Trump is dead-on about U.S.-China trade

Trump’s approach to U.S.-China trade has been a polarizing topic…

But he’s dead-on about using tariffs to communicate with China (as I explain in today’s opening rant).

That’s why it’s important to ignore the noise… and the selloff in the markets. In fact, I’ve been finding more opportunities recently than I have in the past two years. In today’s educational segment, I break down a few of my favorite ideas to buy on this pullback [1:01:46].

But first, I’m joined by David Keller, president and chief strategist of Sierra Alpha Research LLC [25:32]. David’s firm focuses on using technical analysis, behavioral finance, and data visualization to find great investments. Today he explains how you can use technical analysis to find opportunities.

Transcript

Wall Street Unplugged | 681

Rob McEwen’s advice for the next gold bull market

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.

Frank Curzio: How’s it going out there? It’s August 7th. I’m Frank Curzio, host of the Wall Street Unplugged podcast where I break down the headlines and tell you what’s really moving these markets. Let’s start with the elephant in the room, the big market sell-off, which started on Friday. Thanks. Donald Trump sent out a tweet saying that a snag in the levee, 10% tariffs on an additional $300 billion of Chinese imports. This kind of surprised a lot of people in the markets, which started to crash after his tweet.

We thought everything was going along smooth and they were meeting and everything was fine, so it was a surprise. The markets were up a few hundred points midday Friday, right before the tweet. And then after the tweet, they sold off hard, for more than 500 points with highs. Rebound a bit on Friday, I’m talking about the Dow here, but then came the fireworks on Monday. The market started selling off again. Falling 800 points on a day.

So to begin Monday, pre-market, stocks were down, down about 300 points. Opened up and then during the day it was just key technical levels that were breached. The Algo’s kicked in and before you know it the whole world is selling, we’re down 800 points on the news that basically happened midday Friday. So the sell-offs about the few emails from you asking if you should go into cash now. Just off of this sell-off, even though the stocks were literally at near all-time highs a couple of weeks ago, [inaudible 00:02:00] season.

I expect that. People get nervous, they watch TV, it’s all crazy. And you know what? I responded to almost every one of those people. It wasn’t a lot, it wasn’t that many people. I just responded and say “Hey, you know what, shut the TV off. Stop reading anything financial related and go hang out with your kids or do something fun. All this is just BS, it’s not going to impact the long-term outlook on the markets at all. And that’s what you should be focused on, long-term.”

Now before you, and you, I’m referring to my listeners who do not like my opinion on trade, you may want to fast-forward but before you fast-forward to the interview, which we have a great interview set up, guys, today. It’s a first time guest, he’s awesome and you’re going to love. But before you tune me out here, seriously, just give me a listen because I promise I’m going to make a lot of sense. I promise and just to show that I’m not a hypocrite, I’ve been a little critical of Kyle Bass because I’ve been embarrassed for such a long time and wrong, I respect him though because he puts his money where his mouth is, unlike a lot of other notable bears who have become rich over the past 10 years despite everyone they give advice to are flat-out broke. I won’t mention names.

But Kyle Bass got on CNBC yesterday and gave his opinion on trade. I had CNBC muted at the time. By the way, I’m telling you guys to shut off CNBC, I watch it because it’s the best way to gauge sentiment in the markets and they have some good interviews on there, but you may just want to shut it off during those extreme times because it gets a little bit crazy. But anyway, I have it on mute and I see Kyle Bass name across the screen and I’m like, “Here we go. The market’s down 800 points. He’s a bear, I wonder what he’s going to say.”

But he started talking about trade and man, I love what he had to say. He was like, “Look I’m not a Trump supporter or even voted for Trump, but what he’s doing is right and important.” He says China claims to be at 15% of global GPD in dollar terms, but less than 1% of global transactions settle in their own currency. What does that mean? That means they have to support their own currency and be dollars to do it. Basically it’s saying, you better start playing hardball. He also talked about China-US negotiations.

Last year where were we? This has been going on for about two years now. They promised to buy agricultural products from us, stop stealing our intellectual property, make trade fair. They said all this and they did nothing. So what did we do? We levied tariffs on their goods and that’s what started the so-called trade war. People love using trade war, it’s not a trade war guys I’ll explain why it’s not a trade war. Relax.

Now fast-forward to today. And there’s been some ups and downs in trade and whatever. Almost every sell-off I sell, look, this is nonsense, buy stocks and it kept going higher and higher. Now we’re back again . All right because what are we seeing? Well, the current round of negotiations, which took place in China last week, we dealt hits from both sides present. China said when they sat down at the table, they said, “Before we engage in talks you, meaning the US, has to drop all tariffs on goods right now. Stop disallowing Huawei to sell goods to the US, and release the CEO of Huawei.” That’s what China said, that’s the first thing they said when they sat down, engaging in talks.

And we said, basically, “Go F yourself.” China got up, China delegates got up and walked away from the table, literally just got up and walked away. Our delegates reported to Trump, told him what happened and Trump said, “Hey okay, if that’s what they want then we know what we’ve got to do. He came out with that tweet, leveled another 10% in tariffs on Friday, or additional $300 billion worth of goods added the 10% tariffs, which I think would trigger I think September 1st, early September, if they don’t come to terms. Now I know this is going to be difficult for some of you to comprehend and I get it. I really do because emotions are crazy high these days and people have strong opinions.

Social media is so much easier to today’s stupid shit when nobody knows who you are or you’re not face to face with someone. I mean that’s our world today, right? Where I grew up in Queens, you said something to people’s face and if they didn’t like you got into a fight now what you can say whatever you want, you’re away and you get more aggressive because you’re not in front of people. But you would never say the things on social media that you would say in person, no way, but emotions run high.

Just look at your Twitter and just look at Twitter, look up Facebook’s a little different family oriented that your Twitter, it’s 80% of the posts are angry, negative people pissed off the way it is. So I get it. I know emotions running high these days, but I’m talking about something a lot different because this podcast is about investing, about helping you make smart investment decisions. So that you, your kids and their kids can be secure. Talk about creating generational wealth.

That’s why I have this podcast. I think that’s what most of you listen. But that’s the goal. When it comes to politics I don’t care which side you’re on. I don’t care who you like, who you hate. So put your emotions aside for just a minute and let’s talk business because what Trump is doing on trade is right. China has been stealing from us and taken advantage of us for decades. We let them steal our intellectual property and never did anything for decades and decades.

We allow them to jump the cheap commodity, cheap steel on our markets, which crushed the industry and result of thousands of people losing their jobs. This stopped on this presidency. Just look at the data on this, which I provided my tariffs report, which still a lot of people downloading free by the way, available on a site curzioresearch.com if you want my opinion on trade here, more details, but China’s a massive trade deficit with us, which doesn’t have to be that big if they just bought, maybe some of our cars, soybeans, natural gas, agriculture products from us.

These are facts, not debatable and something needs to be done to stop them. Right now we have employment near record lows, a stock market at historic highs before this pullback. Consumer spending very strong, housing market pretty stable and getting better because the rates going lower. mortgage are low. Where are you financing my houses. But now’s a perfect time to do this, right when the US has a position of strength, and again, I’m talking business here because picture this picture your Apple and nobody really cares about… You don’t care about Apple.

I care about Apple because you know with earnings and stuff like that, but you just use their product, their iPhone. It’s awesome. The iPad, Mac, use all the products. It’s cool. We’d have fun and tweet and laughing, whatever, right? But behind scenes, Apple and you could go into Walmart, Comcast, all these large companies just choose one. They control their suppliers. They do not let their suppliers dictate terms with them. No, they’ve earned that right. Because they’re huge and everybody wants to deal with them.

You sell a product, you’d like to sell it in Walmart. Yeah, your margin be a little low, but you’d make it up on volume. Since it’s the biggest retail in the world, big box retailer. But if you go with Apple, you’re not get to let, I mean, Apple’s not going to let their suppliers dictate those terms or have, say Skyworks or Riva, Micron, Texas instruments, whatever else. They can name 30 companies right now that have stuff in iPhone. I’ve covered this, but you don’t have these chip companies saying, “Hey, you know what? You need to buy our products, our chips that say whatever, $100 each instead of $50 and also we’re going to run a deficit with you forever Apple. That’s what we’re going to do.

