저자: BobKendall · 외국인
요약 보기
은행위기는 고립된 문제이며 2008년과 달리 보유자산이 국채라 대형 연쇄파산 가능성은 낮다고 봄. 상업용 부동산 공실은 거시경제에 큰 영향이 없다고 봄. 금리는 장기간 3~6% 범위에서 등락하며 하락하기 어렵다고 봄(장기 관점). 달러 패권 약화 우려는 과장이며 달러는 쉽게 사라지지 않는다고 봄. 소형·중형주(러셀2000)에서 자금 순환이 시작될 수 있으며 개별 종목 펀더멘털 분석을 권함. 현금 비중은 현재 약 20% 이상 보유 중이라 언급.
다듬은 글
You are about to watch a fascinating interview with a hedge fund trader who gives us incredible insight into his opinion not only on Warren Buffett, but also on Kathy Wood, what's happening with the banking crisis, the recession, and much more. Keep in mind that I bring you all my videos thanks to my own programs to help you create wealth.
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Check out all the programs linked below. That's the main sponsor, and it's what keeps us on this channel to offer you this value. So check out the link below. That's all for the sponsors. Now let's move on to the interview. Hello everyone, 're with Bob Kendall from Kendall Report. Welcome aboard. Thank you so much for being here.
Tell us about yourself. What do you do for a living? Who are you? Tell us how people can follow you. Brilliant. I'll try not to get too involved. I have many functions. I am a software developer. I was a trader on the Pacific Stock Exchange and also on the Chicago Stock Exchange. I was also the chief financial analyst for a major company.
I worked at Mirror Lynch in Research for a while, managed money in many important places, and advised about 36 banks. In fact, I recall that three of the largest banks are no longer in business. Bear Stearns Credit Suites and...and right now I'm forgetting the other one. Well, yes, I've done a lot of that kind of thing in the markets, and I started on the Chicago Stock Exchange in 1979.
I lost all my money. Should I tell that story? Of course. Yes. It was the year Vulkar was nominated for retirement. Yes. I was stuck at the border for four days and when I woke up they didn't have it. All the money was gone. So it was a good experience because it made me focus on two things. The emotions of the event and, I suppose, understanding how to develop risk strategies and things like that , and that was important.
You know, preserving capital was everything, and always will be. But on one of the software platforms I have, I developed something called Advance and Protect. If you search for Advance and Protect on Google, you'll see a lot of investment advisors, probably even current clients, former clients, but I taught the whole industry how to basically protect their assets in case of a downturn by resorting to cash.
What a concept, right? Yes of course. And also participate when markets rise. So I'm trending. Many of the things I do are trend analysis, that kind of thing. Oh. I am a technician. I could go on and on. I used to do that. I remember I was about 40 years old. A guy told me, "You're too old to have that resume." I regret having done all those things.
Oh. That's very impressive. And now, one of the things you mentioned is that you have a strong opinion about what's happening with the banking crisis because, obviously, it's been a huge issue for the past month. When will the next bank fall? Jamie Diamond says the JP Morgan hurricane is on the horizon.
The next banks and the next bankruptcies will come. What are you saying? I do n't see it. Very isolated. There are some banks that are having problems, and there has been a lot of talk about all the cash flow going into money market funds and all that stuff. Yes, the banks won't care at all . I even saw that someone texted me this morning saying that the Federal Reserve has those losses on its books, and it does, but they have something unique.
They can print money. They have a direct connection to the legislative branch. The rules can change. And I heard a good point. Lard said something that really woke me up in a clip I saw yesterday, and he said that one of the things we're going to talk about is debt restructuring. And I thought, wow, I'd never thought about that before.
So, in the world of commercial real estate, they're simply going to restructure the debt. That's why they're all in arrears. Yes. And nobody cares because these guys just make deals like, " Okay, Kevin, you owe me money. It's due next week, but don't worry. Pay me back in two years. We'll see how it goes, and I'll give you a discount on the interest." And so, in other words, default so that you can negotiate the restructuring.
Exactly. Yes. But think about restructuring all the world's debt with all the central banks because you know it's with the ECB now, but do you know what would happen if they restructured all the debt? We're going to change. Tell me about it. Do you mean all outstanding Treasury bonds, all of them ? To everything.
So why would they be talking about restructuring the debt? Whose debt are they talking about restructuring ? I have no idea. It was just a comment, right? Oh, interesting. And he's been reviewing a lot of things with CBD DC and all the other stuff out there. So, does that make you nervous as an investor in the markets?
I do n't know how to interpret it. Debt restructuring. Yes. I mean, first of all, we don't know what it's about. It was a comment. We're going to talk about debt restructuring. And I thought , wow, that's a very interesting thing to do. Hey. Yes of course. Because you know it makes sense in the commercial real estate sector, and I think one of the things we're seeing is that a lot of people are very concerned about the commercial real estate sector, which is understandable.
The vacancy rate for offices is 50 or 60% in many cities, and it's very difficult to convert them into housing, especially office buildings from the 1960s. They don't get converted; it's impossible. Yes, there are not enough window spaces and emergency exits. So there are legitimate reasons to be concerned about the commercial real estate sector.
But when we hear about, for example, the WeWork breach that just happened or some of the other breaches that are occurring. Are these worrying signs for regular investors, or is it simply a normal business process? I would say that, from a macroeconomic point of view , it's not going to matter. Okay.
If people, if there are empty office buildings, I was telling someone, we're, you know, here in Los Angeles, you count them. You count the buildings in Los Angeles, you say: "one, two, three empty, one, two, three", you know? Out of every 10, you have three empty ones, right? You get to 10, three of them are empty.
Not physically, obviously, but cumulatively, so I don't think it's going to affect the average citizen; it's not going to stop anyone from going to Walmart to buy anything. They don't know what's going on. Because that's the big catalyst that people are saying is the cause of the next recession now.
It's going to be the banking crisis, the tightening of credit standards, and the commercial real estate sector. We're all screwed. It's going to be worse than 2008, they say. What are you saying? Yes. And I've talked about this on my channel quite extensively. It's just that it's never going to happen physically.
Don't you see it passing by? No. Because if you look at what has happened, even if you go back to the global financial crisis and delve into all the restructuring, which was a debt restructuring in 2008, yes, in 2008, so during that time, you know, you saw how everything was being restructured, the banking system was being restructured, there was a lot of money to start from scratch, as if an additional sketch had been made .
If they had done so, a couple of situations would have occurred. The whole system would have collapsed if they hadn't done what they were doing. I heard that credit cards were an hour away from ceasing to work. Yes. Yes. I mean, everything, you know, if money starts coming out of the ATM, it's time to panic, right?
Definitely. If the ATM stops working. Yes. Exactly. And then, did you see it on...how was it ? It wasn't in Greece. It was in another country, right there. where they could only get a certain amount of dollars, $300 a day or whatever. I mean, they're brutal odds or rather rations in terms of how much cash, so once you start that game you're in trouble, then it's really panic.
He reiterates what the question was. Yes, so you think we have a banking crisis? We have these recession fears about commercial real estate . You're saying that maybe the banking crisis isn't that important, but do you still see a recession? I mean, everyone's predicting recession, zero recession, zero recession, zero recession.
So one of the things I wo n't mention by name, but I watched a video on the way here just to know exactly what wasn't going to happen. I won't mention the name that wasn't going to happen. Alright. OK. Because of whatever. Anyway, one of the things everyone is talking about is the collapse of the M2.
Alright . The fall in the money supply. Nobody talks about speed. It really goes vertically. Okay. Take a look at those charts. Speed is screaming and it is, uh, that 's the rotation of money. Yes. And we've been talking for years about the speed plummeting. Yes, that's how it was. Exactly. You know, that's been the dialogue.
In fact, I'm surprised it's already happened . When did it happen? Now I feel behind. Yes. Well, recently, only recently. Yes. During the SBV and throughout the banking crisis. Oh, this is very recent. It's important. And some people say there will be a small rebound and, you know, some kind of reaction.
But is the banking crisis so serious? Let me try to explain something. Because the reason why...I'm not saying there aren't problems in the banking sector; There are always problems. Everyone is talking about uninsured deposits ; They have never been insured . Nothing has changed. That's right, they never have been; suddenly that's the bears' dialogue to try to make you say, "Oh, no.
They're not insured." "Yeah. I mean, what bank has ever been insured ? It's always been based on trust. Yeah. You know, I started out on a trading floor where I was yelling and shouting at my friends trying to make money and all that. If you and I were trading and we agreed on a trade, well, the next morning you'd forget to hand over your card because it was the old paper days.
They'd come up and say, ' Hey, Kevin, I bought this and that from you.' And you'd say, 'No, I didn't buy anything from you.'" "I didn't sell anything." And then he's called DK. And now guess what? I don't trust you anymore. The next time I walk into a trading pit, I'll say, "Dude, one day I saw a guy in a trading pit for half an hour trying to place a market order to buy something because nobody trusted him." Nobody trusted him.
