Speaker 1: first back in the mid seventies. Um had to be

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Speaker 1: a rough period. Oh it wasn't rough because I started

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Speaker 1: exactly at the boy him of the market when people

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Speaker 1: had been wiped out. Between nineteen seventy four. I got

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Speaker 1: the distinct pleasure of graduating from Maryland Sales School, coming

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Speaker 1: back to to mary Lynch and Richmond, Virginia, picking up

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Speaker 1: the phone and now I'm on the white Horse and

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Speaker 1: I'm gonna help everyone, and they've just been lost. They

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Speaker 1: just lost about six point market was more than sm

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Speaker 1: was more than cut and half over that period exactly,

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Speaker 1: So no one was really interested in the twenty some

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Speaker 1: year old kid coming in to help them. But I

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Speaker 1: realized if I'm going to be successful, I had to

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Speaker 1: become an expert at something. So I chose the option market,

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Speaker 1: which had just debuted the year before in April of

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Speaker 1: nineteen seventy four. So I became an expert in options

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Speaker 1: by studying weekends and whatnot. Ultimately that led to Wheat

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Speaker 1: First Securities, which was a large regional firm, hiring me

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Speaker 1: to come across and develop and manage their first option

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Speaker 1: strategy department. That's funny, I mentioned I read you when

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Speaker 1: I was early in my career. Similarly, from Wheat first,

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Speaker 1: I read Don Hayes. His office was right next to mine.

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Speaker 1: So in the last minute, we have and we're gonna

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Speaker 1: spend a lot more time on point and figure next segment.

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Speaker 1: What makes point and figure different from traditional charting, Well,

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Speaker 1: because point and figure charts are not updated every day. Uh,

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Speaker 1: there are certain things that have to happen before chart

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Speaker 1: is updated. It's made out of xs and o's and

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Speaker 1: looks kind of funny to people, but there is a

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Speaker 1: learning process that you have to go through when you

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Speaker 1: to understand the buy signals and sell signals in in uh,

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Speaker 1: in point and figure. What has to happen for a

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Speaker 1: point and figure chart to be updated, Well, what has

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Speaker 1: to happen is the stock either has to reverse columns

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Speaker 1: by three boxes or more, meaning the price has to

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Speaker 1: come down to come down by three typically a certain

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Speaker 1: amount exactly. So it's really that doesn't happen, it's not

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Speaker 1: gonna be updated. I'm Barry rid Helts. You're listening to

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Speaker 1: Masters in Business on Bloomberg Radio. My guest this week

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Speaker 1: is Tom Dorsey. He is the founder of Dorsey Wright Associates,

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Speaker 1: which is a research and newsletter firm that was sold

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Speaker 1: to the nast Act for a couple hundred million dollars

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Speaker 1: last year. Before we get into the specific of point

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Speaker 1: and figure charting, you come out of the Mary Merrill

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Speaker 1: Lynch sales program, uh, which I know is a fairly

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Speaker 1: fundamental approach to looking at stocks. How did somebody like

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Speaker 1: you in the early seventies find your way into technical analysts? Well,

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Speaker 1: it was totally by accident, Barry, because when Wheat First

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Speaker 1: Security hired me to to leave Mery Lynch and come

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Speaker 1: across and develop and manage their first option department, I

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Speaker 1: realized I need to hire somebody who really understood the markets.

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Speaker 1: And I hired this guy from Charlotte, North Carolina. Name

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Speaker 1: was Steve Kane, and he brought with him a little

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Speaker 1: book written in nineteen forty seven called the three point

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Speaker 1: Reversal Method of Point and Figure Stock Market Trading by A. W. Cohen.

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Speaker 1: And he said, would you read this so you'll understand

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Speaker 1: the operating system in my mind when I come to

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Speaker 1: you with a stock or the sector, or the market

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Speaker 1: or that type of thing. I said, I do it,

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Speaker 1: and I took it to a Virginia beach that weekend

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Speaker 1: with my wife. Read the first paragraph of the introduction

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Speaker 1: brought me back to my economics education in the university,

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Speaker 1: and I had the epiphany right then that I knew

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Speaker 1: I had to teach this to my brothers and sisters

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Speaker 1: for the rest of my life because it brought me

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Speaker 1: back to econ one on one, which was the most

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Speaker 1: important course I ever had in the university. Supply and demand. Absolutely,

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Speaker 1: that's the key to all of the irrefutable law of

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Speaker 1: supply and demand. And this methodology was created simply as

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Speaker 1: a logical, organized way of recording the imbalance between supply

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Speaker 1: and demand. So we we talked earlier about xs and o's.

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Speaker 1: In other words, you know, it's not so much that

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Speaker 1: you're looking at a line chartum on a screen, but

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Speaker 1: you're essentially looking at x's when the stock is rising,

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Speaker 1: oh's when the stock is falling. Um. Why didn't this

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Speaker 1: method ever go mainstream? If it's if it's so successful, well,

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Speaker 1: I'm actually glad it never did go mainstream because it's

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Speaker 1: because for you, it takes it takes uh an education

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Speaker 1: to do this. You've got to want to learn point

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Speaker 1: and figure charge. Anyone could look at a regular charge

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Speaker 1: in Bloomberg or yeah, but this real. You need to

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Speaker 1: have some background. You've got you need to have some background,

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Speaker 1: and not that much background. I mean, I'm not selling

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Speaker 1: a book, but you could read my book in your

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Speaker 1: and you've got enough. So the one of the key

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Speaker 1: questions anytime I mentioned point and figure charting to people,

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Speaker 1: well why should I use that method as opposed to

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Speaker 1: regular technical analysis. Well, one of the things is it's

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Speaker 1: number one easily programmable because the computer already understands ones

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Speaker 1: and zeros, It understands xs and ohs like you can't imagine. Um,

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Speaker 1: there are relative strength things that we can do with

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Speaker 1: the point and figure charting that you really can't do

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Speaker 1: with bar charts. Bar charts are updated every day, no

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Speaker 1: matter how inconsequential, the more minute by minute, as often

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Speaker 1: as you want to be in the thick of it,

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Speaker 1: so they only whisper when a particular signal is given

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Speaker 1: ers or something should be done with a point and

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Speaker 1: figure charts yells at you. You see a stock rise

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Speaker 1: to a particular point four times and it can't get

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Speaker 1: through that level, and the fifth time it finally gets

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Speaker 1: through that level, it's yelling at you and says, you know,

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Speaker 1: that supply that was at that level all this time

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Speaker 1: could be even a few years. In the case of

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Speaker 1: Coca Cola, back could be a few years. And finally

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Speaker 1: it's it's it's sopped up all that selling pressure and

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Speaker 1: this breakout suggests is going much much higher. I like,

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Speaker 1: I like that explanation. Regular charts whisper point and figures. Yeah,

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Speaker 1: they shout that that's that's really quite quite interesting. So

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Speaker 1: one of the things, and again I was a reader

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Speaker 1: of Dorsey Wright for many many people should realize that

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Speaker 1: for those of those folks who might not have been

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Speaker 1: on the cell side, on the brokeren side at any

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Speaker 1: part of their career, this was pretty much a staple

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Speaker 1: across broker's desks and strategist desks all over Wall Street.

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Speaker 1: Lots and lots of people were reading Dorsey Wright. And

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Speaker 1: one of the things that I very vividly remember was

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Speaker 1: your concept of is the offensive team or the decent

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Speaker 1: offensive team on the field, Please explain that for for

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Speaker 1: the average lay person, that's a concept that day's back

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Speaker 1: to nineteen and Earnest Staby began thinking about what we

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Speaker 1: needed in the market, and he's basically said, we need

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Speaker 1: a soulless barometer that will begin becoming negative when the

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Speaker 1: markets at at the top, and positive when the markets

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Speaker 1: at the bottom. Something totally confounding two investors that when

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Speaker 1: things look the best, we need to start getting negative.

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Speaker 1: So in N. W. Cohen created what's called the bullish

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Speaker 1: percent index. Now, the beauty about a point in figure

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Speaker 1: chart is a buy or sells signal by singing will

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Speaker 1: simply a column of excess that exceeds the previous column

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Speaker 1: of excess. That's simple. Just think in your mind, that's

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Speaker 1: all excess that exceed a previous contents. So a a

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Speaker 1: higher price right on a certain range, that's right, and

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Speaker 1: you can see it's it's so visual, it's unbelievable. The

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Speaker 1: computer can see this easily. When you look at the

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Speaker 1: New York Stock Exchange, which has about two thousand stocks

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Speaker 1: on it somewhere in that area, and we calculate the

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Speaker 1: percentage of stocks that are on by signals, that that

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Speaker 1: means if we went through, if I gave a seventh

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Speaker 1: grader every chart on the New York Stock Exchange and

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Speaker 1: said look to the far right hand side, and every

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Speaker 1: stock you see that has a column of excess that

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Speaker 1: exceeded a previous column of excess counted as counted over here.

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Speaker 1: Set it in a pile. Then we'll divide by the

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Speaker 1: total and we get a percentage from zero to a hundred.

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Speaker 1: So there are different risk levels, but in general, when

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Speaker 1: it's in a column of x's and rising, you have

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Speaker 1: the football. So when you have the football, you should

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Speaker 1: be playing offense. Now, field position is a different story.

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Speaker 1: If you're near the seventy level, that would suggest that

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Speaker 1: everyone is in that wants to be in, and you

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Speaker 1: may have the football, but your field position is terrible.

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Speaker 1: That tells you what plays you probably should run. If

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Speaker 1: you're down at the line level and you have the football,

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Speaker 1: then you can be gonna run much more aggressive plays. Conversely,

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Speaker 1: when it's in a column of OS and declining, in

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Speaker 1: other words, more stocks going on cell signals, which is

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Speaker 1: a column of OS exceeding a previous column of OS,

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Speaker 1: it suggests to you that the defensive team is on

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Speaker 1: the field. Play it that way, play defense. And that's

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Speaker 1: probably the most important market indicator that we have ever

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Speaker 1: had created back in and I could effectively manage the

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Speaker 1: market just with that. So you mentioned that's your favorite indicator.

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Speaker 1: What other indicators do you pay attention to, and perhaps

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Speaker 1: more importantly, what other indicators do you completely ignore? Well,

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Speaker 1: the other ones that we pay attention to, our bullish

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Speaker 1: percents on other types of indexes, like the NASTAC. We

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Speaker 1: do bullish percents on all the sectors. We look at

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Speaker 1: the percentage of stocks that have positive relative strength in

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Speaker 1: a particular industry, sector or the market, and it's the

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Speaker 1: same zero to a hundred grid. You look at that

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Speaker 1: like a football field zero to a hundred uh hundred

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Speaker 1: yards exactly, and when you're above seventy you have bad

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Speaker 1: field position. Below you have good field position column of X,

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Speaker 1: as you have the ball column of o's you don't

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Speaker 1: have the ball. And then we look at all kinds

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Speaker 1: of things like that relative percent of stocks. So in

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Speaker 1: in the last minute we have define what relative strength is.

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Speaker 1: And again for the lay person who may not be

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Speaker 1: familiar with this, relative strength is like an arm wrestling contest.

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Speaker 1: You might have two people and everyone's see an arm

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Speaker 1: wrestling contest, and you see two people on television arm wrestling,

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Speaker 1: and one guy summarily beats the other guy. He has

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Speaker 1: better relative strength than the person. He just two strong guys,

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Speaker 1: one of them is just a little stronger than the

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Speaker 1: precisely and you can do that for different stocks in

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Speaker 1: different sectors. Yeah. Absolutely, I mean it's something that we did,

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Speaker 1: we did nine years ago. We should do that by

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Speaker 1: hand because we didn't have computer systems to do it.

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Speaker 1: I'm Barry Ridholtz. You're listening to Masters in Business on

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Speaker 1: Bloomberg Radio. My guest this week is Tom Dorsey. He

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Speaker 1: is the founder and FORMACYEO of a technical research firm.

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Speaker 1: Dorsey Wright sold last year to the NASDAC for two

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Speaker 1: hundred and something million dollars uh and now Tom is

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Speaker 1: the CEO and c i O of his own family office,

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Speaker 1: running money for his own account and and the family's account.

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Speaker 1: I want to talk a little bit about power shares,

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Speaker 1: e t F and some of the strategies you developed.

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Speaker 1: But before we get into that, not technicals, but let's

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Speaker 1: talk about technology. How has technology changed what you do

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Speaker 1: every day? Barry. That's a great question because you know,

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Speaker 1: technology has had such a major effect on our whole industry.

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Speaker 1: Anything that can be automated will be automated. And you've

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Speaker 1: got to understand that with technology, our relative strength work

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Speaker 1: that we do for our E t F and and

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Speaker 1: the comparisons and contrast we do. We used to do

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Speaker 1: by hand. Back twenty eight years ago, I started charting.

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Speaker 1: I'm early in my career. I worked with a gentleman

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Speaker 1: named Guy Ortmann, who introduced me to both Don Hayes

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Speaker 1: and you. He's now I believe that um Scarsdale Equities,

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Speaker 1: but at the time it was Prime Charter, which was

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Speaker 1: ultimately sold to Oppenheimer. Hard to keep track of, remember

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Speaker 1: account and easy. He used to do charting by hand.

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Speaker 1: He would show me here's where this was, and you

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Speaker 1: could look at the screen, and you can look at

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Speaker 1: a computer, but it's not the same thing as actually

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Speaker 1: writing it down by hands. That's exactly right. We used

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Speaker 1: to day before we had the computer capacity to do it.

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Speaker 1: So many people And do you do five hundred stocks

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Speaker 1: a day past the book to the next person? They

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Speaker 1: did that by the by the end of the week,

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Speaker 1: each persons seen. That's unbelievable. It's amazing. But boy, you like,

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Speaker 1: just like you said, how do you get a better

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Speaker 1: feel than doing it that way? But you can't do there.

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Speaker 1: You know, there's only a certain amount of things you

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Speaker 1: can do. Take for instance, if we wanted to create

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Speaker 1: a matrix on the standard pours five. In other words,

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Speaker 1: I want to create the way we do a relative

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Speaker 1: strength charters, divide one thing by another. If I wanted

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Speaker 1: to compare coca cola to pepsi, I would divide the

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Speaker 1: price of coke by pepsi. That gives me a number.

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Speaker 1: I take that number. I plotted on a chart. It

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Speaker 1: looks like a regular trend chart, but it's not. It's

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Speaker 1: a relative strength chart between the two. When it's rising,

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Speaker 1: the first one is doing better what it fall Precisely,

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Speaker 1: it's just spread between the two exactly. And if I

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Speaker 1: did that on the SMP five hundred, we have to

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Speaker 1: create two fifty charts. In other words, each one relative

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Speaker 1: to a number, two, relative to the number three, relative

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Speaker 1: to all five hundred. So two fifty charts. You've gotta

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Speaker 1: have a lot of employees or good computer exactly. Now,

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Speaker 1: we do overnight seven and a half million relative strength

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Speaker 1: charts every single night, comparing the world, Malaysia, Indonesia, Indonesia

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Speaker 1: to France, France to the United States, everything you can

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Speaker 1: think of. That that's an incredible number of permutations, which

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Speaker 1: actually leads me to my next question. So you run

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Speaker 1: a lot of different strategies. How do you develop these

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Speaker 1: new strategies? How do you come up with these ideas? Well,

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Speaker 1: you come up with the ideas. We sat in a

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Speaker 1: circle for twenty eight years. Nobody's ever had an office

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Speaker 1: at Dorsey Wright. I never had an office of doors. Right,

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Speaker 1: we sit together. So there's a constant hum in the

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Speaker 1: office of discussing things and talking about different things. And

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Speaker 1: they all come from that type of thing. Person will

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Speaker 1: a company will call us and say, hey, we're interested

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Speaker 1: in X, y Z, can you create that forest? Then

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Speaker 1: the ideas start to float around, and and they come

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Speaker 1: in the most unusual ways. I was looking at I

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Speaker 1: was looking one day out the window and I saw

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Speaker 1: a guy cutting the grass with one of these big moors,

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Speaker 1: And I thought to myself, who helps him? Does he

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Speaker 1: go to a major wirehouse and open an account with

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Speaker 1: two thousand dollars? No, they don't let him in the door.

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Speaker 1: So who helps him? So I created a model called

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Speaker 1: the People's Portfolio, and I compared in contrasted three things

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Speaker 1: on a relative strength basis, the standard ports cap weight

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Speaker 1: against the standard ports equal weight. Both trade. They trade

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Speaker 1: totally differently against cash. Cash was in there as the

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Speaker 1: risk management tool of the piece, and whichever one won

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Speaker 1: the arm wrestling contest against the three of the portfolio

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Speaker 1: went in over what time period is that just continuous?

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Speaker 1: How often does that readjust maybe once every three years?

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Speaker 1: Oh yes, I was gonna say, that's a longer term cycle,

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Speaker 1: very long term cycle. But I define many money managers

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Speaker 1: to outperform it. It's a challenge because sim typically the

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Speaker 1: cap weighted does great at the end of his cycle, right,

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Speaker 1: and then when it rolls over, it's the eagle weight

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Speaker 1: that does much precisely. But instead of trying to call

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Speaker 1: the point that that you're at the end of the cycle,

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Speaker 1: let the work do it. Let the relative strain do it.

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Speaker 1: And when that changes and it points to another direction,

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Speaker 1: that's where you go. And So instead of sitting back saying, gee, whiz,

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Speaker 1: you know, I've got all I've I've got a PhD

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Speaker 1: in and this and that and mathematics, and I'm going

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Speaker 1: to figure out when that end is No, wait for

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Speaker 1: the wait for the rules based program to do it.

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Speaker 1: I'm Barry rid Halts. You're listening to Masters in Business

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Speaker 1: on Bloomberg Radio. My special guest today is Tom Dorsey.

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Speaker 1: He is the founder of Technical analyst firm Dorsey Wright

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Speaker 1: and basically a fixture on Wall Street for many years.

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Speaker 1: Dorsey Wright is now part of NASDAC, having been sold

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Speaker 1: last year. Let's talk a little bit about momentum and

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Speaker 1: what it means. What's the significant momentum to either a market,

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Speaker 1: a sector, or a specific stock. Simply this berry. Everyone

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Speaker 1: understands things in motion and to stay in motion until

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Speaker 1: acted upon by an opposite force. That's the same thing

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Speaker 1: that happens in the market. People are trying to catch

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Speaker 1: a knife, so often they want to buy things that

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Speaker 1: are down or going down, and they think that the

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Speaker 1: lower I buy it, the better I'm going to be

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Speaker 1: getting nice bounce back up. That's not the case. Things

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Speaker 1: in motion tend to stay in motion. That's where you

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Speaker 1: want to be and what acts upon it. It's all

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Speaker 1: supply and demand. If you have demand for a particular stock,

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Speaker 1: there are more buyers and sellers willing to sell. Prices

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Speaker 1: gonna rise until all of a sudden supply comes in.

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Speaker 1: That's where that opposite force comes in and supply overtakes

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Speaker 1: the amount of demand available. The up move stops and

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Speaker 1: it begins to down move. So that's really all it is.

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Speaker 1: So One of the things that early in my career

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Speaker 1: I had explained to me was that when institutions buy something,

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Speaker 1: they just don't go out and buy a million shares

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Speaker 1: today and that's it. Typically it's in response to some

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Speaker 1: portfolio change. They're buying it. For larger institutions, pension funds,

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Speaker 1: retirement accounts, and money just flows in on a regular basis.

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Speaker 1: So as long as that four oh one k or

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Speaker 1: institutional money keeps flowing in, they're going to continue to

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Speaker 1: buy more or less the same names over and over again.

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Speaker 1: And as long as there's a limited amount of supply

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Speaker 1: at various prices, that stock is just gonna keep marching

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Speaker 1: higher until more supply comes in or the buying slows down.

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Speaker 1: Is that a fair way to describe. Yeah. Absolutely, And

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Speaker 1: they don't go in and just buy today, and they

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Speaker 1: buy until they've they've got enough in that sitt and

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Speaker 1: then he go do something else. They have more accounts

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Speaker 1: coming in, more money coming in, they're gonna buy in

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Speaker 1: the right places. Take for instance, back in the year

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Speaker 1: two thousand October two thousand, an interesting thing happened all

429
00:22:49,520 --> 00:22:52,159
Speaker 1: of a sudden, after a number of years where large

430
00:22:52,200 --> 00:22:55,240
Speaker 1: cap was the place to be uh a large cap

431
00:22:55,280 --> 00:22:56,639
Speaker 1: and cap weight it was the place to be. It

432
00:22:56,720 --> 00:23:00,240
Speaker 1: switched to small cap and equal weight. And not only

433
00:23:00,240 --> 00:23:02,119
Speaker 1: it went from growth which was the place to be,

434
00:23:02,240 --> 00:23:05,879
Speaker 1: to value and that was a major change. All you

435
00:23:06,000 --> 00:23:07,840
Speaker 1: had to do at that point in time with that

436
00:23:07,920 --> 00:23:11,840
Speaker 1: major change is by a value stock equal weighted small

437
00:23:11,920 --> 00:23:15,080
Speaker 1: cap and leave your customer alone for the next thirteen years,

438
00:23:15,400 --> 00:23:19,000
Speaker 1: go play golf every day. Precisely you did extremely well.