All right, so we’re not even going to pay you right now. We’ll pay a different time and this is what we’re going to do. And by the way, Apple, we’re telling you this, we’re going to try and steal your intellectual property every single chance we get. You know what Apple will say? They’d say, “Fuck you. We’ll use other suppliers who are lined up around the block, serve as us. They’ll help us lower costs and generate more profits.”

That’s what we’re trying to do with China. It’s that simple. If you’re a business owner, which I know so many you are because you email me. If you’re a business owner, would you do business with a company that’s stealing your intellectual property? No matter how big that company is, you would never do it. That’s your intellectual property, the biggest asset for your company. So those are you saying that the US is wrong for calling out China and going through all this stuff. Either have an agenda, they trying to win election or they just complete idiots and don’t care about the data.

What’s even crazier, that’s a word crazier is that there are experts that I constantly see on TV. So called experts. It’s funny how they label themselves experts. I think it’s great that believe the US will be a worship in China. If we have a long out drawn out trade war. Let me tell you something. China is done. Sell China right now because even if they negotiated deal damage already done, companies are moving their supply chains out of China.

You’ve seen that with the numbers and companies who basically telling you this on their earnings score because they don’t like that uncertainty. They need to get out of there. They’re going to move their supply chains, a small part of them until they get all this supply chain, wherever. Because they don’t want that uncertainty where they’re not going to be able to measure their cost. It’s almost like Walmart or Target. So the biggest retailers who have trucking fleets, not locking in the… Or even say airlines not locking in the price of fuel.

Imagine if you don’t lock in the price, how do you dictate how much you could spend cap X unless you lock it into the futures market. You don’t want that uncertainty. You don’t want to have things going great and all of a sudden oil goes to 130, $150 wherever and now you want to lock in your costs this way you have a three year plan of here’s what we have to spend. Here’s what we’re going to buy new planes. We’ll got to buy new trucks.

That’s what companies are doing. You’re seeing it a data and they’re telling us this, so they removing stuff out of China already, but let’s just say that we don’t come to terms with China and this gets drawn out long-term, right? Let’s take a quick look at the numbers. Because China shipped nearly 20% of his exports to the US last year. We’re by far their biggest customer. You know, outside of Hong Kong, which basically China. But the next biggest is Japan, which is 6% I think South Korea, Vietnam, like 5% they have whatever, how many countries you know the fill in the gap.

Now, if we decide not to trade with China anymore, which is never going to happen, but let’s use an extreme case because these days that’s all you hear in the media, right? That’s all you hear. That’s all the media gets extreme cases and one. So let’s go really extreme, right? Pretend with media right now, if we cut off China, who are they going to sell the products to? Who are they going to sell those specific products too, we count for 20% customer.

How would they make up the difference given that we’re the largest consumer in the world, we’re the highest personal consumption expenditures per capital, which is a fancy way of saying that US consumers like to spend a shit load of money more than anybody else, almost more than anybody else on things they just love to spend. That’s great for someone selling products into our market, but how are they going to make up that difference? Please? Somebody tell me that. I remember Chinese economy is already weak. Its housing market is in bad shape.

Massive debt. Consumer spending is weak. Look at the numbers. It’s like a black hole. Now imagine taking away a 20% customer from your business, but what happened to your company? Accelerate a 20% customer might be the difference between you reporting a profit and a loss every year. Well, basically having a decent business or having to go bankrupt and fire all your employees. A 20% customer. Yeah, if you’re the US you buy these goods, almost anywhere.

Who wouldn’t want… People are going to be producing these goods like crazy. Imagine if someone said, “Hey, we’re going to spend hundreds of billions of dollars with you. If you could find a way to create these products at the cheapest price.” Nope, China’s been that country, but now it’s going to be Taiwan, Vietnam and other countries will end up to pick up the slack and yes, it may cost us more, which would pressure margins a little and maybe create a little inflation, which is not the worst thing. I mean the Feds been try to do that for eight years and it’s been unsuccessful and everybody’s so worried about inflation right now.

We can get goods from anywhere, anywhere. You can’t sell them to anywhere, but you could get them wherever you want to be. If you’re willing to pay for some people are going to create, they’re going to make it and I’m sure they want to deal with the US because having a good trade partner comes with a lot of benefits, different things that you can do behind the scenes. I won’t even go into that. So if you look at China, they have so much more to lose here and are absolutely crazy for playing hardball.

I mean, you want proof? Listen, if you think I’m crazy, just look at the stock markets. Guys, pull it up. You go to Google, go to whatever charts you see. We have a chart you have and just pull up like the US stock market compared to Chinese and look at the differences or what happens when negotiations breakdown. I mean you’re looking at China selling off more than two X than us. Much more than us. And when things start looking good again, China rebounds tremendously.

Moves almost at a two X pace above ours, right? That means they’re more leveraged. They have much more to lose and also to gain, than us. Now going even further here for all those who think our trade fight with China is an end of the world event. It’s an end of the world event. Holy Catchy. It’s just trade wars, I just love things like trade. We’re not a trade war. It’s okay. Well this is negotiating tactics. I mean, if you look at the numbers and extra 10% in tariffs on 300 billion in goods amounts too, $30 billion.

The US economy is $20 trillion. China’s what? 13, 14 trillion, right? So this amount of what? Point less than 0.2% of the US economy. It’s nothing. It’s nothing. What you need to know as an investor is tariffs are a way of communicating. This is how we communicate with China, how they communicate with us. I know you say, “Well Frank, look at the market sell off. It’s accelerating I mean the market was selling off on Monday 800 points, right? So you’re looking at the markets and I have access to a ton of amazing research, even from technical analysis and seeing the technical levels that will be broken kind of when the market opened.

There’s a lot of people, the smart people are smart or whatever, but yeah, the Algos are going to kick in certain levels are going to get hit. And the people that I spoke to that I know best who are really great in the markets, they knew the market was going to sell off a lot more than that. They start coming, they see you coming, all Algos start triggering or whatever. But this is on news that happened on Friday. And again, it’s overreaction, right? It’s all behavioral. We’re going to talk about that with my guess later that people get scared, they sell or whatever.

Then you got the Algos who don’t care about companies or anything and they’re just looking at market triggers and getting ahead of everybody else and selling. And I don’t even know what companies, what they do, whatever, but they just trading in and out of it. But the big a deal here with all this, with all this communication, everything is we want China to stop stealing our intellectual property. What our Lord devastate by buying our goods, like agricultural products, whatever, and natural gas, cars. And they refuse too.

They continue to lie to us and not follow through on what they’re saying. I mean, it’s very, very simple and there’s a stubbornness there. And maybe they don’t come to terms with us, but if that’s the case I think its kind of important to swallow your pride because China’s economy is going to be in scandals. I mean it’s already crashing and it basically undo all growth they’ve seen over the past 15 years. If they’re going to get an extreme example, loses us which they won’t. It’s not a trade war yet guys. This is communication.

Don’t fall into trap and watch everything on all the media channels. Again, their jobs is scare a crap out of you. This way you’re watching, this where they generate more money off their commercials. That’s their goal. Their job is to get viewers. How do you do that? You don’t say, “Well, this isn’t really a big deal.” Because nobody… No this could escalate this trade last time we had a trade war before World War II. Look what happened.

They said it’s a cause of the world wars. So it’s so easy to scare the crap out of people because your message gets sent to everyone in seconds all over the world. But just take a step back a little bit. They are communicating. It’s okay. We’re coming off highs all-time highs. We’re down a little bit. Maybe we pull back a little bit more, but just put things in perspective because if you look at China, they have a lot more to lose than us. So during this segment here, I know most people don’t like Trump. You think he’s a racist chauvinistic pig, like whatever.

