Rebel Traders 031 : The Four Horseman of the Trading Apocalypse

Do you hear it? The sound of hooves galloping across the markets and the four horsemen of the trading apocalypse ride. The Rebel Traders stand firm and show you how you can outfox, outrun and outmaneuver many scenarios that could wipe out your portfolio…

In this week’s show, the Rebel Traders, Sean and Phil are taking the reins as they discuss what could happen in 4 very dangerous scenarios for your trading and show you what you can do to not only do to protect yourself but get a tactical advantage and position yourself for profit.

With the 4 horsemen of the trading apocalypse riding across other traders portfolio looking for potential weaknesses, you can be prime positioned to raise your awareness and prepare to be the smarter trader and the last man standing…

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Sean Donahoe: Are the four horsemen of the trading apocalypse going to tear up your portfolio? What can you do? Ready to ride? Let's rock.
Automated: Rebel traders takes you inside the world of two underground master traders, who take an entertaining and contrarian look at the market to cut through the noise of Wall Street and help you navigate the trading minefield. Together, Sean Donahoe and Phil Newton are on a mission to give you the unfair advantage of a Rebel Trader. Now, here are your hosts, Sean Donahoe and Mr. Phil Newton.
Sean Donahoe: Hey, hey, hey, this is Sean Donahoe, hope you're all doing great. We are here again for another amazing, we hope, podcast.
Phil Newton:
Sean Donahoe: It's the end of the world as we know it, but I am joined by my esteemed colleague, my fellow rider here, Mr. Phil Newton. How are you doing, sir? I have no idea where I was going with that one.
Phil Newton: No, no. Well, maybe a little bit of, I don't know, forgetfulness, could be the Alzheimer's kicking in, I don't know.
Sean Donahoe: Could well be.
Phil Newton: Boston legal, William Shatner should call it the Mad Cow's -
Sean Donahoe: Mad Cow, that's exactly it. I was going to introduce you as Mr. Red, but then again, I'd have to get the jar of peanut butter and rub it on your gums, and see what the hell happened there. It could have gone terribly wrong.
Phil Newton: Anyway, craziness aside, yeah, doing okay, this side of the pond. It's been an interesting week. Funny story, Martin Luther King day, the downside to trading at the US markets when you're not in the US-
Sean Donahoe: I knew where he was going with this.
Phil Newton: ... is at the open of the markets, I was rearing to go. I'd blown the dust off a few old strategies, as you know, I was telling you about, and I was rearing to go, made a few tweaks under the hood, few adjustments, and I'd literally, at the opening bell, which is at 2:30 my local time, so for a good hour, 40 minutes, sat in front, kind of nail biting, waiting for the markets to open. Then ding, ding, ding ... Well, there was no ding, ding, ding, for a start, the opening bell ... There was no opening bell. I'm thinking, metaphorically tapping the side of my , I think there's something wrong with the internet here, there's no data coming through, what's going on here?
Sean Donahoe: That's funny.
Phil Newton: Two minutes later, I ask Google, "Are the markets open today?" No, you Muppet.
Sean Donahoe: I can't laugh because I've done that before myself, not even paying attention to -
Phil Newton: It's easy to overlook.
Sean Donahoe: ... the screen, and it's like, "Where the hell's ... Is my data platform going wrong? Do I have to get on the phone with Trade Station or whatever?" No, no, no-
Phil Newton: I had a proper brain fart, yeah.
Sean Donahoe: No, I've done that many times myself, and then you just look at the screens like, "Oh, you doofus."
Phil Newton: Of course, that's why there was no pre-market activity.
Sean Donahoe: Yes, I think every trader has done that at some stage, and if you haven't, you will, so don't worry about it. That's good for a laugh. Anyway, in this week's show, we are taking the reins and discussing that would happen in four very dangerous scenarios for your trading, and show you what you can do, and not only to protect yourself, but also get a tactical advantage and position yourself for profits.
Phil Newton: And we've got the usual quick fire round, it's your trading questions are answered. The bullshit of the week continues to be my favorite section, as I mentioned last week, it's because I can get an early swear word in usually, but we do call out the hype, the hyperbole, the shenanigans, of the industry. Somewhere amongst all of this, excitement is going to be the core question of where is the trade?
Sean Donahoe: Awesome.
Phil Newton: So Sean, where is the trade?
Sean Donahoe: Where is the trade? Let's have a look.
Phil Newton:
Sean Donahoe: Okay.
Phil Newton: I knew you were going to do that.
Sean Donahoe: I know. I set that up just this morning for you. Yes, do you hear it? The sound of hooves galloping across the market and the four horsemen of the trade apocalypse ride. We're going to stand firm, we're going to show you how you can outfox, outrun, outmaneuver many of these scenarios that could wipe out your portfolio, and get the Rebel Trader edge. This isn't biblical, we're not going religious here, it was just a wee bit of fun.
Phil Newton: We're just having a bit of fun.
Sean Donahoe: Absolutely.
Phil Newton: Before you get on your high horse with it.
Sean Donahoe: You had to go there. Good pun. Good pun. Good pun. Good game. Good game. Sorry, that's a British pop culture reference. We'll go for the bonus, but what we're going to be doing here is literally breaking down the four different horsemen of the apocalypse. Again, we're not talking about the lamb of God breaking the seven seals, which if you-
Phil Newton: We're not suggesting that we get out with the sandwich boards either, the end of the word is neigh.
Sean Donahoe: You know he sat down last night and wrote down every horse pun he could find. Let's start off with the first horseman of the trading apocalypse. Actually, funnily enough, in the book of Revelations ... I'm not religious, just for reference, but I actually have studied a few -
Phil Newton: Which is referencing a good book, yeah.
Sean Donahoe: I've referenced a few and studied a few religions over the year, but in the book of Revelations, they actually said, "The first horse was actually conquest," it's been changed over popular culture, references, and everything else to pestilence, but let's go with the popular culture reference. Rather than conquest, as I could have a little tongue-in-cheek about some of the blue chips, but we're saving that for later, we're going to be talking about pestilence. In this reference, in this scenario, is the noise, the pollution of news media and making your decisions based on reactive input. Now, hyperbole, about that, something that we talked about-
Phil Newton: We mention that every week, but yeah, this is ... I think, personally, I think that's one of the biggest downfalls that you can have as a trader, if you've not got a systematic approach to evaluating news. I'm not talking about from the talking heads, from actual reports. There are some good information, but I just think this is one of the biggies that if you're getting your information second, third, fourth hand, which is from the talking heads and the popular media, you're just setting yourself up for failure.
Sean Donahoe: Yes, it's the problem of punditry because, again, think about the cycle. You have something that's happened, you've had the pause, the period, it's hit the news media, then you're cemented in opinions. Then, a lot of the news media have to take both sides to be, and to coin the phrase from Fox News, fair and balanced. They have to have one side and then the other, which means, at the end of the day, they are having to take those opposing views. Basically, there's no conclusion, just argument. They might put forth different reasoned arguments and everything else, and then what happens? You listen to that information wherever you get it, either in realtime from the news or later on, when you're trying to figure out what the hell is going on, which means even more time has passed from the original event.
Then you're deciding whether you're going to act on that, way after the event has actually happened. Then you might go down a further rabbit hole looking for more information to try and corroborate any of the ideas, or your cognitive bias you have one way or the other, because you've already got a base idea of your opinion of what's going on, based on your own experience, track record, and everything else. By the time you've gone through all this elongated process and noise, you're left holding. Yeah, the move happened, it doesn't matter. That's very reactive.
Phil Newton: Yeah. Usually the move that you're evaluating because of the news has already been gone, done, dusted, and happened. So all you're doing is trying to chase on the shackles. Don't get me wrong, while I've got my prejudices against news, I know a lot of good traders who use the news to their advantage. So, the trap is chasing the news item and being far too late on it. What you can go do though, if you can evaluate news in the headlines and more pay attention to the wording, the suggestion that something might happen, the press releases, the news that comes direct from the horse's mouth, to again use another pun. If you can get in the news cycle as close to the source as possible and read the headlines, and evaluate the wording that's used, then that might give you a suggestion, a little hat tip, a little crack of the jockey's hip maybe, that something might happen.
That's a better way of using the news in my experience, and certainly from the traders that I know that use that method, they get a nice very short list of stocks that they're going to perhaps be more actively trading for the day ahead, with that base. Rather than chase the news that's already happened and try and evaluate the news that's talking about the move that's already happened, blah, blah, blah. Again, recipe for failure versus recipe for success, get ahead of the move, rather than follow the move and hope that there's more to come. I think hope is horrible and just get ahead of it, evaluate what's already happening. Sorry, evaluate what's potentially going to happen, rather than hop on what's already happened. Again, there's a very clear distinction and I hope it's come across in my ramblings and musings about the news though.