439
00:23:19,040 --> 00:23:22,920
Speaker 1: So these things are not overnight phenomenons that happened, and

440
00:23:23,000 --> 00:23:25,800
Speaker 1: there was buying pressure in that for probably thirteen years

441
00:23:26,040 --> 00:23:28,840
Speaker 1: until this begins to change. So put that into context.

442
00:23:28,920 --> 00:23:33,639
Speaker 1: You have throughout the nineties, technology, especially big cap, is

443
00:23:33,720 --> 00:23:37,040
Speaker 1: just running away. You had some especially on the NASTAC,

444
00:23:37,119 --> 00:23:42,840
Speaker 1: you had some thirty years. People forget the young guns

445
00:23:42,840 --> 00:23:44,840
Speaker 1: out there, don't remember what it was like in the

446
00:23:44,920 --> 00:23:47,960
Speaker 1: late nineties. It was insane. It was like the Roaring

447
00:23:48,000 --> 00:23:50,520
Speaker 1: twenties had to be pretty close. And and at least

448
00:23:50,560 --> 00:23:52,800
Speaker 1: when you look at it historically, I not that old,

449
00:23:52,800 --> 00:23:55,479
Speaker 1: so I don't remember, but I do remember. I do

450
00:23:55,560 --> 00:23:58,960
Speaker 1: remember the nineties, and I do remember that was astonishing.

451
00:23:59,359 --> 00:24:02,480
Speaker 1: That peak them around March of that year, and you're

452
00:24:02,520 --> 00:24:05,399
Speaker 1: saying it took another six months or so for the

453
00:24:05,480 --> 00:24:08,000
Speaker 1: money to start flowing in a different direction. It clearly

454
00:24:08,080 --> 00:24:11,359
Speaker 1: was flowing out of the big cap. You know, you

455
00:24:11,440 --> 00:24:14,960
Speaker 1: had only a certain number of horsemen in the SMP

456
00:24:15,080 --> 00:24:17,280
Speaker 1: five hundred. I think it was something like ten or

457
00:24:17,320 --> 00:24:20,600
Speaker 1: twenty stocks were responsible for almost all of the games.

458
00:24:20,640 --> 00:24:23,639
Speaker 1: And absolutely because towards the end of the what do

459
00:24:23,680 --> 00:24:26,320
Speaker 1: you want that that's a point in time where when

460
00:24:26,359 --> 00:24:28,440
Speaker 1: it switches to cap waited saying, you know what you

461
00:24:28,440 --> 00:24:31,600
Speaker 1: should own an index just only SMP five hundred. Don't

462
00:24:31,600 --> 00:24:34,120
Speaker 1: worry about diversifying. That's what you should own. And that's

463
00:24:34,119 --> 00:24:37,240
Speaker 1: where it was at the end of into the year

464
00:24:37,280 --> 00:24:40,320
Speaker 1: two thousand UM. Most of the time from there it's

465
00:24:40,359 --> 00:24:42,360
Speaker 1: been a market of stocks where you want to own

466
00:24:42,359 --> 00:24:44,359
Speaker 1: individual stocks, but that was the point in time you

467
00:24:44,359 --> 00:24:46,520
Speaker 1: want to own the index. So let's go back to

468
00:24:46,600 --> 00:24:51,639
Speaker 1: October two thousand. What was it in point and figure

469
00:24:51,720 --> 00:24:54,600
Speaker 1: charting that would have given you an indication, Hey, go

470
00:24:54,760 --> 00:24:57,359
Speaker 1: from big cap too small cap, from cap weighted to

471
00:24:58,160 --> 00:25:00,560
Speaker 1: equal weighted, and go from growth to vale. You it's

472
00:25:00,600 --> 00:25:04,240
Speaker 1: that relative strength calculations that we do. When they're done

473
00:25:04,359 --> 00:25:07,320
Speaker 1: every night, they don't change every night. I mean this

474
00:25:07,440 --> 00:25:10,400
Speaker 1: was five years coming, and all of a sudden, you're

475
00:25:10,400 --> 00:25:12,960
Speaker 1: watching these two guys aren't wrestling, and the guy who

476
00:25:12,960 --> 00:25:15,280
Speaker 1: loses every single time for five years, all of a

477
00:25:15,320 --> 00:25:17,600
Speaker 1: sudden beats the other guy. Why he's in the gym

478
00:25:17,640 --> 00:25:20,040
Speaker 1: working out. He's getting stronger. You don't realize it, but

479
00:25:20,080 --> 00:25:22,159
Speaker 1: all of a sudden, that day comes that he wins.

480
00:25:22,560 --> 00:25:25,240
Speaker 1: And if you're watching it and you have alert set,

481
00:25:26,320 --> 00:25:29,640
Speaker 1: they it can't escape you. So I do recall from

482
00:25:29,760 --> 00:25:32,359
Speaker 1: March two thousand, two October there was a pretty hefty

483
00:25:32,359 --> 00:25:36,000
Speaker 1: sell off. But I also noticed, from having been in

484
00:25:36,040 --> 00:25:38,320
Speaker 1: the industry for as long as I have, that when

485
00:25:38,320 --> 00:25:40,760
Speaker 1: you reverse yourself and say, I know, we've been talking

486
00:25:40,800 --> 00:25:45,720
Speaker 1: about big cap and growth and and momentum uh for

487
00:25:45,760 --> 00:25:48,439
Speaker 1: a long time, but now it's time to switch. What

488
00:25:48,560 --> 00:25:51,960
Speaker 1: sort of pushback do you get from clients and investors

489
00:25:52,040 --> 00:25:55,479
Speaker 1: when you've basically trained them, Hey, you get rewarded by

490
00:25:55,480 --> 00:25:57,720
Speaker 1: this over and over again, and now a new it's

491
00:25:57,720 --> 00:25:59,960
Speaker 1: a new game. Yeah, it's not so much the push

492
00:26:00,040 --> 00:26:02,040
Speaker 1: back that there's a new game. It's a pushback that

493
00:26:02,080 --> 00:26:04,240
Speaker 1: when you say there's a new game and they don't

494
00:26:04,280 --> 00:26:06,879
Speaker 1: see the new game yet, we're experiencing it right now,

495
00:26:07,320 --> 00:26:09,680
Speaker 1: right now, we have where there's a major change taking

496
00:26:09,680 --> 00:26:11,880
Speaker 1: place in this market. When you think back to two

497
00:26:12,119 --> 00:26:14,560
Speaker 1: October of two thousand and eleven, that was a tough year.

498
00:26:14,920 --> 00:26:16,920
Speaker 1: But at the end of two thousand eleven, all of

499
00:26:17,000 --> 00:26:20,159
Speaker 1: a sudden, for US to six asset classes, US equities

500
00:26:20,160 --> 00:26:23,280
Speaker 1: became number one that you should overweight in your portfolio,

501
00:26:23,480 --> 00:26:26,600
Speaker 1: and that stayed from two thousand and eleven to two

502
00:26:26,680 --> 00:26:30,240
Speaker 1: thousand and sixteen. Just recently it moved out of number

503
00:26:30,280 --> 00:26:33,320
Speaker 1: one place, number two, went to number three, slid back

504
00:26:33,359 --> 00:26:36,840
Speaker 1: to number two marginally. But it's saying something is wrong here.

505
00:26:37,119 --> 00:26:42,040
Speaker 1: But what's happened is you have healthcare, biotechnology, drugs and

506
00:26:42,080 --> 00:26:44,720
Speaker 1: whatnot that that helped carry this the whole way have

507
00:26:44,800 --> 00:26:47,520
Speaker 1: totally fallen out of bed. So they had positive relative

508
00:26:47,520 --> 00:26:49,600
Speaker 1: strength when they came out. I mean it was like

509
00:26:49,640 --> 00:26:52,240
Speaker 1: the snap of a finger bingo. Now all the things

510
00:26:52,280 --> 00:26:54,320
Speaker 1: that you were doing that were positive relative strengths for

511
00:26:54,359 --> 00:26:56,320
Speaker 1: those years. You find this year in two thousand and

512
00:26:56,320 --> 00:26:58,600
Speaker 1: sixteen year at a loss relative to the SMP five.

513
00:26:59,240 --> 00:27:02,200
Speaker 1: That's when people begin to get upset. They think everything

514
00:27:02,240 --> 00:27:05,879
Speaker 1: has to be perfect. We're speaking with Tom Dorsey, formerly

515
00:27:05,920 --> 00:27:08,240
Speaker 1: of Dorsey Wright and now c I O of his

516
00:27:08,320 --> 00:27:11,840
Speaker 1: own family office. So if the US as a market

517
00:27:12,600 --> 00:27:16,480
Speaker 1: was leading the train and now is two or three,

518
00:27:16,920 --> 00:27:19,040
Speaker 1: what has risen to the four? What parts of the

519
00:27:19,040 --> 00:27:22,480
Speaker 1: world are are starting to look more attractive. It's interesting

520
00:27:22,760 --> 00:27:25,120
Speaker 1: because what went to what number one and number two

521
00:27:25,160 --> 00:27:27,400
Speaker 1: and then six asset classes that we have. We look

522
00:27:27,440 --> 00:27:33,040
Speaker 1: at international equities, US equities, cash, fixed income, commodity commodities,

523
00:27:33,359 --> 00:27:36,760
Speaker 1: and foreign currencies. What moved into number one place? Fixed

524
00:27:36,760 --> 00:27:41,439
Speaker 1: income to place was held for a few weeks and

525
00:27:41,480 --> 00:27:46,560
Speaker 1: it's still marginally there. Uh is cash now that was interesting.

526
00:27:46,680 --> 00:27:48,720
Speaker 1: Cash has moved up, not to US Cash has a

527
00:27:48,760 --> 00:27:50,720
Speaker 1: simple m N Y m k T, so we look

528
00:27:50,760 --> 00:27:53,160
Speaker 1: at it just like money, regular money market. We look

529
00:27:53,200 --> 00:27:55,560
Speaker 1: at that symbol like it's like it's IBM or General

530
00:27:55,560 --> 00:27:58,040
Speaker 1: Motors or whatever, and it has moved up to number

531
00:27:58,040 --> 00:28:02,400
Speaker 1: two spot. Um, something is going on here and there's

532
00:28:02,440 --> 00:28:06,000
Speaker 1: a major change taking place. I see commodities began to

533
00:28:06,040 --> 00:28:08,440
Speaker 1: move up from number six level to number five level,

534
00:28:09,440 --> 00:28:12,120
Speaker 1: So they were the bottom of the barrel. Now they're

535
00:28:12,160 --> 00:28:14,119
Speaker 1: beginning to come off of the bottom of the barrel.

536
00:28:14,160 --> 00:28:17,600
Speaker 1: What about international which is emerging? Internationals at is at

537
00:28:17,600 --> 00:28:22,120
Speaker 1: the bottom, but I'm finding some international some some emerging markets.

538
00:28:22,240 --> 00:28:25,960
Speaker 1: I trade Indonesia direct doing extremely well. They're in Indonesia's

539
00:28:26,520 --> 00:28:31,320
Speaker 1: So going back to the original concept of waiting for

540
00:28:31,359 --> 00:28:35,639
Speaker 1: a momentum to develop, if you're looking at emerging markets,

541
00:28:36,240 --> 00:28:39,560
Speaker 1: you're probably if you're long emerging markets, you're probably not

542
00:28:39,600 --> 00:28:42,840
Speaker 1: going to see a whole lot of positive gains anytime soon.

543
00:28:43,160 --> 00:28:45,480
Speaker 1: But if you're looking at something that's ranked six out

544
00:28:45,480 --> 00:28:48,160
Speaker 1: of six, does that mean there's a lot of potential

545
00:28:48,240 --> 00:28:51,440
Speaker 1: upside down the road. Yeah, but where's down the road?

546
00:28:51,720 --> 00:28:54,080
Speaker 1: I don't know. It might be down the road. That's

547
00:28:54,080 --> 00:28:56,200
Speaker 1: a trillion dollar question. That could be. That's the thing,

548
00:28:56,280 --> 00:28:58,400
Speaker 1: it's a trillion dollar question. You don't know how long

549
00:28:58,440 --> 00:29:01,240
Speaker 1: that road is. So you have to wait until the

550
00:29:01,360 --> 00:29:04,239
Speaker 1: actual change your relative strength charts begin to change and

551
00:29:04,280 --> 00:29:07,360
Speaker 1: begin to win the arm wrestling contest, you'll find I

552
00:29:07,400 --> 00:29:09,840
Speaker 1: think if if commodities is is one of the ones

553
00:29:09,840 --> 00:29:11,640
Speaker 1: that's gonna move up to number one, like two thousand

554
00:29:11,640 --> 00:29:14,600
Speaker 1: and eight, commodities held number one rank for what sure

555
00:29:14,880 --> 00:29:17,000
Speaker 1: you know, if that's going to be the case, then

556
00:29:17,040 --> 00:29:20,480
Speaker 1: you probably find international move up to during the during

557
00:29:20,520 --> 00:29:22,600
Speaker 1: the decade of two thousand and two, thousand and ten,

558
00:29:22,960 --> 00:29:25,120
Speaker 1: the last place you'd want to invest in equities was

559
00:29:25,120 --> 00:29:28,120
Speaker 1: the United States. International was the play that whole time.

560
00:29:28,160 --> 00:29:31,160
Speaker 1: We'll think of all the emerging markets are big commodity exporters.

561
00:29:31,320 --> 00:29:34,040
Speaker 1: Is at the time, China was one of the big

562
00:29:34,160 --> 00:29:36,760
Speaker 1: drivers of that. In China's in the Emerging Market index.

563
00:29:37,080 --> 00:29:41,360
Speaker 1: So that that makes perfect sense. So you had mentioned

564
00:29:41,360 --> 00:29:44,880
Speaker 1: earlier you don't have an issue with cap weighted indices.

565
00:29:44,920 --> 00:29:48,240
Speaker 1: I know some people do. You're just suggesting there are

566
00:29:48,280 --> 00:29:51,720
Speaker 1: times when cap weighted is desirable or more desirable, and

567
00:29:51,760 --> 00:29:54,080
Speaker 1: there are other times when equal weighted is more. That's

568
00:29:54,080 --> 00:29:56,200
Speaker 1: exactly right, you know. And and when I explained cap

569
00:29:56,240 --> 00:30:00,000
Speaker 1: weighted to people, it's like Congress. In the Senate, Congress

570
00:30:00,120 --> 00:30:04,080
Speaker 1: is um cap weighted. If you look at look at California,

571
00:30:04,160 --> 00:30:07,880
Speaker 1: state state, the more and more more representatives the Senate

572
00:30:08,200 --> 00:30:13,000
Speaker 1: is equal weighted gets to and that's a great, great

573
00:30:13,000 --> 00:30:14,800
Speaker 1: way to look at it. So sometimes it's the Senate,

574
00:30:14,880 --> 00:30:17,400
Speaker 1: sometimes it's the Congress. You just wait to see what

575
00:30:17,480 --> 00:30:20,080
Speaker 1: happens because this it's that they both sit down their

576
00:30:20,160 --> 00:30:22,600
Speaker 1: arm wrestle every single day and you watch and see

577
00:30:22,640 --> 00:30:24,560
Speaker 1: who's gonna be winning. It's you don't change on a

578
00:30:24,600 --> 00:30:27,320
Speaker 1: daily basis. Signals on on relative strength and point and

579
00:30:27,320 --> 00:30:29,000
Speaker 1: Figure can last two or two and a half years.

580
00:30:29,440 --> 00:30:32,040
Speaker 1: So if people want to find your writings or your perspective,

581
00:30:32,080 --> 00:30:34,960
Speaker 1: what's the best place for them to track you down. Well,

582
00:30:35,080 --> 00:30:37,680
Speaker 1: you can go to Dorsey Right dot com www dot

583
00:30:37,680 --> 00:30:40,520
Speaker 1: Dorsey Right dot com. We do a podcast every week

584
00:30:40,520 --> 00:30:43,360
Speaker 1: that's free to anybody. If you just go to that site,

585
00:30:43,400 --> 00:30:45,040
Speaker 1: Dorsey Right dot com you can see it. And we're

586
00:30:45,040 --> 00:30:47,240
Speaker 1: one of the oldest podcasters in the country. We're on

587
00:30:47,320 --> 00:30:51,040
Speaker 1: five hundred and some weekly podcasts. And you also you

588
00:30:51,080 --> 00:30:53,200
Speaker 1: have a number of books, but the big one important

589
00:30:53,200 --> 00:30:55,880
Speaker 1: figure is called it's called Point and Figure Charting exactly

590
00:30:55,880 --> 00:30:58,400
Speaker 1: that and you'll see my picture on the cover. Um

591
00:30:58,440 --> 00:31:01,640
Speaker 1: it's the fourth edition Point and Figure Charting. It's pretty

592
00:31:01,720 --> 00:31:03,640
Speaker 1: much all you need to know. You know, we've been

593
00:31:03,720 --> 00:31:06,560
Speaker 1: hiding in the open for twenty eight years. We you

594
00:31:06,640 --> 00:31:08,479
Speaker 1: really read that book, you see exactly what we do.

595
00:31:08,560 --> 00:31:11,160
Speaker 1: We tell you exactly how to do it, but nobody

596
00:31:11,200 --> 00:31:14,200
Speaker 1: wants to do it. You know. Harvard professor once said, uh,

597
00:31:14,240 --> 00:31:16,400
Speaker 1: people don't want the quarter inch drill, they want the

598
00:31:16,440 --> 00:31:20,000
Speaker 1: quarter inch hole. And that's what we try to give

599
00:31:20,040 --> 00:31:24,200
Speaker 1: a manefits or teach the same thing. If you enjoy

600
00:31:24,280 --> 00:31:26,880
Speaker 1: this conversation, be sure and stick around for a podcast

601
00:31:26,960 --> 00:31:30,040
Speaker 1: extras where we keep the tape rolling and continue chatting.

602
00:31:30,640 --> 00:31:33,840
Speaker 1: Be sure and check out my daily column on Bloomberg

603
00:31:33,880 --> 00:31:37,400
Speaker 1: View dot com or follow me on Twitter at Riolts.

604
00:31:37,880 --> 00:31:40,680
Speaker 1: I'm Barry Hults. You've been listening to Masters in Business

605
00:31:41,000 --> 00:31:44,040
Speaker 1: on Bloomberg Radio. Tom. Thank you so much for doing this.

606
00:31:44,120 --> 00:31:46,800
Speaker 1: I'm really excited to have you here. I've been looking

607
00:31:46,800 --> 00:31:49,400
Speaker 1: forward to this for a while, Barry. Anytime, I love it,

608
00:31:49,440 --> 00:31:52,360
Speaker 1: I enjoy it. I said this earlier when we first met.

609
00:31:52,760 --> 00:31:58,800
Speaker 1: I've been reading your stuff, no exaggeration, for so many years. Um,

610
00:31:58,840 --> 00:32:01,000
Speaker 1: I feel like I know you personally. And it's funny

611
00:32:01,000 --> 00:32:03,360
Speaker 1: because people say that to me and I have a

612
00:32:03,360 --> 00:32:06,640
Speaker 1: hard time understanding that. And now it's like, oh, I

613
00:32:06,720 --> 00:32:09,320
Speaker 1: kind of get that you read somebody for a decade.

614
00:32:09,320 --> 00:32:11,080
Speaker 1: It's like I kind of not understand what he thinks.

615
00:32:11,080 --> 00:32:15,080
Speaker 1: I understand the philosophy, and like I mentioned earlier, I

616
00:32:15,120 --> 00:32:17,800
Speaker 1: started as a trader. I went into the research side.