But put your personal feelings aside because Trump on trade on this specific subject is dead on and this will work out for us in the end, despite what the experts in the media telling you, if the market falls 800 points a day, again, their jobs is to scare you. I mean how many times we have to hear this since China-US been fighting about trade for, I mentioned all that pretty much two years now. How many times we have to hear how the US is in big trouble and the market’s going to crash. I know I heard that at least seven times over the past two years after every initial sell off in the market and every time smart investors use it as a buying opportunity in stocks [inaudible 00:20:24] or to new highs.

We’re back at the same scenario again and later my educational segment, I’m going to tell you how to position yourself again to make some big returns over the next six months as trade war tensions are likely to die down again. Let’s China, wants to destroy the economy. I still don’t see that and the market will push back to new highs again probably in the next few months, which sounds crazy, but ballistics time with the S&P 500 fell more than 3% a day. This is dating back to 2015.

The S&P 500 popped an average of more than 2% three months later. Pretty cool stat. Thanks [Epicor 00:20:59] research for that. But I see the market hitting new highs definitely before the end of the year and into next year with the Fed lowering rates, which they have to do regardless of data’s. And it’s, the current rate is two and a quarter, which is much, much higher than the US bonds, which are yielding 1.7% I mean suggests that more rates are going to come. You know, Trumps going to do everything in his power to keep the economy strong and drive stock prices up.

You may hate him, but he’s heading into election year and you know, people in the past, when you’re looking at a did they vote with their wallets? They’ll tell you anything they want to tell you about, they hate everybody, but if you have more money in your pocket, that’s the way they’re going to vote. That’s how people vote. That’s been proven for a long time. So Trump’s going to do everything he can. Whether you agree with it or not, I’m just, I’m talking from a financial sense. Okay feel free to Frank@curzioresearch.com whatever I talk about this, I get tons of emails about how could you like Trump? He’s a racist.

He caused all the shootings last week. It’s because of all this garbage and nonsense. This is about your money. That’s why you listen to this podcast. But not only that, if you don’t think stocks are going to go high, look at the companies buying back their stock over $1 trillion this year is going to be it going to be buying by S&P 500 it’s going back and trillion dollars in stock. I mean you combine that with the around 2% yield. You’re looking at a full yield between buybacks and dividends of five, 6% of the S&P 500 and I can tell you it’s going to lead to much higher earnings and much higher than most experts are forecasting.

And we’ve seen that almost every single earning season. Earnings are beating the estimates almost every single time. When you look the S&P and the total, I told you guys how to do that. Go to Fact Set, Google Fact Set earnings every five or six days, they come out with a full earnings reports like 1520 pages long. It’s amazing just telling you everything forward all this stuff’s fantastic. It’s awesome for free. Just Google it. Great information for you.

But when I’m looking at the buybacks plus, yeah, people talk about they loved the recession. They love that word. People love that word recession, recession, recession is coming into hats. It has to come because this bull market, it lasts so long and based on history, we use every session, every whatever, six, seven years, and this is one of the longest bull markets ever. All right, so people love throwing around a recession, but lower rates are leading to a stronger housing market.

We’re seeing that data now. Consumers are still spending like crazy, unemployment still on the record lows while stocks are trading below their five year average based on forensic earnings. I don’t see a recession over the next 12 to 18 months or through the time that the election comes 2020. So guys, that’s how I see it. Ken, my educational segment, I’m going to dig in and tell you guys exactly what to look for, what you need to, because there’s a lot of great stocks reported.

Awesome earnings, raise their guidance are down 15-20% over the past two or three weeks. Small caps especially, which have gotten murdered. That’s about companies that also report a really good earnings. It’s the difference between the S&P 500 this is based on performance and the Russell is that’s why this gap based on a percentage in over 10 years, usually small caps tend to outperform large caps, especially during bullish times, but the start of this year has been horrible for small caps.

You seeing some amazing opportunities, some great opportunities, probably more opportunities. I’ve seen the last two, three years in my educational segment. I’ll break that down. Moving on, have a new guest today I’m going to interview. His name is David Keller who’s a president and chief strategist of Sierra Alpha Research LLC. Also a chartered market technician or the best Allen’s when it comes to behavioral analysis, which we’re seeing a lot of, right? It’s a big part of volatility markets, but he combines that with technical analysis and data visualization to find the best trading opportunities for an investor’s opportunities.

I’m hoping that he’s going to share with us today. David is a big shot previously managing director at Fidelity. Yes, Fidelity, trillions in assets where he managed the technical department, he writes for Bloomberg magazine, has lectured about technical analysis all around the world. He’s also currently a member of the American Association of Professional Technical Analysts and a member of the International Federation of Technical Analysis.

So pretty amazing background experience. So buckle up because it’s going to be a fantastic interview. You know what, let’s get to the interview with David Keller Right now. David Kelly, thanks so much for coming on Wall Street Unplugged.

David Keller: Absolutely Frank. I’m looking forward to it.

Frank Curzio: Yeah, so I’m looking forward to this too because you have a background and you studied behavior behavioral find it behavioral now analysis and I guess we could start off, well let’s get everyone involved [inaudible 00:25:48] could you explain exactly what that is, including how do you measure it? But I’m sure a lot of people let’s get everyone on the same page because I got a lot of great questions I ask.

David Keller: Absolutely. And the way that I always describe it when I’m working with my clients is that I try to help people make better decisions. And with investing it’s better investment decisions. But what’s funny is as you unpack behavioral biases, it’s essentially all the stuff that gets in the way between you and a really good decision about your money. You make a lot of decisions during the day, not just with your investments, but what milk you’re going buy, what car you’re going to buy, where are you going to live?

And again, the same issues that cloud your financial decisions cloud a lot of your decisions. So a lot of what I do is just try to help get through that cloudiness get through to a good decision by unpacking some of the biases and focusing on good routines, good discipline that are going to help you focus on the data. And behavioral finance is essentially a group of studies, academic studies, practical studies that describe why we make decisions the way we do and then hopefully prescribed some ways that you can alleviate some of the negative impacts.

And for me, I found that technical analysis, visualization charts are one of the great ways that I’ve found to try to minimize the impact of those biases, focus on the evidence and focused on the right decisions.

Frank Curzio: So now I’m in the financial newsletter industry basically all my life, my late Dad ran his own investment company for 30 years. And in our business at least from our competitors sometimes and not talk bad about them at all, but a lot of their business models are based on fear. In other words they know by scaring the hell out everyone, this is going to lead to more sales and more decisions. You know, everybody’s going to buy gold and old times because eventually is going to disappear, whatever which again, it’s crazy in my mind but it does get the heck out of people.

For me I’m so surprised because I’m a data-driven guy as well, and I don’t call myself a permeable bear, a permeable bull, I just look at the data and let the data dictate what I’m recommending to my subscribers. Do you track stuff like this because it’s such a big deal and it influences the market. Even if, say the last 10 years, gold has not been the best investment has been fantastic lately but it seems like people don’t even really care about the data.

They just get hooked on that behavioral and conditioning where they’re just going to make sometimes irrational business decisions because they don’t want to look at the facts and look at the data.

David Keller: You hit on so many really good points there, Frank. And you hit on I think a key point, which is that fear sells, right? So fear is a great motivator for you to separate yourself from your money, to be honest and I think a lot of people traditionally have described the emotional state of investors as fluctuating between fear and greed. You know, fear pushing us downwards. Greed driving us upwards. And I would argue that now, whether it’s marketing or just the overall state that people are in with the recent bare market movements that we’ve had in the last 20 years, it’s sort of fear drives all of it.

So it’s fear of losing everything on the downside. It’s fear of losing your shirt, your boat, your nice private school because you’ve hung on too long. But on the upside it’s no longer greed. I think it’s fear of missing out, the Fomo that a lot of people talking about. So it’s expecting or assuming that others around you are getting better returns because there’s somewhere where you’re not and if that’s how you go about your investing decisions driven by that fear, you going to fall victim to so many different things that products that are really well suited for you.

But also things like trading way more actively than you should. Not paying attention to long-term trends. Getting caught up in the short term movements. And that is the recipe for just losing a lot of money or making it a lot harder for you to make money. And I would say the other thing that you hit on, which is absolutely right, I what are the common buyers that I’ve seen we call narrative buyers, which is essentially as humans we love the narrative, we love a story.