Sean Donahoe: Absolutely. I think one of the things, we talk about it all the time, just raising your awareness, raising your awareness of potential. For example, we're going to actually talk about one scenario with the next horseman in a moment, but I always look at the particular sentiment, the tone, the rigidity of language or the specific focus that people have. If it's looking to different issues that become cumulative, say for example someone's talk about and an issue with Brent, or then someone's talk about an OPEQ discussion, or for example, privatization coming up of the Saudi Arabian oil conglomerate, I can't remember the name off the top of my head, they're looking to private, take it from basically public ownership and go IPO with it.
That's a government controlled ... Okay, if I'm starting to see rumblings from, say, Brent, and then WTI, and then different things happening, or potentially happening, with Saudi, I can start seeing, "If I put all these different elements together, those are three pieces of an oil jigsaw, what could that mean?" Well, okay, that raises my awareness of possibly a bullish move, or a continued bullish move, with oil. Maybe that's something I can use to get that tactical advantage because having an awareness of different things going on, you can start gathering basically disparate information and rumblings, and then putting them together to create, "Oh, there's an idea."
You can use it as a awareness grower, but don't trade, per se, on the news, unless you're using it like we've talked about many times, as to get out of a trade that you're already in. The news is the last to know, this is one thing that we talk about a lot, the news being the last to know, and we talk about information overload. You have to be able to have the blinkers on, to again, use more horse references, to cut out and focus on what is important to you and your particular trading. Maybe you have no idea, you know nothing about the oil sector, it's not in your area of purview, so to speak, so forget it. Unless you want to expand it there-
Phil Newton: Yeah, don't worry about it.
Sean Donahoe: ... filter it out, because that's just adding bandwidth to an already congested line. That's more water in a bucket that's already overflowing. One thing a lot of traders fall into is total information overload. To use, funnily enough, a publishing term, if everything's bold, in terms of font, nothing's bold, because it's all there in a mess, and you don't have any impact. You want to make sure that you're focusing on the right things, the right way, and that allows you to filter out that then. Any thoughts on that in the information overload? Because I've got a couple of other points I want to go over, but want to give you a chance.
Phil Newton: I think it's just a classic case of, instead of looking backwards, which is what the talking heads do, and comment on what has happened, you'll be looking forward and trying to ... I wouldn't say predict, I think that's the wrong choice of words, but just trying to look for the clues, the footprints, that suggest that something might be about to happen. You can do this from a day trading point of view, which was kind of where I was coming from, looking at the daily news to find out, "What could be the gap as movers and shakers for the day?" You can look at it from a more lazy standpoint and a long-term viewpoint, and again, have that long-term horizon. It is literally the difference between looking backwards and looking forwards.
Sean Donahoe: Love it. Another thing that we talk about, which again, adds to the noise, think about the different situations and scenarios where traders have noise in their lives, is having too many indicators and too many contradicting signals. Now, we've talked about this in previous shows a little bit, we've talked about indicators being just that, indicators, not signal generators, but absolutely.
Phil Newton: Clue's in the name. Clue's in the name, folks.
Sean Donahoe: That's going to be Phil's catchphrase, "Clue's in the name."
Phil Newton: Well, it is.
Sean Donahoe: Phil Clue's-In-The-Name Newton.
Phil Newton: Well, if you think about it, most of the time, the clue is in the bloody name.
Sean Donahoe: It really is. It really is. A lot of people do fall into the trap of having too many indicators on their screen, trying to fight with each other for dominance, in terms of which signal to listen to, or which position to listen to, or which indicator to listen to, and how does this all culminate in a decision? Then some accounts ring the other and you're just left, again, information, even in this micro scenario of information overload, you're like, "Well, okay, I'm stuck, not being able to move now and decide, because this one's telling me this, this one's telling me this, and this one's telling me this," and again-
Phil Newton: Most of them will have a conflicting indication anyway, which is potentially a problem. Well, it's not potentially a problem, it is a problem. What you'll find is a lot of the tools and the indicators, using too many of them, they're all going to conflict with each other because they're all designed to show clue, that interpret price in a different way because they've got a different formula running in the background. With that in mind, you're never going to get a true, "Here's exactly what you should do." What we suggest is to use them as they're intended, they're indications, an interpretation, of what might happen. Again, it's just to help you make a more informed decision. If you can stack them all next to each other, then you get a greater interpretation, rather than use the indicators as a signal generator. If you have a nice detailed process to help you find, filter, and source opportunities, then that contradiction's going to go away. I suppose it comes down to you need to understand what you're doing and what you're trying to achieve, and you're going to avoid that pestilence, that pollution, of your end objective, which is to find a trading opportunity on a consistent and methodical basis.
Sean Donahoe: Absolutely. At the end of the line, the way to combat this is with focus. Develop strategies and trading plans that allow you to cut through the noise and be rebutting, disseminate the information, the important information, and filter out the rest, and you will avoid that first horseman.
With that being said, let's move on to the next one, war. Okay, so what happens here? We're talking about war, that's one of the infamous, or famous, whichever way you want to look at it, horsemen of the apocalypse, but here's the thing, in the current environment we are looking at rumblings from North Korea and I want to look at this one. What happens if we go into this completely ... I want to say a new theater of war, but it's not really because we had the Korean War back in the last century, which is a weird thing to say.
Phil Newton: It is. It's weird to say that.
Sean Donahoe: Came to my head, but in the 50's and everything else, and this is something that has certainly raised its head, missiles flying, an test missiles flying, and we had the ... Did you hear about what happened in Hawaii with the wrong button being pushed? I'm sure that made it over to the US.
Phil Newton: You know what? Ironically, I'm on a news fast, despite ... Surprisingly, I'm taking my own advice. I have literally trimmed the fat off everything that comes my way. I used to keep an eye on the headlines, but I have dieting and fasting on anything news related. I just want to reduce the stress level. So, I did hear a whisper of it, but I didn't explore it any more than someone's pushed the wrong button.
Sean Donahoe: Yeah, that's basically ... It was all over the news here, obviously, but yeah, someone in Hawaii pressed the wrong button, sent out a panic alert that, "This is not a drill, nuclear missiles are flying." Now, if that had happened ... The funny thing is, I say this, that was genuinely, must have been, absolutely terrifying. I've got some friends in Hawaii that were absolutely freaking out and just ... I don't blame them. If that happened in the US, say for example the National Alert System had gone off saying, "We are under attack, nuclear missiles are flying, -"
Phil Newton: Attack is imminent, yeah.
Sean Donahoe: ... "seek shelter." Holy Moses -
Phil Newton: To be fair, you lived in the 80's and 90's in the UK, we had a lot of terrorist type incidents. I remember a lot of those types of alerts when I was a kid growing up.
Sean Donahoe: Oh, the IRA.
Phil Newton: Yeah, I wasn't going to say it, but yeah, I had a lot of those growing up as a kid. It was pretty .
Sean Donahoe: Oh, it was.
Phil Newton: When suddenly you've got all sorts of alerts and up the road from where I live, there was some major terrorist attacks, bombs going off, and every time you saw a plastic bag unattended ... I've lived through it, it's a horrible experience.
Sean Donahoe: It was. Funnily enough, I'm just talking about that. There was a time where we were in Hampshire, near Aldershot, which is a military base, and again, my father was ex-military, but we were told to look under our vehicle and stuff like that, because they were targeting ex-officers and stuff like that, that were out of the military, at one stage. We were looking under cars and things like that, because we had credible alerts in our area, which had been attacked a couple of times, all that. So, it is terrifying. It's not something that is easily ignored, but the markets tend to ignore them. This is something that we've been talking about a lot, but let's talk -
Phil Newton: Yeah. We talked about, because they get conditioned to ... When it becomes the normal, the normal every day ... It was not an every day experience, but when it becomes a know known-
Sean Donahoe: As you like to say.
Phil Newton: ... the markets shrug it off. Back to what we saw, again, more recently with the North Korea, and rockets over Japan, and, "Oh, it's another rocket," because the first time it happens, the markets went batshit crazy.