617
00:32:18,480 --> 00:32:21,960
Speaker 1: I worked with some people where that were religious Dorothy

618
00:32:22,040 --> 00:32:26,840
Speaker 1: Right adherents, if only because it was clear the fundamental

619
00:32:26,920 --> 00:32:29,640
Speaker 1: side of things wasn't getting it done, and they wanted

620
00:32:29,680 --> 00:32:33,040
Speaker 1: a structure, they wanted a model. You're really popular, or

621
00:32:33,040 --> 00:32:35,800
Speaker 1: at least in my experience in the nineties and the

622
00:32:35,840 --> 00:32:41,480
Speaker 1: two thousands, Dorothy Doroth c right was really popular amongst

623
00:32:41,480 --> 00:32:44,800
Speaker 1: a certain contingent of the brokerage community. Right. Exactly, it's

624
00:32:44,800 --> 00:32:47,800
Speaker 1: always been professional for us. We don't have any real

625
00:32:48,760 --> 00:32:52,240
Speaker 1: uh any, any real large clientele and individual investors, not

626
00:32:52,240 --> 00:32:54,880
Speaker 1: not a retail audience, no, not retail at all, only

627
00:32:54,920 --> 00:32:58,440
Speaker 1: professional oriented. And now that business is changing, are you

628
00:32:58,480 --> 00:33:01,920
Speaker 1: still finding the same reception to what you guys do

629
00:33:02,360 --> 00:33:05,600
Speaker 1: or how has that morphed over the years. Well, back

630
00:33:05,600 --> 00:33:09,720
Speaker 1: in back in the beginning, advisors needed something desperately to

631
00:33:09,800 --> 00:33:13,479
Speaker 1: help them manage portfolios, and the technical side was just

632
00:33:13,600 --> 00:33:16,240
Speaker 1: never there at the firm was always fundamental. So the

633
00:33:16,280 --> 00:33:18,960
Speaker 1: technical side resonated with them an in particular point and

634
00:33:18,960 --> 00:33:22,360
Speaker 1: figure because it's easy for anyone to understand. In fact,

635
00:33:22,640 --> 00:33:26,360
Speaker 1: Tammy was my right hand. Remember Tammy, We've been into

636
00:33:26,360 --> 00:33:29,760
Speaker 1: Gates Elementary school teaching this to seventh graders and and

637
00:33:29,760 --> 00:33:31,960
Speaker 1: and they catch on in about forty minutes. Adults take

638
00:33:31,960 --> 00:33:34,880
Speaker 1: a lot longer to d program. But it's so simple

639
00:33:35,080 --> 00:33:39,840
Speaker 1: that kids can understand it, and it's it's professionals need

640
00:33:39,880 --> 00:33:43,560
Speaker 1: the help to stay in the business where individual investors

641
00:33:43,600 --> 00:33:45,560
Speaker 1: will do it for a while, all of a sudden

642
00:33:45,600 --> 00:33:47,440
Speaker 1: the stock goes down. They thought it would go up

643
00:33:47,440 --> 00:33:50,720
Speaker 1: there going on vacation, they canceled. So we're professional and

644
00:33:50,720 --> 00:33:55,680
Speaker 1: we and our portfolio and charting system for what we

645
00:33:55,760 --> 00:33:57,800
Speaker 1: do in portfolio charting because it's probably the largest in

646
00:33:57,800 --> 00:34:00,520
Speaker 1: the world on the internet for portfolio and charting. So

647
00:34:00,680 --> 00:34:03,000
Speaker 1: I'm We talked about relative strength, we talked about some

648
00:34:03,000 --> 00:34:06,040
Speaker 1: of your favorite indicators. What what are some of your

649
00:34:06,120 --> 00:34:09,040
Speaker 1: least favorite indicators? And I went to Twitter and asked

650
00:34:09,040 --> 00:34:12,160
Speaker 1: people and these are the suggestions they had given me

651
00:34:12,239 --> 00:34:17,000
Speaker 1: to ask you. Um, Elliott Wave, everything rings in here.

652
00:34:17,040 --> 00:34:20,960
Speaker 1: It's crazy Elliott Wave. Your fan of Elliot Wave at all? No,

653
00:34:21,080 --> 00:34:24,680
Speaker 1: I don't understand it. That's my five waves, three waves,

654
00:34:24,719 --> 00:34:28,120
Speaker 1: two up, seven down down, two thousands something like that.

655
00:34:28,160 --> 00:34:31,080
Speaker 1: I don't Barry, I don't get it. You know, that's

656
00:34:31,080 --> 00:34:33,520
Speaker 1: my problem. I've I'm not even a member of the

657
00:34:33,640 --> 00:34:37,600
Speaker 1: Market Technicians Association. That's interesting, and that's because I am.

658
00:34:37,719 --> 00:34:40,600
Speaker 1: I'm a member of the Egyptian Technical as Society. Why

659
00:34:40,680 --> 00:34:43,000
Speaker 1: is that well, because I've been to Egypt so much

660
00:34:43,040 --> 00:34:45,880
Speaker 1: and I like these like them they're great people. Do

661
00:34:45,960 --> 00:34:50,479
Speaker 1: they use point and figure in Egypt practically a bunch

662
00:34:50,480 --> 00:34:54,160
Speaker 1: of X is. You're exactly right. I've been there, uh

663
00:34:54,200 --> 00:34:56,560
Speaker 1: so numerous times. There are some people to do. But

664
00:34:57,800 --> 00:35:01,480
Speaker 1: um I'm remember the International Technical and Society, but only

665
00:35:01,520 --> 00:35:03,520
Speaker 1: because I like to go internationally and meet all the

666
00:35:03,560 --> 00:35:07,840
Speaker 1: different technicians. I don't understand a lot of the types

667
00:35:07,880 --> 00:35:11,439
Speaker 1: of things like Fibonacci, retracements, gan angles. You know, it's

668
00:35:11,880 --> 00:35:15,200
Speaker 1: it's the thing, the sixties seven percent or whatever the

669
00:35:15,239 --> 00:35:18,520
Speaker 1: heck it is. I don't get it always looks good

670
00:35:18,520 --> 00:35:22,040
Speaker 1: in retrospect, but never perspectively. My problem is I'm not

671
00:35:22,080 --> 00:35:24,759
Speaker 1: smart enough to understand that. I think that a lot

672
00:35:24,800 --> 00:35:27,360
Speaker 1: of these things have a degree of randomness in it,

673
00:35:27,440 --> 00:35:32,520
Speaker 1: and we're easily fooled by our pattern recognition subroutines. Um.

674
00:35:32,560 --> 00:35:36,200
Speaker 1: So people sort of impose what they you know, it's

675
00:35:36,200 --> 00:35:39,920
Speaker 1: a roth Chack test. People impose order on on that

676
00:35:40,040 --> 00:35:42,600
Speaker 1: disorder and see things that I don't know if it's there.

677
00:35:42,640 --> 00:35:46,239
Speaker 1: I think Fibonacci is a fascinating concept. I love the

678
00:35:46,280 --> 00:35:48,600
Speaker 1: idea of him as a mathematician and what he's done.

679
00:35:49,080 --> 00:35:53,120
Speaker 1: But UM, if you read this defense fascinating book called

680
00:35:53,280 --> 00:35:57,640
Speaker 1: Um Against the Gods, where there's a whole discussion on

681
00:35:57,640 --> 00:36:03,279
Speaker 1: on Fibonacci as a mathematician, as an early person who

682
00:36:03,320 --> 00:36:07,560
Speaker 1: identified how to deal with risk, how to mathematically determined risk.

683
00:36:08,000 --> 00:36:10,000
Speaker 1: But it had nothing to do with stock patterns or

684
00:36:10,000 --> 00:36:12,080
Speaker 1: anything like that exactly. And that's the problem. That's why

685
00:36:12,200 --> 00:36:16,800
Speaker 1: with me. If it doesn't apply to UM, if it

686
00:36:16,840 --> 00:36:20,600
Speaker 1: doesn't apply to portfolio management, doesn't mean anything to you.

687
00:36:21,239 --> 00:36:24,840
Speaker 1: I don't know how it can because people don't trade anymore.

688
00:36:25,120 --> 00:36:29,279
Speaker 1: The regulation that's come on us since has been incredible,

689
00:36:29,480 --> 00:36:32,160
Speaker 1: the new regulation that's coming from the Department of Labor.

690
00:36:32,200 --> 00:36:34,839
Speaker 1: Now you have to be a portfolio manager. You've got

691
00:36:34,840 --> 00:36:38,919
Speaker 1: to be a retirement portfolio manager. These things don't necessarily

692
00:36:39,000 --> 00:36:45,000
Speaker 1: fit in that vernacular, so to me, I don't use them.

693
00:36:45,040 --> 00:36:49,359
Speaker 1: So let's let's talk about some other technicians who who

694
00:36:49,400 --> 00:36:51,799
Speaker 1: are out there. Are there any technicians that stand out

695
00:36:51,840 --> 00:36:56,200
Speaker 1: to you, anybody you particularly like? Follow? No or you? Yeah,

696
00:36:56,239 --> 00:36:59,960
Speaker 1: there's you know, like UM. Number one would be Ralph Akapor,

697
00:37:00,560 --> 00:37:02,720
Speaker 1: great friend of mine. He's the founder of the Market

698
00:37:02,719 --> 00:37:06,560
Speaker 1: Technicians Association. He's just a wonderful, wonderful person. He's retired

699
00:37:06,600 --> 00:37:08,719
Speaker 1: now and I would love to go on the road

700
00:37:08,719 --> 00:37:10,560
Speaker 1: with him and do some talks. That would be fun.

701
00:37:10,600 --> 00:37:13,879
Speaker 1: We had him here as a guest. He was terrific.

702
00:37:13,920 --> 00:37:16,040
Speaker 1: I took the course with him. I don't know, twenty

703
00:37:16,120 --> 00:37:19,800
Speaker 1: years yeah, absolutely, it was really it was really i

704
00:37:20,000 --> 00:37:23,680
Speaker 1: opening and fascinating. And even though I'm no longer an

705
00:37:23,680 --> 00:37:27,200
Speaker 1: active trader I was twenty years ago. Understanding what he

706
00:37:27,280 --> 00:37:30,880
Speaker 1: taught me is just helped my understanding of what's going on.

707
00:37:31,920 --> 00:37:33,799
Speaker 1: I don't trade day to day, but it's nice to

708
00:37:33,880 --> 00:37:36,680
Speaker 1: understand what people are thinking about day to day as

709
00:37:36,680 --> 00:37:39,920
Speaker 1: someone in the business as I, but but as I

710
00:37:39,960 --> 00:37:41,799
Speaker 1: go a little further. If I go to go to

711
00:37:41,800 --> 00:37:43,160
Speaker 1: the far East, let's go to the other Let's go

712
00:37:43,320 --> 00:37:47,600
Speaker 1: halfway around America, I would say, Mohammed al faith In

713
00:37:47,600 --> 00:37:52,719
Speaker 1: in Indonesia, Jakarta, Uh, Gideon Lapian in Chicago. In Jakarta,

714
00:37:53,000 --> 00:37:55,640
Speaker 1: I go to Malaysia. Qualit. I'm poor. Fred tam one

715
00:37:55,640 --> 00:37:58,160
Speaker 1: of the greatest in the world. So you think technicians

716
00:37:58,160 --> 00:38:02,319
Speaker 1: are everywhere, are around the world, in every country. It's

717
00:38:02,360 --> 00:38:05,040
Speaker 1: not just the United States. People think, oh, technicians are here,

718
00:38:05,360 --> 00:38:09,680
Speaker 1: They're everywhere. You mentioned three countries in the Pacific, rim Indonesia.

719
00:38:10,120 --> 00:38:13,319
Speaker 1: What are those folks trading, Well, they trade Indonesia. They're

720
00:38:13,320 --> 00:38:16,279
Speaker 1: trading the Indonesian market and the Far East market, which

721
00:38:16,320 --> 00:38:19,160
Speaker 1: would be Malaysia. In Malaysia, each each one of the

722
00:38:19,200 --> 00:38:21,399
Speaker 1: technicians in his own country will trade that his own

723
00:38:21,480 --> 00:38:26,960
Speaker 1: country mostly. But um, those markets deep and broad enough

724
00:38:27,000 --> 00:38:30,360
Speaker 1: and liquid enough that these guys can trade. That's a

725
00:38:30,360 --> 00:38:33,040
Speaker 1: great question because I've been trading now probably for fourteen

726
00:38:33,120 --> 00:38:36,600
Speaker 1: years direct in Indonesia, and I have an account at

727
00:38:36,600 --> 00:38:40,440
Speaker 1: east Samuel dot com. And you could trade the Indonesian

728
00:38:40,480 --> 00:38:44,200
Speaker 1: market from the US directly through a third party broker. Yeah,

729
00:38:44,520 --> 00:38:47,200
Speaker 1: absolutely online. I mean, the world is open for business.

730
00:38:47,520 --> 00:38:50,000
Speaker 1: Anyone that wants to do this can do it. And

731
00:38:50,080 --> 00:38:54,160
Speaker 1: I love trading Indonesia because it's there's a lot of

732
00:38:54,200 --> 00:38:57,760
Speaker 1: anomalies there that can be It's still not perfectly efficient

733
00:38:59,280 --> 00:39:01,239
Speaker 1: a lot of time. So I don't can't pronounce the

734
00:39:01,320 --> 00:39:04,040
Speaker 1: name of the company, But is that is that important

735
00:39:04,040 --> 00:39:08,319
Speaker 1: when I look at the chart? You know? So we

736
00:39:08,400 --> 00:39:12,480
Speaker 1: run models on all these countries too, So you you

737
00:39:12,480 --> 00:39:16,240
Speaker 1: mentioned models is a question I've always wondered about. Maybe

738
00:39:16,239 --> 00:39:18,160
Speaker 1: you can help me with this, So when you have

739
00:39:18,239 --> 00:39:21,359
Speaker 1: a model, how could you tell the difference between a

740
00:39:21,440 --> 00:39:25,759
Speaker 1: model that's temporarily out of favor and something that no

741
00:39:25,840 --> 00:39:30,800
Speaker 1: longer works well for us? It's always gonna be temporarily

742
00:39:30,800 --> 00:39:34,800
Speaker 1: out of favor, because I know relative strength works absolutely

743
00:39:34,840 --> 00:39:38,160
Speaker 1: for us. That's the direction we have. Relative strength has

744
00:39:38,200 --> 00:39:41,759
Speaker 1: been working since before I was born. And that's a

745
00:39:41,800 --> 00:39:46,120
Speaker 1: long long time ago, Barry. Let me tell you. And Uh,

746
00:39:46,920 --> 00:39:49,720
Speaker 1: it's a matter of being out of favor for a while.

747
00:39:49,800 --> 00:39:53,280
Speaker 1: Like I said, relative strength will be out of favor

748
00:39:53,320 --> 00:39:55,800
Speaker 1: one quarter out of four or five. It's going to

749
00:39:55,920 --> 00:39:59,439
Speaker 1: happen while it's trying to find attraction, you know, because

750
00:39:59,440 --> 00:40:01,279
Speaker 1: some years you have, Barry, some years when you look

751
00:40:01,280 --> 00:40:04,560
Speaker 1: at the disparity between the best performing asset class and

752
00:40:04,640 --> 00:40:06,960
Speaker 1: the worst performing asset class, there's not much in the

753
00:40:07,000 --> 00:40:12,400
Speaker 1: middle there. My favorite graphic is that quilt the chart

754
00:40:12,480 --> 00:40:16,000
Speaker 1: of all the boxes representing and and they more than six.

755
00:40:16,000 --> 00:40:19,319
Speaker 1: They'll break it into twelve or fourteen asset classes. And

756
00:40:19,360 --> 00:40:22,640
Speaker 1: here the returns for each asset class year by year,

757
00:40:23,080 --> 00:40:27,000
Speaker 1: and some years the best performing one is worst is

758
00:40:27,000 --> 00:40:30,960
Speaker 1: flat or negative. Exactly. That's a huge spread. Exactly, that's

759
00:40:30,960 --> 00:40:32,640
Speaker 1: a huge spread, but a lot of times you don't

760
00:40:32,719 --> 00:40:34,440
Speaker 1: find a huge spread in these, so a lot of

761
00:40:34,520 --> 00:40:36,920
Speaker 1: times the spread is pretty narrow. And when the spread

762
00:40:36,960 --> 00:40:39,600
Speaker 1: is narrow, picture of car spinning its wheels and it's

763
00:40:39,640 --> 00:40:41,960
Speaker 1: trying to find traction. It just can't. It just keeps

764
00:40:42,000 --> 00:40:45,240
Speaker 1: throwing the dirt behind it, and once it finds traction,

765
00:40:45,360 --> 00:40:48,759
Speaker 1: something breaks out. Like um, let's let's say back in

766
00:40:48,800 --> 00:40:53,439
Speaker 1: two thousand eleven, you had the healthcare drugs biotechnologies break out.

767
00:40:53,560 --> 00:40:56,000
Speaker 1: All of a sudden, those wheels catch and that and

768
00:40:56,040 --> 00:40:59,240
Speaker 1: the car shoots forward. You know, until then it's spinning

769
00:40:59,280 --> 00:41:01,920
Speaker 1: its wheels, So that will happen with relative strength when

770
00:41:01,920 --> 00:41:06,359
Speaker 1: there's no real dispersion between best and worst. Around that time,

771
00:41:06,400 --> 00:41:09,680
Speaker 1: it's so funny. I'm fond of reminding people to not

772
00:41:09,800 --> 00:41:15,040
Speaker 1: allow their personal politics to influence their investing. And around

773
00:41:15,080 --> 00:41:19,839
Speaker 1: that time you had the Supreme Court say, uh, what

774
00:41:19,920 --> 00:41:24,359
Speaker 1: we call Obamacare was not going to be overturned. And

775
00:41:24,480 --> 00:41:27,160
Speaker 1: we looked at each other and said, well, hospitals, pharmaceuticals,

776
00:41:27,160 --> 00:41:30,480
Speaker 1: the whole health care sector just got another ten million

777
00:41:31,239 --> 00:41:35,239
Speaker 1: people courtesy of the taxpayer, are going to be consumers.

778
00:41:35,360 --> 00:41:38,000
Speaker 1: That's probably good for the sector. And we got huge

779
00:41:38,040 --> 00:41:40,680
Speaker 1: pushback from people saying, well, you know, I don't know.

780
00:41:40,760 --> 00:41:43,279
Speaker 1: I don't really like opomacare or this or that. I'm

781
00:41:43,280 --> 00:41:46,000
Speaker 1: not asking you how you're going to vote. I'm asking

782
00:41:46,040 --> 00:41:49,080
Speaker 1: you what sectors are gonna do well relatives. That's exactly right.

783
00:41:49,120 --> 00:41:52,160
Speaker 1: And you have to be agnostic totally. I mean you've

784
00:41:52,160 --> 00:41:53,960
Speaker 1: got to walk down. You know, people will ask me,

785
00:41:54,000 --> 00:41:56,320
Speaker 1: what do you think? I don't. I don't have the

786
00:41:56,440 --> 00:41:59,239
Speaker 1: luxury of doing that, because if I could figure these

787
00:41:59,280 --> 00:42:02,200
Speaker 1: things out, if I was clairvoyant, we'll be doing this

788
00:42:02,360 --> 00:42:06,359
Speaker 1: talk from Verona, Italy on my shipping fleet. It's an

789
00:42:06,360 --> 00:42:09,799
Speaker 1: expensive indulgence to allow your politics and to on either side,

790
00:42:09,920 --> 00:42:12,480
Speaker 1: left or right. It should really be kept separate, it

791
00:42:12,520 --> 00:42:15,680
Speaker 1: asked me. Politics are for the voting booth, but when

792
00:42:15,719 --> 00:42:18,280
Speaker 1: it comes to investing, you have to be an object

793
00:42:18,440 --> 00:42:21,759
Speaker 1: like we're we're right here in a room that's self contained. Here,

794
00:42:21,800 --> 00:42:24,960
Speaker 1: there's no noise outside, double glass and that type of thing.

795
00:42:25,239 --> 00:42:28,920
Speaker 1: That's where you need to operate with your portfolio. Double glass,

796
00:42:28,960 --> 00:42:32,560
Speaker 1: no noise, and that's it. Objective evidence bets right and

797
00:42:32,640 --> 00:42:35,880
Speaker 1: keep it separate. So let me ask you another question.

798
00:42:35,880 --> 00:42:38,400
Speaker 1: And again I asked people on Twitter, Hey, what should

799
00:42:38,440 --> 00:42:41,279
Speaker 1: I ask Tom Dorsey, and one of the questions came

800
00:42:41,400 --> 00:42:46,719
Speaker 1: up was this, what's the problem with buy and hold? Well,

801
00:42:46,840 --> 00:42:48,600
Speaker 1: the problem with buy and hold and and and there,

802
00:42:48,680 --> 00:42:51,560
Speaker 1: and there is no problem with that if a person

803
00:42:51,640 --> 00:42:54,080
Speaker 1: wants to do that, because there may be it may

804
00:42:54,120 --> 00:42:56,720
Speaker 1: be an investor who says, you know what, I'm gonna

805
00:42:56,719 --> 00:42:59,880
Speaker 1: make a bet on the five largest companies of America.

806
00:43:00,400 --> 00:43:05,000
Speaker 1: And that's it. And exactly I'm done. And I don't

807
00:43:05,040 --> 00:43:07,080
Speaker 1: have to have a broker, I don't have to pay fees.

808
00:43:07,320 --> 00:43:10,080
Speaker 1: I buy it one time. I'm making a bet on America.