So forget about all the data. We want a clean narrative that explains stocks are going to do X, bonds are going to do Y, Golds going to do Z because that’s how it should be. That’s what’s normal. And we get so caught up in that narrative that we make bets based on that story and how that story should play out. But you know, probably better, better than I do that the markets are not a simple mechanism. They’re complex and there’s so many moving parts and just right now you think of the headlines, would that have driven the markets in the last couple of weeks it’s been all over the place.

It’s been a ton of different things. And so what you don’t want to do is focus on a narrative. Come up with an idea of what should happen and then make a bet that way. You want to focus on that data, gather all the evidence. And I always tell my clients, think about casting a wide net, gather all the data you can and then start to make decisions about where you should be positioned. Because something like gold people just sort of counted out in their head.

They think, well, gold clearly wouldn’t work right now because of XYZ. That’s a narrative. If gold is working, then I’d want to be in gold, if stocks are working, I’d want to be in stocks. But that assumes that you’re following the evidence and following the data, which is really, really important.

Frank Curzio: Now you brought up a good point because you said fear of missing out. Fomo we see a lot from your experience and I know it is, might be hard to gauge. I’m just curious because I know you know, you look at stuff like this I think, but is, do you see a bigger fear from people when it comes to say what I just talked about earlier, where you got to get in the market, you got to be in gold? Or is it a bigger fear from, “Hey, fear of missing out where you may make money on something but you’re not all in on it.

And that to me, I see that being a big risk. Is it one like Trumps the other or is it kind of like all in the same ballpark?

David Keller: So you know there’s been a lot of academic cruisers trying to unpack this and sync all prospectors which basically deals with how we interpret gains versus losses. And I’m generalizing a great deal here, but makes sense. And so the short answer is, what studies have shown is that we feel the pain of losses more than we feel the joy of gains. So the fear of losing money is the ultimate motivator.

And I would say there’s a number of ways that that manifests itself in stock prices and the way that I always well and one of the ways to think about it is people have said that the market goes up the stairs that goes down the elevator, right? So it goes up slowly. As people accumulate positions, they feel informed, more confident. But when things really get bad, you don’t kind of get nervous and kind of lose a little bigger position.

You panic and you sell everything very quickly. And that’s why the chart of the stock looks a certain way because it’s accumulation on the way up. And then quick distribution as people take profits or panic and the market move down on average more quickly than it will go higher. So people have that fear of losing. But again, I think to my earlier point, I would say that I’m finding fear of being a broad motivator. And I think on the upside as well as the downside now maybe one of the best places to see that as with something like Bitcoin, which there’s very little fundamental data on, it’s much more driven purely on the emotional state of investors.

A lot speculation, not real concrete fundamental data. And so as a result, there’s a huge volatility, huge percent swings, and it will go up and down very quickly depending on sort of a flavor of the day and what people are feeling. So I would say more and more we as technical analysts are seeing timeframes compressed as the market is able to react more quickly to information because it’s more widely disseminated now than it was before. And also, I think on both the upside and downside, you see quicker moves and fear being a real motivator on both sides of up and down markets.

Frank Curzio: Yeah. And you’re pretty good when it comes as technical analysis stuff, right? I mean, you’re your chartered market technician, I guess. Why don’t you explain to everybody exactly what that is?

David Keller: Sure. So there’s an organization called the CMT association. I sort of describe it to people. That’s the sort of the CFA for technical analysis. So does the CFA that certifies professionals is understanding the fundamental process and valuing companies and management teams. And the CMT was created in the early 19. The organization was in the early 1970s, I think the late 70s, early 80s. They came up with a CMT designation and on the SCC at the time and FINRA now is sort of a determined that the CFA and the CMT qualify professional analysts to have an opinion based on fundamental or technical data.

And so, earning the CMT is essentially a three exams worth of a bootcamp on all things, technical sentiment, breadth, behavioral finance, quantitative analysis, statistics, all the tools you should need to make an opinion based on analyzing the visual data, analyzing the charts. And so the organization for me has been a fantastic part of my experience in the industry, both just from networking and meeting others that were looking at similar data sets.

But then I joined the leadership as president in the organization from 2010 to 2014, which led to a lot of really cool discussions with some of my mentors like Rob [Back 00:34:37] and Pura and Allen Shaw, Louisa modern. And some that had been analysts well before many of us were investors or even born. So it’s been, it’s certainly been a fantastic learning experience and a great way to learn really the breadth of the technical toolkit.

Frank Curzio: Yeah, that’s really great stuff. I mean, that’s fantastic obviously I’m being sarcastic when I say, you know, a little bit about technical analysis because your background, but yeah, no, it’s definitely been very, very impressive. Now here comes, well, so far the questions haven’t been too tough, but I want to ask you this, could you take me through an example maybe in the past this way because I know the investors love this when they look at methodologies and how people find new ideas.

But can you take me through maybe a good example of how monitoring trading behaviors using behavioral analysis combined with technical analysis had led to great returns on investment? Like how the whole thing would work and you use a past example, but how you would use your, this methodology which has worked for you such a long time. Could you go over an example of how it worked this way people could maybe understand it a little bit more maybe how to use it themselves?

David Keller: It’s a great question. Happy to do it. I would say there’s a lot of different ways to use technical analysis to use charts and the way I would introduce it is think about what the data tells you. So if your timeframe as an equity investor is short term, a couple of days to a couple of weeks is what I would put in that bucket. Then in general, we should be betting on mean reversion, meaning buying weakness, selling strength. Because on that time frame things tend to fluctuate back and forth pretty quickly.

If your timeframe is medium term, so I would say a couple of months to a couple of years, then you should be a trend follower. Again, all else being equal based on the data over multiple decades. That’s what tends to work. Meaning you want to own stocks that are working and you want to underweight or not on the stocks that have not been working. And then if your time frame is longer than that, a couple of years beyond, then you’re getting into sort of the business cycle and more back to the cyclical sectors coming in and out of favor and things like that.

And you should be back to thinking as a contrarian as a [inaudible 00:36:32] so for me, those first two timeframes are really the sweet spot for technical analysis. Because once you get further out a couple of years, I would argue that stocks trade to the fundamental valuations. That’s totally fair. So if you’re hidden five years, 10 years down the road, you should be really thinking about those big secular themes and companies that are going to last for that period. But if you’re down in the first two timeframes, you really want to be thinking of long-term uptrend.

So I look for things that are strong in the last six to 12 months, but then a week or short term trends. So something that’s pulled back in the short term, if you think about it, what that does is it combines those first two timeframes. So something that’s been strong. It’s had a long-term uptrend, meaning there’s a good know trajectory to the upside, but then in the short term, it’s pulled back. So you’re not buying into a vertical market you’re buying into something that’s more reasonable.

So, what comes to mind with something like that. I mean, maybe, I mean, just thinking of something out of nowhere, a stock like American Express maybe make sense. And thinking of the chart and the good or bad thing about being a technical analyst is if you look at enough charts, you can bring them up in your head without seeing them anymore. It’s a little strange but it happens. So if you think of AXP, that’s a stock that bottom with the rest of the market in late 2018 sort of that December period rally pretty well.

And it’s been in a pretty good uptrend for the last seven, eight months. But probably over the summer I would say maybe April, May, June period when the markets sort of pull back American Express pull back a little bit as well. Pulled right back to its 50 day moving average. And there are a number of different ways that you can track short term and long-term trends. And I have a number of more systematic, rules-based ways that I sort of determine if a market’s in an uptrend or downtrend over those different periods.

But subjectively, if you look at it at AXP, you’d see long-term uptrend in the first half of 2018 pulls back a little bit too it’s 50 day moving average. Besides that short term pull back, everything else looks pretty good. It’s still a strong uptrend. Still showing signs of accumulation. And again, if you buy when a stock like that pulls back to its 50 day, it tends to do pretty well. And what’s happened since then is it sort of that was a good entry point. Continues Higher. So again, something that scores well on the long-term scores, weaker on the short term.