Sean Donahoe: The theory-
Phil Newton: Then literally two weeks later, it happened again and, "Oh, it's another rocket," and literally the speed at which the markets discounted that was unbelievable. I just couldn't believe that the markets didn't react to the second one. It's probably because of the speed of information and the willingness that we are ... I want to say we, the markets, people, the general public, are prepared to accept that as, "Oh, they've sent another rocket." It's not new anymore, it's not shocking anymore, because we've got this constant stream and barrage of information on a regular and consistent basis. As soon as the news happened, it's discounted immediately the second time that something similar happens. We've cited many examples over this in the past.
Sean Donahoe: Indeed. Actually, I was just referring to or thinking about a conversation I had with Andrew in one of the to different things. We've got the S&P 500, the data collection of that has not gone back to periods of like the ... It goes really back to the 80's or what have you, and it has not taken into consideration some of the big war events, except for like the Gulf War and stuff like that, and how it's reacted to real instances of war. With Kim Jong-un and the threat of nuclear attacks, and everything else, we've just moved ... Funnily enough, this is one thing that gets me, we've just moved B52 nuclear strike bombers to Guam. Now, here's the thing, the B52 Stratford came into service in 1955. They're extending its service. This is a giant bloody plane, but they're extending its service to 2044, that's almost 100 years of service for a plane. Which, yeah, they're upgraded and refitted-
Phil Newton: There's nothing that can replace it, is that what they're saying?
Sean Donahoe: They're saying they don't need to. Which is insane, that this is a -
Phil Newton: Don't make them like they used to. They don't make them like that anymore, do they?
Sean Donahoe: I know. My God. This is-
Phil Newton: You know you've hit a certain age when you start saying comments like that.
Sean Donahoe: Indeed. This is a plane that is ... Technologically obviously they've added to it, they've modified it over the years, but at the end of the day, this is going to be a 100 year old plane, so a lot of what's going on in terms of what ... We're talking about where is the trade, where are the opportunities? Is, we're looking at military spending, we're looking at, "Okay, what would happen if we did enter into a war?" Now, we have to assume that, and I'm praying to any deity that may listen, that we don't end up in a nuclear ... North Korea is not turned into a blast parking lot because if there was any military action or missiles flying, literally it would be obliterated. Even if there was also a scenario where, and this actually turned out to be false, but the administration saying that they'd like to look at giving them a blood nose to put them in their place, first with tactical incursions-
Phil Newton: I thought the popular phrase is preemptive strike, isn't it?
Sean Donahoe: Yes, the preemptive strike, I'm trying to be avoiding-
Phil Newton: It puts me in minds. Well, I've not got a-
Sean Donahoe: Bug in the race.
Phil Newton: ... horse in this race.
Sean Donahoe: Yeah. Horse in this race, there you go.
Phil Newton: I've not got a horse in this race, I'm not a resident, so I think I can get away with saying what I want, mostly. Let's think back, do you remember ... Was it 1982? Or was it later?
Sean Donahoe: Oh, you're going to the .
Phil Newton: No, I'm going to go war games.
Sean Donahoe: Okay.
Phil Newton: Just thinking about ... What was the guy's name? He was only a kid at the time. Do you remember the movie, War Games? The guy of Ferris ... Broderick, Matthew Broderick.
Sean Donahoe: Yeah, Matthew Broderick. Ferris Bueller.
Phil Newton: The guy of Ferris Bueller's day off, yeah. Yeah, that's the one. This isn't a new discussion, but it was basically playing tic-tac-toe against thermonuclear warfare games, hence the name War Games, they were literally simulating war games back then. We're having the same conversation 30-35 years later, it's not a new conversation, it's just that the technology, the speed at which we could deploy arms, as it were, is ever increasing. That's pretty scary.
Sean Donahoe: It is.
Phil Newton: Really, when you think about it.
Sean Donahoe: It is, but here's the thing, the only time that there is the rumblings of war ... Also, with the current administration, this is a couple of areas where-
Phil Newton: War makes money. It's sad to say.
Sean Donahoe: It is. It is. A lot of people are against the war machine or they might have different opinions based on the information that we're getting, and again, how that shifts popular opinion. We've got a administration where they are looking to modernize the military, where the previous administration, it could be argued they disseminated a lot of the current military and the control of the military, and everything else. Again, outside of the politics, pro or against, there are rumblings where we need to modernize our military force, there's a lot of development in terms of UAV technology, unmanned aerial vehicle technology, modernizing the infantry in different areas of the service. The technology, obviously there's more push to automation and keeping people out of harm's way where possible, and leaning more towards the technology side.
Phil Newton: Autonomous warfare, that's the phrase I was silent over. Autonomous warfare was the phrase I've heard. Again, in one way, I think that's better because people's live aren't being put at risk, but then the receiving end, they are being put in risk.
Sean Donahoe: Well, the receiving end is a completely different story.
Phil Newton: I know, it's an ironic situation.
Sean Donahoe: Yeah.
Phil Newton: Trying to prevent lives from being put in danger by killing ... I don't get it, but hey, let's not get into a philosophical debate. From a, "Where's the trade," point of view, it's in arms dealership. There's plenty of businesses that will benefit from, not necessarily war, but even the fear of war or a modernization of arms, which is what you were just skirting around.
Sean Donahoe: Indeed.
Phil Newton: Maybe that's a safer direction to take this conversation.
Sean Donahoe: Well, we could get into the philosophic debate.
Phil Newton: Yeah, for or against, let's just leave that on the shelf and let someone else worry about that, because I'm not smart enough to make that decision.
Sean Donahoe: Go ahead.
Phil Newton: Yeah, just purely from the market's point of view, there's certainly opportunities abundant for the fear of war or the modernization of armaments. We can profit from that. Just the fear of war in itself, it's not necessarily the gun race, as it were, to get more modernized weapons, maybe there's ancillary benefits. When I say benefits, I don't mean there's a benefit to war, before anyone gets on that high horse, as well. It's just that the markets will appreciate or depreciate because of it. If we're just thinking back to 2003-2004, just oil, for example, went through the roof when the-
Sean Donahoe: Gulf War.
Phil Newton: ... Iraq conflict. Yeah, and the Gulf War, and there are other things that benefit around that. Just the possibly that it might happen, where's the opportunity? Is that going to create opportunity in new technology, speed of communications? Maybe there's a communications play, companies that are specializing in military communications and encryption, that type of thing, that might be a little bit of an obscure way of churning it, rather than being involved directly in armaments type investments.
Sean Donahoe: Well, you've also got-
Phil Newton: If you see where I'm going with it. You can be involved with it, without having to worry about the moral issue of, "I don't want to be involved in war." You could have ancillary benefits, is what I'm trying to-
Sean Donahoe: Well, there's three other ways-
Phil Newton: ... skirt around.
Sean Donahoe: Yeah. Outside of that, which is the direct for the military expenditure, one thing we should mention is that oddly enough, measured against GDP, and this is an ironic thing ... I'll actually include this chart on the show notes, if you go to tradecanyon.com/rebeltraders and find this show. Funnily enough, the percentage of GDP spent on the military has actually decreased dramatically since '55, which was the first Korean conflict. However, obviously, in terms of monetary expenditure, because GDP has dramatically increased over the last 60 years and beyond, then-
Phil Newton: Yeah, I always think-
Sean Donahoe: ... you've got -
Phil Newton: The phrase I'm thinking about is lies, lies, and dumb statistics. Comparing these figures, I think they can be a little bit misleading sometimes. Yeah, let's not go there. Sorry, I interjected.
Sean Donahoe: No, that's fine. It is. The money has gone up-
Phil Newton: Compared to GDP-
Sean Donahoe: ... but GDP has gone up dramatically, so the percentage has gone down in comparison.
Phil Newton: Yes, compared to GDP, that's definitely the case according to the chart that you've got there. That'll be in the show notes there. I'm struggling to kind of think ... Again, I keep going back to that question of, "Where is the trade?" The opportunity is abundant when there is war on the horizon. Again, I'm not making any judgements for or against it, it's just a statement of fact, is there an opportunity? Of course there is, there's always plenty of opportunity. Throughout history, the people who have benefited the most are the people who were selling the weapons. As sad as it is to say, that's the opportunity. When the sabers are being rattled, you want to be selling sabers.
Sean Donahoe: Well, exactly. Compared to this, this is how you can take advantage. I'm going to give you some ways to position yourself for profit here. There's three ETFs that I look at, outside of the individual components, places like Honeywell, , Boeing, and everything else, and a lot of the other firearms manufacturers. There's three ETFs that I look at in regards to this. There's PPA, which is power shares, aerospace, and defense. There's the XAR, which is the S&P aerospace and defense, and the ITA, that's the iShares aerospace and defense. If you look at each one of those, they have steadily gone up since inception, continuously. In this current environment, again, I would certainly expect continued growth in there. If there was, again, more saber rattling and events, look to the volatility index, may be an interesting play there.