He was finished. So you just go back. But the same thing happens here with everything. It's about trust, you know, the US dollar, it's about trust, right? Interesting. Yes. Well, and that's also something important now , people are talking about this dedollarization because Saudi Arabia has partnered with Iran and perhaps denominated some oil and natural gas transactions in renminbi instead of dollars.
What do you think about that ? I mean, is the dollar going to die tomorrow? The dollar isn't going to die tomorrow. There is some downside risk to the dollar, but it's not going to... Think about it. How long did it take to create the euro? Oh my God. Well, yes. I mean , it was a very long period of time.
They'd been talking about it for as long as I can remember , since the early 90s. It didn't materialize in 1999. I told everyone and said, "Well, they were going to have it there, but it wasn't going to get off the ground until the following year." "Sure. Sure. And I think it still took them until 2003.
They basically doubled the world's currency . The euro has to come down. Everyone . Oh, no. No, it has to come down. If you look at when the euro came out , it just went down. Ah, interesting. It went down like 12, 15 percent, boom! Because there was twice as much currency in circulation. Okay, there's more.
It's not going to go up until they remove one of the two components. It made sense to me. And then, uh, and in relation to the dollar, yes, so with the dollar, I think what we're seeing is a bifurcation of people doing transactions. Anyway, it's always been happening, but it's never been acknowledged again.
Now, suddenly, it's a big deal because there have been some big deals. I mean, with Macron going to China and saying some of the things he said the other day, like, well, what's this all about? You know, okay, I need to diversify and move away from the daers. It seems like that sentence It came from someone else's script.
Zenping's script, that's right. Yes, yes. I don't think the daer are going to disappear. That's not going to happen because, once again, it 's trust. Yes. So, do you really want to be in yuan? Do you want to do that? Maybe not. But if you're in one of these countries, minor countries, I saw that Larry Summers made an interesting comment in a Bloomberg interview a few days ago and said that when China offers money to some of these small countries, they offer something like building infrastructure.
How about an airport? Okay. Yes, we'll take an airport and some money and yes, we'll get infrastructure. He said they call the US, they get a lecture about how great the US is and how they want to use our dollar. They don't get anything in return, except for a conference, where you think, you know, it's the old thing, uh, you're going to give me something, I'm probably going to pay more attention to you.
Yes, exactly. Yes, absolutely. So, uh, this idea of dollarization, do you think maybe now it's Is he exaggerating a bit in the mainstream media to criticize the current administration or something? It's probably a combination of all of that, but I think the reality is it's not going to happen. Yes. It's not that you couldn't see a shift and a fork in the planet where there are two worlds.
There already is. Yes. If you look at it, it's been like that for a long time. They just decided—I think the current administration has isolated itself so much, and especially because of the sanctions on Russia and all that—they've just forced this thing that seemed like it was going to happen. Right.
And from Claro, you know, uh, I was thinking about kim.com, if you follow him. He's going crazy about this. The dollar is no more and all that stuff, you know, and uh, he's a very clever guy about it, but I don't think that's going to happen. Now, it seems like it might be because I'm American, and that might have something to do with it.
I see a lot of people who are very anti-dollar are often very interested in gold and they sell it. Do you think there's just a bias in that then, potentially, or because I think that Going back to what you said about confidence, uh, in paper money, the dollar is the one that inspires the most confidence.
All paper money may be crap, but it's the best of the worst, so to speak, so, uh, yeah, like I said, I don't see it going away. I don't see that playing out really well. So there's no banking crisis, no dollar crisis. Okay. Well, let me qualify the banking crisis. Are there problems in the banking sector?
Yes. Will thousands of banks fail ? No. Why? Because if we go back to 2008, everyone was in the same situation. Mhm. Okay. Everyone had the same mess. They had assets on their books that were worthless. Okay. They have Treasury bonds. They're not worthless. Okay. Okay. And by the way, because of what's happened in the last 10 years and all the rates, most of the problems have gotten worse.
Yes, exactly. It already is, and in fact, if things had been handled right with this BB, so I think there was a conflict of interest because Becker was on the board of the San Francisco Federal Reserve. All they had to do—and this is what I said when you and I met at Let That One Fail— well, no, all they had to do was open the discount window .
Oh, right. They said, "Oh, Mr. SVV, you have a liquidity problem." No problem. How much money do you need? " They could have plugged the gap. Yes, they could have filled the void. And guess what? By filling that void , they probably would have seen the same reaction in Treasury bonds. And a portion of 20, 30, 40 percent or more, the problem would have disappeared immediately.
Immediately. That's right. And by Monday morning after SBV, they didn't even have a problem anymore if they just left the doors open. Wow. And the state regulators in California shut it down. They shut it down Monday morning before the FTC or the Federal Reserve had the ability to close the bank. Only the state regulates.
Oh, very interesting. Okay. So, the state had to pull the trigger. So, somebody panicked, pulled the opening string, and that was it. Oh, wow. You know, and there were others there, but I felt like there must have been some kind of conflict of interest , like I was on the board and now their banks were in trouble.
I work for a company where the chairman of the Chicago Board of Commerce was also our chairman. We were the The biggest commodity traders on the planet at that time. Okay. What happened? We had capitalization problems with our company. Our president is the chairman of the Chicago Board of Trade. The first thing he did was resign from the CVBOT.
Everything started to fall apart. Nobody wanted to be our friend anymore. Capitalization, 14 days to liquidation. There were other companies, like Futures, Refco. If you look at the history of the futures markets, we were the first to fall, and then similar events occurred. Wow, things repeat themselves, and, you know, sectors change a lot, but going back to all this and what I said on the broadcast we were on, all they had to do was open the discount window .
Literally, as I was saying that, the Federal Reserve announced that they were opening the discount window, with a special offer. I don't know if you remember. Oh, yeah. A line of credit. I was really frustrated for an hour. I was trying to tell everyone that this was all they had to do. Yes. Yes. Here They are, you know?
And, of course, we have the rebound in Treasury bonds and blah, blah. Oh, yes. Instantly. Yes. Well, but yes, I think so. Banking is looking back at how it was in 2008 compared to now, there are no systemic problems. Everyone has Treasury bonds. They're not worthless assets, unlike the CDOs of 2008.
Exactly. Which were becoming worthless because of the housing cycle for those watching us. In other words, those assets were going to zero, whereas today everyone has Treasury bonds, you know? And getting back to the topic we're on , you know, just talking about prices, what the markets, the bond markets, the bond markets around the world are valuing .
They're not valuing anything. What it's doing is there's less demand at the end of the market. Well, it's going to be lower. Interesting. Think about the real estate sector. You're a real estate agent. Yes. There isn't , you know, try to make a Refinancing. Nobody's going to refinance right now, are they?
The bonds are gone. Okay. You have 2%, why would I go to 6%? Of course, you know, all the demand at the back of the curve has disappeared, and what you're going to see is that the curve is going to start—it's already U-shaped. If you look, it's already at 30%, which is starting to rise, so it's all going to make a U and then it's going to rise a little bit.
Interesting. How would you explain that to someone watching who isn't very familiar with bonds? Well, we were talking about this C shift , right? Well, I caught a comment Paul made, and it was just incredible. It was like it stopped me in my tracks. Yes. Jerome Paul. Well, he said that we're doing something right now with the structure of interest rates that's going to last for decades and that's going to change the way things work in the future.
Well, I heard it's a small thing. It was at a press conference, uh? It was at a conference of press. And when I heard that, I thought this was it...and I've talked to several friends of mine. They're very well informed. And this is what I think is happening . Rates will never go down for a very long time.
Wow. They'll stay between...it would be where they are now, three and a half, maybe a little above three, but they're going to fluctuate between three and six, maybe, and mortgages are going to be somewhere between, maybe, up to nine at some point. So why is that? Because the Federal Reserve wants out of the quantitative easing game.
They're not going to enter the game. They've already gone so far that all they have to do is look at Japan. We could spend another hour talking about that. But they don't want that. They don't want to be in that game. So what they want to do is—this is what I grew up with. If you've been in the markets for 20 years, you believe that the Federal Reserve controls everything and adjusts rates and that everyone is the puppet master, right?
If you go back to before that, the markets were always the Federal Reserve, If we go back to the '60s, '70s, and beyond, the Federal Reserve just adjusted rates to the market, and they want to get back into that game again. They don't just want to; they want to create the market. So, yeah. So what is the interest rate?
It's kind of a risk assessment of giving you money. I need you to give me something back. Think about it. Depositors are actually going to get money. In fact, you can put money into a money market fund. That's what everyone does . The money markets right now are at 4.5%. Why not? Of course you're going to , aren't you?
And that's actually healthy. It's not a bad thing because now people are, you know, talking about inflation. Well, that's being offset in part by just doing that. And then, but if you start looking at some of the ramifications of these higher interest rates, it's not there. Well, I bought a house here in California in 199.
So, yeah, 19 would have been 1986. Okay. My My mortgage was 13.25. Wow. I didn't even flinch. That's how the market was. Yeah. House prices. If you look back at the housing market, it was fine. Yeah. 13%. Yeah. Before that, there were people paying 15 and 16, and there was a market. It's crazy . It was like buying in the credit card market, and people were buying houses, and, you know, I wouldn't say the money was necessarily easy.