And most institutional quantitative models have a momentum factor and it’s usually based on something similar to what I just described, like a 12 month return minus one month return or something like that. And it’s based on the data and it’s sort of like the simple example that I had just explained with AXP.

Frank Curzio: I love that you explained it because I’ve had people who do trend following it right about trend following. And whenever I question them about something, they just simply say, “Hey, you buying what’s working and you’re getting out of what’s not working.” And I’m like, that’s pretty okay. But could you explain, because when is something considered not working because you can look at things which work for seven, eight years and you could argue that maybe it’s not working as much where Amazon, Netflix has sold off where you have the Googles and Apples that have outperformed them a little bit as of late.

But putting technical analysis with it. What you just did. I really appreciate it, but I don’t know if you hit the same thing about trying to follow, but I’m glad you put technical analysis because like you say, it’s a very big deal to combine those. Right?

David Keller: That’s exactly right. And to be honest technical analysis, I mean I started in the industry in 2000 so I’ve now about 19 years in. But even when I started in 2000 hedge funds had grown and become more and more popular. But technical analysis still was very what’s not widely used in the mainstream. It was considered sort of a pariah sort of exercise and a lot of people wouldn’t admit, and still to this day, I’m sure some investors wouldn’t openly admit how much that they use technical analysis.

Although I would argue that more people look at charts than you would expect based on the time I’ve spent with institutions over my career. But if you think about it, what’s happened since then, there’s been more and more academic research showing that momentum works and that trend following works. And the first study that I have ever seen on it was actually from the 1960s where there’s a paper by this gentleman, I think Robert Levy was his name, L-E-V-Y.

And he wrote a paper basically explaining relative strength buying stocks that were outperforming under weighing stocks that were underperforming over that six to 12 month period. And he showed over decades that it kind of worked. And that actually that factor, that momentum factor has continued to work even to this day as more and more people know what it is. And are betting on it, it’s still seems to work.

So trend following absolutely has stood the test of time. And I think keeping that as part of my tool kit has been an important part of it for sure.

Frank Curzio: So, with your experience, you’d be doing this since 2000, all the groups that you’re in that allow you from tech analysis perspective to pick the minds of some of the greatest guys out there that would be doing this. What are the changes that you’ve seen? Because for me, I am more, I wouldn’t say fundamental analysts. I do look at charts a little bit, but it’s becoming more and more part of my methodology because you had the Renaissance Six Sigma, the high fixie trading firms, Algos get in and out immediately.

Has this changed the way you look at technical analysis? Do you have to adjust for this? Because today with the algorithms, I mean, you’ll see companies report better earnings and open up down 3% by the end of the day down 15% and it’ll bounce right back. It’s like the Algos, it’s just all as volume comes in. But I wonder if have you look at that or talk to some of the great legends out there where that’s become a bigger deal because you have to focus on that now. I don’t care what analysis of your fundamental value growth, you have to start looking at charts.

I’m looking at these things because when they break these levels, it seems like it’s more accelerated to the upside and downside today and the past couple of years than it’s ever been. I’ve been doing this for over two decades.

David Keller: It’s a really, really good question. And the short answer is absolutely the world is certainly changed in the last 20 years at say nothing of the last 50, 100 years. I mean the markets have evolved and I think the pace of change has certainly accelerated. I ran the technical team at fidelity from 2008 to 2016. Worked with all the equity fund managers there and I had a chance to spend time with one of my predecessors. His name’s Bill Don and isn’t maybe a name that some people are familiar with, but he ran the technical research department, including the chart room at Fidelity, sort of a late, mid 70s, early 80s would be my guess at that timeframe.

So this is during the 74 low, this is during a really tumultuous period. And then the 82 bottom 83 breakout, I mean, a really fascinating period of market history. Sort of a really good time talking with him about it. And the way he described it was the world was very different in that there was a huge information edge at a large firm, like a Fidelity and they still have a huge chart room with wall sized paper charts going back 100s of years on equities and breaking down different assets are really, really cool stuff.

But at the time in the 1960s and 70s, just no one had that because the only way you would be able to chart stocks like that was to have a team of people that spent all of their day literally charting. And guys that came before me, they actually called themselves Chartist because they literally created charts for 90% of the day because you had to do all by hand. You had to do it by pencil and paper and looking up the data and updating the charts.

Now what’s happened as you know, is that information is more widely disseminated. There’s not a huge information edge. So the edge I think you can have as an investor is not trying to know what other people know in terms of fundamental information. Because I think everyone will know that it’s knowing the data and knowing the relationships and identifying an opportunity or a divergence and outlier in a way that others won’t. And for me, charts of have been the way that’s been the case. And they were my predecessors were doing that 50 years ago.

We’re doing it now. It’s just the toolkit has changed. It’s all electronic. You can screen for things so widely. So if you figure your universe’s 10,000 global stocks that you could buy or sell on any day screening on technical inputs, breakouts and a significant volume of different things. That’s the way you’re going to surface the best ideas to the top of big list much more quickly and much more efficiently than you could by looking at a bunch of 10 Qs and trying to find good stories with individual companies and to say nothing of the fact that ETFs have been the biggest game changer in terms of your ability as an investor to have exposure to themes and market cap ranges and global regions in a way that you never could before.

So I think again, charts are a really cool way to look at a broad universe and just see what’s working and what’s not, where are the movements and regardless of what the US equity market is doing, there is always something out there that is breaking to new heights and there’s always something breaking to new lows. So I do a lot of screening on 13 week new highs and lows and other sorts of things just to pay attention to where the movements are and then you dig into those stories and see where the opportunities are. So I think our toolkit is richer and more dynamic than it’s ever been, which is really, really exciting.

Frank Curzio: So based on that, is there anything, this may change by the time we finish this conversation but based, because I wouldn’t have come to set goals, but is there anything that you’re seeing now right that may be that like even a sector, because I know the transportation companies have broken through new lows, which is kind of a singular way. Maybe recession a year again is not too much proof in that, but that’s what you hear out there.

More money into consumer staples means that safety will make to gold same thing. But is there anything that you’re seeing like over the past day or two because we dealing with this big selloff and kind of nervousness in the market that like you said, there’s always a time where there’s things that you could buy or things that you could sell. Things are not working and you can make money off of or ETFs and stuff. I just wonder if you had anything that you look at?

It’s a tough question because I know that could change completely by the time people listen to this, which is going to be tomorrow.

David Keller: Yeah, that’s right. It’s exactly right. And obviously we’re in a period of a lot of movement and a lot of rotation. So seeing where the dust settles I think is most important. So when the market sells off like this we always say, “Don’t confuse brains with a bull market.” So the market’s doing well and your portfolio is appreciating. It’s easy to pat yourself on the back and feel like you’re kind of getting it done in your process is solid.

But when the market turns down and you start to see some paper losses and you start to feel some uncertainty. That’s when your process really needs to be stable and that’s when you really need to have some ideas of where you would reconsider position. So I always am looking at levels or movements that would cause me to change an opinion or cause you to reverse thing. What’s going to cause you to revisit something.

So you hit on a number of things that I think are pretty interesting. That to ratios. I would say that I follow the closest are known offense versus defense within consumers. So just the ratio of consumer discretionary versus consumer staples. And again, generally speaking that’s going to do well in a bull market phase. We did really well on the first quarter of this year as the market roll over April may that ratio turned lower.

It’s been holding up pretty well, but it just turned down a couple of weeks ago. So before the markets really started to sell off into this week that ratio had actually started to reverse a little bit, which for me was sort of look if staples are starting to do better, that’s the kind of environment that I’m not feeling great about much further highs in inequities. The second general thing I would say would be the relative performance of semiconductors.

so that’s a group that tends to do well in bull market phases. It tends to underperform in bear market phases that ratio had almost gotten back to new highs just a week or two ago was back up to the levels from the end of April. And it just quickly is now reversed tax. It didn’t break to new relative highs telling you there’s less momentum for semiconductors. That’s sort of a macro worry. And then the third thing maybe if I’d throw in would be up breath.