Also, here's a larger view and something that a lot of people haven't considered. If there was continued conflict with North Korea, again, we've got the South Korea, we've got the Winter Olympics happening later this year, we've got lots of tension between us and China. We've talked about this in the Happening Now report, which was released earlier this week, in my conversation with Andrew in regards to China downgrading US debt. Now, think about this from a trade relations standpoint. China has been a big supporter of North Korea, this administration, lots of the Western world, has been putting pressure on China to do something about North Korea and their nuclear intentions, and to put pressure on them because they are trading with them. Now, despite the UN sanctions, any conflict with North Korea is going to put pressure on US/China relations, and possibly also Russian relations, as well. If you look at that, what other aspects are there in terms of trade deficit or trade issue, or monetary and US debt issues? With our booming economy that we have right here, right now, why would China downgrade US debt?
This is the conversation I was having with Andrew. In doing that, is that a retaliation against the trade or because of the pressure that we're putting on them in regards to North Korea? Now, if we go into actual any sort of conflict, I think it's a lot of actual cyber warfare going on right now, behind the scene, a lot of intelligence gathering behind the scene, but anything outside of the covert, if you go overt, then you've also got to look at the international relationships, where does that put the US markets? Because that's what we're focusing on, in relation to the other trade deficits, the debt downgrading, will that further impact the dollar, will that prevent or provide trade opportunities, and then, are there any other ancillary trades or investments in and around that, for a longer term play? Again, in any global conflict situation or any global event like this, don't just look at the immediate, look at the surrounding, and look at the ancillary or infrastructure that could be impacts. Are there any major deals or any major relationships that, again, could provide opportunities?
Phil Newton: That could provide benefits, yeah.
Sean Donahoe: Yeah. At the end of the day, there's lots and lots of ways to position yourself to take advantage of any of these scenarios we just mentioned.
Okay, so moving on to the next one, death.
Phil Newton: Everyone's friendly hooded, cowled, scythe wielding person.
Sean Donahoe: I know. I have a conflict here because I either think of death from the Terry Pratchett books-
Phil Newton: I'm the same, yeah.
Sean Donahoe: ... or I keep thinking of Monty Python. "I've got Mr. Reaper here, he's here for the Reaping." Old classic. Anyway, so what happens, and I'm going to take this into the death of the markets, what if we have a major correction or a crash? What if -
Phil Newton: What if the markets stopped trading? What if they ceased trading? It happened, what was it, turn of the ... Just after the 19th century?
Sean Donahoe: Mm-hmm (affirmative).
Phil Newton: Prior to or during the first World War, they literally halted trading for a period. It could happen, it's possible.
Sean Donahoe: Now, listen, I've got to say, if a nuclear missile went off, I imagine that that would cause that scenario.
Phil Newton: Yeah, it was cease trading. Yeah, because ... Yeah, because.
Sean Donahoe: Yeah.
Phil Newton: It would be absolutely mental.
Sean Donahoe: It would be. I hate to sound like a millennial, which Phil is and I have to mock him all the time about this now.
Phil Newton: Only technically.
Sean Donahoe: Only technically. Yes, I just can't even in terms of what would happen if a nuclear missile had flown from North Korea to any US territory. I have to do that because obviously we've got Hawaii, Guam, and everything else. In real terms, just couldn't even imagine what ... Everything else like that would become irrelevant, in terms of everyone would become very insular to, "What do I do? Where's my family?" It would now come as, "Oh God, what next? Are there more missiles flying," and what have you. Everything, your investments, your trading, would become unimportant instantly, but you could look at some of these -
Phil Newton: That also creates a level of panic in the markets.
Sean Donahoe: Yes, and that would be devastating. Again, that is, if you think about ... Again, attach it back to which we used with Iran. You could look at, okay, what happened if they did use cyber warfare against, for example, our power grid, or any of our infrastructure, or again, anything from communications to what have you, there's many different targets, devastating or have a major impact on lots of different areas. At the end of the day, yeah, let's keep it less drastic-
Phil Newton: Let's keep light and airy.
Sean Donahoe:
Phil Newton: Let's just keep it light and airy.
Sean Donahoe: Yeah.
Phil Newton: All this doom and gloom's getting me depressed.
Sean Donahoe: I'll just say -
Phil Newton: This is worst case scenario, this is end of ... Let's be fair, the tone of the show is four horsemen of the darn apocalypse for crying out loud, this is end of world scenarios when it comes to the financial market. This is literally worst case scenario.
Sean Donahoe: Now, I'm also going to throw something out here, because again, just to put a lot of tinfoil hats on, but this is actually stuff that has happened. Is that there has been penetration, and behave yourself, of the markets-
Phil Newton: Inconceivable.
Sean Donahoe: There has been security concerns that hackers have had access or have hacked the markets, like the NASDAQ, the New York Stock Exchange, continuously under cyber attack. Now, imagine what happens, or could happen, if these incursions succeeded and they triggered a flash crash or worst case, absolute worst case, they wiped out the Exchange.
Phil Newton: Something nefarious. We've seen what happens someone literally pushed the wrong button, fat finger trades, or high frequency selling creates, or some high frequency activity creates some sort of cascade of order. It has happened, it's not a case of it could happen, these are things, these are , as you like to say-
Sean Donahoe: Indeed. Yeah.
Phil Newton: These are things that have happened. What if they're deliberately triggered? We've seen the panic and pandemonium that happens when just in the natural course of the way things unfold, we've seen it happen. What if it's intentionally set up that way? That's, again, another scary scenario. People literally will be losing the shirts off their back, margin calls will be called in and they're never nice to happen. Look at the round of people who are mortgaging their house and kind of investing, and I choke on the word, . People are literally selling up their life's belongings to put into some sort of financial vehicle in the hope for a better more prosperous future. What if the worst case scenario happens and you're caught holding the bag? Literally, at the top of the market, and suddenly, you end up owing someone a lot of money? It's not a pleasant experience.
Sean Donahoe: Yeah, where we are right now with -
Phil Newton: Not pleasant.
Sean Donahoe: ... Bitcoin right now as an example -
Phil Newton: Maybe because it's topical and timely at the moment because it's a relevant example.
Sean Donahoe: Yeah.
Phil Newton: As I'm looking at it, it was off 25% last time I looked.
Sean Donahoe: Well, it's down from its high, which is the end of last year -
Phil Newton: That was on the day I was talking about, as we're doing this.
Sean Donahoe: Yeah, it's dropped over 50% from its high, which if you think about it -
Phil Newton: Someone's hurting.
Sean Donahoe: For the people that were mortgaging their house, hoping to buy at the all time high, which again, we always recommend against. We've now cracked down, yeah, looking at it right now, panic sellers have kicked in even more, this is why I was warning some friends about ... It went down at 9400 from 19,50, that's $10,000 in just the course of just over two weeks. Yeah, actually, right before Christmas when I was making my Scrooge McDuck prediction, and I hate to say that we have been holding this and warning about this for a while, but yeah, people right now are in just panic. It's dragged out all the markets.
Phil Newton: Yeah, this is what happens, this is the death of your trading accounts, to be a little bit more close to home. We touched on this in the last podcast, as well, this is what happens when markets move dramatically in a very short space of time, people lose their life savings. It's scary. I suppose the lesson with the worst case scenario, yeah, we could be talking about, saying, global thermonuclear war, to kind of quote the War Games movie, but even in a short term trading or investments opportunity, if it goes wrong, it goes south, and you've got your life savings, if you upped your eyeballs in ownership of that, and it goes in the opposite direction by large amounts, like we've seen on one or two of the instruments we just mentioned. Certainly, you're entire life savings, wealth, and quite likely , it's not a pleasant experience. I think the lesson to learn is always be in business tomorrow. We've said that.
What we're talking about here, to kind of reference last week's show, is we're talking about from the trading point of view, from the market point of view, your account is truly dead. Which what we want, is we only want it to be mostly deadly. So don't put all your eggs in one basket is the old adage. Have some diversity in the number of positions, the type of positions that you have, a variety of different trading or investment opportunities. Just spread it around, spread it thinly, so that if something happens in one area of the market, then it's not going to be detrimental to the overall account health that you will see. You're going to be in business tomorrow, as you like to say, if the worse case scenario happens, you're only going to be mostly dead, and you'll be back in business ... Technically, you'll be back in business tomorrow because you've got still some left in reserve.