809
00:43:10,560 --> 00:43:14,360
Speaker 1: Fantastic if you did that hundred years ago, Man, you

810
00:43:14,440 --> 00:43:16,839
Speaker 1: made a great bet. I mean it's been it's been

811
00:43:16,840 --> 00:43:19,759
Speaker 1: a great ride. But what will happen, though, two, is

812
00:43:19,880 --> 00:43:22,240
Speaker 1: when you when you put your foot in that stirrup

813
00:43:22,280 --> 00:43:24,799
Speaker 1: and you're just you're just a buy and hold, you

814
00:43:24,880 --> 00:43:27,239
Speaker 1: miss things that are happening. Let's say you were buying

815
00:43:27,360 --> 00:43:29,640
Speaker 1: hold back in October of two thousand and all of

816
00:43:29,680 --> 00:43:32,720
Speaker 1: a sudden, what happened was the market went to small

817
00:43:32,800 --> 00:43:39,200
Speaker 1: cap uh equal weight and value. You missed it. So

818
00:43:39,360 --> 00:43:41,960
Speaker 1: for you're you're sitting there in a in a in

819
00:43:42,000 --> 00:43:45,520
Speaker 1: a cap weighted SMP five hundred the next thirteen years

820
00:43:45,560 --> 00:43:47,680
Speaker 1: you wander performed. I want everyone let's listen to this.

821
00:43:48,040 --> 00:43:51,520
Speaker 1: Go just go on on Yahoo finance and look at

822
00:43:51,560 --> 00:43:55,000
Speaker 1: the difference in performance between the RSP which is the

823
00:43:55,040 --> 00:43:58,480
Speaker 1: equal weighted standard, and the SPX, which is the cap

824
00:43:58,520 --> 00:44:02,040
Speaker 1: weighted Look at the difference. Go back twenty years and

825
00:44:02,080 --> 00:44:04,160
Speaker 1: say which one would I have preferred to be in,

826
00:44:04,800 --> 00:44:06,880
Speaker 1: and you'll see that they traded totally different. Right in

827
00:44:06,920 --> 00:44:09,720
Speaker 1: the nineties, you want the cap weighted. In the two thousands,

828
00:44:09,719 --> 00:44:12,760
Speaker 1: you want the equal weighted exactly. And then after when

829
00:44:12,760 --> 00:44:15,919
Speaker 1: when has now we're now we're at cap weight. It's

830
00:44:15,920 --> 00:44:18,480
Speaker 1: been cap weight here recently, but if you look at

831
00:44:18,480 --> 00:44:21,440
Speaker 1: the long term picture, it's long term picture is still

832
00:44:21,480 --> 00:44:24,319
Speaker 1: equal weight, but more recently cap weighting has been been

833
00:44:24,360 --> 00:44:27,160
Speaker 1: to play and large cap has given way to small

834
00:44:27,160 --> 00:44:29,279
Speaker 1: cap or small cap has given way to large cap. Now.

835
00:44:30,360 --> 00:44:33,120
Speaker 1: So so now your e t F that looks at

836
00:44:33,239 --> 00:44:37,439
Speaker 1: both of these variations, it's always in either cap weight

837
00:44:37,840 --> 00:44:40,960
Speaker 1: or equal weight. That that's the option. No, it's not.

838
00:44:41,000 --> 00:44:43,520
Speaker 1: That's not the option. We could be in some of each.

839
00:44:43,560 --> 00:44:47,600
Speaker 1: I mean it doesn't how how how doesn't have Well

840
00:44:47,640 --> 00:44:50,560
Speaker 1: what we look at as as a general As a

841
00:44:50,600 --> 00:44:52,840
Speaker 1: general rule, we don't cap weight any of our e

842
00:44:52,960 --> 00:44:56,240
Speaker 1: t f s. They're all equal weighted. Take for instance,

843
00:44:56,239 --> 00:44:59,960
Speaker 1: our PDP, our technical leaders. We look through stocks one

844
00:45:00,000 --> 00:45:02,800
Speaker 1: it's a quarter, and we do that arm wrestling calculation,

845
00:45:04,040 --> 00:45:06,680
Speaker 1: massive number of charts we have to create. We pick

846
00:45:06,719 --> 00:45:11,040
Speaker 1: out the one hundred strongest out of and that goes

847
00:45:11,080 --> 00:45:14,200
Speaker 1: into the portfolio and that's gonna be your your PDP

848
00:45:14,360 --> 00:45:16,879
Speaker 1: for the next quarter. And that's done pretty well, that's

849
00:45:16,880 --> 00:45:20,160
Speaker 1: been out right. What what's the track record of that

850
00:45:20,280 --> 00:45:23,400
Speaker 1: e t S? Oh god, I couldn't begin to performed.

851
00:45:24,680 --> 00:45:27,200
Speaker 1: It has um But here's the thing. Very when you

852
00:45:27,239 --> 00:45:30,279
Speaker 1: look at that, it's almost like a sector rotation kind

853
00:45:30,280 --> 00:45:32,560
Speaker 1: of model, because when you look at the things in

854
00:45:32,560 --> 00:45:35,560
Speaker 1: that universe and it says, gee, we're gonna push you

855
00:45:35,600 --> 00:45:38,280
Speaker 1: into the one hundred, it's pushing into the one hundred strongest.

856
00:45:38,760 --> 00:45:40,719
Speaker 1: So pushing you into the one strongest is going to

857
00:45:40,800 --> 00:45:43,480
Speaker 1: put you into the sectors that are doing the best.

858
00:45:44,040 --> 00:45:48,200
Speaker 1: And you you mentioned earlier the strategy that shifted back

859
00:45:48,200 --> 00:45:50,800
Speaker 1: and forth. Is that an e t F or is

860
00:45:50,840 --> 00:45:55,040
Speaker 1: that state? Well, we have probably eighty five different models

861
00:45:55,680 --> 00:45:59,480
Speaker 1: that run on on our system, on our portfolio excuse me.

862
00:45:59,760 --> 00:46:04,239
Speaker 1: On our website, those are like unwrapped ETF. So that's

863
00:46:04,239 --> 00:46:08,680
Speaker 1: an interesting question. Take for instance, our F v. Frank Victor.

864
00:46:09,400 --> 00:46:13,680
Speaker 1: That's that E t F garnered the most sponsorship in

865
00:46:13,680 --> 00:46:17,120
Speaker 1: in buying any E t F in a shorter period time.

866
00:46:17,160 --> 00:46:18,879
Speaker 1: Came out in two thousand and fourteen. In one year,

867
00:46:19,080 --> 00:46:22,280
Speaker 1: we had about four billion dollars in a snow four billion.

868
00:46:23,000 --> 00:46:26,560
Speaker 1: Now f E stands for it's set first trust five. Okay,

869
00:46:26,680 --> 00:46:28,799
Speaker 1: so we look at the first trust twenty sectors. We

870
00:46:28,880 --> 00:46:31,400
Speaker 1: do the arm wrestling contest on a rollatives train basis,

871
00:46:31,440 --> 00:46:34,600
Speaker 1: pick the top five and that is basically it. We

872
00:46:34,719 --> 00:46:37,359
Speaker 1: let the top five wiggle back and forth until it's

873
00:46:37,560 --> 00:46:40,880
Speaker 1: until they cross a particular level. So that's not readjusted

874
00:46:40,920 --> 00:46:44,400
Speaker 1: on a on a set timeline. It's based on price exactly,

875
00:46:44,440 --> 00:46:46,839
Speaker 1: I mean based on relative straight as long as they

876
00:46:46,880 --> 00:46:48,520
Speaker 1: stay in that, you know, which is like a picture,

877
00:46:48,760 --> 00:46:52,080
Speaker 1: like a baseball game. You watch your picture and your

878
00:46:52,080 --> 00:46:54,920
Speaker 1: picture starts out and he's doing really well until the

879
00:46:54,960 --> 00:46:56,719
Speaker 1: fifth inning. Then all of a sudden he's sarting to

880
00:46:56,760 --> 00:46:58,840
Speaker 1: hit people with the ball and they're hitting home runs

881
00:46:58,880 --> 00:47:01,680
Speaker 1: on him, and and boy, all of a sudden, the coaches,

882
00:47:02,160 --> 00:47:05,399
Speaker 1: something's wrong with his relative strength. I gotta I gotta

883
00:47:05,440 --> 00:47:07,680
Speaker 1: take him out of the portfolio. In other words, I

884
00:47:07,719 --> 00:47:10,480
Speaker 1: gotta call over to the bullpen. He calls over the

885
00:47:10,520 --> 00:47:13,200
Speaker 1: bullpen and says, who's throwing the heat? He means, who's

886
00:47:13,239 --> 00:47:15,719
Speaker 1: got the best relative strength? Because I gotta take this

887
00:47:15,719 --> 00:47:17,680
Speaker 1: guy off the mound, because he's starting to get weak.

888
00:47:18,000 --> 00:47:19,919
Speaker 1: I put him in the dugout. I bring the guy

889
00:47:19,960 --> 00:47:22,360
Speaker 1: who has the best relative strength out of the dugout,

890
00:47:22,520 --> 00:47:25,000
Speaker 1: and he becomes the picture. So that's how things come

891
00:47:25,040 --> 00:47:27,759
Speaker 1: in and out of the portfolio like that. The f

892
00:47:27,960 --> 00:47:31,879
Speaker 1: V the First Trust five has been has gone years

893
00:47:31,920 --> 00:47:35,320
Speaker 1: without without a change until recently all of a sudden

894
00:47:35,320 --> 00:47:37,760
Speaker 1: would happen in First Trust five. The things that carried

895
00:47:37,800 --> 00:47:39,920
Speaker 1: it over the last five years, which was we were

896
00:47:39,960 --> 00:47:44,399
Speaker 1: in the healthcare drugs, we were in um technology big

897
00:47:44,400 --> 00:47:49,000
Speaker 1: time we had and also we had no oil. It

898
00:47:49,000 --> 00:47:53,319
Speaker 1: would not let a relative strength portfolio a sector that's

899
00:47:53,320 --> 00:47:55,000
Speaker 1: been in free falls, right. But if you were a

900
00:47:55,000 --> 00:47:57,719
Speaker 1: fundamental portfolio, you'd have you'd have to have part of it.

901
00:47:57,960 --> 00:48:00,200
Speaker 1: You wouldn't be able to be out of oil, which

902
00:48:00,239 --> 00:48:01,839
Speaker 1: we were out of oil. We wouldn't let it in.

903
00:48:01,840 --> 00:48:03,920
Speaker 1: So a lot of times it's what you don't that

904
00:48:03,960 --> 00:48:07,600
Speaker 1: really makes the difference. So the first Trust five was

905
00:48:07,640 --> 00:48:09,960
Speaker 1: a model. Those were the five E t fs and

906
00:48:10,239 --> 00:48:11,880
Speaker 1: and what you did is you bought those five E

907
00:48:12,000 --> 00:48:14,640
Speaker 1: t f s as a professional, and whenever a change

908
00:48:14,680 --> 00:48:19,960
Speaker 1: took place, we emailed you if you're running that as

909
00:48:20,000 --> 00:48:22,400
Speaker 1: a separate model and a separate model, and probably about

910
00:48:22,400 --> 00:48:25,120
Speaker 1: four billion dollars was in that model because it's available

911
00:48:25,120 --> 00:48:27,920
Speaker 1: to our professionals. Now, the interesting thing there is the

912
00:48:27,960 --> 00:48:32,160
Speaker 1: wirehouse broker who needs Q SIPs. He has to satisfy compliance,

913
00:48:32,160 --> 00:48:34,960
Speaker 1: he has to satisfy branch manager, customers want to see

914
00:48:34,960 --> 00:48:37,480
Speaker 1: things in the portfolio and whatnot. He buys the model.

915
00:48:37,920 --> 00:48:40,640
Speaker 1: We took that model and wrapped it up into an

916
00:48:40,640 --> 00:48:43,280
Speaker 1: E t F which was symbol f V Frank Victor

917
00:48:43,880 --> 00:48:47,160
Speaker 1: exactly the same thing, except one Q SIP over here,

918
00:48:47,400 --> 00:48:54,799
Speaker 1: which service the individual investor UH managers who pay a

919
00:48:54,920 --> 00:48:56,680
Speaker 1: fee whenever they buy a stock, they have to pay

920
00:48:56,680 --> 00:49:00,600
Speaker 1: a commission. So this worked perfectly for them to have

921
00:49:00,760 --> 00:49:03,759
Speaker 1: one symbol that wrapped up that model. But on the

922
00:49:03,760 --> 00:49:06,719
Speaker 1: other side you had the wirehouse broker who wanted the

923
00:49:06,800 --> 00:49:10,840
Speaker 1: QUE SIPs. So they both trade side by side. We

924
00:49:12,960 --> 00:49:16,279
Speaker 1: have eighty five different models that could be wrapped up

925
00:49:16,320 --> 00:49:18,520
Speaker 1: into an A t F. And and how many A

926
00:49:18,640 --> 00:49:20,439
Speaker 1: t F do you have? I'm actually trying to pull

927
00:49:20,480 --> 00:49:26,360
Speaker 1: that up. Probably about seventeen, uh well totally total, maybe twenty.

928
00:49:26,440 --> 00:49:30,680
Speaker 1: I'm not sure exactly how many of them, um And

929
00:49:30,760 --> 00:49:32,840
Speaker 1: what's the U M of all those I'm trying to do.

930
00:49:34,239 --> 00:49:36,240
Speaker 1: If you just look at the E t s themselves,

931
00:49:36,239 --> 00:49:40,520
Speaker 1: I would say probably after this last decline. Maybe that's

932
00:49:40,560 --> 00:49:44,120
Speaker 1: not an insubstantial amount of money. No, it was higher

933
00:49:44,160 --> 00:49:47,440
Speaker 1: before the market market took them away. But we've been

934
00:49:47,480 --> 00:49:49,640
Speaker 1: at this game for a long time. I worked with

935
00:49:49,719 --> 00:49:51,279
Speaker 1: the first d t F that ever came out with

936
00:49:51,280 --> 00:49:55,080
Speaker 1: which Joseph Rosello was head of marketing at the Philadelphia Exchange.

937
00:49:55,360 --> 00:49:57,080
Speaker 1: That was the first E T F that ever came out,

938
00:49:57,160 --> 00:50:00,920
Speaker 1: which was what the cash index participation unit symbol BUS

939
00:50:01,800 --> 00:50:04,920
Speaker 1: participation right. This was back in the mid eighties. Joseph

940
00:50:05,000 --> 00:50:07,240
Speaker 1: Rizzello was the head of marketing at the Philly Exchange.

941
00:50:07,280 --> 00:50:10,719
Speaker 1: They brought this this, uh we called it the SIP.

942
00:50:11,200 --> 00:50:13,880
Speaker 1: It was simple b I G which was dal Jones

943
00:50:14,239 --> 00:50:17,279
Speaker 1: and simple SNP, which was standard in ports, and they

944
00:50:17,280 --> 00:50:19,239
Speaker 1: traded on the Exchange. So it was the first e

945
00:50:19,360 --> 00:50:22,160
Speaker 1: t F that traded, but they ran into trouble and

946
00:50:22,239 --> 00:50:26,160
Speaker 1: got sued by the Futures Exchange in Chicago because that

947
00:50:26,320 --> 00:50:30,680
Speaker 1: e t F was backed by futures not stocks. And

948
00:50:31,200 --> 00:50:34,000
Speaker 1: so now you have the Dale Diamonds and the SMP Spiders.

949
00:50:34,239 --> 00:50:38,440
Speaker 1: That's the same thing, except they're backed by stocks not futures.

950
00:50:38,520 --> 00:50:40,680
Speaker 1: I wonder why they used futures and stead guess it

951
00:50:40,760 --> 00:50:43,200
Speaker 1: was just it was it was cheaper to do it

952
00:50:43,239 --> 00:50:45,600
Speaker 1: that way. You had the same thing, but it was cheaper.

953
00:50:46,200 --> 00:50:48,120
Speaker 1: What happened then then the next e t F that

954
00:50:48,200 --> 00:50:51,439
Speaker 1: came was the Toronto Stock Exchange came down and used

955
00:50:51,480 --> 00:50:55,080
Speaker 1: the same template and created the Toronto Index Participation units

956
00:50:55,440 --> 00:51:00,640
Speaker 1: backed by stock, and that still trades. That's amazing, that's

957
00:51:00,640 --> 00:51:05,120
Speaker 1: still trades to this day. I'm looking for this. Look

958
00:51:05,120 --> 00:51:10,200
Speaker 1: at that list. That's impressive. Um. So we went over

959
00:51:10,239 --> 00:51:13,560
Speaker 1: buy and hold. We went over a number of different strategies,

960
00:51:14,120 --> 00:51:17,120
Speaker 1: and we talked about your love of Fibonacci and Elliott wave,

961
00:51:17,680 --> 00:51:20,200
Speaker 1: which is always it's just it's just that I don't

962
00:51:20,239 --> 00:51:22,560
Speaker 1: understand them. So it's not I'm not slamming them. I

963
00:51:22,560 --> 00:51:26,040
Speaker 1: wouldn't say anything against them in the right hands, every

964
00:51:26,040 --> 00:51:29,000
Speaker 1: every every bit of technical analysis works. But it's just

965
00:51:29,080 --> 00:51:31,200
Speaker 1: in my hands. The only thing I've ever looked at

966
00:51:31,320 --> 00:51:33,879
Speaker 1: or used or anyone a d w A has ever

967
00:51:33,920 --> 00:51:36,160
Speaker 1: done this point in figure charting. So let me get

968
00:51:36,200 --> 00:51:38,520
Speaker 1: to my last two questions that we skipped during the

969
00:51:38,520 --> 00:51:43,439
Speaker 1: main part, and then I'll get to my favorite questions. Um, So,

970
00:51:43,640 --> 00:51:45,719
Speaker 1: the past twenty years, we've seen the rise of high

971
00:51:45,760 --> 00:51:48,920
Speaker 1: frequency trading. We've seen all these ztfs, we've seen a

972
00:51:48,920 --> 00:51:52,480
Speaker 1: shift towards index thing. What has any of this stuff

973
00:51:52,560 --> 00:51:57,600
Speaker 1: done to the strategies that you employ? Nothing? Nothing, nothing,

974
00:51:57,640 --> 00:52:00,279
Speaker 1: absolutely nothing in fact, In fact, the point in figure charts,

975
00:52:00,320 --> 00:52:02,520
Speaker 1: if you look back to the old guys who wrote

976
00:52:02,520 --> 00:52:05,640
Speaker 1: about it, A. W. Cohen and Ernest Staby, they always

977
00:52:05,719 --> 00:52:09,200
Speaker 1: said the faster chart forms, the better it is because

978
00:52:09,200 --> 00:52:11,279
Speaker 1: the same players are still there. It's not like a

979
00:52:11,360 --> 00:52:13,560
Speaker 1: chart pattern forms today and two and a half years

980
00:52:13,560 --> 00:52:17,680
Speaker 1: it's still the same chart pattern everybody's going. So you say, wow,

981
00:52:17,719 --> 00:52:20,680
Speaker 1: the market has moved got more volatile, things have gone faster. Okay,

982
00:52:20,719 --> 00:52:23,319
Speaker 1: that's great, it's even better for us. And um, the

983
00:52:23,360 --> 00:52:27,880
Speaker 1: other question we I skipped, so smart beta has been

984
00:52:27,880 --> 00:52:32,719
Speaker 1: getting quite popular is there a risk that becomes too popular. Well,

985
00:52:33,080 --> 00:52:35,520
Speaker 1: now you have to understand, Barry, that smart beta really

986
00:52:35,560 --> 00:52:38,759
Speaker 1: is a marketing term. You're not the first person who

987
00:52:38,840 --> 00:52:41,279
Speaker 1: said that. You know, it really is because to me,

988
00:52:42,200 --> 00:52:44,480
Speaker 1: smart the way they look at smart beta is anything

989
00:52:44,480 --> 00:52:47,520
Speaker 1: that's not capitalization weighted. But the way I look at

990
00:52:47,560 --> 00:52:50,839
Speaker 1: smart beta is things that are rules based that if

991
00:52:50,840 --> 00:52:53,240
Speaker 1: you're going to be smart about it. You know, let's

992
00:52:53,239 --> 00:52:56,640
Speaker 1: say with the kale. We talked about the kale before

993
00:52:56,719 --> 00:52:59,520
Speaker 1: on the radio. If you want to make kale taste good,

994
00:52:59,520 --> 00:53:00,880
Speaker 1: there are a thing you need to do to it.

995
00:53:01,040 --> 00:53:03,840
Speaker 1: If you want to create a portfolio of of exchange

996
00:53:03,840 --> 00:53:06,439
Speaker 1: trader funds, there are some things that fit together well,

997
00:53:06,719 --> 00:53:09,319
Speaker 1: some things that don't fit together well. So with the

998
00:53:09,400 --> 00:53:12,280
Speaker 1: rules based program, that's how you're gonna create your portfolio.