So, there’s a lot of ways you can measure the breadth of an advance or a decline within the equity space. One of the things I would look at as the percent of stocks in the S&P 500 that are above their 200 day moving average. And again, if you think of the 200-day moving average as a simple long-term trend following device looking at what percent of names in the S&P 500 or above or below that level. A lot of times we’ll tell you, just give you a sense of how much stocks are participating.

That was up around 75%, maybe a week or two ago, and it’s already down to probably 55, 57%, which means you’re not selling almost 20 or so percent just in a week, which is a lot of stocks breaking down through a key long-term level. And if people get that 50 day moving average, like the example with American Express, we looked at earlier that that was up to about 85% and is now down to 25%. So 60% of the stocks in the S&P big large cap names have rotated below the 50 day moving average, which is kind of that first trigger telling you to be a little more cautious.

So that rotation in breadth that’s happened confirms that this is there’s certainly been a corrective action. And now the key is looking at all of those three things that I just mentioned the consumer discretionary versus staples, relative performance of semiconductors and then breadth in the S&P and seeing if it breaks down through levels that it tends to hold in a bull market correction. If it breaks through those it tells you it might be more of a steeper decline going into the fall. So that remains to be seen.

Frank Curzio: Now you broke, oh a lot of the technicians down just now and I want to know from me. Right because usually I like to ask questions. I think my one is like this is my actually personally so when I’m looking it’s almost overlapped. What I’m thinking about it because I have when you look at behavioral analysis, I guess one of the key indicators you look for that, because you just mentioned technical indicators, but what about volatility because I know volatility?

I’m saying volatility might be one or money moving out of the markets and to bonds on those indicators where, and even I mentioned RSI, which could actually be both I think, right? Technicians and also behavioral. But for me, I look at CNBC and I’ll watch TV some. And the reason why I I’m not picking on these channels I like and have good people. It lets me gauge sentiment and it allows me to really come on, here on my podcast and tell people, “Hey this is what you really need to be listening to.” Because sometimes they get to extreme levels and as their job this way you get more people watching.

David Keller: That’s right.

Frank Curzio: So, you know it long winded questionnaire, but you know, what is some of the indicators I guess that you look for when it comes to determining behavior?

David Keller: Such a good question. There’s so many things that I can answer with and I would start off by just agreeing. I’ve always, my tool kit, there are a lot of different parts of the technical toolkit. That umbrella has a lot of things underneath it. I’ve always gravitated toward things that fit a couple of criteria. Number one, something that’s testable, meaning I can determine, I can test over time how effective has this been, which is no guarantee it’s going to work going forward.

But it gives me some sense of its capabilities in different market regimes. So some sort of testability. The second thing would be provability meaning why would this make sense? It has to resonate. So if an indicator tests very well, but I can’t explain to my mother, here’s why it makes sense to use this, then you probably don’t use it. Because it means you’re making things way too complex. I like things that are simple to understand, simple to interpret, simple to test, but also simple to explain and understand.

And if something can sort of check all those boxes, it’s something you want to use. So having said that, I would share two things. One is you mentioned RSI, which is the Relative Strength Index, simple measure of momentum. And I use that all the time. If I have one indicator on a price chart, it would be the RSI at the bottom, because it, what it does is it essentially takes a Z score of the price returns. If anyone that’s statistically minding, meaning it takes all the movements out of the way and just looks at the relative movements.

You know, how much this stock tend to move. And how much is it moving right now? So what’s happened with the S&P just in the last couple of days, we’ve had the huge selloff into the beginning of this week. The RSI went below 30 for the first time since the beginning of June of this year. That only happens when the market has come down a lot, just by definition. That’s what it tells you statistically, so the question is when it gets to that level, is this a short term bounce, which today we’re seeing on Tuesday the 6th.

But that could be just what we call a dead cap pounds. Just a quick reaction move before we continue lower and looking at RSI as one of the ways they, you can determine whether how much are people reacting to the Fed and China and all these things that are happening. The price in the RSI tells you that’s something quantifiable that tells you what are people doing, how are they voting with their feet or voting with their money.

And that’s how you can start to quantify fear on one side of the other. So that’s something I’m looking at right now. From a more subjective standpoint, perhaps you sort of hinted at this idea of contrary opinion and years ago my predecessors at fidelity and elsewhere, we’d look at magazine covers. So the death of equities came up in the late 70s just before the biggest bull market in the US history when the market rallies to the peak in ’99, 2000, all the tech companies going vertical, you had getrich.com and then the new economy, the new America all talking about, tech companies going up forever.

And that was pretty much the time to be selling technology. This has happened through multiple regimes. The housing bubble, you had housing stocks going up forever. Your home is going to be, your new is the new equities and all of those things tend to happen. And in a shorter term timeframe you could measure the same thing with newspaper headlines with financial media, financial TV, and the simple thing is if there’s bright red on the screen or bright green on the screen, that will mirror the general market movement and the general sentiment of investors on a short term basis.

So if you want to see where to bet against, I would be looking for the brightest, boldest, craziest new logo that’s created to identify a theme. That’s usually when you want to start thinking of the other side and thinking about risk management for that play. So Contra opinion can be really, really powerful. And looking for extremes in sentiment can be really powerful. My concern was something like magazine covers or headlines in such is how testable is it and how consistent can that be?

And anecdotally I like to look for examples of that, but then I’ll always go back to the data to try to qualify it. Am I seeing some extremes in price movements or in momentum that would help qualify or confirm what I’m seeing with sort of the general media approach to something?

Frank Curzio: Yeah, you know, what you can add to your list, which is a great indicator. When I used to work-

David Keller: What’s that?

Frank Curzio: On Wall Street, so I worked right across from the stock exchange by the street.com for about five years. So every time a company would come to ring the bell, they would display certain things outside. They’ll have a banner outside, which is standard. But some companies it’s like and we used to joke about this with the analysts that were there. They think it was an ethanol company. They had this 18 wheel truck, they had pretty much a 100 people dancing in the streets. And I was like, all right, just shut the stock.

David Keller: That’s it. Yeah, right. Yeah. The one of my mentors at Fidelity, one of the former portfolio managers said he was at a technology conference in like ’99. And I mean this was when things were just going absolutely crazy. And he was at one of these trade shows that had ballooned from like 20 attendees to like 20,000 in a couple of years because there was so much interest and he looked at it and look where the bathroom was and he said, “I literally could not get across the trade show floor to get to the bathroom.”

And he’s like, and I walked out and started selling my positions because they just like this is way too much excitement for this theme. Like that’s it. So there you’re right, there are some really good anecdotal examples that are just really, really tell the story of the extremes in sentiment.

Frank Curzio: Yeah. And one last question because I know you mentioned earlier that you coach investment professionals, hedge fund, the money managers. I think you may be the third or fourth person on it that said that this is one of the things that you do, and it’s surprising. This is just the past 18 months where it seems like this has become a pretty big business, pretty big industry right now. Talk a little bit about that because hedge fund managers, I know a lot of them and people have had money. They have incredible egos. They always think that there’s a post to have a credible, he, I’m not, I’m not saying that’s what you want.

If you’re investing in it, you want that that got to be totally confident. But you don’t see too many of those guys take a step back and say, “Hey, I need help. It’s all about that process.

David Keller: There’s a reason why most 12 step programs start with number one, which is admitting you have a problem. And there is a reason why you start with that. And you’re right. I mean, there’s a bravado, there’s a confidence that is, it resonates with most money managers I think out of necessity because you have to do it. And again, I’ve spent a lot of my career coaching professional analysts and employing them and mentoring them and I found that you coach people to pound the table, have an opinion and really drive it home and get people to buy into it.

And the problem is when things start to go against that idea, when you start to have trouble, you’re not really equipped to deal with that. And if we often told prepared the new analysts when they would arrive at this is… You’re used to going to school and getting good grades and being right 90% of the time. Getting an a here you’re in an industry where you’re going to be right just over half the time probably, which means almost half the time you’re going to be wrong and you’re going do a great work and you’re going to do a thorough job and the market’s just going to move against your position.