Sean Donahoe: Now, I would like to point out two things here, kind of obvious if you look at them. Again, the crypto market was in a bubble, we talked about it, we called it a bubble, lots of people saying it's not a bubble. John right now is probably a little bit worried about his prediction and his promise that where the markets hit and his consumption habits, we won't go into that again. It was in a bubble and the pressure burst, it popped, it dropped dramatically. Now, we have been bearish long time on the general markets for a while. Okay, you can't ignore the fact that it's gone up and just a couple of quick stats here, 2017, the Dow posted as of December 29th, I think it was, its ninth straight monthly gain, the longest streak since 1959.
The tech sector and the FANG stocks are specifically where the main driver of the S&P growth over last year, and the tech sector actually provided more than 40% of the S&P 500's gains. We've been in this bull market, there was a little bit of sideways in there was the end of 2014-2015 ... Actually, it was 2015-2016, but we have not had a major correction. What we have here, and it's really hard to quantify in terms, is this rational or irrational exuberance and optimism. We've certainly seen 2018 kick off major gains. At the time of recording -
Phil Newton: Gains, bro.
Sean Donahoe: Exactly. Show me your gains, bro.
Phil Newton: As all the kids on the street like to say.
Sean Donahoe: Indeed.
Phil Newton: Look at me trying to be all popular.
Sean Donahoe: I know, you're trying to be relevant. -
Phil Newton: Markets only go up, yeah.
Sean Donahoe: Yeah, exactly. Again, gravity has to kick in, when is that going to happen? We have to be aware of those facts. Again, it's kind of mirroring now, to my mind, that we are pushing into that definite need with this ultra low volatility environment, which we'll talk about in a moment, but we are definitely in need of a major correction and some rationality to be injected back into these markets.
Phil Newton: In a perfect world, I would like a steady, healthy, corrective bear markets, rather than a shock and it all happens at once. I think that would be the death of a lot of point, from a trading point of view, as you were just talking. If we could have a steady, healthy decline, slow and steady-
Sean Donahoe: Controlled demolition.
Phil Newton: Exactly. If it could do that, I think that would be healthy. It would be painful, but it would be tolerable because it's slow and steady, and that's the nature of a bear market. What we don't want is the crash. We don't want the death of the markets, we don't want a literally swan dive from the top of a building scenario. We don't want the fat fingered, flash crash scenario, that will be painful in the extremity. Again, it's in everyone's recent history, what happened in 2008, and we've seen how that can affect and impact people, that would not be a perfect scenario. When we're talking about when we want to see a bear market, we want a healthy bear market, we want a contraction, which is normal in not just the financial markets, but from an economic viewpoint. We need a little bit of trimming the fat, we need to go into our winter plumage temporarily, so that we can prepare ourselves for the summer season. Get that financial beach body going.
Sean Donahoe: Oh my God, he's creating all sorts of mental images that I just do not want. Anyway, however, that being said-
Phil Newton: Your financial man-kini on the go.
Sean Donahoe: If he starts talking about waxes, we're out of here. So, we're talking about a lot of different scenarios, all doom and gloom, but here's the thing, you can profit from a bear market and from a bull market. You can profit from a crash, I've seen lots of people do it. What you do need is a balanced, diverse portfolio, you need an awareness of the environment. Don't overextend, and certainly, be aware of margin. I really am against trading on margin-
Phil Newton: I didn't used to distinguish. I think there's nothing wrong with trading using a margin account, but leveraging the money because of margin, that's where the danger is.
Sean Donahoe: Indeed, yeah, just for clarification.
Phil Newton: I don't leverage the money that trading on margin allows me, if that makes sense. Again, that's another pitfall that we can probably discuss another day.
Sean Donahoe: Absolutely, yeah. Absolutely, because again, when people overextend themselves, they take risks, and they're not-
Phil Newton: Always be in business tomorrow, but leveraging your money because you've got a margin account, that's a fool's error.
Sean Donahoe: It really is.
Phil Newton: Always be in business tomorrow.
Sean Donahoe: Absolutely. Always, and this is Phil's phrase, always be prepared to change your mind. New information, new data that might influence where you are, the environment you're in, and everything else, if you are predominantly long, don't get locked into those positions, especially if everything turns south.
Phil Newton: If your viewpoint changes with new information, yeah.
Sean Donahoe: I see too many people-
Phil Newton: Awesome.
Sean Donahoe: ... hold onto trades that just are no longer valid positions, they're no longer valid and they just say, "Well, no, it's going to change." No, I still believe, that's okay, if you've got data -
Phil Newton: Well, I suppose could believe, because of the way that we trade these days, Sean, is we're not going fall into that pitfall because we like to express our trade with stock options, they have expiration dates and I don't make a habit of rolling positions just because, hey, I'll see what happens. It's like, it's not worked out in ... My turnaround is about 30 to 45 days maximum, so at the end of 45 days, if my viewpoint's not changed and the trade's not worked out, then there's something wrong with my viewpoints. I have this built in timeout that allows me to, "Well, I'll just see what happens in the next 45 days," if it doesn't go initially right, well at the end of that 45 days, I'm out, automatically, it's going to expire worthless. So you have that kind of built in. You get the benefits of seeing what happens, but without having to hope that something with happen. If that makes sense, because we're not being stopped out. We're not trying to unnecessarily prolong a painful trade.
Sean Donahoe: Absolutely.
Phil Newton: It's not working, it gets cut.
Sean Donahoe: Perfect. Okay, so last horseman of a trading apocalypse is famine, and in this case, we mentioned it just now, the low volatility environment. The serious lack of volatility is, for many ... Many of the previous factors we've talked about, they could introduce some volatility into this market. If there was war, if there was cyber conflict, if there was a major correction or crash, believe me, there would be some volatility, but right now, there isn't. It's almost, like Phil said, missiles flying, not a blip. First time, that was scary, okay big spike, and it came back down almost immediately. Second time around, not even a care in the world. Now, why are the markets so fearless right now? We're talking a lot of the fear index, the , is measure off of options volatility on the S&P 500, and that is where a lot of the concern is because there isn't much volatility. A lot of traders, pundits, and experts are decrying these conditions, saying it's impossible to profit with these scenarios. I call bullshit on that and for many reasons we've discussed in the past.
Phil Newton: I agree. Just because it's low volatility, it doesn't necessarily mean that there's not movement. Predominantly, I trade for direction, but that still doesn't mean that there's not opportunity or that there's not movement, or pockets of movements. I think when most people talk about volatility, particularly the options sellers, which is kind of the sub-universe that we're involved in quite a lot, is they're talking about the sell side because the premium is less rich. There's always usually a lot of options sellers who are always bitching and moaning because they're not getting more money for the same trade essentially.
Sean Donahoe: I could certainly agree that the profits have gone done from the seller's side because I sell a lot of options.
Phil Newton: Yeah. It doesn't necessarily mean ... Personally, I don't think it's a good thing or a bad thing, it's just the environment that we're in at the moment.
Sean Donahoe: Yeah, exactly.
Phil Newton: Again, I think it's a ... Is misnomer the right word? It's kind of like a false scarcity almost.
Sean Donahoe: I agree with that in a certain scenario because the thing is-
Phil Newton: It depends. There's got to be a clause there, it depends what you're doing, of course. For directional trades, there's plenty of movements. I'm looking at stocks right now, there's lots of movement around there, it's just in a low volatility environment. What are people referencing when they talk about that? The complacency, the lack of concern is causing this low volatility, no one's scared that there will be a crash, is essentially what that means-
Sean Donahoe: Yeah.
Phil Newton: ... in layman's terms.
Sean Donahoe: Now, we've seen these conditions before, you look at 2007-2008, very similar scenario-
Phil Newton: Surprisingly, Sean, is history repeating itself?
Sean Donahoe: I believe it is, sir. I believe it is. How about that?
Phil Newton: Well, tickle .
Sean Donahoe: You know, I'm not going there.
Phil Newton: Said something else.
Sean Donahoe: I was going to say something else, but it would be a very inappropriate, reflective movement. Anyway, yeah, we are in desperate need of a shakeup, we have seen these conditions before, leading up to the last crash, but again, what can you do? How can you come back? Again, as Phil said and I say all the time, there are opportunities everywhere. There are simple ways to find these opportunities if you look at individual stocks, rather than, like everyone else is doing, worry about what's the average volatility of the S&P 500 options or the options volatility on the items. At the end of the day, there's volatility in little pockets, there are movements everywhere, and again, one of the things that we do, again, as options traders, it's part of our strategy, is looking at stocks that have hit extremes of their own volatility. We look at individual items, we look at stocks that are two standard deviations away from their mean, and again, that implies or funnily enough, without actually going into the specifics, in many ways, it's an implied volatility on that particular instrument, without getting into actual implied volatility, which is a completely different topic.