999
00:53:12,360 --> 00:53:14,640
Speaker 1: I always look at you. You ever watch the Master

1000
00:53:14,760 --> 00:53:17,759
Speaker 1: Chef on TV show all right now? Whenever they go

1001
00:53:17,840 --> 00:53:21,000
Speaker 1: into the Master Chef pantry, everyone runs in with their basket,

1002
00:53:21,040 --> 00:53:25,239
Speaker 1: same ingredients or different ingredients, right, different ingredients they got

1003
00:53:25,239 --> 00:53:26,759
Speaker 1: the same They have to make the same thing, but

1004
00:53:26,800 --> 00:53:29,319
Speaker 1: they're gonna pick different things. When I look at that

1005
00:53:29,360 --> 00:53:32,120
Speaker 1: Master Jef pantry, I see E T. F s. That's

1006
00:53:32,160 --> 00:53:34,800
Speaker 1: all I see. And they're assembling things out of exactly

1007
00:53:34,840 --> 00:53:37,360
Speaker 1: they're picking the protein to picking everything. And with with

1008
00:53:37,440 --> 00:53:40,600
Speaker 1: a money manager like yourself, you have all those things

1009
00:53:40,680 --> 00:53:43,840
Speaker 1: available to you. It's your job to create a fantastic

1010
00:53:43,920 --> 00:53:46,440
Speaker 1: meal for your customers. So you have the selection of

1011
00:53:46,440 --> 00:53:49,080
Speaker 1: everything in that master chef pantry, and that's how you

1012
00:53:49,120 --> 00:53:52,360
Speaker 1: create your your your portfolio for e t f S.

1013
00:53:52,880 --> 00:53:55,600
Speaker 1: That's really interesting, you know. I always thought it was

1014
00:53:55,640 --> 00:54:00,799
Speaker 1: a fascinating coincidence that the standard for an index is

1015
00:54:00,880 --> 00:54:03,160
Speaker 1: cap waited when we know there are so many problems

1016
00:54:03,160 --> 00:54:05,960
Speaker 1: with cap waiting towards the end of the sectors, at

1017
00:54:06,000 --> 00:54:09,640
Speaker 1: the end of the cycle especially. But that said, I

1018
00:54:09,680 --> 00:54:12,919
Speaker 1: don't really see so much of a difference between cap

1019
00:54:12,960 --> 00:54:16,319
Speaker 1: waiting profitability rating. If you look at some of the

1020
00:54:16,360 --> 00:54:20,680
Speaker 1: things that UM Research Affiliates does rob or not, instead

1021
00:54:20,680 --> 00:54:23,040
Speaker 1: of doing it cap waiting, they do it by profitability

1022
00:54:23,080 --> 00:54:26,200
Speaker 1: dived and yield. All these different metrics, you still end

1023
00:54:26,320 --> 00:54:29,960
Speaker 1: up with an index that isn't actively traded. You're just

1024
00:54:30,239 --> 00:54:34,120
Speaker 1: using a different basis for assembling it, like the relative

1025
00:54:34,160 --> 00:54:37,719
Speaker 1: strength First, I'm sorry, you hit on it perfectly very

1026
00:54:37,719 --> 00:54:40,040
Speaker 1: when you said a different way of assembling it. So

1027
00:54:40,080 --> 00:54:41,880
Speaker 1: you come to me and you say, Tom, I'm going

1028
00:54:41,920 --> 00:54:46,160
Speaker 1: to use astrology to pick my stocks. And I'm gonna

1029
00:54:46,200 --> 00:54:48,600
Speaker 1: come to you with a hunter stocks and and and

1030
00:54:48,640 --> 00:54:50,759
Speaker 1: this is like when Jupiter's line with Mars. We're gonna

1031
00:54:50,800 --> 00:54:53,200
Speaker 1: do this sector and when you bring to me the

1032
00:54:53,239 --> 00:54:56,880
Speaker 1: stocks will organize it. We'll do We'll put our relative

1033
00:54:56,880 --> 00:54:59,400
Speaker 1: strength on it. Organize it. If it's junk that you

1034
00:54:59,480 --> 00:55:01,440
Speaker 1: give me, I'm gonna give you the best junk. I

1035
00:55:01,560 --> 00:55:06,960
Speaker 1: put the best junk precisely, precisely, so it's two hands.

1036
00:55:07,280 --> 00:55:08,759
Speaker 1: What's the name of the et F by the way,

1037
00:55:08,800 --> 00:55:12,480
Speaker 1: the astrologer relative is that one that's out there. No,

1038
00:55:12,680 --> 00:55:14,239
Speaker 1: there's not one out there, but you never you never

1039
00:55:14,280 --> 00:55:17,080
Speaker 1: can't tell when that will happen, you know. But but

1040
00:55:17,120 --> 00:55:19,760
Speaker 1: that's the idea that you play with piano with both hands.

1041
00:55:19,960 --> 00:55:22,000
Speaker 1: You could give me. I love to have a fundamental

1042
00:55:22,160 --> 00:55:25,400
Speaker 1: report saying, hey, these stocks are truly right and just

1043
00:55:25,600 --> 00:55:28,920
Speaker 1: a fundamentally sound et cetera. Can you deal with these

1044
00:55:28,920 --> 00:55:32,279
Speaker 1: beautiful I love it first trust does the alphabex way

1045
00:55:32,600 --> 00:55:36,719
Speaker 1: of fundamental rea alpha dex. I'm not sure exactly how

1046
00:55:37,040 --> 00:55:38,480
Speaker 1: they haven't never come to me and told me how

1047
00:55:38,600 --> 00:55:40,239
Speaker 1: they do it, but they do a great job at it.

1048
00:55:40,480 --> 00:55:42,839
Speaker 1: They give us the list. Everything that First Trust does

1049
00:55:42,920 --> 00:55:47,400
Speaker 1: is alphabex fundamentally organized. Then we take that fundamentally organized

1050
00:55:47,440 --> 00:55:51,040
Speaker 1: and create the portfolio and manage the portfolio. And so

1051
00:55:51,239 --> 00:55:53,359
Speaker 1: we play with the piano with both hands. They play

1052
00:55:53,400 --> 00:55:56,319
Speaker 1: the fundamental side, we play the the technical side. I've

1053
00:55:56,360 --> 00:55:58,359
Speaker 1: worked with a friend years ago. He used to call

1054
00:55:58,440 --> 00:56:02,760
Speaker 1: that technamentals is the technical side. He is the fundamental side.

1055
00:56:03,120 --> 00:56:06,040
Speaker 1: You marry the two together. Ralph at Kempor you mentioned earlier,

1056
00:56:06,440 --> 00:56:09,560
Speaker 1: was fond of saying, fundamentals tell you what to buy,

1057
00:56:09,960 --> 00:56:13,960
Speaker 1: Technicals tell you when when exactly precisely. All right, so

1058
00:56:14,080 --> 00:56:16,799
Speaker 1: let's jump to some of my favorite questions. These are

1059
00:56:16,800 --> 00:56:19,840
Speaker 1: what I asked all my guests, and and usually we

1060
00:56:19,920 --> 00:56:24,600
Speaker 1: get some we get some some interesting questions. You mentioned

1061
00:56:24,680 --> 00:56:27,960
Speaker 1: you were an economics major at university. What did you

1062
00:56:28,040 --> 00:56:31,759
Speaker 1: do before you found your way to merrow lynch Well,

1063
00:56:31,800 --> 00:56:34,640
Speaker 1: I spent four years in the Navy, first and a

1064
00:56:34,680 --> 00:56:40,000
Speaker 1: couple in Vietnam off the coast, and they so I

1065
00:56:40,040 --> 00:56:43,120
Speaker 1: was in from nineteen nineteen sixty seven, beginning of nineteen

1066
00:56:43,080 --> 00:56:46,960
Speaker 1: saw some submction of it. I didn't see that I

1067
00:56:46,960 --> 00:56:50,000
Speaker 1: was on an aircraft carrier. Okay, the planes we shot

1068
00:56:50,000 --> 00:56:53,719
Speaker 1: off the action, so you were relatively safe work on

1069
00:56:53,760 --> 00:56:56,720
Speaker 1: the ship. Absolutely so, so how did you get from

1070
00:56:57,840 --> 00:57:00,400
Speaker 1: you're in the South Pacific Sea to Maryland. That's when

1071
00:57:00,440 --> 00:57:02,560
Speaker 1: I went back to college, and so I did the

1072
00:57:02,600 --> 00:57:04,640
Speaker 1: Navy first college. Second, I went on the g I

1073
00:57:04,719 --> 00:57:08,520
Speaker 1: bill and going to school. And g I bill was, well,

1074
00:57:08,560 --> 00:57:10,400
Speaker 1: I could, I could pay my tuition, but you know,

1075
00:57:10,600 --> 00:57:13,239
Speaker 1: much money left. And by the end of the By

1076
00:57:13,239 --> 00:57:14,880
Speaker 1: the end of that, I was driving a car with

1077
00:57:14,920 --> 00:57:17,600
Speaker 1: no reverse, and you know, so by the time it

1078
00:57:17,640 --> 00:57:19,880
Speaker 1: was it was time to graduate, I said, I'm tired

1079
00:57:19,920 --> 00:57:22,760
Speaker 1: of being poor. Wait, you're driving a car with no reverse.

1080
00:57:22,880 --> 00:57:24,840
Speaker 1: Reverse you wherever you parked it, you had to make

1081
00:57:24,880 --> 00:57:27,280
Speaker 1: sure you're coming straight out of it. That's hilarious. I

1082
00:57:27,280 --> 00:57:30,000
Speaker 1: I had a VW bug that there were periods of

1083
00:57:30,000 --> 00:57:32,400
Speaker 1: time where I had no battery, but it was a stick.

1084
00:57:32,480 --> 00:57:34,320
Speaker 1: So as long as I parked on a hill, that's right.

1085
00:57:34,360 --> 00:57:36,040
Speaker 1: It was the same thing I could pop it into.

1086
00:57:36,480 --> 00:57:38,840
Speaker 1: And that's the stuff we did back then. You know,

1087
00:57:38,880 --> 00:57:41,200
Speaker 1: when hey, your college, you're broke, you're putting it working

1088
00:57:41,200 --> 00:57:43,120
Speaker 1: away through school. No way I could pay to get

1089
00:57:43,120 --> 00:57:44,640
Speaker 1: a reverse put in that thing. So I just kept

1090
00:57:44,720 --> 00:57:47,720
Speaker 1: on going forward. That hilarious. But by the way, that's

1091
00:57:47,760 --> 00:57:50,160
Speaker 1: where the momentum strategy came from. As long as you're

1092
00:57:50,160 --> 00:57:53,040
Speaker 1: facing in the right direction, exactly there you go. That's uh.

1093
00:57:55,000 --> 00:57:57,520
Speaker 1: I gotta go where there's money. And a friend of

1094
00:57:57,520 --> 00:57:58,960
Speaker 1: mine said, well, i'd be Wall Street and said what

1095
00:57:59,040 --> 00:58:01,320
Speaker 1: do they do. He said, well, it's like Merrill Lynch

1096
00:58:01,400 --> 00:58:03,919
Speaker 1: and you know stock market. So I applied to Merrill Lynch.

1097
00:58:04,240 --> 00:58:07,520
Speaker 1: I applied exactly at the end of the terrible bear

1098
00:58:07,600 --> 00:58:10,160
Speaker 1: market that customers have gone through. They were not hiring

1099
00:58:10,200 --> 00:58:13,760
Speaker 1: anyone and most of their customers had left them. So

1100
00:58:13,840 --> 00:58:16,320
Speaker 1: I went to Richard's Wine Cellars, which is part of

1101
00:58:16,360 --> 00:58:19,840
Speaker 1: Canadagua Industries, one of the largest wineries in the country.

1102
00:58:19,840 --> 00:58:22,680
Speaker 1: This was in Petersburg and I was a production supervisor

1103
00:58:23,400 --> 00:58:26,240
Speaker 1: until and this is the way paths happened to you

1104
00:58:26,280 --> 00:58:29,120
Speaker 1: in life. Certain things happened. You can take the path

1105
00:58:29,200 --> 00:58:31,000
Speaker 1: or not to take the path that leads you somewhere else.

1106
00:58:31,280 --> 00:58:32,919
Speaker 1: And this came to me and he said, you know what,

1107
00:58:33,360 --> 00:58:37,400
Speaker 1: I was at um a career counseling meeting up in Washington,

1108
00:58:37,480 --> 00:58:40,440
Speaker 1: d C. He said, Merrill Lynches is now hiring, and

1109
00:58:40,480 --> 00:58:43,120
Speaker 1: I said, you're kidding me. So I reapplied to Merrill Lynch.

1110
00:58:43,160 --> 00:58:45,480
Speaker 1: I badgered them to the point they couldn't take it anymore.

1111
00:58:45,960 --> 00:58:48,200
Speaker 1: Gave me an interview. They figured, hey, this guy's a

1112
00:58:48,240 --> 00:58:51,520
Speaker 1: good sales Yeah, he won't give The secretary of the

1113
00:58:51,560 --> 00:58:53,600
Speaker 1: manager finally called me and says, you've gotta stop this.

1114
00:58:53,920 --> 00:58:56,520
Speaker 1: He can't you know you kill see you Tuesday, I

1115
00:58:56,600 --> 00:58:58,560
Speaker 1: knew I was in. I still didn't know what a

1116
00:58:58,560 --> 00:59:02,040
Speaker 1: stockbroker did. It didn't matter, No, it didn't matter. It

1117
00:59:02,160 --> 00:59:04,600
Speaker 1: was like, I'm in the best company, the biggest company

1118
00:59:04,600 --> 00:59:06,800
Speaker 1: in Wall Street, Wall Streets kind of cool. I don't

1119
00:59:06,800 --> 00:59:08,680
Speaker 1: know what they do yet, but I'm going to study.

1120
00:59:08,880 --> 00:59:11,960
Speaker 1: And when I passed the series seven, in one second,

1121
00:59:12,000 --> 00:59:14,360
Speaker 1: when I saw that on one Liberty Plaza down here,

1122
00:59:14,640 --> 00:59:16,880
Speaker 1: I saw that posted up there, I went from a

1123
00:59:16,920 --> 00:59:19,320
Speaker 1: nobody to a somebody in one second. How long did

1124
00:59:19,320 --> 00:59:21,240
Speaker 1: you stay at Mery Lynch for Well, I stayed to

1125
00:59:21,280 --> 00:59:23,400
Speaker 1: Mary Lynch about five years, close to that, and then

1126
00:59:23,400 --> 00:59:25,640
Speaker 1: went to Wheat for Securities to develop and manage their

1127
00:59:25,680 --> 00:59:28,200
Speaker 1: option department. All right, and you were with Wheat first

1128
00:59:28,240 --> 00:59:32,160
Speaker 1: for how long? Nine years? And nine years? Because I

1129
00:59:32,200 --> 00:59:35,120
Speaker 1: had set the age of forty to start my own company.

1130
00:59:35,320 --> 00:59:38,360
Speaker 1: That was the last forty was to cut off day.

1131
00:59:38,520 --> 00:59:40,640
Speaker 1: And at thirty nine I gave my resonation, so I

1132
00:59:40,920 --> 00:59:44,120
Speaker 1: had to go on Target. I didn't do that until fifty.

1133
00:59:44,200 --> 00:59:47,800
Speaker 1: But that's okay, you did it worked out. Um, that's

1134
00:59:47,800 --> 00:59:52,200
Speaker 1: that's kind of fascinating. So you were at at two

1135
00:59:52,480 --> 00:59:58,040
Speaker 1: well regarded places. Wheat First, which eventually became First was

1136
00:59:58,120 --> 01:00:02,760
Speaker 1: bought by First Union First Union First, and then there

1137
01:00:02,800 --> 01:00:04,640
Speaker 1: might have been one or two other steps before that

1138
01:00:04,680 --> 01:00:06,480
Speaker 1: became Well. I think there were two other steps before

1139
01:00:06,480 --> 01:00:08,480
Speaker 1: a while Fargo Fani took him and you were at

1140
01:00:08,600 --> 01:00:11,240
Speaker 1: you were at Meryl. So who were your mentors at

1141
01:00:11,280 --> 01:00:14,920
Speaker 1: these places? Well, I had no mentors at those places.

1142
01:00:15,200 --> 01:00:18,480
Speaker 1: The two mentors I had in my in my business

1143
01:00:18,520 --> 01:00:22,160
Speaker 1: life was one the late Jim Yates, I know the

1144
01:00:22,240 --> 01:00:25,040
Speaker 1: name Jim Yates of d y R and Associates, Dalton

1145
01:00:25,120 --> 01:00:28,080
Speaker 1: Yates and Revco. Jim was I think the most premier

1146
01:00:28,560 --> 01:00:32,439
Speaker 1: option expert in the world. To me, he was He

1147
01:00:32,560 --> 01:00:35,600
Speaker 1: was able to teach me and understanding of options that

1148
01:00:35,680 --> 01:00:39,160
Speaker 1: I have rarely ever seen in anyone else and rarely

1149
01:00:39,200 --> 01:00:42,200
Speaker 1: ever utilize his way of thinking, which brought me back

1150
01:00:42,200 --> 01:00:44,720
Speaker 1: to statistics one on one, the second most important course

1151
01:00:44,760 --> 01:00:49,440
Speaker 1: in college and the normal distribution, and Jim was very

1152
01:00:49,480 --> 01:00:55,840
Speaker 1: important in that. Next was um was that Chartcraft and

1153
01:00:56,040 --> 01:01:03,480
Speaker 1: um oh my thinking about his name art Craft. Art

1154
01:01:03,520 --> 01:01:06,240
Speaker 1: Craft was been around for a while. It had been

1155
01:01:06,280 --> 01:01:09,000
Speaker 1: around for a long time. Chart Craft and Investor Intelligence,

1156
01:01:09,280 --> 01:01:11,960
Speaker 1: and the late Mike Burke was the president, not president,

1157
01:01:12,000 --> 01:01:15,080
Speaker 1: but he was the editor the chart Craft in and

1158
01:01:15,240 --> 01:01:19,800
Speaker 1: um Um Investor Intelligence. They came together and chart Craft

1159
01:01:19,880 --> 01:01:21,800
Speaker 1: was that was the company that sent you the monthly

1160
01:01:21,800 --> 01:01:23,880
Speaker 1: books on point and figure charting. You've got the big

1161
01:01:23,880 --> 01:01:26,440
Speaker 1: thick books and they updated you once a month and

1162
01:01:26,520 --> 01:01:30,160
Speaker 1: that type of thing. Mike Burke was one of my mentors.

1163
01:01:30,200 --> 01:01:32,440
Speaker 1: He was a great guy. He was almost like he

1164
01:01:32,520 --> 01:01:35,800
Speaker 1: was almost like Einstein. He would get up in the

1165
01:01:35,840 --> 01:01:37,800
Speaker 1: morning and he would walk out in one sleeve would

1166
01:01:37,800 --> 01:01:39,840
Speaker 1: be buttoned down the other sleep we rolled up and

1167
01:01:39,880 --> 01:01:42,440
Speaker 1: he would figure out why why not do that? You know?

1168
01:01:42,760 --> 01:01:45,600
Speaker 1: But he was the very clear thinker. And one of

1169
01:01:45,640 --> 01:01:47,240
Speaker 1: the things I'll never forget about Mike. He came to

1170
01:01:47,280 --> 01:01:49,080
Speaker 1: me when didn't come to me, but we were talking

1171
01:01:49,120 --> 01:01:52,000
Speaker 1: one day and he said, Tom, he says, let me

1172
01:01:52,040 --> 01:01:54,400
Speaker 1: tell you something. I said, what's that, Mike? He said,

1173
01:01:54,440 --> 01:01:56,920
Speaker 1: the market will do what it wants to do, and

1174
01:01:57,000 --> 01:02:00,320
Speaker 1: that was it didn't anymore. And that's so profound owned

1175
01:02:00,920 --> 01:02:04,120
Speaker 1: that when you sit back and think about it, why

1176
01:02:04,200 --> 01:02:07,320
Speaker 1: watch TV, Why get ideas from all these different places?

1177
01:02:07,360 --> 01:02:08,919
Speaker 1: When the market will do what it wants to do.

1178
01:02:09,080 --> 01:02:11,080
Speaker 1: Then listen to the market, which you have to listen

1179
01:02:11,080 --> 01:02:14,000
Speaker 1: to the market. Don't listen to something else, the things

1180
01:02:14,040 --> 01:02:16,560
Speaker 1: that you think the market should do because of X,

1181
01:02:16,680 --> 01:02:19,480
Speaker 1: y Z, because of Janet. Yellen did this and and

1182
01:02:19,680 --> 01:02:21,959
Speaker 1: Greenspan did that. The market will do what it wants

1183
01:02:21,960 --> 01:02:24,640
Speaker 1: to do. I started as a trader, and I used

1184
01:02:24,680 --> 01:02:28,000
Speaker 1: to have those discussions with people, and I would get

1185
01:02:28,000 --> 01:02:31,920
Speaker 1: these long, convoluted explanations as to why this should happen.