You had to qualify. Yeah. Yeah. But it wasn't like the crazy days, and, you know, back in 2006, when dead people could get loans. Exactly. Yeah. Can you sign a piece of paper for ninja loans? But, you know, I feel like they're going to restructure this, and it's going to be very different. Okay. So I want to explain a little bit.
So you're thinking we 're not in a recession? We're at a higher price than they're saying, that's going to be higher for longer? They're serious. Yeah, they are. That's what I've been thinking. Saying. So, the bond market isn't necessarily wrong. It just does n't understand that we're actually going to have this higher price for longer.
And it's a bond market. Yes. Because it's just a market like any other. People want to say, "Well, they're doing this." No, they're not . It's just a bond market. It's demand. There are buyers and sellers. So don't put too much emphasis on some guy who's been yelling and screaming and doesn't really understand price discovery.
It's just price discovery because you were a market maker at some point. Yes. Yes. Because people keep saying, "Oh, the bond market knows everything." An inverted yield curve indicates a guaranteed recession, so what can I say? " You could look at the yield curves, and they're not very accurate. Oh, interesting.
Which one would you look at to see the inaccuracy? I don't know which one right now, but it's happened many times. And in this particular one, if you think about it, yields have shot up because they were at zero. They were never supposed to be at zero. They were always supposed to be where they are now, by the way.
Okay. Okay. All the Federal Reserve does is normalize yields to how they should be valued in a normal economy. So this could be a normalization. That's what I call it. Interesting. Yes . So it's not, you know, I don't see, as I said, I don't see the bond market valuing anything other than demand. If you look at actual demand, especially in the back-end, you know, 10-year, even 5-year, and the spread they're taking into account, I do n't care about 210.
It's, uh, so I went from 19, uh, let's see, from From 1992 to 1998, I had a consulting firm, and we advised about 36 of the biggest banks. I mentioned earlier that some of them are no longer around, and basically, if you look at the banks' pricing, it's the five, the 530s, the ones with the big margins, and the 510s.
Okay, okay, not the twos, the twos don't lend money at two rates. Right. They lend money at rates of five to ten and sometimes 30. So, if you like the typical yield that a bank, if I work with banks on their risk management side, on their gap analysis, and if a bank doesn't take risks, it's not supposed to take risks.
Okay? They lend money, they provide services, they take margins, right? Okay. So, you know, if you look at the yield on a duration, if they go up to seven years, that 's very optimistic for bonds, it 's crazy. So, they typically trade between three and a half and five and a half. Okay. Okay. And everyone was like Pretty short here.
But the Federal Reserve said, "Well, you can, you know, do a hold- forever strategy, right?" Clear. Clear. Health maturity, hide it there. You know, do that and don't even bother with, you know, we don't care what the prices are, right? Nets. But the minute you sell one of those or do something in that group, yeah, now it becomes market value.
Right. Right. You move them to available for sale. What happened with SB? They played with that group. They had to do something. So, okay. So what do you think about the duration of the bonds ? Where are we now? I don't know the exact number. Okay, that's fine. Yeah, that would be interesting. Yeah, but I think it's still pretty short because of the way it's been, and you think we're bullish when it goes up.
Three and a half, four at most. Okay. And that's because of the way everyone structured at this point. So, for a normal investor right now, if they're not seeing a banking crisis, if they're not seeing a big fear of a dollar crisis, maybe one remaining question or fear would be the Inflation. I mean, are we going to have three waves of inflation again like we had in the '70s, or do I think we'll probably see things stay pretty stable?
I mean, the title of my video on Friday morning was Negative PP, or Negative PPI on Thursday. Everyone thought it was crazy. We had negative numbers. Yeah, we did. Yeah, big time. You know, and you can see what the Augos were doing trading that day. They had a lot of fun. Yeah. They, you know, Friday was different.
Sure. But that was kind of filler, but yeah, as far as inflation goes, I think it's another forever up. I think there's a lot... Oh, it'll stay sticky, you think? Yeah. I don't know if they'll get to... well, the other day a 27 was reported, so it 's hard to say it can't get to 25 when a 27 was reported, but I think that was an isolated report we saw.
I think we'll see things go back up, that 3.5, 3.5, or 4.5 will stick. There. Rates are going to be between four and five. All of this is going to normalize because it has to be priced the way it is. Interesting. Maybe they'll fix inflation, maybe they won't. Maybe inflation will just stay put because, well, there are a lot of things due to the company's restructuring and how things work, there's a higher cost of everything, so that sounds a bit pessimistic, although if inflation stays steady and rates stay high, we don't go back to the era of easy monetary policy, wouldn't that be a potential drag on stocks that might be waiting for that turnaround, so to speak?
From 1983 to almost 1990, inflation was above 5.26%. That was one of the biggest bull markets we've ever had. That was when Prector predicted 3600, right? That was the way it was if you look at the markets, returns only matter when they're not really participating in the economy in a structure. So let me explain what I mean by that: the way we're structured right now , The economy can just scream.
It can go on and on. It's not getting... I know everyone's talking about the credit crunch and all that. You know, I think people will just keep doing business. So you just look and say, " Well, the rate is 5%, and now I'll just keep doing things." No. Exactly. What else are you going to do? You're going to stop living.
Okay, I'm going to stop living. If you have money, you'll make those transactions. And it seems like people have more money now than... Question for you. What do you see in the real estate sector right now? I know it 's... I mean, the beginning of the year has improved a little bit. You know, I mean, we had a drop from May to December, but January, February, and March have been fantastic months so far.
Prices have come up, and partly because people are just buying what's available, and there is n't much available. People aren't really selling. Yes. Now, I mean, maybe we'll get Blackstone or some of these big institutions or REITs to liquidate, but so far it doesn't seem like people are really convinced to If corporate responsibility reaches them enough, they might want to sell some residential properties.
In fact, it's something I've thought about, and I'd like to know what you think about it , because I think if the commercial property sector collapses now, suddenly capitalization rates skyrocket in the commercial property sector, so why would anyone buy residential properties as an investment? Those investors move into the commercial sector.
Then residential property prices fall, and housing prices rise. There's an equalization. So, the fall in the commercial sector should cause the residential property sector to fall. I maintain that if I had a lot of money, I would buy these properties in the commercial sector. I don't know what I'm going to do with them, but I would buy commercial properties.
Yes . Right now, as prices fall. Okay. In the fear, or now, or would you wait? If you did that in 089, oh God. Yes. Which I did. Yes. Okay. Well, it was the best trade you'd ever make. So you know, if you buy low, sell high. It looks like they're setting up the bottom. It doesn't mean I'm going to to bounce tomorrow.
Sure. But do you know where you think the bottom is? I have no idea. It's not my market. Sure. My brother works in multifamily and he told me it's worse in multifamily right now than it was in 0809. What? Tell me more about this. Which means the only business that's happening is the ones somebody has, you know, the 40, what's the 403 exchange called?
Oh, exchange 1031. 1031. Yeah. It used to be called... You said your brother works in multifamily real estate. And he was just saying there are no loans going on . The only business that's happening there. Someone who sold something and has to buy a business. Sure. Well, there was a property the other day.
There were like 60 bids on it. Oh my God. On one property. Wait, but in what is it worse than in 2008? That sounds good. Because there's no financing. The capitalization rates haven't changed. Nothing's been adjusted. So you can't close a deal. He says, "There's no way to close a deal and make it work, you know?" " Yes.
Yes. Yes. Exactly. In other words, everything is overvalued. Yes. Exactly. Are you predicting a crash? Most of the Multif family is me negotiating with you. Hey, Kevin, I bought this property four years ago. You paid for this, and they just trade amongst themselves. Yes, they do. I mean, there are a lot of these things.
I mean, these guys went when zero money was rising. Well, you know, they went from 50 million to 2, 3, 400, 500 million. Of course. Yes. And they're buying, you know, 12- unit and 36-unit properties, not the big ones. You 're not buying 2,000 units. Right. You don't need to. Yes. There are a lot of opportunities in the property sector, and I think we'll go through it again; there's everything here , it's everywhere, right?
Well, yes, I think to sum up where we are here, I think we're going to see that all of this is a radical shift, normalizing the radical shift was when Vulker It arrived when I started, so we went through these crazy rates trying to end inflation, okay? Restoring that credibility of the Federal Reserve, yeah, we got to 21% discount with a 4% penalty if you showed up in the discount window too often, like everyone else .
So it was literally 25 %. I mean, today I think it's a 25- bit penalty. Yeah. I have to quote Dr. Baker on this because he ran the Pensquare Bank I was telling you about. Well, the guy who ran Pensquare Bank was bragging to Baker. He said, " Bake, I'm doing all these loans and I'm getting 25%." And Baker laughs.