It’s going to be the wrong decision. And winning in this industry is not about having great wins. It’s about minimizing the bad losses and making sure that small losses don’t become larger losses. So, for me, I think that’s the biggest hurdle to get through with people and using social media and other educational platforms. I’ve tried to find people that have an openness and a willingness to admit that there are some weaknesses in my process. Because, what we essentially do when we start working together is identify work together.

What are you looking at first thing in the morning? What’s your daily routine? How often are you checking positions? How are you incorporating financial media blogs and stuff in your process. What information are you’re getting all your data from. And during the course of that you find all these little pieces of opportunity for improvement places where it’s inefficient or you’d have some bad habit that’s developed and again, finding, I think the courage to reconsider some of your shortcomings is probably the biggest challenge for that. They’re the most event investors will have.

But again, the best investors that I’ve gotten to know over my career are the ones that are open and honest and have a process, either a natural or a deliberate process where they go back and think about what’s gone well and what hasn’t. And I’ll finish with one quick anecdote. One of my favorite managers to work with a once a year. At the end of every year, he would look at the S&P 500 stocks over the last 12 months.

What were the five best performers and what were the five worst performers? So in my benchmark, what five names were the best ones to have owned and what were the five that were the worst to have owned? And did I own any of the five top stocks? And if so, great if not, what did I miss, right? What was there in the theme and the story and the chart, what could have gotten me into that top performer and then the same thing did I own, anything toward the bottom of the return list. And if so like what did I miss on the downside? Where’s my risk management process sort of have some gaps in it.

And by doing that regularly, once a quarter, once a month or once a year, you’ll start to identify some potential places where you can make some improvements. But I then, you have to have the humility to, to even have that discussion. And you’re absolutely right. I think if more investors had that humility or had that self-awareness, probably I would say wouldn’t they be better for it for sure.

Frank Curzio: All right, so great stuff. I’m going to end with one last question, which this one is probably more important than anything we talked about today. Okay, guarantee it. Is Ohio State going to win the College Football Championship?

David Keller: I love this question. I’m a huge fan of this question. Frank thank you for that. I thought highly of you, but you went up just a notch right there with that question. I as all college football fans, my team is undefeated as of right now. So I will ride that momentum until it ends. But is it that is a fantastic program and I’m thrilled to be following it. I would say so I’m in Cleveland actually at the moment, and I would say that there’s more of an excitement for the Cleveland Browns than I have ever seen and since Bernie Kosar, our days in the early, mid 90s, late 80s. So, there’s an excitement for all number of sports teams here in Ohio, so I’ll take it.

Frank Curzio: Yeah, may feel the [chugs 01:00:46] going to be here too, I don’t know if you saw that.

David Keller: Yes, at the Indians game that’s great.

Frank Curzio: Which is great, and I saw that you went to Ohio State there’s no way anyone who goes Ohio State without being a total huge football fan. So glad you [crosstalk 01:00:58].

David Keller: It’s pretty much a requirement that’s unavoidable and my father-in-law actually took a football coaching class with Woody Hayes and the early 1970. So no joke is a true story too. Asked my wife’s hand in marriage. I literally had to take an Ohio State football tests on play calls and all sorts of stuff at my wife and I and our two children. Now I pass the test.

Frank Curzio: That’s great. Well David, listen, I mean usually these interviews go 20 minutes or so went lower because we just had so many great topics and I really appreciate you coming on. I love what you had to say. Educating my listeners and open invitation whenever you want to come back on and love what you had to say and really appreciate you coming on.

David Keller: Appreciate it. Frank [inaudible 01:01:39] progress on the podcast and things seem to be going real well on the and yeah, I’ll certainly keep you in the listening.

Frank Curzio: Oh, thank you. I appreciate it. Wow. Great stuff from David. I mean I really enjoyed that interview. He covered everything. I love that he explained everything in detail. He’s not just throwing out things out there. He tells you what RSI is. For me I want to learn more about the difference between behavioral and technical. Right. Because if you saw even the questions I was asking it’s things that overlap, but there is a lot of true to behavioral, I mean like I said earlier, I watch CNBC just to gauge what a sentiment is.

You can go to stores, you can go out so many different ways. I mean he brought those magazines, which are great. I mean you could tell that perfect like a dotcom is here don’t buy equities whatever it was in the 70s here’s someone that’s been doing this for a very long time though. Some of the best people in there to me came across as just like a humble guy that’s trying to help investors and I love that. These are the type of guys I want to bring on.

But again, this podcast, not about me, it’s about you. Let me know what you thought. Frank@curzioresearch.com that’s frank@curzioresearch.com and yeah, David’s just another great guest that we had on with Ken Fisher. Med Favor, Rob McEwen found a Gold Corp we’d, Steve Kumar, great take on trading China and at David Keller, I mean next week’s going to be another first-time guest. He has to be the CEO one of the biggest security token exchange in America. I’m begging you to please understand that trend because it’s going to be very big. It’s here, it’s not coming. We were early to that party, which is perfect timing now. It’s great and everything’s come home.

He’s of the policies fit in perfectly right now, which is awesome because we close our security token, a Curzio Equity Owners token on the 15th of July. So really exciting stuff. And we have investors in our company and give you direct access, but he’s going to talk about that industry and nobody knows about him because again, I want to give you the name. You could probably dial it down to about five or six different people who it might be, but he is the CEO of one of those biggest security token exchange in America.

But getting back to the point, I just want to say thanks because a lot of this spreading word of mouth and it’s getting bigger and bigger. And because of that we’re getting a lot of high profile people and great guests reach out to us to come to the podcast, which is at the say this year has been the first time. And we’ve seen that sometimes, but not overwhelmingly the big names and billionaires that want to be interviewed in this podcast.

So they see us as a platform, they see a lot of people listening and I just want to thank you guys because of you and spreading the word and that’s really cool stuff. And I’m hoping to get [cow bass 01:04:05] to come on, which might happen because I think he’s a really smart analyst and I think it’d be a good debate and just to talk to him. So I’m trying to plan that as well. And hopefully, we’ll get him to come on and a lot of great guests going forward.

So moving on, let’s get some educational segments since podcasts run a little late. I do like to keep those, I was aligns, it’s 20 minutes, 25 minute interviews, but when things are going great and just I’m getting just stuff that I think you could learn. I’m going to ask more questions and I’m going to try to keep those guys on for long as I can. And I appreciate that David stayed on that. That was I think over 30 minute interview, which is really cool.

But getting into educational segment, right? We’d talk about China I talked to Matt in the opening in China-US trade biggest topic in the markets right now. And we’ve seen the markets pull back the bouncing up a little bit. And remember David said we did the interview Tuesday. I tried to interviews Tuesday and Wednesday even though they come out Wednesday, but these are high profile guys. They’re not available on Wednesday at 4:00 PM just before all the time. Sometimes I’ll have to tape them Tuesday, but I wanted to make that clear to you really quick because he’s a technical guy and things could change.

He recommended a few things, but that was Tuesday, today’s Wednesday. So when you’re looking at the markets here and everything going on with trade you see I’m seeing so many great opportunities and if you’re looking at small caps, why this gap in terms of the forums relates to S&P 500 10 years so they’re significantly underperforming of the markets. Now when I look at the markets on the fact is that could push us lower.

Absolutely. I mean, maybe we just start getting some really weak data on the housing front, on consumer spending. Although this may be viewed as a positive sense, it’s going to get the thumbs up for the Fed to lower rates. Right. So bad news is has now become positive even though the Fed has lower rates and they will lower rates no matter what, just based on where bond yields are, a corporate bond deals maybe housing tails with tensions worsening China, Brexit. I mean, you know, Trump tweets on negative whatever a trade with Europe or other countries.

Yeah, that’s always a wild card. I think I read a Morgan Stanley report and highlight like 10 negatives, 10 positives, and out of a 10 negatives, like seven of them had Trump’s name in it, which I know. And so I was like, wow, Trump just shut up. Maybe this market would be a lot higher. But, I just thought that was funny. But after the recent sell off, I’m really seeing some amazing opportunities. Like I said early, I see no signs of a recession is based on the data.