1186
01:02:32,080 --> 01:02:35,120
Speaker 1: Or I love hearing people say, well, you know, if

1187
01:02:35,160 --> 01:02:39,160
Speaker 1: the market wasn't interfered with, here's what would happen. How

1188
01:02:39,200 --> 01:02:40,760
Speaker 1: do you know? How do you know what the market

1189
01:02:40,760 --> 01:02:43,200
Speaker 1: would do? And how do you how do you know

1190
01:02:43,320 --> 01:02:46,080
Speaker 1: that every time the market you know, you look at history,

1191
01:02:46,360 --> 01:02:49,360
Speaker 1: every time the market is cut in half, there's always

1192
01:02:49,440 --> 01:02:52,640
Speaker 1: some sort of response from the powers that be. You

1193
01:02:52,680 --> 01:02:55,920
Speaker 1: could pretend it doesn't exist, but the market tends to

1194
01:02:55,960 --> 01:02:59,760
Speaker 1: anticipate that, and it tends to respond regardless of whatever

1195
01:03:00,080 --> 01:03:02,520
Speaker 1: our narratives on. That's exactly right. It's gonna do what

1196
01:03:02,560 --> 01:03:05,000
Speaker 1: it wants to do, and you could either be along

1197
01:03:05,040 --> 01:03:07,960
Speaker 1: for the ride or not. That's right, exactly, we'll be

1198
01:03:08,000 --> 01:03:11,080
Speaker 1: going in the opposite direction. It's it's and that's always

1199
01:03:11,120 --> 01:03:14,600
Speaker 1: been summed up with don't fight the tape, but some

1200
01:03:14,640 --> 01:03:17,560
Speaker 1: people never seem to uh learn that message. Well, today,

1201
01:03:17,600 --> 01:03:22,360
Speaker 1: with news blogs, all kinds of different things, you can

1202
01:03:22,360 --> 01:03:24,800
Speaker 1: get news and information about the markets twenty four hours

1203
01:03:24,800 --> 01:03:28,320
Speaker 1: a day everywhere you go, and there's always an ax

1204
01:03:28,440 --> 01:03:32,880
Speaker 1: to grind. There's always uh no, there are no disinterested parties,

1205
01:03:33,600 --> 01:03:37,080
Speaker 1: you know, so you've got to be disinterested yourself. You've

1206
01:03:37,120 --> 01:03:39,760
Speaker 1: got to look at the rules and regulations that you

1207
01:03:39,840 --> 01:03:42,920
Speaker 1: set up, you know. It's it's also fascinating you mentioned

1208
01:03:42,920 --> 01:03:47,400
Speaker 1: that I always hear from various people about, well, I'm

1209
01:03:47,400 --> 01:03:50,320
Speaker 1: gonna do this as opposed to that because I've read

1210
01:03:50,320 --> 01:03:52,200
Speaker 1: all this research and I think this is what's going

1211
01:03:52,240 --> 01:03:55,480
Speaker 1: to happen. My answer is always yeah, but everybody's read

1212
01:03:55,520 --> 01:03:58,080
Speaker 1: that research. It's out there, it's public. You're trying to

1213
01:03:58,120 --> 01:04:05,280
Speaker 1: forecast based on on on a some public information. If

1214
01:04:05,320 --> 01:04:08,680
Speaker 1: everybody has access to the same info and you're if

1215
01:04:08,720 --> 01:04:12,680
Speaker 1: you're using to use your your chef metaphor, if you're

1216
01:04:12,760 --> 01:04:16,840
Speaker 1: using the same ingredients as everybody else, you can't really

1217
01:04:16,880 --> 01:04:19,880
Speaker 1: do anything special. Everybody is is cooking more or less

1218
01:04:19,920 --> 01:04:22,480
Speaker 1: the same thing. If you want to do something special,

1219
01:04:22,800 --> 01:04:26,760
Speaker 1: you need some special ingredient or special approach. And either

1220
01:04:26,800 --> 01:04:28,880
Speaker 1: it's going to be a disaster or a home run.

1221
01:04:29,360 --> 01:04:31,800
Speaker 1: But if everybody's cooking the same things and reading the

1222
01:04:31,840 --> 01:04:34,800
Speaker 1: same things, everybody is going to be part of the crowd,

1223
01:04:34,800 --> 01:04:38,360
Speaker 1: and they're gonna be so so performance. Yeah, and people today,

1224
01:04:38,400 --> 01:04:41,160
Speaker 1: you know, money managers today, I implore anyone I talked to,

1225
01:04:41,480 --> 01:04:45,000
Speaker 1: I said, whatever you do, get it computerized. Anything that

1226
01:04:45,120 --> 01:04:49,080
Speaker 1: can be computerized, anything it can be, will be. And

1227
01:04:49,240 --> 01:04:51,919
Speaker 1: you've got to understand that a lot of people out

1228
01:04:51,960 --> 01:04:54,000
Speaker 1: there that thought they were going to get by with

1229
01:04:54,040 --> 01:04:57,680
Speaker 1: a particular investment approach is now out there for everybody.

1230
01:04:57,720 --> 01:05:01,320
Speaker 1: So let's let's talk about other investors might have influenced

1231
01:05:01,520 --> 01:05:05,120
Speaker 1: your approach to point and fear who who else has

1232
01:05:05,120 --> 01:05:07,800
Speaker 1: been If not a mentor, but who else has influenced

1233
01:05:07,800 --> 01:05:11,680
Speaker 1: your thought process? Well, it's gonna sound like a strange answer, Verry,

1234
01:05:11,720 --> 01:05:14,400
Speaker 1: But no one, no one. Those two were the most

1235
01:05:14,440 --> 01:05:18,160
Speaker 1: important to me, and for what I learned from them

1236
01:05:18,240 --> 01:05:20,560
Speaker 1: and how they opened my mind in the way they

1237
01:05:20,600 --> 01:05:25,120
Speaker 1: think it's a lifetime. I can continue on down those

1238
01:05:25,120 --> 01:05:29,000
Speaker 1: two lines. Yeah, I and I and I try to

1239
01:05:29,040 --> 01:05:34,200
Speaker 1: put the blinders on, because, um, these things are distractions.

1240
01:05:34,240 --> 01:05:36,600
Speaker 1: There's a lot of noise relative to the signal, and

1241
01:05:36,640 --> 01:05:39,439
Speaker 1: the noise, you know, I have to block the noise out.

1242
01:05:39,920 --> 01:05:45,240
Speaker 1: So a couple of things, to me, you know, is simple, straightforward. Economics,

1243
01:05:45,240 --> 01:05:47,800
Speaker 1: to me, is the most important and icon one on one,

1244
01:05:47,880 --> 01:05:50,040
Speaker 1: the most important course I ever had. I was going

1245
01:05:50,080 --> 01:05:52,480
Speaker 1: to ask you if statistics was the second most stat

1246
01:05:52,480 --> 01:05:55,200
Speaker 1: one on one, because it taught me the normal distribution.

1247
01:05:55,640 --> 01:05:58,480
Speaker 1: Those two things right there, the irrefutable off supply and

1248
01:05:58,560 --> 01:06:01,400
Speaker 1: demand and the normal distribution. My god, you have a

1249
01:06:01,440 --> 01:06:06,120
Speaker 1: lifetime of thinking about strategies and things like if I

1250
01:06:06,160 --> 01:06:08,720
Speaker 1: mentioned to you said, you know, if you look at

1251
01:06:08,720 --> 01:06:11,000
Speaker 1: a normal distribution, I'm looking at men's heights in the world.

1252
01:06:11,720 --> 01:06:13,880
Speaker 1: Some some men are too hot to all, some of

1253
01:06:13,960 --> 01:06:16,000
Speaker 1: the men are too short. Most of us are in

1254
01:06:16,000 --> 01:06:19,160
Speaker 1: the Middlebury were one standard deviation above or below trend

1255
01:06:19,280 --> 01:06:21,960
Speaker 1: if you look at every trade you made in the market,

1256
01:06:22,000 --> 01:06:25,280
Speaker 1: and we've done this with our models, sixty eight percent

1257
01:06:25,520 --> 01:06:28,919
Speaker 1: of US men's heights are in the middle. Sixty percent

1258
01:06:29,000 --> 01:06:31,200
Speaker 1: of everything you do with will be one standard deviation

1259
01:06:31,240 --> 01:06:33,120
Speaker 1: above trend goes up, a little down, a little bit

1260
01:06:33,120 --> 01:06:35,640
Speaker 1: down up. So it says, if sixty eight percent of

1261
01:06:35,720 --> 01:06:38,560
Speaker 1: the time everything is middle, and what's the right strategy

1262
01:06:38,800 --> 01:06:42,320
Speaker 1: that will be a neutral strategy. So for most investors,

1263
01:06:42,360 --> 01:06:46,880
Speaker 1: what's that neutral strategy that makes the most sense? Covered writing? Oh,

1264
01:06:46,920 --> 01:06:50,720
Speaker 1: really absolutely, because you're dealing with something that's sixty eight

1265
01:06:50,720 --> 01:06:52,920
Speaker 1: percent of the time is going to be hanging around

1266
01:06:52,960 --> 01:06:56,080
Speaker 1: the center. You can't do naked straddles, you can't do nate,

1267
01:06:56,120 --> 01:06:58,440
Speaker 1: you can't do naked anything. You're gonna be in court.

1268
01:06:59,160 --> 01:07:03,880
Speaker 1: I mean as an there's a ton of risk relative

1269
01:07:03,920 --> 01:07:07,160
Speaker 1: to reward with that. But the covered right is the

1270
01:07:07,200 --> 01:07:11,320
Speaker 1: one strategy that's a neutral strategy. That's right sixty. You

1271
01:07:11,400 --> 01:07:13,920
Speaker 1: own an index or you own a group of specific stocks.

1272
01:07:14,280 --> 01:07:17,040
Speaker 1: You're writing call options on this, so you're taking in

1273
01:07:17,040 --> 01:07:20,640
Speaker 1: that that income stream from that, and the only major

1274
01:07:20,640 --> 01:07:22,920
Speaker 1: shift is going to be either when you get the

1275
01:07:22,920 --> 01:07:25,720
Speaker 1: stock gets called away to the upside or if there's

1276
01:07:25,720 --> 01:07:30,520
Speaker 1: a downside move which ultimately either leads to new covered

1277
01:07:30,520 --> 01:07:33,000
Speaker 1: writing or using a stop blow strategy to get out

1278
01:07:33,080 --> 01:07:35,520
Speaker 1: exactly do you understand it completely? But also to for

1279
01:07:35,600 --> 01:07:38,400
Speaker 1: someone like yourself, where you run a tremendous amount of money,

1280
01:07:38,720 --> 01:07:40,720
Speaker 1: you could look a little bit of money. You could

1281
01:07:40,760 --> 01:07:44,160
Speaker 1: look at you run a tremendous amount. I'm I'm running

1282
01:07:44,920 --> 01:07:48,400
Speaker 1: a smidgeon. You could create an index that, let's say,

1283
01:07:48,440 --> 01:07:50,760
Speaker 1: looked like the standard and Pours five looked like the

1284
01:07:50,840 --> 01:07:54,720
Speaker 1: Russell two thousand, and there's index options that trade, so

1285
01:07:54,800 --> 01:07:58,160
Speaker 1: you could sell these index options against that portfolio where

1286
01:07:58,200 --> 01:08:02,560
Speaker 1: nothing is kept off. So two out of so it's

1287
01:08:02,560 --> 01:08:05,000
Speaker 1: more than two out of three times. This is going

1288
01:08:05,080 --> 01:08:08,480
Speaker 1: to be an outperforming strategy. Absolutely absolutely and that and

1289
01:08:08,520 --> 01:08:11,200
Speaker 1: that takes you to stat one on one. Anybody should

1290
01:08:11,240 --> 01:08:15,760
Speaker 1: just go google normal distribution, learn it, love it, embrace it,

1291
01:08:16,120 --> 01:08:19,280
Speaker 1: and uh. It just gives you an idea of what

1292
01:08:19,320 --> 01:08:21,800
Speaker 1: to do. So whenever you look at you might buy

1293
01:08:21,800 --> 01:08:25,360
Speaker 1: a particular stock. On our charts, we have a normal

1294
01:08:25,360 --> 01:08:28,040
Speaker 1: distribution on the side of each chart. So if you

1295
01:08:28,080 --> 01:08:30,960
Speaker 1: see it move up to where it says top your

1296
01:08:31,000 --> 01:08:33,960
Speaker 1: three standard deviations above trend, that's telling you the stock

1297
01:08:34,000 --> 01:08:36,880
Speaker 1: has done well, but the probability is it wants to

1298
01:08:36,880 --> 01:08:40,719
Speaker 1: go back to the middle reversion coming back being reversion.

1299
01:08:40,800 --> 01:08:42,719
Speaker 1: That's the point you sell a call against the position.

1300
01:08:42,920 --> 01:08:44,640
Speaker 1: So there's a lot of simple stuff that you can

1301
01:08:44,680 --> 01:08:48,800
Speaker 1: do with stat one on one, any con one on one. Fascinating.

1302
01:08:48,960 --> 01:08:50,920
Speaker 1: So let's talk about books. What are some of your

1303
01:08:50,960 --> 01:08:55,960
Speaker 1: favorite books out there? Well, you said books in general, right,

1304
01:08:56,640 --> 01:09:00,840
Speaker 1: any from any any live that you can walk in

1305
01:09:00,960 --> 01:09:04,200
Speaker 1: or Amazon or whatever. My favorite book that when I

1306
01:09:04,320 --> 01:09:06,960
Speaker 1: finished reading it, I said, what do I read now?

1307
01:09:07,840 --> 01:09:12,639
Speaker 1: Is Shanta Ram Shanta Ram. I can't think of it now,

1308
01:09:13,479 --> 01:09:16,840
Speaker 1: who um? But it's about a guy who breaks out

1309
01:09:16,840 --> 01:09:21,400
Speaker 1: of um a maximum security prison in Australia, goes to Bombay,

1310
01:09:21,439 --> 01:09:25,000
Speaker 1: India and it begins there. Oh my lord, you're not

1311
01:09:25,040 --> 01:09:28,000
Speaker 1: gonna put this book down. This book, and I suggest

1312
01:09:28,040 --> 01:09:30,680
Speaker 1: you listen to it rather than read it, because the

1313
01:09:30,680 --> 01:09:33,200
Speaker 1: book is so thick. Listening to it you get all

1314
01:09:33,240 --> 01:09:35,240
Speaker 1: of the accents and things that are involved in the

1315
01:09:35,320 --> 01:09:38,200
Speaker 1: Indian accents. It's wonderful for me. I listened to books

1316
01:09:38,200 --> 01:09:42,160
Speaker 1: because I'm dyslexic, uh, and I easier than read it. Yeah.

1317
01:09:42,200 --> 01:09:44,160
Speaker 1: I don't read books because it's too hard for me.

1318
01:09:44,320 --> 01:09:45,960
Speaker 1: It was hard for me all my life to In fact,

1319
01:09:46,000 --> 01:09:48,400
Speaker 1: I wrote my first book before I read my first book.

1320
01:09:49,560 --> 01:09:52,000
Speaker 1: But when books on tape came out, then I found

1321
01:09:52,040 --> 01:09:53,800
Speaker 1: out I was a bookworm and I didn't even know it,

1322
01:09:54,240 --> 01:09:55,599
Speaker 1: you know. So whenever I get in the car, I'm

1323
01:09:55,600 --> 01:09:57,479
Speaker 1: pressing the button. If I'm on the treadmill and press

1324
01:09:57,640 --> 01:10:00,840
Speaker 1: I'm listening to books constantly. So Anti ram I would say,

1325
01:10:00,840 --> 01:10:03,360
Speaker 1: listen to the book that sounds interesting. What else do

1326
01:10:03,720 --> 01:10:06,360
Speaker 1: you like? Another one I like is the four hour

1327
01:10:06,520 --> 01:10:10,759
Speaker 1: work week. Excuse me, yeah, four, it's four our workwek exactly.

1328
01:10:10,760 --> 01:10:12,439
Speaker 1: I was gonna be about to say day, but it's weak.

1329
01:10:13,600 --> 01:10:15,920
Speaker 1: The reason this is important one of the guys in

1330
01:10:15,920 --> 01:10:18,320
Speaker 1: my office is a huge fan of his. The reason

1331
01:10:18,360 --> 01:10:23,320
Speaker 1: that's important, Barry, is I believe that through technology, if

1332
01:10:23,360 --> 01:10:26,200
Speaker 1: you have things that are computerized, everything that can be

1333
01:10:26,280 --> 01:10:28,560
Speaker 1: computerized is going to be. You should be able to

1334
01:10:28,600 --> 01:10:30,560
Speaker 1: run a billion dollar portfolio from a cruise ship with

1335
01:10:30,600 --> 01:10:34,400
Speaker 1: an iPhone. We we've been talking about this pretty consistently,

1336
01:10:34,680 --> 01:10:40,839
Speaker 1: and again I've been finding that running a small office,

1337
01:10:40,920 --> 01:10:46,080
Speaker 1: what we're capable of doing with fourteen thirteen people. Twenty

1338
01:10:46,160 --> 01:10:49,559
Speaker 1: years ago would take fifty people to do just simple

1339
01:10:49,640 --> 01:10:52,760
Speaker 1: things like the portfolio rebalancing once or twice a year,

1340
01:10:53,320 --> 01:10:56,519
Speaker 1: and things like tax lost harvesting. It used to take

1341
01:10:56,560 --> 01:11:01,240
Speaker 1: three or four Green visored accountants a week to do

1342
01:11:01,320 --> 01:11:04,679
Speaker 1: this for a portfolio of a few hundred families. Now

1343
01:11:04,720 --> 01:11:07,479
Speaker 1: you push your button as a software called i reboll

1344
01:11:08,040 --> 01:11:11,439
Speaker 1: that's integrated into the custodian and you could set it up,

1345
01:11:11,479 --> 01:11:15,040
Speaker 1: go find me some tax losses to offset the tax games,

1346
01:11:15,280 --> 01:11:18,439
Speaker 1: and it's it's astonished. That's a great example. Back in

1347
01:11:18,479 --> 01:11:20,400
Speaker 1: the day you said you needed all these people with

1348
01:11:20,439 --> 01:11:23,240
Speaker 1: the green shades or a week, but exactly for a week.

1349
01:11:23,560 --> 01:11:26,360
Speaker 1: Now it's been automated. What will be automated, can be,

1350
01:11:26,439 --> 01:11:29,720
Speaker 1: will be. So now it's automated. So why couldn't you

1351
01:11:29,800 --> 01:11:33,519
Speaker 1: do that from Thailand? You certainly could. Why then why

1352
01:11:33,520 --> 01:11:35,439
Speaker 1: aren't you on the beach in Thailand because I'm here

1353
01:11:35,520 --> 01:11:39,200
Speaker 1: talking to you. But the concept is you can, and

1354
01:11:39,240 --> 01:11:41,439
Speaker 1: that's why the four hour work week. What's cool about

1355
01:11:41,479 --> 01:11:43,880
Speaker 1: the four hour work week is it's got all kinds

1356
01:11:43,920 --> 01:11:46,600
Speaker 1: of websites and things you can go to. Yeah, that

1357
01:11:46,680 --> 01:11:51,040
Speaker 1: will help you become more efficient yourself. Like if you

1358
01:11:51,120 --> 01:11:53,800
Speaker 1: wanted to have an assistant in India. You can do that.

1359
01:11:53,920 --> 01:11:55,920
Speaker 1: There are places you can go in India there will

1360
01:11:55,960 --> 01:11:58,400
Speaker 1: be your assistant, just like she's with you now, except

1361
01:11:58,439 --> 01:12:01,080
Speaker 1: when you're asleep. She's working. He's sleeping. When you're working.

1362
01:12:02,080 --> 01:12:04,479
Speaker 1: You want to get get me reservations for dinner to night.

1363
01:12:04,479 --> 01:12:06,639
Speaker 1: So and so I also need flowers from my wife.

1364
01:12:06,760 --> 01:12:09,840
Speaker 1: I need you to do this whatever it's there available.