He says, "I'm buying Treasury bonds and they pay me 17% risk-free and my loans are guaranteed by the U.S. government and you'll never see a penny of that 25%." Sure. Because they're going to refinance them all. They're not even going to refinance them. They're just going to default. And that's what happened.
No way. Are you serious? Yes. If you look at Pin Square Bank , they didn't get paid for all those aggressive loans they were making. It was just massive defaults. Wow. There was also an oil thing because, uh, if we go back to that time, crude oil was under $10. Oh, yeah. Yes. And what happened was, a lot of the oil companies in Denver and Oklahoma were financing these things at exorbitant rates.
I see. So, of course, it blew up. Well , sure, the price of oil goes down, but they still can't keep up with their payments. So, well, the first big change was Vulker in '79, when he was appointed. So, in the early '80s, the first C-change, and that pretty much normalized the credibility of the Federal Reserve.
Okay. And, again, really attacking inflation, inflation. Okay. Because everyone was saying, you know who raises rates during a recession? Vulker. Vulker. Yes. Yes. Exactly. And the It went up aggressively. Well, because Burns, before that, was under the impression that we'd rather tolerate higher inflation than have people lose their jobs.
Vulker turned that on its head. You mention Burns. He's on my list as the worst Federal Reserve governor before he screamed, but that's another story. Before he screamed, I don't know. Okay. All right . Well, but I didn't know what screaming was. I used to say that when I first started in the markets, but I'll have to show you my Halloween pictures from two years ago.
I dressed up as Powell. My father-in-law was Janet Yellen. Oh, that's funny. And we gave away money with candy. That's great. Because our argument was that inflation was transitory. Yes, yes, it was then. Anyway, okay. First C-change, bullish curve, second C-change, dot-com bubble. Okay. It all reshaped itself again by what it was—what was Greenspan's word— exuberance.
Something irrational. Irrational exuberance. Okay. It was E. Yes. Okay. And that happened, and then, of course, 2008 and the housing sector. Now, we're here. Radical changes aren't necessarily a crisis. They're a restructuring of how rates work, and the Federal Reserve has a lot to do with that, of course, right?
But, like I said before, what they're really trying to do is they want the market to understand the rate structure, what the demand is, what kind of risk stability is. Yes, yes, I mean, that's why, and I think what you're seeing, even in the 10-year period, that's why we printed money down to the low 3s.
Incredible. I was on my channel one night saying that I was getting projections to go down to 3.45. That's crazy. And they got down to 3.45. Yes, they did. And I thought, it was completely, you know, I have to do my job, my quantitative work, I do what I do. And that's what I was saying, you know, and now it's probably going to be 365 or 370.
It'll stabilize somewhere between where we are now . Interesting. So, it looks like we're going to stabilize for a while. How long will it last? Now, I mean, inflation— what if it turns out to be transitory and inflation ends up going back down to 1.5 percent? Rates will probably go down. Yes. But it won't; the market will determine that, you know, because think about it if that were to happen.
That would be the case. I can tell you where I live in Arizona. They just went to the SEC the moment they cut oil production. There's a distributor that just raised their rates as if there was some guy at headquarters saying, "Oh, they just did this," and they just raised them 10 cents . We've gone up more than four dollars.
I know that would be cheap. You'd like to buy gas for four dollars. Yeah. I'm not kidding. California. So you say OPEC plus cuts. Someone raises prices instantly. But when they come down, it's trickle, trickle, trickle, right? Right. So they're just playing with the margins. So, yeah. I like how I see the world right now.
I've been doing this for 43 years. So I've been here a few days. Yeah. And I've seen... I've been through all those guys, starting with Vulker when I first got into the business. So I 've seen all the Federal Reserve officials. Yeah. You know, I got to see Helicopter Ben up front. My wife Ben. Yeah.
Yeah. I mean, you know, he, you know, those were crazy times. And actually, Yellen—I trolled her a little bit—but Yellen was the only Federal Reserve chair who never had a crisis under her watch. That's a good point. During the end of the Obama era, yeah, she never had one. And my pitch back then was that all these guys would have something bad happen to them, Except for her.
Except for her, it never happened to her. So ...So, more women fed the place. Yes. I do n't think what was really happening then was that it was stabilization after all the money had been added, and there really was n't any crisis for whatever reason. I'm a little worried about her at the Treasury. Well, it's very politicized there.
It's very politicized, but even then, if you look at the Treasury's bank account, it's pretty much depleted because we have the debt ceiling. That's another thing. But that's going to be raised. Of course. Yes. Everyone knows that. It's just that they're going to have some kind of drama to negotiate.
They have to make it look like they're resisting. Exactly. No, that's true. Yes. And I don't think that affects anything that's going on . I mean, it seems to me that you're not too worried about the recession, the dollar crisis, China, or inflation. What you think is that we have to get used to the current numbers and that the economy can continue to function.
I would say that all those things you mentioned, any one of them, They could reappear and be a problem. But they're not right now. They're talking points, and as you know, the markets are in August and can be triggered very easily. There's a lot of activity in the markets , and when they come in, there's a dynamic that's been happening in the markets that hasn't happened for a long time.
When I started in 1979, the volume on the New York Stock Exchange was 40 million a day. That's a nanosecond on Monday morning. Well, the point is, the markets have evolved, and after that, we probably doubled or more the number of people participating in the markets. Wow. Wow. And the other thing that's helped make that happen—and it wasn't just Robin Hood—was fractional stock.
Right. My favorite line is that investing used to be for someone; now it's for everyone. Oh, and the reason is... I have a little podcast I did in 2019. I went to the Charles Schwab Institutional Convention in San Diego, and I was watching, and they announced they were going to do fractional stock, and I said what we were going to see is that we were doing around a billion shares on average per day.
Yes. And what we're going to see is that we're going to see the volume quadruple. We're now doing six billion. Wow. But if you look at 2020 after all that, I mean, I was there literally a few weeks before the pandemic hit, right? Yes. But once that happened, everything went crazy, you know? But isn't that a good thing because there's more liquidity?
Very good. It's a very good thing. And fractional shares have given people access to the markets . And, unfortunately, in 2020 it seemed like it was easy. Yes. Yes, absolutely. And it's not that easy. And I remember proclaiming in 2021 that the easy money was over, folks. It was going to be back to work, back to normal.
And those higher rates, maybe higher inflation. Look what happened with the meme stocks , you know, all the Kathy Wood stuff, you know, really bad, you know? So, isn't that... Do you like Kathy? Should I say so? Well, what do you think of this? What do you think of the shares? I think she's one of the worst portfolio managers I've ever seen.
Wow. Okay. Why? Why do I think that? It's just that she just buys on the dips, buys on the dips, buys on the dips. It's in her paperwork. I was really excited. So I rebuilt Arc on our software platform, right? I take all the shares, and she's so... she has a very high weighting, and then she's committed to her ideas, which is admirable, I guess, if you're an individual investor, but when you're managing other people's money, you know she went down almost 80% from the peak, right?
So you ca n't manage money like that. She just kept buying more and more and doubling down, doubling down, doubling down, quadrupling down whatever. So from an advisory point of view , yeah, I mean, if you're managing, I know, I know you've got your fund up and running now, and if you're managing money, you want to make sure you You can manage volatility, and volatility is everything, from you as an entrepreneur trying to grow your fund to the guy who's investing in it, right?
So, you have to manage it, and it's very important, not just through diversification. If you make a quick comment about ETFs in general, if you look at each ETF, they're very heavily weighted, and then when you get to the fund, there are only a couple, maybe 1 %, of some bonds. If you invest most of them, I do something called ETF hacking.
Okay. So I'll take all those ETF hacks. Yes. So, we go in, we go into our software, and basically, for the most part, the holdings are reversed. Wow. Oh, so you put the smaller positions as the larger ones. What happens is that most people are going to invest in what they think will move the most. So they weight that initial part, of course, and if you're wrong, the volatility goes through the roof , of course, but hey, but it's interesting because some of the...
You'd think my least likely picks are actually really good picks if you analyze them. Oh, interesting. Well, I often look at the bottom end of these funds. Really? Yes. Especially when we did a hack of XLE up in 2001. The easiest trade on the planet, right? Buying energy, right? There's nothing smart about it, except that it was an easy trade.
Okay. And it actually goes back to 2020. In November 2020, I was telling everyone about finance and oil. Wow. That's where you want to be. That's where you're going to be. Energy, that's the sector you want to invest in. And it was obvious that you'd come out of the pandemic at some point. You'd have demand for oil, financial activity, but you know, those two very easy trades that everyone told me I was wrong about, and that I was absolutely right about .
Yes. And the hack of the ETF went up over 40%. Wow. You know, in 2021, which wasn't a bad thing. year, but I don't think everyone would like to concentrate, but that's my other strategy. I like concentrated strategies. Wait, but on one hand, you're saying to take the smaller ones and diversify them against the diversified ones, turn them into bigger trades.
Oh, you're literally just saying to swap them, almost swap them. So, you're just saying if I put our software there and we run this, chances are the outlook is completely different. Well, but that's just a different opinion. But what you're saying is, you swap, you look at the ETFs and take, say, something that has a 1% allocation versus something that has a 10% allocation, and you would potentially swap them based on whether there was a trend, whether they had a signal— all of that would be based on technical analysis.