Stocks are not expensive. The Fed’s get a low rates going forward. We’re heading into an election year. It’s usually great for stocks. Just, it doesn’t suggest that they were going every session, at least over the next 12 months. I don’t see it. I don’t know. I haven’t seen anyone convince me otherwise. Doesn’t mean it can’t happen. And again, I’m looking at the data, but right now it’s still very positive where it’s not great, but it’s definitely not recession.

So I can see the market bouncing back just like it did. And we are probably going to see that again. We’ll get into election years. A lot of positives and we’ve seen this before and I’ve gotten emails and people get worried and get crazy and I get it. But I look at companies like Intel, which blew out their numbers and raised guidance a few weeks ago. That was when the stock was at 53-54 and now it’s at 47 only because of the market. Amazon at 1750, I mean quarter was decent, but massive growth ahead for this company.

Firing on all cylinders. You look at the, yeah, the chip sector breaking down. If you look at transportation, I really like transportation. I mean trucking, shipping look very attractive from a value standpoint. And I understand that value’s not in favor, but also from a growth standpoint, you’re seeing growth slow the industry. But there’s a lot of good names that are going to see growth based on a lot of callus coming up over the next couple of years.

I think it’s, I mean, I thought these things were great buys. I haven’t recommended, I have recommended one that I think we’re doing okay on considering the rest of the market has come down. And we basically, I think we’re going to make a lot of money on that stock for Curzio Research Advisory. So anyways, scrubbing knows exactly what stock I’m talking about. But when I look at some of these names, I thought they were buys 10, 15% ago and they’re down even further.

Again, you want to wait for the trend to change a little bit, get a little more positive, but seeing a lot of value, I’d stay away from energy. There’s just these companies have too much debt right now and I think all parties have to go a lot higher. I mean, you’ll be safe with the Exxon, Chevron was reported good earnings, Devin pioneers and stuff like that. Mid Cap, smaller names. Just be careful there guys. These guys have a lot of debt that they rolled over in 2015 when they almost went bankrupt.

Then oil prices bounced back. But now a lot of that debt is due and these guys pedals had metal right now where there they need to produce as much oil as possible, which more supplies is going to push the prices lower because they need to pay off their debt. So it’s a very dangerous industry. I’d stay away from that. Software names, pull back a lot, some great names in that area. And I’m seeing the sector. I would definitely, if you want a game plan, that’s what I wanted to go over you with real quick. If you want a game plan, I mean look at small cap names at blew up earnings and start doing your homework on those because that way they blow out earnings.

A lot of these companies we’ve seen a steep sell off because the Russell 2000 just being shorted like crazy right now. And you’re seeing some of these names that don’t have exposure to China down 20% anthropology, really strong earnings and also raising guidance. They’re not going to give away too many names, but I have dozens on my watch list that I’ve got to make that weigh into my portfolio. So, Curzio Research Advisory, also Curzio Venture Opportunities. So I suggest, look for names that reported solid earnings that sold off.

Make sure you look at their guidance, which it’s all that really matters and you can put great earnings if you’ll all you got, he stops to get crushed. Vice versa. If you rate your guidance and you missed earnings and stocks and go higher, like we saw with take two, which is the name of the portfolio that we’re up a pretty nice on in a Curzio Research Advisory. But look for companies that raise guidance that maybe also, well maybe that didn’t raise guys, so they’d say maybe they beat the corn and blood the numbers, which means if you blow out the numbers you would raise guidance right for the year are a lot of companies aren’t doing that.

They’re being conservative because of the geopolitical risk. What’s Trump going to tweet today? And it gets crazy where some of these companies do have supply chains still in China and the latest tariffs is really crushed a lot of retailers and stuff like that. But see if they’re being conservative with that guidance and also look at the evaluation, are they cheap? Which could sometimes be a negative guy’s not always positive to stocks cheap, but it’s cheap for a reason, right? Because it’s probably not growing.

But if they’re not cheap, a little bit expensive, do they deserve that premium because of the market they’re in? Like maybe software, social media, AI, big data incentive, the things, all these trends that I’ve covered numerous times over the past few years. But trust me, especially when it comes to small caps, I mean I’ve not seen this many opportunities for at least two, probably three years and I’m loading up my personal portfolio right now.

It’s just a lot of these companies are sold off unfairly and is creating good buying opportunity. And there’s also a lot of money in the sidelines I think is going to come back in once this trade thing really dies down a little bit, which eventually it would. If it doesn’t, I think we’re still going to be okay. There’s just too many factors that are going to be positive with Feds, low interest rates, earnings are still pretty strong. Consumer spending is still pretty, pretty strong right now.

So, that’s my take in the markets. So using this temporary pullback as one of the buying opportunity, which I told you to do, again, not patting myself on the back or whatever you’re saying, how remember those other times when, yeah, David talked about that fear that pushed you out of the markets. Well, we rebounded almost every single time after that. And every time after that, and I think the same is going to happen here. We could go down a little bit further, but start doing your homework now.

Start looking at these names, names that just reported great earnings that have sold off again, guy and stuff like that there’s so much to look at right now. And this is conference calls, but trust me, you’re going to find a lot of really good ideas that are down 20-25% after reporting fantastic earnings. It makes me think if they report a weak earnings, what are they going to get out? 50% just doesn’t make sense. It’s like a disconnect right now where people are just selling stocks and not looking at fundamentals and there’s a lot of hidden gems in there, at least I’m trying to find that are going to make their way into by newsletters.

Yeah. So that’s it for me. Be sure to check out our Token Tracker site, which get sent to you for free. If you’re on our list, which is our mailing list. So to get on malaise, just go to a website at www.curzioresearch.com where you’ll get access to even more free stuff, which we like to, especially people listen to this the first time. They’re like, who is this nut job? I don’t know him. He curses some times. I don’t like his political views, whatever. But there free stuff allows you to see what we’re doing and that’s what we have to do, right?

If you never saw us before, never heard us before, like give away some free stuff. So once you see it, a lot of you subscribe to our products, which is great, but other free stuff we offer is we’re going to send out alerts and Wall Street Unplugged is publish and want transcripts of the podcast, a weekly breakdown where we pull the best stories of the week, the stories that can actually make you money in the markets. And we send that to you again for free every single week.

This is a really cool stuff which you’ll have access to ones you sign up for free email list at www.curzioresearch.com. So guys, Wall Street podcast today closing out here and I try to say put your emotions aside. I know that’s so difficult today’s market. I mean when you see in shootings and all kinds of crazy stuff and just look at for people blame or whatever I get it. I do, I understand that we just want answers.

You may not agree with sometimes my sentiment, my political views and relation to the market, which that’s why I use my political views for in relation to the market. Which is very important, how we make money and stuff like that. But whether you agree, disagree, just know one thing. I always have you back. I’m trying to make you guys money. I’m trying to just be a clear will be assets out there regardless. And I don’t expect you to agree with everything I say. And that’s cool and I understand that and I want to get feedback from you guys because a lot of times I might disagree with you, but you may come up with something that makes a lot of sense and change my mind and it’s all the better for it.

So I really appreciate you guys listening. And again, this was for me looking at as podcasts, strong opinions, but trade and things like that. I just, a lot of people have it wrong. They’ve had it wrong for a while. I feel like we’ve been right on this so far. Although I thought they wouldn’t be a trade war and it’s not a trade war, I didn’t think it last this long. But still we’ve been able to say to really stay in US stocks and do very, very well.

And I think this is providing another buying opportunity and will see going forward, I mean not right all the time, but been right on trade and in terms of getting you guys in stocks at the right time. And hopefully that continues because at the end of the day, I just want to make you guys money. So that’s it for me. Thanks so much for listening. I’ll see you guys seven days. Take care.

Speaker 1: The information presented on Wall Street Unplugged is the opinion of its hosts and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility. Wall Street Unplugged produced by the Choose Yourself Podcast Network. The leader in podcasts produced to help you choose yourself.

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