1365
01:12:10,000 --> 01:12:13,280
Speaker 1: So The Four Hour work Week is a great book

1366
01:12:13,320 --> 01:12:16,639
Speaker 1: to make you think about more things that you can

1367
01:12:16,680 --> 01:12:19,960
Speaker 1: do become more competent in less time. Alright, that's book

1368
01:12:20,040 --> 01:12:23,080
Speaker 1: number two. Give me one last book. I love this

1369
01:12:23,200 --> 01:12:27,120
Speaker 1: broad selection of stuff because normally it's the Intelligent Investor

1370
01:12:27,320 --> 01:12:31,080
Speaker 1: and and things like that. This is really fascinating. Yeah,

1371
01:12:31,160 --> 01:12:32,880
Speaker 1: and I'm you know, all of a sudden you start

1372
01:12:32,920 --> 01:12:34,799
Speaker 1: to go blank. You think about all of the books

1373
01:12:34,840 --> 01:12:37,240
Speaker 1: that that that. What are you reading right now? Right now?

1374
01:12:37,240 --> 01:12:42,120
Speaker 1: What am I reading? That's a great question. The Great Deformation, Um,

1375
01:12:42,479 --> 01:12:45,000
Speaker 1: that was trying to remember who wrote it? That was

1376
01:12:45,080 --> 01:12:48,519
Speaker 1: by um, oh god, what's his name? He worked for

1377
01:12:48,600 --> 01:12:51,160
Speaker 1: Ronald Reagan, got taken out to the wood stock stockman,

1378
01:12:51,520 --> 01:12:54,840
Speaker 1: exactly stockman. This is the phrase the wood shed too.

1379
01:12:54,880 --> 01:12:57,200
Speaker 1: I remember exactly. Remember that taken out to the see

1380
01:12:57,240 --> 01:12:59,640
Speaker 1: I'm all dough to appreciate that. Remember that. Well. The

1381
01:12:59,680 --> 01:13:01,880
Speaker 1: answer thing thing about this book is if you really

1382
01:13:01,880 --> 01:13:07,519
Speaker 1: want to understand the deformation or the desecration of our

1383
01:13:07,640 --> 01:13:11,080
Speaker 1: free market system within with interest rates in the and

1384
01:13:11,200 --> 01:13:13,640
Speaker 1: the financial system, this is going to give you a

1385
01:13:13,720 --> 01:13:17,080
Speaker 1: great understanding going back to FDR days. It's not an

1386
01:13:17,080 --> 01:13:19,479
Speaker 1: easy thing. That's why I think you should listen to

1387
01:13:19,520 --> 01:13:22,080
Speaker 1: this book too, because, yeah, if you sit down and

1388
01:13:22,080 --> 01:13:24,040
Speaker 1: start reading it in five minutes, you might fall asleep.

1389
01:13:24,400 --> 01:13:29,000
Speaker 1: But if you're driving the car and you know, I

1390
01:13:29,040 --> 01:13:32,880
Speaker 1: think you're gonna stay awake. But it's a pretty meaningful book.

1391
01:13:32,880 --> 01:13:35,439
Speaker 1: And I find myself going back over and re listening

1392
01:13:35,439 --> 01:13:38,200
Speaker 1: and re listening. He's a fascinating guy. He really I

1393
01:13:38,240 --> 01:13:40,840
Speaker 1: saw him. I think it was Stephanie Rue. I think

1394
01:13:40,840 --> 01:13:44,880
Speaker 1: it was on Bloomberg. I saw him describe how the

1395
01:13:44,920 --> 01:13:48,240
Speaker 1: way he described it was. Stockman described it was the

1396
01:13:48,280 --> 01:13:53,200
Speaker 1: financialization of the US economy took fifty years to slowly

1397
01:13:53,240 --> 01:13:56,120
Speaker 1: develop and then blew up in the crisis, and we've

1398
01:13:56,320 --> 01:13:59,320
Speaker 1: we've basically the tail is wagging the dog. He used

1399
01:13:59,400 --> 01:14:02,760
Speaker 1: to say, finance in Wall Street. That's where he came from.

1400
01:14:02,760 --> 01:14:06,200
Speaker 1: He came from finance, went into politics, went back to finance.

1401
01:14:06,800 --> 01:14:10,959
Speaker 1: Finance used to serve industry and now finances just another industry.

1402
01:14:11,000 --> 01:14:13,800
Speaker 1: And that was a major shift. If I'm not not

1403
01:14:14,040 --> 01:14:16,400
Speaker 1: misquoting him at all, you're right, and which you and

1404
01:14:16,479 --> 01:14:18,920
Speaker 1: things you learned in this book is like in N. Two,

1405
01:14:19,280 --> 01:14:22,240
Speaker 1: the Thomas Amendment, you wouldn't even think about this, but

1406
01:14:22,360 --> 01:14:26,320
Speaker 1: gave FDR the right to cut the gold backing on

1407
01:14:26,400 --> 01:14:29,519
Speaker 1: the US dollar by fift gave him the right to

1408
01:14:29,600 --> 01:14:32,120
Speaker 1: back at not in gold, but in silver to create

1409
01:14:32,160 --> 01:14:35,360
Speaker 1: money if he wanted. And that was the beginning of

1410
01:14:35,520 --> 01:14:39,240
Speaker 1: the financial system getting totally out of hand. And every administration,

1411
01:14:39,320 --> 01:14:41,960
Speaker 1: bar none, from there forward has carried it even further.

1412
01:14:42,120 --> 01:14:44,800
Speaker 1: And the Obama administration now he carried even further. Every

1413
01:14:44,800 --> 01:14:47,519
Speaker 1: one of them have whether you're Republican or Democrat or whatever.

1414
01:14:47,680 --> 01:14:50,080
Speaker 1: But you think back to two when this happened with

1415
01:14:50,080 --> 01:14:52,599
Speaker 1: a Thomas Accord, that was the point at which that

1416
01:14:52,880 --> 01:14:56,280
Speaker 1: ball started rolling. The fear was that you were constrained

1417
01:14:56,479 --> 01:15:01,240
Speaker 1: with what the the uh Traasury up could do by

1418
01:15:01,240 --> 01:15:04,599
Speaker 1: the gold standard, which had its own problems. And now

1419
01:15:04,640 --> 01:15:07,960
Speaker 1: it's unconstrained and you have a whole different set of exactly,

1420
01:15:08,040 --> 01:15:09,920
Speaker 1: and it's it's damned if you do, and Dan, if

1421
01:15:09,920 --> 01:15:14,160
Speaker 1: you don't, let me give you one more. Okay, this

1422
01:15:14,160 --> 01:15:17,080
Speaker 1: this is great. Uh. The author is Martin Truce t

1423
01:15:17,280 --> 01:15:21,040
Speaker 1: R o O S. T. And his are travel books.

1424
01:15:21,080 --> 01:15:23,120
Speaker 1: But it's not the kind of travel book that you

1425
01:15:23,120 --> 01:15:25,160
Speaker 1: would think, Okay, let's go to Hawaii and here's you

1426
01:15:25,200 --> 01:15:27,559
Speaker 1: need where he needs. He actually goes to these places

1427
01:15:27,600 --> 01:15:29,760
Speaker 1: and talks about what it was like for him to

1428
01:15:29,800 --> 01:15:35,400
Speaker 1: live there, and um, all series of books he's done.

1429
01:15:35,560 --> 01:15:39,320
Speaker 1: One was Sex and Drugs with the Cannibals or something

1430
01:15:39,400 --> 01:15:43,400
Speaker 1: like that. It sounds I mean, it's he is so funny.

1431
01:15:43,400 --> 01:15:47,320
Speaker 1: He's a great wordsmith. That would be dangerous, Yeah, it

1432
01:15:47,320 --> 01:15:49,960
Speaker 1: could be. It could be very dangerous. But he talks

1433
01:15:49,960 --> 01:15:52,559
Speaker 1: about living in Vana Wattu and what it's like to

1434
01:15:52,600 --> 01:15:55,360
Speaker 1: live there. And but it's not a travel book where

1435
01:15:55,400 --> 01:15:57,000
Speaker 1: you're gonna, oh gee, I'm gonna go to this hotel

1436
01:15:57,040 --> 01:15:59,760
Speaker 1: and stay there. No way. Then he does one of them.

1437
01:15:59,800 --> 01:16:03,280
Speaker 1: My favorite was, um, it was about China and it's

1438
01:16:03,320 --> 01:16:07,320
Speaker 1: called Lost on Planet China, which is a total riot.

1439
01:16:07,680 --> 01:16:10,160
Speaker 1: His books are all as funny as you could possibly get.

1440
01:16:10,400 --> 01:16:13,680
Speaker 1: He's a great words Smith and um t R O

1441
01:16:14,600 --> 01:16:17,439
Speaker 1: double O S T Yeah, Truce Martin, Trust Martin, Truce,

1442
01:16:17,479 --> 01:16:19,799
Speaker 1: I take, and I would listen to his books because

1443
01:16:19,800 --> 01:16:24,479
Speaker 1: Cyrus Vance who reads the books, really does. That's who

1444
01:16:24,520 --> 01:16:27,479
Speaker 1: you would expect would be reading books on tape, you know,

1445
01:16:27,520 --> 01:16:31,320
Speaker 1: Cyrus Vans. Yeah, yeah, well he's a big reader of

1446
01:16:31,400 --> 01:16:35,440
Speaker 1: on tape. Maybe there's two Cyrus Vances, the former political

1447
01:16:35,520 --> 01:16:37,920
Speaker 1: guy and and is then am I thinking about the

1448
01:16:38,000 --> 01:16:39,840
Speaker 1: right person? Maybe there's two of them because this he

1449
01:16:40,320 --> 01:16:44,800
Speaker 1: I have searched for books that are read by Cyrus Van. Yeah,

1450
01:16:44,800 --> 01:16:47,920
Speaker 1: so I would read the book because he read it.

1451
01:16:48,240 --> 01:16:50,639
Speaker 1: That's fascinating, all right. When I, by the way, when

1452
01:16:50,640 --> 01:16:54,280
Speaker 1: I post this on on the blog and on on Bloomberg,

1453
01:16:54,479 --> 01:16:57,080
Speaker 1: I'll include the list of recommended books that people want

1454
01:16:57,080 --> 01:16:59,800
Speaker 1: to want to find that they'll be able to get it. So,

1455
01:17:00,200 --> 01:17:02,160
Speaker 1: last couple of questions I normally have you for a

1456
01:17:02,160 --> 01:17:06,120
Speaker 1: little lore time. Um, so what's changed since you've joined

1457
01:17:06,160 --> 01:17:08,639
Speaker 1: the industry? And is it a good thing, a bad

1458
01:17:08,680 --> 01:17:13,240
Speaker 1: thing or does it not even matter? What's changed is regulation.

1459
01:17:14,520 --> 01:17:16,960
Speaker 1: That's the big thing that's changed, because if you think

1460
01:17:16,960 --> 01:17:19,400
Speaker 1: back to nineteen seventy five, Arier, were you in business.

1461
01:17:20,560 --> 01:17:22,840
Speaker 1: I was in high school and next high school. But

1462
01:17:23,080 --> 01:17:27,599
Speaker 1: I do recall when when the commission ceiling was removed.

1463
01:17:27,640 --> 01:17:31,120
Speaker 1: That was the early seventies, exactly a huge chance exactly

1464
01:17:31,120 --> 01:17:33,840
Speaker 1: where I'm coming from right now. That's put us on

1465
01:17:33,880 --> 01:17:36,679
Speaker 1: the path of where we are now with feedbase, because

1466
01:17:36,720 --> 01:17:39,600
Speaker 1: that was May day. May one, nineteen seventy five is

1467
01:17:39,600 --> 01:17:43,400
Speaker 1: when commission deregulation happened. And we used to charge massive

1468
01:17:43,400 --> 01:17:46,439
Speaker 1: commissions uh to customers, all the same thing, but they

1469
01:17:46,439 --> 01:17:50,160
Speaker 1: were massive. Nineteen seventy five when deregulation came in Charles

1470
01:17:50,320 --> 01:17:54,040
Speaker 1: wap started, was the first year of charsh wab And

1471
01:17:54,120 --> 01:17:56,599
Speaker 1: I can tell you right now we laughed at Charles Wapson.

1472
01:17:56,680 --> 01:17:59,160
Speaker 1: Who would ever deal at a discounter? I mean that

1473
01:17:59,160 --> 01:18:02,559
Speaker 1: would do now? I mean we used to wear three

1474
01:18:02,560 --> 01:18:04,719
Speaker 1: piece suits and if you needed a standard poor sheet,

1475
01:18:04,760 --> 01:18:08,320
Speaker 1: we could mail it to you. That was technology. Then

1476
01:18:08,720 --> 01:18:10,920
Speaker 1: you know we've got the technology. It's the post office

1477
01:18:11,360 --> 01:18:18,320
Speaker 1: and Joshua began. That was what began the move toward

1478
01:18:18,400 --> 01:18:24,439
Speaker 1: discount and lower fees and and and for us, this

1479
01:18:24,560 --> 01:18:28,880
Speaker 1: was the beginning of a change from commission to fee base.

1480
01:18:29,240 --> 01:18:32,880
Speaker 1: Because what happened is I think the um the firms

1481
01:18:32,880 --> 01:18:35,800
Speaker 1: like Marrilynch, Pierce, Fentner and Smith. The partnerships look at

1482
01:18:35,800 --> 01:18:37,680
Speaker 1: this and said, you know, this is not for us

1483
01:18:37,720 --> 01:18:39,960
Speaker 1: any longer. Let's sell out to banks. And all of

1484
01:18:39,960 --> 01:18:43,040
Speaker 1: them did. Pain Webber, Jackson, Curtis Smith, Barney Harris up them.

1485
01:18:43,120 --> 01:18:45,599
Speaker 1: They all sold out to banks. Banks became the owners.

1486
01:18:45,880 --> 01:18:48,599
Speaker 1: And what do banks understand? They understand fee, They don't

1487
01:18:48,640 --> 01:18:51,360
Speaker 1: understand commissions and fee, and they understand risk. You're all

1488
01:18:51,400 --> 01:18:55,280
Speaker 1: concerned about defaults and whatever. Precisely they don't get commissions.

1489
01:18:55,320 --> 01:18:58,519
Speaker 1: So everyone began to move more towards the fee basis. Well,

1490
01:18:58,560 --> 01:19:01,120
Speaker 1: Dorsey Wrighting Associates, I looked at I looked at us

1491
01:19:01,200 --> 01:19:03,360
Speaker 1: as a pilot fist. You ever look at a pilot

1492
01:19:03,360 --> 01:19:05,880
Speaker 1: pilot fish s little fishing falls. The shark he didn't

1493
01:19:05,880 --> 01:19:07,640
Speaker 1: he didn't get close enough to the sharks amiel to

1494
01:19:07,640 --> 01:19:10,280
Speaker 1: get eaten. But he stays back and no no other

1495
01:19:10,320 --> 01:19:14,759
Speaker 1: fish bottles, lots of crumbs and exactly a little protection.

1496
01:19:15,040 --> 01:19:17,920
Speaker 1: That's right. That's us. We were pilot fish, and and

1497
01:19:17,960 --> 01:19:20,439
Speaker 1: the shark was merrill lynching and all the rest of

1498
01:19:20,439 --> 01:19:22,760
Speaker 1: the big guys. So whatever direction they went, we had

1499
01:19:22,800 --> 01:19:25,840
Speaker 1: to go. So that's why we began creating models and

1500
01:19:25,920 --> 01:19:29,120
Speaker 1: feed base models way before anyone else because we knew

1501
01:19:29,320 --> 01:19:31,840
Speaker 1: if I didn't follow that shark and I kept doing

1502
01:19:31,840 --> 01:19:34,760
Speaker 1: commission business and trading business, that's where they were going

1503
01:19:34,800 --> 01:19:37,280
Speaker 1: away from and we had to go with it. So

1504
01:19:37,360 --> 01:19:40,840
Speaker 1: that began the move towards fee base, which is which

1505
01:19:40,880 --> 01:19:44,040
Speaker 1: is where we clearly are now. The last data point

1506
01:19:44,080 --> 01:19:46,599
Speaker 1: I saw on this, between Morgan Stanley and Merrill Lynch,

1507
01:19:47,280 --> 01:19:50,280
Speaker 1: they twenty years ago they were less than ten percent

1508
01:19:50,400 --> 01:19:56,000
Speaker 1: fee based, and now about two thirds about you know,

1509
01:19:56,000 --> 01:19:57,960
Speaker 1: what's going to cover the other third is this new

1510
01:19:58,000 --> 01:20:03,000
Speaker 1: regulation now from UM Department of Labor that's on four

1511
01:20:03,000 --> 01:20:06,040
Speaker 1: oh one K that's on retirement accounts, on retirem accounts exactly.

1512
01:20:06,080 --> 01:20:08,960
Speaker 1: Is not an insubstantial amount of It's not. I would

1513
01:20:09,000 --> 01:20:11,400
Speaker 1: bet a huge chunk of their fee based stuff is

1514
01:20:11,400 --> 01:20:18,759
Speaker 1: already accounting stuff. And and that's active is probably although

1515
01:20:18,800 --> 01:20:21,840
Speaker 1: you would think the tax are qualified standard would would

1516
01:20:21,840 --> 01:20:24,800
Speaker 1: be better for active than UH than the fee based

1517
01:20:25,400 --> 01:20:27,880
Speaker 1: strictly from a tax perspective, Well, it's going to change

1518
01:20:27,880 --> 01:20:30,880
Speaker 1: things totally where the guy that typically doesn't think about

1519
01:20:30,920 --> 01:20:35,080
Speaker 1: the fiduciary and operating in the in the right exactly

1520
01:20:35,120 --> 01:20:36,840
Speaker 1: for the customers on the same side of table. But

1521
01:20:36,880 --> 01:20:39,320
Speaker 1: here's something also. If I come to you and I say, Barry,

1522
01:20:39,320 --> 01:20:42,080
Speaker 1: I want you to take your your IRA or your

1523
01:20:42,120 --> 01:20:44,760
Speaker 1: your your corporate retirement account and roll it over to

1524
01:20:44,800 --> 01:20:48,000
Speaker 1: an IRA and I'll manage it. Boy, I better be

1525
01:20:48,120 --> 01:20:49,840
Speaker 1: right in telling you that, and I better give you

1526
01:20:49,880 --> 01:20:53,000
Speaker 1: all the reasons, and I better document this. And when

1527
01:20:53,000 --> 01:20:54,559
Speaker 1: we do this, you and I are going to sign

1528
01:20:54,560 --> 01:20:59,080
Speaker 1: a contract. That's what's different now, the three changes that

1529
01:20:59,200 --> 01:21:03,439
Speaker 1: have become really really significant. When that happens, you have

1530
01:21:03,560 --> 01:21:06,120
Speaker 1: to say, Okay, I'm gonna be like a lawyer or

1531
01:21:06,120 --> 01:21:09,120
Speaker 1: an accountant, and I'm gonna be a fiduciary. In second,

1532
01:21:09,479 --> 01:21:12,160
Speaker 1: I have all these transparency rules. Anything that I need

1533
01:21:12,200 --> 01:21:15,640
Speaker 1: to disclose, I'm gonna disclose. In third, if there are

1534
01:21:15,680 --> 01:21:19,280
Speaker 1: any conflict of interest. There was just a huge article

1535
01:21:19,320 --> 01:21:22,800
Speaker 1: in New York Post today about daily News of the Post,

1536
01:21:22,840 --> 01:21:26,000
Speaker 1: one of them about one of the big firms I

1537
01:21:26,000 --> 01:21:29,280
Speaker 1: don't remember which is running these sales contests sell X

1538
01:21:29,400 --> 01:21:34,000
Speaker 1: y Z, when a when a vacation trip. If you're

1539
01:21:34,080 --> 01:21:38,360
Speaker 1: getting paid outs and therefore it's not necessarily the client's

1540
01:21:38,400 --> 01:21:41,320
Speaker 1: best interest, but you want to win a contest, you

1541
01:21:41,479 --> 01:21:44,519
Speaker 1: better disclose that and if there's a conflict, you better

1542
01:21:44,960 --> 01:21:48,639
Speaker 1: be up for it. I think that for the long

1543
01:21:48,720 --> 01:21:51,479
Speaker 1: haul it's gonna be good for investors, but over the

1544
01:21:51,479 --> 01:21:54,080
Speaker 1: short term there's going to be an adjustment process. There is.

1545
01:21:54,160 --> 01:21:55,479
Speaker 1: There really is, because a lot of a lot of

1546
01:21:55,520 --> 01:21:59,360
Speaker 1: advisors who deal in ira A type accounts and rollovers

1547
01:21:59,400 --> 01:22:01,639
Speaker 1: and that's leader business. I'm going to find that theory

1548
01:22:01,680 --> 01:22:03,960
Speaker 1: incomes probably gonna be cutting cut in half. You know,

1549
01:22:04,000 --> 01:22:07,240
Speaker 1: the thing that started this whole process way back when

1550
01:22:07,720 --> 01:22:10,360
Speaker 1: was a lot of four oh one K and the

1551
01:22:10,479 --> 01:22:13,320
Speaker 1: nonprofit version of it is four oh three B. There

1552
01:22:13,320 --> 01:22:15,840
Speaker 1: were studies that were showing that they were jammed full

1553
01:22:16,120 --> 01:22:19,960
Speaker 1: of high cost annuities that were running like you complained

1554
01:22:19,960 --> 01:22:22,800
Speaker 1: about two and twenty, these guys were charging six and

1555
01:22:22,880 --> 01:22:27,720
Speaker 1: eight percent in retirement accounts and that was just so egregious.