Yes. Oh, and quantitative stuff. Yes. So, we run 10 million calculations every night on our database. Oh my God. Every symbol has 600 variables that are analyzed every day. We've been Running this process since 1997. Do you refine this software every day, or how do you fine-tune it? It runs every night.
It has an allocation process. It's very interesting because it's basically about rebalancing. We created something called dynamic profit harvesting, where you literally take things away from the fastest- growing ideas when you have a new one. Yes. You take from the big fish, the winner. Yes. And then you put it into the new idea.
The concept is that the fastest- growing idea is probably nearing the end of a cycle or closer to it. The new one has a completely new cycle. It's more likely. It has a greater chance of growing. And what happens is, it literally causes an acceleration of capital growth. Wow. So, what would you advise a regular investor who follows us now?
If they have, you know, cash, and let's say they have 50% cash right now, do they still hold cash now? Do they go into stocks, real estate, bonds? Yes, that's what I am, being a quantitative analyst, the first thing I would do is go to my software and see if I like this kind of thing. Yes. But, from my point of view, I think individual investors have the opportunity to go in and do some analysis of the stocks they like and then find some kind of analysis, whether they're using analytical analysis or whatever they 're doing, find some kind of concept they can back up, whether it's fundamental, understand what you 're involved in, that's a simple rule, right?
Everyone should know that, but not everyone does, and you probably don't watch too many podcasts or come away with too many different ideas. Yes. Because that brings us back to what we were talking about earlier, you know, be careful what you read. You might believe it, right? Same with...you know, and I do daily streams every day, right?
I'm in the opposite sphere to what I told you about. I'm online at 9:30 at night. So I do a pre- market setup for what's going to happen the next day, the night before. And we have something called the market grid, and it actually predicts where The ranges are going to be there. Great. So we have something like ...it's really interesting.
So I'll say it's going to be S1 compatible with an S...R2. Yes. And they're incredibly accurate and developed. It seems that when you first look at it , it might be like a Ballinger Band, but they're not based on standard deviation. Okay. And, uh, they're based on volatility and they have some Fibonacci calculations that indicate where the range is.
I actually created that indicator for my institutional accounts when I was working with banks because we were working with gap analysis. So, if you were a bank and you had long-term liabilities, you would need to sell something. You would look for the exact point at which you would try to sell something.
So we developed this: this is the best possible price for you to sell on that day because these guys have to do something. It's not something they want to do. Because they're hedging. Yes. Exactly. So I have a new channel, we especially worked a lot on the mortgage channel, and you have mortgages that just came in today.
Do I want to hold them? How are they doing, or what kind of risk is involved? What kind of duration are we looking at? Well, so if I need to sell something, we would develop a price range where these would be your target price ranges for your sales, here are your target ranges for your purchases, and then we started evolving to use it in other markets.
We started predicting ranges for individual stocks and everything. So , well, in the market, in general, bullish or bearish, the S&P 500 2023, very bullish, yes. So, to give you an example, I have the database I'm talking about right now, 63% of all the stocks, okay, are long. Some people look at, oh, stocks that might be above the 200-day moving average.
That's just the fact that they're above the 200-day moving average; it doesn't mean they're trending. It just means they're above the 200-day moving average. So everything I do is based on trends, and therefore... So, right now I have about 10,000 symbols in the database that suggest they're going to go up.
But guess what? 63% are up. Yes. They're suggesting that I have a map of every symbol. So I can tell you how long we typically hold, what the returns are, what the deviations are, every statistic you have going forward. One of the things I talk about on my channel is what percentage of us are bulls?
There are some magic numbers. I won't talk about that, but it's too detailed. But at a certain level, there's enough traction in the market, it's not going to go down. I told everyone the other night that I'm not going to be wrong 9,600 times. Okay, that's not going to happen. Probably 60% or more will work.
And some will be spectacular trades, some will be moderate trades, but the market as a whole, so there's a going-forward component. So we know that in our intermediate models the average holding period is about 220 days, 230 days. That It's a year. Yes. Almost a year, right? So, all of this, especially if you're talking about trading days.
Yes, they're trading days. Oh, yes . So, you're looking forward . So, we started buying. The first time we saw anything was in October, right after the October lows, but we were on the last 22. Yes, we were in cash for most of the year, a lot of cash. And then we get to Q4, we start getting buying. And we have short-term buying that's 35 to 50 days of holding.
And then we have the intermediate ones that are 200, we'll just say 200 or more. So, when the 200 or more starts to show up now, these are real. They're material. Uh-huh . And right now, our forward view, I still think, at this point, the first thing that comes to mind is that we still have maybe 120 to 150 days of positive forward view.
Wow. Well, I think we're not going to have anything to talk about until Q3, maybe mid-quarter. of the third quarter, and then you might say, "Well, let's see what happens because that's where everyone says there's going to be a recession," and I understand that. And I can tell you that's where our models project a point.
But what can happen is that with 16,000 symbols, we're going to have a rotation. So these things can refresh the statistics. Some things sell, go down for a while, get bought back, and that's how they rotate. So I'm always looking at these statistics. What are your favorite sectors now? What do they say?
What are your favorite sectors right now ? What are your models? Well, that's good. I wish I had looked at it a little more closely. But yes. Bearish commodity markets. Yes. Yes. I'd have to look at it. I wish I had looked at it earlier. Just... Yes. I don't have an answer for you. But what I can tell you is that of all the sectors we track, all of our indices are custom-made.
They're not standard at all. Everything is custom-made. But right now, I think Eight out of 11 sectors are bullish right now. Wow. There are definitely some favorites that look better than others, but I have n't reviewed them. So, if you weren't prepared for that, let's say you're 25 today and you have some money.
Do you buy a house? Do you go all in on the S&P 500, the NASDAQ? Do you get a better job? What do you do? All of the above . I buy a commercial REIT. It's just an analogy I'm showing. I shouldn't make that joke. But like I said, if you're going to buy low , yes. Yes. Listen, I think the stocks I 've been talking about a lot are the ones that are going to come into play.
Small caps. Okay. Which are your favorites? I do n't have any. Okay. Just Russell in general. Yes. 2,000 small caps. You have to understand that when we look at things, we have a lot of metrics that we build things with. Well, you're a technical assistant. You're not that into earnings conference calls, Huh?
Yeah, the earnings are bad. You have to understand that I worked in two institutional research departments. You never want to hear anything they say. Is it all marketing? I was trolling Ed Yardini the other day. Yeah. Well, I worked with Ed. Ed was our boss in the '80s. He was our chief economist. Right.
And we just got rid of him. It was the best firing operation ever . Really? Because he's almost as good as Kramer. Stop. Oh my God. I'm serious. Oh my God. And someone said they quoted Ed and I thought, "Well, now I get it, he's actually improved." "He's just wrong most of the time, not always." Oh my God.
But that's typical of economists. If economists could trade, they'd be the best managers in the world. They can't get out of a wet paper bag . Okay. Yeah. When I hear that stuff, you know, yeah. Okay. Well, I'm not a fan of earnings conference calls because it's all sales marketing, and yeah, because think about it, I always say that in earnings, don't I?
So what's really going on is these guys underestimate so they can make the stock go up— sure, companies are always trying to do that, are n't they? It's marketing. All the research reports you've ever seen, having worked at two big institutional firms, are marketing reports that have nothing to do with what's likely to happen.
Oh my God. That's just my opinion. Do you feel the same way about the mainstream media, too? Absolutely. So, what's your favorite New York Times or Wall Street Journal? Yeah, I don't read newspapers. Oh, not at all. No. Bloomberg, anything? I see some stuff. From time to time, but I isolate myself pretty well.
So stay away from that mainstream and just focus on your algorithms. Yeah, that's it. Wow. So yeah, I think you know I think too much is trying to read. I actually saw Kathy on my way to where she was looking. Okay. And that's what I was trying to figure out. This is what's not going to happen . But one of the things everyone has in common is that we're going into a recession.
M2 is falling. Blah, blah, blah. These are common things that are happening. And, well, you have to understand that I'm an old-school trader, a bit of a maverick, but if everyone says it, it's not going to work. Interesting. It's not going to work. But she says a million dollars in Bitcoin. What do you think?
No idea. I'm not very bullish on Bitcoin right now . But I don't know anything about a million dollars. So it's like you're asking me, Bob, what do you think the market is going to be at in 27? Sure. Who cares That would be my answer. I ca n't trade it. Am I going to place a trade today thinking about 27?
Well, no. Well, but Bitcoin is bullish right now. Yes, it has been. Yes, I could show you . I think we had a signal at, I mean, 15,000. We've been long at 16 in the 15-16 range, that's where we detected this. You know, and we have targets. I've been talking about 31,000 and we're printing. Nobody thought that, I don't know if nobody thought that, but I think so, everything I do is really the opposite.