Phil Newton: I like to kind of compare them, one's the ghost of Christmas past, and it looks backwards at history, which is looking at price volatility. Implied volatility is like the ghost of Christmas future, it's basically a math formula that suggests what might happen int he future, and that's uncertain, that's not set in stone, and it's constantly in flux and changeable.
Sean Donahoe: That's a great way to look at it. Again, by doing that, having the right strategy, that allows you to filter through the noise, surprisingly, one of the overriding things that we talk about all the time. Then you can find those opportunities when everyone else is complaining, and decrying, and they're crying right into their little -
Phil Newton: Yes. Stop moaning, do something about it.
Sean Donahoe: Exactly. Now, here's the cool thing. This is, again, where we always have the edge, have the tactical advantage over the vast majority of traders out there, is we don't care. We cut through all the noise, we're looking at exactly what's happening with our strategies, we don't worry about what all the noise that is out there ... We have an awareness of what's going on, but if we don't have to worry about it, we don't need to worry about it, it allows us to focus on filtering and sorting stocks the way that we do, and then move on, take advantage of these situations. If everyone else is throwing their money into the markets, I'm quite happy to take that money out of the markets from them, thank you very much, that's my business, well done, thank you.
Phil Newton: I'll have a bit of that, thank you very much.
Sean Donahoe: Absolutely. So, there you go, ladies and gentlemen. Outside the little bit of doom and gloom there, but those are the four horsemen of the trading apocalypse, that's how you can position yourself to take all advantage of these scenarios and situations, raise your awareness, and be a smarter or profitable trader. With that being said, let's move on.
Automated: Now, it's time for the Rebel Trader tip of the week. Brought to you by tradecanyon.com. Ready to take your trading game to the next level? Discover where smarter traders come to get coached by the best and learning to trade just got way easier. Trade Canyon, smarter traders live here.
Sean Donahoe: Okay, so the Rebel Trader tip of the week. It kind of rolls imperfectly with what we've been talking about here, avoid group think. If you're uncertain about a particular topic, position, or event that you are looking to explore for your trading, and the one thing I want to say right off the bat is don't look for advice from those out there that are in the same position of uncertainty. Group think, cloud think, herd, or whatever label you want to put on it, is dangerous to your portfolio. It's too easy for popular consensus without verification and validation to affect what you're doing. Group think is generally lazy, safe, and often times wrong. Now, Phil, what's your opinion on that?
Phil Newton: Well, I think we describe it as me too analysis. "Yeah, yeah, I think ... I think -"
Sean Donahoe: Me too analysis, I like that.
Phil Newton: Yeah, yeah, that's what I was thinking. Look at it this way, you've either got to do your own analysis, do your own research, and then stick to it, but then if you start to take someone else's viewpoints on your existing position, then you're kind of passing your power off to them. That doubt, that uncertainty starts to creep into your decision making, and then you start second guessing yourself. It's a horrible experience. Arguably, this is why we say turn the media off and the talking heads, because they're trying to make it interesting and entertaining because let's face it, this is a pretty dull and boring subject for most people, but they're trying to make it exciting, and interesting, and, "Wow, look at that stock, it's rocketed," and it's only a half a percent. That's what does, that's not exciting, but then you start getting drawn into that hype and the shenanigans that goes on.
Similarly, even without that, if you're involved with groups of traders or you're talking to other people, and they're talking about their different view, but you don't know their strengths, their analysis, their experience. You can get, again, sucked into that other person's viewpoints without fully comprehending why they've got that viewpoint. The reality is, their view does not matter, it's your money, you're putting the trade on, you're pushing the buttons, so it's only your opinion that matters. Now, if they can provide you with a new piece to the puzzle, that maybe compliment your decisions, then yeah, go for it, but most of the time, it's just noise and I go out of my way to ignore it. It would be comparable to the regular guy on the street, it's not their main job trading the financial markets, they're not an expert as such, but the general guy on the street is giving you financial advice, why would you want to listen to that?
Sean Donahoe: Exactly. At the end of the day, if you think about it, you have, as Phil alluded to, you have no way to validate their experience, their knowledge, where their data is. Is it just an ad hoc opinion? Or just because you asked the question, they formed it based on what you've just said because they have no knowledge, and then, "Oh, well yeah, I think that, too."
Phil Newton: Me too analysis yeah.
Sean Donahoe: Me, too. Me, too. Me, too. It's exactly the scenario. Again, the point that Phil made that I really want to reiterate, you're transferring not only your power, but your decision making process, and absolving yourself of responsibility, that is not a way to trade.
Phil Newton: No. That's a key point now, yeah.
Sean Donahoe: I just really wanted to highlight that. That's one thing I really wanted to highlight there, so don't do it. Here's the thing, be firm. If you don't know, research, validate your ideas, and if you're not certain and really unable to verify or validate an idea, then move on, there's plenty of other opportunities out there. Don't get bogged down and go in the quagmire.
Phil Newton: If in doubt, do nought.
Sean Donahoe: If in doubt, do nought, there you go. I like that.
Phil Newton: It's a northern thing.
Sean Donahoe: Absolutely. Rock on. It's a norther thing indeed. As he puts on his flat cap and gets out the blood sheepdog, we'll -
Phil Newton: Hey, don't Gromit.
Sean Donahoe: Indeed, that's exactly what I was thinking is, "Oh God, well if that makes you bloody Wallace, I end up being Gromit," there you go. Works for me. With that being said, let's rock on.
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mailbag for this week's Rebel Traders quick fire round.
Sean Donahoe: Okay, so diving into the mailbag this week, quite a few doozies for you here, and we'll kind of rock on with some of the questions we've got here. First one, Phil, "What is the difference between a growth stock and a value stock?" Now, I'm pulling out the Benjamin Graham books here and everything else, and kind of virtually throw it into the ether, go ahead, explain this one, because I thought this was a rather interesting new trader question.
Phil Newton: Well, let's be fair, I've never really found a satisfactory answer to these questions myself, but as I understand such things, value stock would be a company that's ... It sounds daft, but to say value in it. It'd be sort of like your blue chip style company, they're established, they've got a long track record, their share price may be pretty stable. Maybe actually they've got good dividend payments, there's good value in it, solid company, it's not going to go bankrupt overnight. Whereas a growth stock, as the name suggests, it's got opportunity to grow. So, maybe an IPO might be an obvious example of this. A new listing on the stock market might be seen as a growth opportunity simply because it's a new stock listed on the stock market, they've just got a cash injection of money, they're looking to invest, they're looking to grow the company, and as such, that would potentially increase the valuation of their share price.
Maybe in the future they become a value stock and they become part of that blue chip category. It's not a perfect answer, but that's just kind of to give you the quick back of the envelope version. Growth has the opportunity to increase its share price quite dramatically, value stock would be, perhaps, if you were to looking to invest, it would be perhaps undervalued. Again, an obvious example might be the net asset value of the company is one value, but then the share price reflects that it's undervalued, so if you've got a million market capitalization on your stock, but your assets for the company might be valued at five million, that might be undervalue and you could invest in that and hope that the market catches up with the valuation. So there's a few opportunities there that could be highlighted.
Sean Donahoe: Yeah, I like that.
Phil Newton: Again, not prefect answer, but just a quick version of it.
Sean Donahoe: Yeah. The interpretation I have, and this is kind of like the simplified version, without getting into all the minutia, is-
Phil Newton: Yeah, I'm not happy with the general explanation of what is one versus the other because ironically, a growth stock could also be a value stock, as well. As I was saying, I just thought, "Actually, this could be both, as well," because the undervalued from net assets, that could be considered a growth stock as well as a value stock. Again, I appreciate it's not a perfect example, but just to illustrate some sort of difference with an easy example that most people might be able to comprehend.
Sean Donahoe: Yeah.
Phil Newton: What's your take on it? To be fair.
Sean Donahoe: The way I think of it is, if I can pick up a dollar's worth of value for 50 cents, that a value stock. It kind of touches on exactly what Phil was saying-
Phil Newton: The Warren Buffet type of approach.
Sean Donahoe: Exactly.
Phil Newton: Yeah.