1556
01:22:27,800 --> 01:22:32,000
Speaker 1: That started the ball rolling downhill. Um. So, you know,

1557
01:22:32,080 --> 01:22:35,960
Speaker 1: it's always unintended consequences regardless of who's doing So back

1558
01:22:35,960 --> 01:22:38,200
Speaker 1: to your question, regulation, I mean, that's that's that's the

1559
01:22:38,240 --> 01:22:40,639
Speaker 1: big that's the main thing that has happened along the way.

1560
01:22:40,760 --> 01:22:43,320
Speaker 1: You know, back in back in if you came in

1561
01:22:43,360 --> 01:22:45,479
Speaker 1: and you want to do an option trade. Barry, I

1562
01:22:45,479 --> 01:22:47,680
Speaker 1: would do the option trade. No documents needed, No, we

1563
01:22:47,800 --> 01:22:50,479
Speaker 1: send those out two months later. Oh man, you can't

1564
01:22:51,400 --> 01:22:55,439
Speaker 1: options by the end of you want to discuss options.

1565
01:22:55,479 --> 01:22:57,439
Speaker 1: You have a whole bunch of paperwork to send, You

1566
01:22:57,439 --> 01:23:00,720
Speaker 1: have things signed that you need backed. It's uh, there

1567
01:23:00,720 --> 01:23:02,960
Speaker 1: are a lot of eyes to dot and tees to cross.

1568
01:23:03,000 --> 01:23:08,240
Speaker 1: Not that it's necessarily again on the on the UM edges,

1569
01:23:08,320 --> 01:23:11,479
Speaker 1: there was some really bad behavior and that's what led

1570
01:23:11,520 --> 01:23:14,960
Speaker 1: to a whole lot more regulations too. It's always that way.

1571
01:23:15,000 --> 01:23:19,800
Speaker 1: You have to stop the bad actors. In order to uh,

1572
01:23:19,960 --> 01:23:22,400
Speaker 1: you have to be overbroad. You're gonna bring up a

1573
01:23:22,400 --> 01:23:27,000
Speaker 1: whole lot of um, You're gonna bring up a whole

1574
01:23:27,040 --> 01:23:29,240
Speaker 1: lot of of good actors when you're trying to stop

1575
01:23:29,280 --> 01:23:32,519
Speaker 1: the bad actor. Absolutely no doubt about that. So what

1576
01:23:32,560 --> 01:23:35,080
Speaker 1: do you see if regulation has been what's changed over

1577
01:23:35,080 --> 01:23:37,799
Speaker 1: the past twenty or thirty years, what do you see

1578
01:23:37,880 --> 01:23:42,519
Speaker 1: as the next major shift that's coming. Uh, let's let's

1579
01:23:42,560 --> 01:23:45,240
Speaker 1: look at e t F s. The next major shift

1580
01:23:45,320 --> 01:23:49,120
Speaker 1: and we're already doing this at Dorsey right, is embedding

1581
01:23:49,280 --> 01:23:52,320
Speaker 1: risk and risk management in the e t F itself.

1582
01:23:52,360 --> 01:23:54,800
Speaker 1: How do you do that with cash So remember we

1583
01:23:54,800 --> 01:23:57,000
Speaker 1: said I said money market m N Y m k

1584
01:23:57,120 --> 01:24:00,280
Speaker 1: T is a symbol to us. So take for since

1585
01:24:00,320 --> 01:24:03,599
Speaker 1: our first Trust five. The first Trust five operates by

1586
01:24:03,640 --> 01:24:07,120
Speaker 1: itself and it keeps the strongest five out of twenties sectors.

1587
01:24:07,120 --> 01:24:10,280
Speaker 1: For first trust done extremely well over time, the returns

1588
01:24:10,280 --> 01:24:13,640
Speaker 1: have been been very very good. It's not because we

1589
01:24:13,680 --> 01:24:16,920
Speaker 1: have a first Trust five plus cash. So now cash

1590
01:24:17,080 --> 01:24:22,800
Speaker 1: has already moved up the level and overtaken of the portfolio.

1591
01:24:22,800 --> 01:24:27,799
Speaker 1: And that's done on a relative strength basis, not relative strength.

1592
01:24:27,800 --> 01:24:31,559
Speaker 1: This rules about this Trump guy, I'm gonna move to cash. No,

1593
01:24:31,560 --> 01:24:34,040
Speaker 1: none of that has to be rules based. So there's

1594
01:24:34,040 --> 01:24:38,559
Speaker 1: no gut feeling involved here, no emotion involved. It moves

1595
01:24:38,560 --> 01:24:41,320
Speaker 1: in so it's moved to cash with it. So these

1596
01:24:41,360 --> 01:24:44,400
Speaker 1: are this is what's gonna happen. Now, there's uh UM

1597
01:24:44,880 --> 01:24:48,280
Speaker 1: Horizons has a has a good covered writing program. We

1598
01:24:48,360 --> 01:24:51,679
Speaker 1: have a model that has our PDP, which our technical

1599
01:24:51,760 --> 01:24:55,200
Speaker 1: leaders who plus the horizon covered right. The horizon covered

1600
01:24:55,280 --> 01:24:58,280
Speaker 1: right acts as that um that buffer that acts as

1601
01:24:58,320 --> 01:25:00,920
Speaker 1: that the breaks of the portfolio. So it'll bring that

1602
01:25:00,960 --> 01:25:03,040
Speaker 1: piece of the equation down to a point five delta

1603
01:25:03,240 --> 01:25:07,520
Speaker 1: point being is we're creating products now with risk management

1604
01:25:07,640 --> 01:25:11,080
Speaker 1: embedded in it. That's fascinating. You don't really hear a

1605
01:25:11,080 --> 01:25:14,559
Speaker 1: lot of that sort of of strategies that developed that

1606
01:25:14,720 --> 01:25:17,400
Speaker 1: that's really fascinating, and you see this as the next

1607
01:25:17,400 --> 01:25:19,920
Speaker 1: phase of ET. Absolutely, we're gonna have to do that

1608
01:25:20,120 --> 01:25:23,280
Speaker 1: because again, it takes that human emotion out and a

1609
01:25:23,320 --> 01:25:25,000
Speaker 1: lot of things that you have. You say, you know,

1610
01:25:25,240 --> 01:25:28,120
Speaker 1: we have the first trust five that stays, it's always

1611
01:25:28,200 --> 01:25:31,960
Speaker 1: going to be a percent invested, even in markets that

1612
01:25:32,000 --> 01:25:36,200
Speaker 1: you shouldn't be. But that's a that's a market call

1613
01:25:36,320 --> 01:25:38,840
Speaker 1: on on our part. So we can't go in and say, gee,

1614
01:25:38,920 --> 01:25:40,439
Speaker 1: we think the market is going to go down. Now

1615
01:25:40,640 --> 01:25:42,839
Speaker 1: let's take the first trust. So someone who's an allocator

1616
01:25:42,880 --> 01:25:45,320
Speaker 1: who says I have a slot for equities, Hey, I'm

1617
01:25:45,320 --> 01:25:46,960
Speaker 1: gonna go to Tom Dorsseton and say give me the

1618
01:25:47,000 --> 01:25:49,280
Speaker 1: five best sectors and I'll build it into this and

1619
01:25:49,680 --> 01:25:52,720
Speaker 1: I'll deal with and you'll risk with your bond and

1620
01:25:53,160 --> 01:25:56,760
Speaker 1: you'll deal with it exactly in this case. It's embedded

1621
01:25:57,120 --> 01:25:59,479
Speaker 1: in the E T F. And And now I'm down

1622
01:25:59,560 --> 01:26:02,559
Speaker 1: to my asked two questions, which I are my favorite

1623
01:26:02,560 --> 01:26:06,320
Speaker 1: too when I ask everybody. So imagine a a recent

1624
01:26:06,360 --> 01:26:09,599
Speaker 1: college graduate or a millennial comes to you and seeking

1625
01:26:09,720 --> 01:26:13,040
Speaker 1: career advice. What sort of advice would you give them?

1626
01:26:13,400 --> 01:26:16,439
Speaker 1: For somebody who's interested in in going into finance, Okay,

1627
01:26:16,520 --> 01:26:18,720
Speaker 1: I would give them and I and I operate this way.

1628
01:26:18,840 --> 01:26:21,360
Speaker 1: When I when I bought the building that has my

1629
01:26:21,439 --> 01:26:23,880
Speaker 1: family office, it's right across the parking lot from the

1630
01:26:23,880 --> 01:26:26,800
Speaker 1: building from the Business School of Virginia Kamal University. So

1631
01:26:27,000 --> 01:26:29,840
Speaker 1: my office is open for any VCU business people to

1632
01:26:29,880 --> 01:26:32,000
Speaker 1: come by and talk to me. I'm always open to

1633
01:26:32,040 --> 01:26:34,800
Speaker 1: mentor them and talk to them. So they do. And

1634
01:26:34,800 --> 01:26:36,439
Speaker 1: one of the first things I tell them, I say,

1635
01:26:36,439 --> 01:26:38,600
Speaker 1: what should I do now when I when I graduate,

1636
01:26:39,720 --> 01:26:43,960
Speaker 1: go to China and teach English? I said, go to China.

1637
01:26:44,000 --> 01:26:46,400
Speaker 1: And one of we I had an intern named Jesse,

1638
01:26:47,160 --> 01:26:49,040
Speaker 1: and he came to me said I'm going into business.

1639
01:26:49,040 --> 01:26:51,719
Speaker 1: I said, I said what Why? How old are you Jesse?

1640
01:26:51,800 --> 01:26:53,680
Speaker 1: He said twenty two? I said, why do you want

1641
01:26:53,680 --> 01:26:55,240
Speaker 1: to bother with that? Right now? I said, go to

1642
01:26:55,320 --> 01:26:58,160
Speaker 1: China and teach English? Would do that right now? He

1643
01:26:58,640 --> 01:27:01,599
Speaker 1: exactly went online, got high, went to China, taught English,

1644
01:27:01,880 --> 01:27:05,160
Speaker 1: and then stayed there another year, built a business helping

1645
01:27:05,400 --> 01:27:08,200
Speaker 1: us companies come across and do the paperwork, and now

1646
01:27:08,240 --> 01:27:10,719
Speaker 1: he's back in the US working. But my point being

1647
01:27:10,880 --> 01:27:13,320
Speaker 1: is when you're twenty one and twenty two years old,

1648
01:27:13,880 --> 01:27:15,800
Speaker 1: why do you want to get into business? Now, go

1649
01:27:15,880 --> 01:27:20,080
Speaker 1: to China for a year, then go to Australia and

1650
01:27:20,160 --> 01:27:24,080
Speaker 1: bartend for a year, then then backpack for Europe around

1651
01:27:24,160 --> 01:27:26,759
Speaker 1: Europe for a year. Now you'll be all of twenty

1652
01:27:26,760 --> 01:27:29,040
Speaker 1: four and a half years old, and now you get

1653
01:27:29,040 --> 01:27:32,200
Speaker 1: a resume. I want to see and on three contents,

1654
01:27:32,240 --> 01:27:35,360
Speaker 1: you've seen the world. You might speak a little Chinese,

1655
01:27:35,360 --> 01:27:38,240
Speaker 1: which is gonna become essential, and you know the Chinese

1656
01:27:38,320 --> 01:27:40,880
Speaker 1: culture that's important. So that's what I tell these people

1657
01:27:41,040 --> 01:27:44,200
Speaker 1: is go to China to begin with and teach English. Secondly,

1658
01:27:44,560 --> 01:27:47,360
Speaker 1: if they want to get into this business man, it's

1659
01:27:47,360 --> 01:27:49,599
Speaker 1: not the same as when I got into it. When

1660
01:27:49,840 --> 01:27:52,120
Speaker 1: back in the day it was so romantic. I mean,

1661
01:27:52,160 --> 01:27:53,880
Speaker 1: if you went to a cocktail party and you said

1662
01:27:53,880 --> 01:27:56,160
Speaker 1: you were a stockbroker, that was the coolest thing in

1663
01:27:56,200 --> 01:27:59,120
Speaker 1: the world. Because nobody could buy stocks themselves, they had

1664
01:27:59,160 --> 01:28:01,000
Speaker 1: to do it through you. You were registered with the

1665
01:28:01,000 --> 01:28:03,640
Speaker 1: New York Stocking Change. Today, anybody can do anything they

1666
01:28:03,640 --> 01:28:07,240
Speaker 1: want to do. It's not even it's not even eight bucks.

1667
01:28:07,280 --> 01:28:09,720
Speaker 1: It's free. That's it's a site called robin Hood. You

1668
01:28:09,720 --> 01:28:14,640
Speaker 1: could buy stocks for free, absolutely no cost whatsoever. Folio Advisor,

1669
01:28:14,760 --> 01:28:18,760
Speaker 1: same thing. You know. So the world has changed, and

1670
01:28:19,040 --> 01:28:21,320
Speaker 1: I'm not sure I would say get into this business.

1671
01:28:21,320 --> 01:28:24,720
Speaker 1: But if they really wanted to learn something that you

1672
01:28:24,840 --> 01:28:27,400
Speaker 1: will become the best at it. Be the go to

1673
01:28:27,640 --> 01:28:30,519
Speaker 1: person for whatever it is that you want to do.

1674
01:28:30,520 --> 01:28:33,280
Speaker 1: Don't just learn in a cursory way because you're gonna

1675
01:28:33,320 --> 01:28:35,960
Speaker 1: end up at the call center. If you're truly great

1676
01:28:36,000 --> 01:28:40,599
Speaker 1: at something, then you won't. That's fascinating. And my final question.

1677
01:28:41,680 --> 01:28:46,000
Speaker 1: You began in nine seventy five. You said, say four

1678
01:28:46,080 --> 01:28:50,000
Speaker 1: right at the end of that, so that was forty

1679
01:28:50,040 --> 01:28:53,559
Speaker 1: two years ago. What do you know about investing today

1680
01:28:53,840 --> 01:28:56,360
Speaker 1: that you wish you knew when you started forty two

1681
01:28:56,439 --> 01:29:02,080
Speaker 1: years ago. Well, I'll tell you what. It takes a

1682
01:29:02,080 --> 01:29:04,280
Speaker 1: lot of whiskers in this business. And you know, you

1683
01:29:04,360 --> 01:29:06,519
Speaker 1: gotta walk around the block a lot of times to

1684
01:29:06,600 --> 01:29:09,120
Speaker 1: get to a point where you have a general good

1685
01:29:09,160 --> 01:29:11,559
Speaker 1: understanding about what's going on in Wall Street. But I

1686
01:29:11,560 --> 01:29:14,280
Speaker 1: would say the point in figure charting. You know, if

1687
01:29:14,320 --> 01:29:16,439
Speaker 1: I could have been serious about it at that age,

1688
01:29:16,439 --> 01:29:19,040
Speaker 1: in my twenties. Then it would have gotten me on

1689
01:29:19,080 --> 01:29:21,000
Speaker 1: this road a lot sooner. You know, I had to

1690
01:29:21,080 --> 01:29:23,240
Speaker 1: learn through the school of hard knocks. If if that,

1691
01:29:23,520 --> 01:29:25,760
Speaker 1: if that guy didn't bring that point and figure charting

1692
01:29:25,800 --> 01:29:28,120
Speaker 1: book to me that day as he walked in, What's

1693
01:29:28,200 --> 01:29:31,040
Speaker 1: what's the probability that the first guy I hired my

1694
01:29:31,080 --> 01:29:36,200
Speaker 1: option department brings me this book? This one book, it's

1695
01:29:36,240 --> 01:29:39,200
Speaker 1: a lot and it was a lost art. Why this

1696
01:29:39,280 --> 01:29:41,200
Speaker 1: one book? And then the two of us look at

1697
01:29:41,200 --> 01:29:43,160
Speaker 1: this book. He looks at it as a way of trading.

1698
01:29:43,479 --> 01:29:44,840
Speaker 1: I look at it as a way of changing the

1699
01:29:44,880 --> 01:29:49,200
Speaker 1: whole industry. And these things that happened to you along

1700
01:29:49,240 --> 01:29:51,800
Speaker 1: the way. Sometimes you've got to have a little age

1701
01:29:51,800 --> 01:29:54,519
Speaker 1: on you to have that perception and understanding, you know.

1702
01:29:54,640 --> 01:29:57,800
Speaker 1: So I guess it all was exactly right. At age

1703
01:29:57,840 --> 01:29:59,960
Speaker 1: thirty nine, I had to start the company. By forty

1704
01:30:00,479 --> 01:30:02,800
Speaker 1: I did at them. I was ready. Then I'd learned enough.

1705
01:30:03,040 --> 01:30:06,200
Speaker 1: If I tried before that, maybe maybe maybe I wasn't ready,

1706
01:30:06,240 --> 01:30:08,760
Speaker 1: Maybe it would have failed. I don't know, Tom. This

1707
01:30:08,800 --> 01:30:13,040
Speaker 1: has been absolutely fascinating for me personally. Like I said,

1708
01:30:13,040 --> 01:30:17,360
Speaker 1: I've been reading your work for early since early early

1709
01:30:17,439 --> 01:30:21,720
Speaker 1: in my career. I mentioned, I uh was introduced to

1710
01:30:21,720 --> 01:30:24,479
Speaker 1: you at a place called Prime Charter, which is now

1711
01:30:24,600 --> 01:30:29,360
Speaker 1: part of Oppenheimer and it has been um absolutely a

1712
01:30:29,400 --> 01:30:32,240
Speaker 1: privilege and pleasure to chat with you. Thank you so

1713
01:30:32,320 --> 01:30:34,680
Speaker 1: much for for doing this. I want to say one

1714
01:30:34,680 --> 01:30:37,120
Speaker 1: more thing, Mary hit me. You know how we got together.

1715
01:30:37,840 --> 01:30:40,200
Speaker 1: I've been a reader of you. I read your blog.

1716
01:30:40,280 --> 01:30:44,839
Speaker 1: Remember I loved what you had written, and I emailed

1717
01:30:44,880 --> 01:30:48,839
Speaker 1: you tell you that the the Mutual Admiration Admiration Society

1718
01:30:48,880 --> 01:30:52,720
Speaker 1: will it's you guys used to quote me. I used

1719
01:30:52,760 --> 01:30:54,679
Speaker 1: to pull stuff out that I had done in quote

1720
01:30:54,680 --> 01:30:56,760
Speaker 1: exactly and it was always a thrill from me. It's

1721
01:30:56,800 --> 01:30:59,080
Speaker 1: like God, I was in a green newbie when I

1722
01:30:59,080 --> 01:31:01,639
Speaker 1: started reading to us, see right, and now I'm occasionally

1723
01:31:01,680 --> 01:31:04,320
Speaker 1: quoting in there, and I was just thrilled to death. Well,

1724
01:31:04,400 --> 01:31:07,720
Speaker 1: well it's a pleasure me in absolutely. For those of

1725
01:31:07,760 --> 01:31:10,880
Speaker 1: you who enjoyed this conversation, please be sure to look

1726
01:31:10,960 --> 01:31:13,360
Speaker 1: up an Inch or down an inch on Apple iTunes

1727
01:31:13,400 --> 01:31:15,600
Speaker 1: and you could see the other eighty five or so

1728
01:31:15,760 --> 01:31:19,080
Speaker 1: of these. Be sure and check out my daily column

1729
01:31:19,120 --> 01:31:22,240
Speaker 1: on Bloomberg View dot com. The blog Tom was talking

1730
01:31:22,280 --> 01:31:25,560
Speaker 1: about is the big picture. It's at Ridholtz dot com.

1731
01:31:25,600 --> 01:31:29,519
Speaker 1: I would be remiss if I did not mention Taylor

1732
01:31:29,600 --> 01:31:32,599
Speaker 1: Riggs and Charlie Volmer, the producer and booker of the show.

1733
01:31:32,680 --> 01:31:36,680
Speaker 1: Mark is my recording engineer, and Michael bat Nick is

1734
01:31:36,760 --> 01:31:40,719
Speaker 1: my research assistant. You've been listening research assistant. He's actually

1735
01:31:40,720 --> 01:31:43,559
Speaker 1: the director of research and helps me put all these

1736
01:31:43,840 --> 01:31:46,320
Speaker 1: questions together every week, and I wouldn't be able to

1737
01:31:46,320 --> 01:31:49,400
Speaker 1: do these shows without him. You've been listening to Masters

1738
01:31:49,400 --> 01:31:51,160
Speaker 1: in Business on Bloomberg Radio.