I'm a very unique guy because I built a platform. Think about this. I've monitored 16,000 symbols. Yes. All of the symbols are running my exact models that I built back in the '90s, and I've been following them for three decades. So where does my confidence come from? From those. How do you put one of these together?
How do you start building your own model in your version? If you had to start over right now, Where would you start? Yeah, I don't know. I was very lucky. I created some... I've been very lucky with some of the mentors I've had. I had a former client who was a professor at the University of Michigan, a PhD in physics.
We get our opinion polls from them. Yeah, that's right. But Bill came up with the concept. Well, I have a PhD in moving averages. I know more about moving averages than most people would want to know. Okay. And I've used three moving averages for almost... since 2018. Which are your favorites? EMA or just MA?
No. 1021, simple 102140. I implemented the 200, which I found useful. But we do something unique by running indicators on the internal change of the moving average. So here's the big dilemma, and this was our dilemma: the derivative of the moving average. Yeah. We're looking at the first and second position derivatives of the moving average.
Okay. We tried to determine it and created a probability map. Uh-huh. Okay. Here's the most important thing that everyone is watching. Here's the 10-period moving average, and the market is going down. Will it hold? I do n't know. We'll see. Okay. I can tell you if it will hold. I can tell you the probabilities of it holding or bouncing back because of the three together, thanks to the probability map and basically the percentage change in the angle.
I'm talking about the angle of attack. Yes. Angle of attack is an aviation term. Right. Okay . But it's the same thing here. Once the angle reaches a certain level, the probabilities of it holding start to drop. So once you go past a certain angle, that's when you see the slope. And I have three different versions.
There's a typical one where we reach some kind of terminal value, and then it comes back. There's another one where we can get extended patterns that are likely to occur. And the last one is a parabolic curve that's vertical. Right ? So there are numbers there that establish, uh, that will tell you what's going on .
Wow. So those are the fundamentals of trends. So when Does it go wrong? I don't know. I mean, they're just trades. So, you know, uh, I mean, not all trades work. No. No, they don't. But, uh, when you're right. So, you were talking about building a model. I think it's very difficult because Bill and I worked on it for years, and then I started out on my own .
The good thing is, I was probably using a program in DOS 2.3 at the time. Okay. And there weren't many programs out there. There was one called Computra. And Computra was the first program that came out. And they allowed you to create your own indicators. You could do custom things like, you know, 2023 stuff.
Yeah. To a certain extent. And then we had this dilemma about moving averages. How were we going to figure out when it would hold and when it wouldn't? We needed that answer. Everyone needs that answer. So we came up with the idea of focusing on getting that answer. We're also Elliott Wave people. So, my topic that I talk about is wave technology.
Wave technology is a combination that uses moving averages. and angles of attack to determine the probabilities of change and where they're likely to go. Well, that's the gist of everything I've done since 1984, literally. And does that mean you're...? I mean, I understand you're trading, but when you think what Kathy Wood says, say, isn't going to happen, does that make you against innovation or just against trading?
You know, innovation is fine, I have no problem with that, it's just that stocks have wrong signals, no, they have to do something right, you can't go down forever and keep talking about how this is a good stock. I see good stocks don't go down, so I've never seen, you know, stocks crash. There was someone I followed, and sometimes I get blocked.
I can be a bit of a troll. That's all. We love it. Twitter is entertaining because it is. And there was this guy there, a young guy, who had all of Kathy's stocks and all that stuff, and when they started crashing, when things got really bad "Ugly," I said to her, "Do you realize that most of these actions will never come back?" " Wow.
They'll never come back. I don't care. You can talk about their revenue. You can talk about everything. They're not coming back. Wow. And all you get is a glimpse of that world by looking at crazy penny stocks, like over-the-counter penny stocks. Yeah. Those things, they have that big curve, they crash, they're done.
They never come back because, what do you think happens to a company when that happens? Oh, they can't raise capital. They ca n't raise capital. They can't get funding. They can't do anything. Their interest rates go through the roof. They're screwed. It's over. It's over. So, when you see that crash, good companies don't do that.
And I'm not saying they do n't have good ideas. Great ideas from Tesla. They went down 60%. Tesla went down 60%. Does that make them a bad company? I wish Elon had bought Mercedes-Benz instead of Twitter. Yeah, that would have been the deal of the century. Anyway. Tesla's downfall was mostly due to their Twitter purchase.
They sold about $24 billion in Stocks. I think Twitter, Tesla, has always been quite overpriced, you know, for the most part. It's quite high. There is some risk in Tesla. It's not a major risk right now, but there are some downsides. What about what Kathy said about Roku, Snowflake? What do you think of some of these?
If I showed them on a screen, I could...we'd have some live charts that you could participate in. That's right. Because...So, you're not even looking at cash flows or fundamentals. It's just the trends. Yes. Yes. Well, when we build portfolios, we do look at fundamentals. Okay. We have a selection service that we also offer.
We have a full service because we have institutional clients. We have a bunch of filters that you can use. And yes, fundamentals are important. Yes. And I think none of those companies have really good fundamentals. Got it . Because there's no way these stocks are going to go up, you know, like I said, there are...How do you recover?
We used to say when I was at Pacific Option Exchange that we never You have to play with troubled stocks because there are too many good ones. So, if they have problems, don't try to fix them. Don't try to play them. You know, we traded some of them with AMD back in the day, right? So, what was happening was that Intel would sue AMD.
Every time they came out with a new chip, Intel would sue them. AMD would go from 22 to 24 to 12. Okay? So you'd buy 12 and sell 24. And they would literally do that. It would take about five or six months before you started getting reports, you know, everyone was watching, you know, the lawsuit, and then suddenly, you know, it would turn around , go down or whatever, and boom !
It would go back to 24. So, we were options traders, so we would just put these big spreads in. Simple, you know, and then maybe we'd do two to one on the long side or two to one on the short side, or depending on which side, maybe even much more because we had 90% capacity to, you know, Increase the margin to 90% as market makers.
Sure. Wow. But yes, I think good companies reveal themselves and are fairly easy to follow. So you should know what the fundamentals are. Absolutely. I'm not saying that isn't important, but the technical aspects, and not just technical analysis, but some of the other quantitative things they have. For example, if I had my software here, I could put in a stock.
Yes. And I could say, "Well, this stock typically holds for 180 days and typically generates 32.1." Here's the standard deviation of that return. Here's our average loss. How many days is a losing trade compared to a winning one? We'll have to play with that at some point. Yes, we will. So, what do you say about Citadel, having been a market maker, and the possibility of non-delivery, short selling, and uncovered trading ?
Yes. Yes. Yes. What do you say about that ? Listen, it's difficult. I don't think I know that world very well, but there are many things that are wrong there. There are many pranks. Yes. Yes. It's not good. Yes. You know, Citadel is a monster, no doubt about it. But you couldn't live without them. That's a good point.
Okay. You know, and most of the trades that are made in the markets, people say, "Well, 70 or 80% of all trades or more." Most of them are pricing models, that is, supply and demand, which you are seeing. That's where most of AOS's operations are located. Not all of them operate in the markets by playing long or short.
They do, but AOS's biggest operations are AOS pricing operations. OK? So, there's an order book. In other words, to maintain. And I can tell you that I was once able to take a 12-cent stock and build it up and bid it to 22 using some market-making tricks we used to do. Um Oh, yes. And you know, and then you know, because there are certain things, especially when you have level two screens.
Oh, yes. And you can see who's playing and see if there's anyone real out there. Someone and you can watch them as you start to raise some bids, the offers gradually decrease. The same applies even to e-mini trading. As I teach, one of the things I talk about a lot in day trading is observing the order book.
The order book tells you what's going on . I can still hear the well in my head. So the guy offers 200. I hear the guy yelling 200 to whatever . You know, it's like you can see and say, "Let's see if this guy is real." We got a little closer, then suddenly the 200 went down to 120, then to 80, then 60.
There was never any negotiation there, but the offer disappeared. And then you have the flash sales. The guy, someone releases, you know, 300, 500 for sale at a price, right? Never say, "Oh, there are great salespeople out there." You know, you can't really tell if they're great salespeople or not. Clear.
Clear. Game. Yes, it's just a game. Interesting. So, in the past, if you could do that with, say, a 10-cent spread on a penny stock, today it's probably easy to manipulate a few cents here or there on a large scale with a $100 stock. Yes. So, price discovery, you also want to talk about price discovery.
Okay. Well, most people believe that volume moves markets. Volume doesn't move markets. You need to have volume, but that's not the function. It is the aggressiveness of the buyer or seller that moves the market. So, let me explain. Then, the bid is halfway. I'll make an offer of 58, right? So, make it easy.
So, I have a million to buy. You have a million to sell, right? We 're not showing our size. I have 200, 200 halfway. You're at 200 to 58, right? We're seeing that this is just like the old days, aren't we? We looked at each other and I said, "Take your 200, raise it to 5/8 per 500." I just raised the bid.