Sean Donahoe: He is probably the most famous, well-known, public investor for value stocks. So then a growth stock is, okay, there's some changes in the fundamentals of this particular business, they've got a great management team, we're expecting that from where they are, maybe it is a combination of value and a growth stock, but from where they are, we're looking at acquiring that because for the long term, this industry ... Maybe a good example would be artificial intelligence, an area that is growing dramatically. Are there any market leaders in there right now? Well, okay, those ones with their projections and all the fundamentals are lining up, we're expecting that one to keep on growing and gathering market share, that would be a good example of a growth stock. Amazon, prime example of a growth stock. You couldn't say right now, per se, I wouldn't ... Again, not looking at how much the company is worth with all their assets combined and everything else.
Phil Newton: They're looking to capture market share-
Sean Donahoe: Yeah, and that would be ... I would consider it growth stock still.
Phil Newton: ... is essentially what's going on there. They're looking to grow, yeah.
Sean Donahoe: Yeah. That would be-
Phil Newton: I'm going to say, again Sean, the clue's in the name.
Sean Donahoe: It really is. It really is. Okay, what else have you got in there?
Phil Newton: Well, I've got an interesting question for you. I'm chomping at the bit to throw this at you. "As an investment, should I trade stock or cryptocurrencies?"
Sean Donahoe: Okay, read that again. Read that again, please.
Phil Newton: I knew you were going to love this. "As an investment, should I trade stock or cryptocurrencies?"
Sean Donahoe: Outside of stock and cryptocurrencies, I need to-
Phil Newton: Can we swear at this point? I think it deserves a little bit of a run, this question.
Sean Donahoe: It does. It does, but I'm going to be polite because this might be a brand new trader who doesn't know. Okay, the first part of your question is, there's an investment or trade, you've got to decide which one you want to be, do you want to be an investor or a trader? There's a major difference.
Phil Newton: They're two very different things.
Sean Donahoe: Very different things, so I've got to pick apart the question here. An investor has a different intent of time horizon. If I wanted buy 1,000 Amazon shares today, I'm looking to hold that maybe for three, five, 10 years, or what have you. That's an investment, I'm an investor and I'm looking to the future, not to care about the individual moves that may be happening over the next week, next month, or even maybe the next year. I'll have an awareness and if new information makes me change my mind on that investment to cap out and take that money off the table, and then put it into another investment, even if that happens in the next two months, if new information's making me say, "You know what? I'm taking that off the table," my investment, my intent for that long term haul has changed. That still makes you an investor because that's your intent for the time horizon. A trader, on the other hand, is looking at short term movements, to basically be in and out. Looking at swing trader specifically, a minute to months.
Phil Newton: Anywhere from a minute to months, yeah. A minute to months, it's a ... Yeah, even trading . Yeah, they're not a good distinction. As you were saying that, I was thinking, let's use a real world example just to draw some comparisons. If you're buying a house, you're probably going to have that for many, many years. As such, it's seen as investment. Yet, if I was buying a car, if I was a car dealer, I wouldn't be looking to have that ... If I'm buying a secondhand car with the purpose of trying to make a profit from it by selling it to someone else, I want to get rid of that as quickly as possible. That would be like trading the car, you're buying it at a low price and hopefully trying to flip it quickly and sell it for a high price. There's two very distinct differences between what you're doing long term versus short term. The question is, as you rightly pointed out, the question's got conflicting opinions inside of it, so that's probably why you got the question in the first place. Should you invest or trade is the first part of the question.
Sean Donahoe: Absolutely.
Phil Newton: You need to decide what your time horizons are.
Sean Donahoe: Yeah, absolutely. Again, we're primarily swing traders. Both myself and Phil do occasional day trading when we have time actually sit in front of the screens, we don't generally like to do that, it's not our preferred thing, we're primarily swing traders. For me, I have investments, I have a lot of investments in a lot of different things, but sometimes that money can be more efficiently traded by being more active in the market, but we only trade for about 30 minutes to an hour a day, that's it. I've got other business concerns and everything else going on, so I don't want to be glued to the screen. Again, identify where you want to be and what you want to do as a trader. Now, to the last part of your question, stock or cryptocurrencies, if you look at the markets right now, again, raise your awareness of everything else, you've got to understand, where is the best place to put your money? What is going on? Do you want to basically be high risk high reward? Cryptocurrencies right now are the most volatile and risky instruments to be in right now.
If you look just even in the last few weeks, we've seen a 50% drop, we mentioned earlier in the show just in Bitcoin, and that's dragged down pretty much almost every one of the top 100 coin, because China has said they're considering banning all cryptocurrencies. Well, they make up the majority of the cryptocurrency, not only mining, which they already had issues with, but also trading. So, again, if that happens, that's caused a major panic, that's one of those catastrophic events. In one term, if you wait for the turnaround, then in the long term, that might be a great opportunity, it might be the second run and second opportunity to get into cryptos, but you better wait until it's a confirmed turnaround and the bubble has found its bottom, right now.
Phil Newton: As I like to say, crypto is on ... Despite my prejudices, which are well documented.
Sean Donahoe: They are. We have episodes.
Phil Newton: Yeah. I think it's not a startup business.
Sean Donahoe: No.
Phil Newton: I think that's probably the best advice.
Sean Donahoe: Exactly.
Phil Newton: It's a rollercoaster ride, it's not for the faint hearted, Sean -
Sean Donahoe: It shouldn't be a major part of your portfolio.
Phil Newton: Yeah, you're going to develop high blood pressure. If you want to dip your toes in, yeah, sure, I'm not going to say no. Who would I be? I'm all for capitalism, so yeah, go for it. At the same time, I wouldn't put all -
Sean Donahoe: It's not where I would be the first time, that's for sure.
Phil Newton: I wouldn't start because it is a heart attack sport if you're not used to it.
Sean Donahoe: Yeah. I would also add into that, that again, when you're starting out, you want stability, you want to be conservative, you want to minimize your risk, maximize your rewards. I would push it towards -
Phil Newton: Build your confidence up, as well.
Sean Donahoe: Yeah. I would push it towards options. Options trading on stocks, and again, listen to the strategies that we talk about all the time. Cryptocurrencies, it's a crapshoot, for the most part. There are opportunities there, but it's very high risk. Again, I see so many people-
Phil Newton:
Sean Donahoe: ... all their money into one crypto or spreading it across several different cryptos, then losing their shirts. Again, you've got to be smart about this. If you've got significant money that you want to put into the markets, put it into stable liquid market with a strategy that has a positive expectancy. Hey, everyone loves to go to Vegas and roll the dice, that's fine, that's a gambler mindset, problem is most people in the crypto space with a gambler mindset, they're not professional traders, they're not as strategic, and that's why you see the panic selling-
Phil Newton: They're there for a bit of fun.
Sean Donahoe: ... on every single move. I've still got my money in a lot of crypto, I've taken a lot of my money off the table while I saw the bubble about to burst. Again, I did it right before Christmas, so I've put some money back in on a couple of things and pulled it back out while I'm seeing all these major corrections. In fact, I was day trading Ripple, as an example, just to take advantage of some of the panic selling I'm seeing in different arenas. Again, crypto is a one-sided market, traditional markets are two-sided, which means you can be long and short, and again, take advantages of both sides as they move. You can't do that with crypto, it's one-sided, unless you're trading the futures, which again, is cash settled, it's not really trading crypto, it's trading a side bet.
Phil Newton: Or alternative instruments, yeah. Or alternative instruments. There's the CFDs all spread about and depends on where you are in the world. There are ways around it, but then that comes at a price all of its own.
Sean Donahoe: Absolutely.
Phil Newton: That's, again, a very different conversation for a very different day.
Sean Donahoe: Absolutely. I would absolutely, first of all decide on your time horizon, do you want to be a trader or an investor? If you want to be active in the markets, and I would suggest looking at options trading as your first part, so you can minimize your risk, maximize your upside potential, come at it with a strategic strategy, hop on a call with us, we'll be happy to help you with and go through this with you, and point you in the right direction. I would not start with cryptocurrencies, that is, as you can see, a bloodbath right now, but if you do want to put part of your portfolio in cryptocurrencies, definitely wait for a confirmed bottom and the recovery to have started. Then, again, that's time to re-buy-in. I will probably will be, but I'm waiting for that bottom to occur. Then again, also, I'm also shorting on the futures to kind of take advantage of both sides.
Phil Newton: Trading around your positions.