I just raised the market by an eighth. Clear . And you say, "Three-quarters. Buy your 3/4s. Three-quarters bid 500 because I have a lot of things to buy here. I've only done 400 of my order." Yes. Yes. You still have a lot of work to do and I already have these guys running. That's how you find out.
But that, and you'll see it as if you were watching a Level Two, as if you lived in front of an electronic screen all day with Level Two. When you look at that, you can see that this is happening suddenly. Just like that, sorry for the noise, but you know, it just suddenly, it just goes up right away.
And you find that it went from 100 points to 100-200 points in the futures, it's that simple. Oh. And then all the cash, everyone has to catch up. Yes. You know, so everyone's running there. The arbitration boards are trying to balance everything out, and, you know , most of it is happening electronically, but there's still a delay.
But what happens is exactly that, where you are simply withdrawing the offer and raising the bid to the offer. You withdraw the offer, raise the bid, and simply rotate it upwards. And if you have the size, yes. And you could do that all day. In the early 1990s, there were intraday trading rooms there , and they were called group trading rooms .
A friend of mine ran a very large trading room in Houston and they called it, what did they call it, " Team Trading". One of the guys in the room called him Wamu. He was the biggest trader in the room, wasn't he ? And Wamu said, "I'm going to buy any stock," right? "I'm going to buy something," and everyone in the room would crowd around and start buying and doing exactly what I said.
And meanwhile, Wamu was the first to enter. I was selling. Clear. Yes of course. Well, because thinking about it, if, let's say, I don't know , somebody is selling lemons at a lemon stand for $10 each or whatever, and somebody comes along with a million dollars and wants to increase the value of the lemons, you know, they could buy them for $15 each or whatever.
Suddenly, all the lemons, the lemon market just went up, and now, if they have a lot of lemons, they could start selling them to everyone thinking it's working. Exactly. Essentially, that's all . And it's an intraday move, but that's what's going to drive it. Buyer aggressiveness is what works. The same applies to the sales side, right?
That's why a company like Citadel has a lot of money . They can be as aggressive as they want . Therefore, your AOS could be configured to be very aggressive. Yes. So why would they be aggressive? Because they have a lot of inventory. Clear. Therefore, they have a lot of stock. I mean , back in the old days there used to be an OTC market.
NASDAQ used to call a guy on the phone, and the joke was that if the markets were really bad, the phone would ring and ring and ring and they'd never answer, right? And sometimes, apprehensively, they would raise their arm and say, "Well, we're halfway there or whatever. How many do you have?" You know, and you would have those conversations, but now, the way markets work, this digital world is very, very different.
I mean , faster. You know, I tell everyone that if I tried to do the kind of trades I used to do in a live well, they'd bid me. Oh. Because by doing what I just said, you'll cause people around you to lose money because you have a large size and you bid on these things. And that's what happened. Yes.
Wow. There was a guy in a gold mine in 1980 who, uh, he operated...I'm trying to remember who he operated for . One of the big operators in London, right? Okay. He could control the well at any time. Everyone would follow him, right? But he kept all the winnings from the well. Everyone buys, right? So everyone's bidding, right?
And he would come in with this sales order and just sell everything. Oh. And everyone was saying, "Wait, now there's nobody here, you know, nobody wants to buy." Yes. They're the ones who hold the purse strings. Those who have the bag, literally. Yes. Wow. And that happened, and maybe it was only 50 cents or a dollar, but everyone said that the whole team was like a shockwave.
Oh. Oh. But the price discovery is done by the aggressor. The aggressor, without a doubt. And there could be a lot of volume . Oh, another example is that each of us has a million million to buy. Yes. And I'm going to buy a million at 58. You either buy at half a million and you're going to buy a million at 58.
Yes. Of course. We, you know, go back and forth 15 times. Yes. One of us finally says, " I really want to buy them." So, it's going to go up 1/8 and that's it. And a million shares are going to be traded, right? Where I could give the other example, maybe I only use four or five hundred of them to bid.
Yes. And maybe the price will go up by a quarter. Yes. And now everyone is sitting in front of their small screens. Look , he's in a room. And then the order flow appears. And that's what they're trying to attract, right? So, if they get an external flow of orders, attracting them. That's what we all see every day, right?
I mean , think about it. That's all they're seeing, everyone's saying, "Oh, look, everyone has their chart, a trend line or whatever." And that, and as I said, if the markets went from one million shares to one billion shares a day. Yes. And 19 at an average of six, sometimes eight or more, you know?
So when you have that kind of volume, with so many participants, these waves of buying or selling keep coming. We've seen those great days when you 're literally watching. Okay , there's a wave and it looks like it's going sideways. Another wave, and another wave, and you think it's over. Perhaps Thursday would have been such a day .
Yes of course. Just keep going. It was only like 1.3, but we're talking about some of those 3-star entries. Yeah, those days. Oh. You know, like these guys are serious and you try to short it and try to play it backwards because, oh, X went up. They just keep coming. They keep arriving. Yes. Okay. So, to sum up, for the individual investor, who is bullish in the long term right now, you are at least bullish during the third quarter.
Yes. Do n't you see that a recession is coming? You don't see a banking crisis. You don't think the dollar or the debt ceiling matters. Basically, just invest for the next one. I believe the dollar and the debt ceiling do matter, but the debt ceiling will be met. So that will be sorted out. But the dollar has some potential.
Yes, there is potential. And what does that mean in the next 10 or 20 years? Don't know . Yes, I can talk to you about the next 10 or 20 days. Okay, but you know, in the short term, the dollar has some short-term risk because this is what we don't know. Yes, we have elections next year. There will be a new administration.
There will be a new Treasury Secretary. Although Biden could return. He could have done it. Yes. Yes, that would be very interesting. But if. So, what about Dantis versus Trump? No, I'm not a fan of Danis. No, I don't know what it is. Is it too extreme with Disney or with some of the policies? I don't know .
He doesn't feel trustworthy . We were talking about trust earlier. Don't know. And Trump, I think, for whatever reason, had his moment. I 'm not sure if he'll come back or not. Yes. For better, for worse, or for worse. I don't really have an opinion. I think he changed a lot of things when he was there, from the perspective of the things he did with NATO and some other things.
He made some pretty decent moves there because everyone was starting to get organized, and now he's gone. We are talking about the DAO problem and what has happened now is the bifurcation of pressuring Russia. Imagine this. So why would you want to be a dollar holder when you know that the US could decide, by the way, that all the money you have deposited in your central bank is going to be kept?
Oh, interesting. Yes. I mean, it's probably unlikely. Well, or do you mean Russia? Oh, you're talking about Russia, for example, or North Korea, or Iran, or whatever, or even China, or anyone who steps out of line. Anyone who wants something interesting. Therefore, due to the risk of sanctions . If you disagree, then you could be at risk.
You're talking about countries, of course. Countries, of course. For example, hey Türkiye, you're violating our sanctions. We're going to keep all the money you have with us. Yes. Interesting. So, the DD dollar, that's a real risk. The dollar is a real risk, but you know , it's probably unlikely, just as it's most likely that the debt ceiling will be resolved.
Yes. And perhaps there will be a new asset class, a new currency. But as I said, we were talking before the euro took forever to arrive, so CBDCs don't have to worry about that for a while. I'm a little worried. I think that could happen much faster, I think . Oh, okay. Okay. And you don't like that?
Uh, I don't know what you know. If I look at China, I'm going to say no. I don't like. Okay. Uh, if JPL Janet Janet, I'm worried about Janet. I always call her Grandma Gallon. So it's a bit rude, I know, but yes, I don't think it's the incompetence he's shown. Okay. His work is impressive. Did you like how they resolved the banking crisis, or was it too slow?
Uh , no. I mean, it was what I expected, obviously. Open the discount. That's true. They open the discount window. They open the discount window. They let everyone get the money they need. They fix the liquidity. That's what they're there for. That's why the discount window exists, to solve liquidity problems.
And they solved it. It's true. And then, so that everyone can play with this, well, they open this and the balance increases. I don't know if you noticed that the balance is plummeting. Clear. Yes. There's no one knocking on the window anymore. This is how it works. But as I said, I think the perspective of having observed the markets for 40 years, not just 20 or 10, is important.
Yes. Because it 's easy to think that Bernie's world exists. Clear. And he will return. Yes. Yes. And it's going to change. Interest rates are going to go down . That's not going to happen. I don't think the Federal Reserve's funds will rise by 5 %. If there were a crisis, of course. Clear. They know it.
But since they don't see a recession, they don't see interest rates going down . Yes. I don't see where the recession is coming from. I saw it on his broadcast, he did it. Yes. So, whoever this guy is, he looks around the room and there's no recession. This place is packed. You were talking about Ross Gerber because we love Ross.
We always talk about it, we say that our Ross Gerber research is when we're in a restaurant. Okay, it's time to do some Ross Gerber research. It's full. The stock will rise tomorrow. This goes back to last year, when everyone was really screaming . Even when we had our two negative quarters, I was driving around Scottsdale, Arizona, and all the parking lots were full.
It did n't matter which store it was, there weren't, there were like three parking spaces there, right? Okay, so what's going on here? Why is it so crowded? Every restaurant you pass is full. What's going on? And I think it goes back to the will... I think the effects of the pandemic are still being felt in that people want to be alive.
They want to go out and do things, have experiences and be happy. Now , what it has cost me to get here is proof of that. Thanks for that, by the way. So, mention yourself. Tell Dile that you have been very generous with your time. Tell everyone how they can contact you and make it seem like you have a website where people can go to get information about your platform.
Yes. Yes. We have a lot of things. Well, Kendall, the Kendall Report YouTube channel , and you don't have to write it in spaces. That's the link. Kindle with an a at the end. Yes. KENDAOL. Yes. And then we have a Portfolio Experts website, which is where our software is, and there's no E in Expert. So it's a wallet with just one X.
Okay. Okay. And then we're working on a new site that's just Kindle Report, which has all of that. We also have TradingView indicators. We have a whole set of indicators . Really? Yes. Yes. TradingView is amazing. Yes. TradingView is amazing. And that's how I can get the Bob Kendall indicator on trading.
You can get the Wave Tech indicator. So you get something called Market Grid that predicts daily ranges, and then you can get these what we call PPM indicators, which are price pressure momentum indicators, and they measure the momentum of those averages I mentioned within 2140 and 200. So we have execution for second derivatives, and there's a whole probability map.
There are videos on how to use them, all that. These are indicators I've been using since they were developed in 1984. Wow. And we talked before, just understanding that angle of attack, what the odds are that they will sometimes fail like anything else. But, literally , many of these levels are probably, you know, depending on the angle , there's a 60 or 70%.
We're not going to go below that . And I say this out loud. I mean the quiet and noisy parts of a channel. Okay. And this, you know, this is what motivates me. So the other thing is that with our software we have a complete view of, I think it's 15,700 symbols right now. And that's how we know if we're long or short on any of them.
All our indices are custom-made. There are custom models available . You simply have a complete package. In fact, we're bundling it with the trading view, using Wave technology. We also have what we call our professional side, a portfolio expert, which is a platform and is desktop-based , so it has much more power because it's not all in the cloud.
Yes. Although you would have to argue that some of our models cannot be programmed in the trading view; it doesn't have the capabilities. Oh. We had to create a parallel program, even with the operations station , we had to call other elements of the operations station to do calculations and then give feedback, surely the 01 or whatever was the answer I was looking for.
But yes, the software is there, the indicators are there, and I cover the indicators every night. I'll go over all the details and show you how to use them. I had an operating room, but I didn't close it because I had too many things to do to spend, you know, many hours sitting in the operating room.
Fair. It was fun. As a final question, what percentage of cash allowance would you give someone aged 25 to 30 today? Do n't know. I don't think so, I think everyone has it . I would say that right now we probably have 20% or more invested right now. Okay. And it should be that way, given that, of course, it's so individualized for the stocks that it makes it a general statement, but I think we can get, probably, that's where we were last year, as I told you, we had over 60 in cash.
Clear. Yes. You know, we had a couple of strategies that worked really, really well, but you have to choose the right actions, as always. It remains impossible to surpass that. You still need to know. And the whole process with the models is about knowing what old Kenny Kenny Rogers is, knowing when to keep them, when to keep them.
So that's what the odds say. Yes, that's what the odds tell you. That's what we have, we have something we developed called the ER index, which is effective. So we have a self-assessment in each model of our system. What happens if you just hold the S&P? I don't know . I don't know if I should keep anything.
No comment. Well, my old comment would have been if this were before, but now it's a little different, but if I told you that if it doesn't expire, I probably don't have it. Oh. Well, I was more of a derivatives guy. Yes, clearly. Well, buying and maintaining, I don't know anything about that. I 'm not trading, I'm not sure.
Not just trading. I mean, I 'm not trying to troll Kathy, but you can't hold onto actions forever and keep saying the same thing out loud hoping it will happen. So, S short arc, short arc. No, I haven't looked at ARC. I mean, at some point it hits rock bottom, but the problem is that stocks go from good to bad, you know, Tesla can end up being a really bad stock, it can continue.
I wouldn't know what to tell you, would I? But what you need to do, from my point of view, is to evaluate things gradually and move on. So it never matters that your opinion is worthless in the long run, right? Because it's just an opinion, right? But what matters is what the price will be tomorrow, what it will be the day after tomorrow, and as you go along, you should reconsider it.
But Warren wouldn't agree with you. Yes, Warren wouldn't be able to make much money if he didn't have government support. Just get those Goldman bonds. Do you want to talk about that now? Well, anyway, like their preferred shares or whatever . Yes. Yes. I mean, but the government said, "We'll guarantee it." Yes.
Interesting. I can do that operation. And you? Clear. How much money could you earn if they guaranteed your operation? There was also something good in the United States . He's been doing this forever. He is a friend of all administrations. Really? So , okay. Well, I have to tell you a story. Okay. Here we go.
A very, very good story. In 2020, it was announced that Warren Buffett would sell all of his airline stocks. Do you remember that day? I saw him over the weekend. He said he revealed it on Saturday at his Burkshare meeting. Yes. You can go to my channel. Monday was bad. You can go to kendallreport.com and there's a video there.
How to take advantage of Warren Buffett's mistake. We did 110%. Yes of course. They all doubled. Yes. We simply put them in our model and told them to just follow this and 110%. And then we deleted them all and it does what ... Yeah. Basically, they haven't done anything since then. Yes. But I, you know, but the point is, yes, I have a friend, a big trader, uh, at an institution in London, who told me there was a rumor going around that Buffett was calling management saying he wanted to get bailout bonds and help fund all that, and they told him to [ __ ] off.
And that's how he proved he was going to get off all my airlines. Oh, so that was almost... Whether that was real or not, it was this. So, are you saying that he potentially wanted, you know, special treatment? He didn't succeed. So he said, "Okay, then I'll get rid of it. I'll take my bat and my ball home." So I will get rid of your airline stocks and they will suffer, and then you will have to bail them out even more.
And that's what you get for not treating Warren well. And Bob said they're not going to let the airlines go bankrupt. That is the primary mode of transportation in the United States and everywhere else. They're going nowhere. Yes. Yes. Yes. I mean, once again, the simplest operation in the world, right?
I mean, do you think it's possible that one of the reasons it recently divested its Taiwanese semiconductors had to do with geopolitics rather than the stocks themselves? Likely. The administration is a monster. It will take them years. Oh. Oh, yes. But they're getting a lot of government money for that.
They are doing it. Large stimulus checks. Yes. I like investing in what the stimulus checks go towards. There's nothing wrong with that. Oh really. I mean , I'm totally in favor. So I always look at what happens when you're an investor. Yes. Your job is to look at the cash flow. Where is it going ? Where is the dollar going?
So, if money comes out of something, where does it go? Yes. Yes. It wo n't always be bonuses, but you know, there's a turnover. That's why I mentioned small and medium-sized capitalization companies. I think they are very promising. The patterns that are forming right now in Russell Russell are potentially...
So, what we 've been seeing is that the NASDAQ is far outperforming. Yes, everything, right? But things are really bad here in Russell , aren't they? So I'm making pairs, you know, on Russell against that and it looks like he's trying to hit rock bottom. Okay. And then I look at all the technical analysis and our models and stuff at Russell and we're getting a lot of what I call secondary stocks to start rotating.
So this brings us back to my comment about the ETF hack. The things that are off the radar are going to be where the money is going to be made in the next round. And I don't necessarily think there will be a new ATTH, a new all-time high, or anything like that. It may exist, but that's not what I expect.
But then call all these 90-day call options on the entire Yolo Call portfolio on the Russell 2000. Yes, there you have it. Why not? Yes, technically we don't have a buy signal on Russell at the moment. But you 're waiting for her. Yes, but the pattern—that's why I say patterns are being set up—suggests that this could be where the money will flow because there are a couple of things.
So , what do you do when you invest? You're looking for something cheap. Yes of course. You're going to buy, you know, the technicians because they've done very well for you. They've already done very well. Yes. You can also diversify and more. Do you know where that's going to lead? Maybe I'll reach 30.
It doesn't mean I can't . Yes. But what I'm saying is that you should start looking at some of Russell's mid-range and mid-cap stocks; there might be some gems there. So go and investigate. Yes. Do it. I'm going to do mining. I'll do a fundamental analysis, like finding any kind of financial ratios you like.
Just go and look into those things. We have some metrics on our screens that we look for, right? Everyone has a little bit. Everyone has metrics, you know? Which one is your favorite? Yes, I should mention that there are like...Yes, you have a lot of them. You have so many. Yes, if you see them, I'll show you my spreadsheet, and when you get back from Singapore, I'll come to your office.
I'll check everything. Yes. No, that would be fine. Thank you. But yes, you're welcome. This has been incredible. So, thank you very much. We're going to link everything you 've mentioned below. Brilliant. And we'll have to make another video when I've checked all your screens. Okay. Brilliant. Thank you so much. You are welcome. A pleasure. Thank you.
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