Sean Donahoe: With that being said, another question for you here, Phil, and this is another one from the mailbag. "What is the difference between earnings per share and dividend on stocks?" Now, this is an interesting one. I think this is, again, another new trader who is basically looking for clarification on some of the terms they may have heard in the news or read about in everything else. It's kind of interesting, we're kind of going over a little bit of fundamentals here in terms of terminology, not so much fundamentals on trading. What would you say is the core difference?
Phil Newton: Well, as always, is the clue's in the name. To give some definition between then, the earning per share is ... All companies, they're looking to earn a profit, so what they do is, they take that profit and basically divide it by the number of shares that are available on the stock market, then that gives you the earnings that the company has made per share.
Sean Donahoe: Absolutely. That's absolutely dead on. Dead on. That's almost like we're going to create the Phil-topia encyclopedia here.
Phil Newton: Yeah, perfect. The dividend then is if you own shares or stock in the company, as you might suggest, the phrase suggests, you own stock in the company, you're a part owner of that company. One of the rewards, one of the benefits that you have as an investor, again note the wording, as an investor, if you're holding those shares for a slightly longer period of time, is you become eligible for a part of that profit that's issued as a dividend.
Sean Donahoe: Yeah, it's kind of like a nice little bonus. Now, one of the things-
Phil Newton: It's a little hat tip, yeah. It's a little hat tip saying, "Thanks for investing in our company and here's a share of the profits," and that's called a dividend. Yeah.
Sean Donahoe: Yeah. Me, personally, a lot of my investment portfolio are all dividend paying shares. I always prefer that because at the end of the day, when you have, and again the position sizing, those dividends can be nice wee bonuses, they add to your portfolio quite nicely. What I tend to do with that is, if I have a company that's provided me with good dividends, and they're showing good growth, and they're bang on target, I will actually take a lot of that dividend and reinvest in the stock that are in my portfolio. Again, that is free money, it's house money, and it's just increasing my holdings dramatically. Now, again-
Phil Newton: That is one style of investing, people will purposely seek out stocks with high dividend payments, so that they can do just that. They're looking to collect an income of the dividends, assuming that you've got enough funds to justify doing it.
Sean Donahoe: Yeah. Now, the one thing, again, cautiously, and we've talked about this in previous shows, but it's one thing I want to highlight is always be aware of when they send out the shareholder letters and everything else, what's going on with the company itself, how much of this profits that are being paid out in dividends are legit. Can the company actually afford it? Are they actually growing? This would be an entire different show tied around this-
Phil Newton: Yeah. My gripe is that any company that has debts on the books from borrowed money or loans shouldn't really be paying dividend, but that's a very different conversation.
Sean Donahoe: I was going to go there, I was going to mention that, as well.
Phil Newton: Warren Buffet talks about that in the past, as well. I just don't see, if you've got borrowed money, shouldn't, surely, you should pay the debt off and your share prices will increase as a result of that?
Sean Donahoe: Absolutely.
Phil Newton: Because there's less debt on the books and your per share ... The per share profits, the earnings per share, will start to go up. Ironically, we're getting into all the things that we talked about, you'll get value delivered in the company just because you're reducing your cost of business.
Sean Donahoe: Absolutely. That, again, is smart business.
Phil Newton: To me, that's just smart business practice. Yeah, we hit on the same word there.
Sean Donahoe: Exactly.
Phil Newton: Yeah, just buyer beware.
Sean Donahoe: Absolutely. Again, I'm actually debating creating a Rebel Trader investment course to look at the longer term stuff, as well, by particular strategies in regards to -
Phil Newton: That's your specialty, wasn't it?
Sean Donahoe: Yeah. That, again, will give a lot of insight into the way that, not only I evaluate companies over the short-term, but also long-term historical track record and the way I manage my portfolio, and one of my key focuses is the debt the company holds. Are they paying down principle on those debts? What are the interest payments? What are they doing? How is the management looking at not only ... A lot of CEOs in publicly traded companies are all about trying to make the shareholders happy. For me, if that's the case, I want them to make the business happy and make the business profitable, successful, scalable, and-
Phil Newton: If you have a successful business, you'll make the shareholders happy.
Sean Donahoe: Exactly.
Phil Newton: Duh.
Sean Donahoe: A lot of bad-
Phil Newton: It just seems daft.
Sean Donahoe: A lot of bad CEO's do-
Phil Newton: It just seems daft-
Sean Donahoe: ... focus on just-
Phil Newton: Yeah, yeah.
Sean Donahoe: ... kind of, impolite, like giving every shareholder a reach around so that they can keep their job and their bonuses. If your focus is not on the business and it's just on making shareholders happy, that's not a business I'm ... Anyway, that is a topic for another show and an entire course by itself.
Phil Newton: Interesting to dip our toes in, just to perhaps wet the whistle for maybe a future show.
Sean Donahoe: Absolutely. With that being said, let's rock on.
Automated: Don't forget, if you have a question you want to ask Sean and Phil, just go to tradecanyon.com/rtquestions, and your question may be featured on a future show.
Uh-oh, what's that smell? It's time to call out the Wall Street shenanigans, mainstream confusion, and outright hi jinx and hokum of so-called experts. Yep, it's time for Bullshit Of The Week.
Sean Donahoe: Okay and talking about mismanaged companies, and -
Phil Newton: Surprising -
Sean Donahoe: Unintentional segue, but I'm going to be talking about the GE breakup, General Electric. Now, this is a huge company, has been probably one of the most established blue chip companies in the United States. They have their fingers in every pie, or have, but they are talking about a breakup. This is the monolith cracking and turning into pebbles at the end of this stage. We've had, I want to say ... I'm going to be very careful about how I put this because I used to be an investor in GE until some of the decisions that Jeffery Immelt, who is the CEO, started making, the directions and the way he was talking through the business, that actually got me to pull my money out of that company. I really started seeing a lot of bad decisions being made, what I would consider moves, so I pulled my money out. What's happened is that now over the last ... There's been issues, let's just say, over the last few years. They have their finance department, which is GE Finance and also insurance, and everything else, basically crushed the company.
Phil Newton: Very cleverly named GE Finance.
Sean Donahoe: Indeed, yes. They took, recently, a $6.2 billion hit from their insurance and they've tried to cover it, and everything else, $15 billion in place, but at the end of the day-
Phil Newton: You mean to tell me, Sean, that they're trying to massage the books?
Sean Donahoe: They're doing something to the books. Massage would be one polite way to put it.
Phil Newton: Massage might be an improvement.
Sean Donahoe: Massage might be an improvement. I was going to say, there might be some Vaseline involved and greasing wheels here, but at the end of the day, I've got to be careful about what I'm saying. The new CEO has come in and has looked at this and said, "You know what? This is a freaking mess," and they're trying to shore up, they're trying to cut loose some of the things, but it's not working, and they're saying, "Oh, we're actually now looking at breaking up the company." This is a prime example of what happens when focus, I think the eye on the ball was seriously lost, a lot of bad decisions that were, I would say, very much avoidable-
Phil Newton: Left to fester, perhaps, might be a polite way of saying.
Sean Donahoe: Yeah. I'm including some links that you can look at it in a little more detail, I don't want to go into all the micro details of how the insurance plays out, how on the mortgage side how they're focus is lost on some of the big stuff. They make everything from MRI machines and they've got their things allotted, everything from light bulbs to MRI machines, they are literally very, very diverse globally, but again, it's that un-focus, I think, would be a polite way to put it. A lot of bad decisions have left them very vulnerable.
Phil Newton: They're trying to juggle too many balls and they ended up dropping the ball.
Sean Donahoe: Indeed.
Phil Newton: Multiple balls.
Sean Donahoe: I think a lot of it is, it was a freight train that was well telegraphed, but it was very obvious if you look at the balance sheet, what was going on, where those -
Phil Newton: Here's probably the shocker as well, Sean, just to interject, probably because it's one of those blue chips that we were talking about earlier, and it's a household name, even if you're not aware of the stock market, everyone knows who they are, because of that, they've kind of maybe-
Sean Donahoe: Rested on their laurel.
Phil Newton: ... been, not allowed ... Yeah, exactly, they've got away with it because they're a blue chip, because they're a big company, they think they can get away with things that perhaps newer, younger companies wouldn't even dream of doing. They've maybe just got set in their ways. Old habits, bad habits, and one bad habit leads to another bad habit, and look at the mess that happens many, many years later down the road. This is what we're seeing now, it's culmination of a mindset that is not adaptable to business.
Sean Donahoe: Here's the thing, you look at GE and all the assets they have, they do have a lot of viable areas of business, they need to snap things off, and again, restructuring is actually smart. They've got to look at the way that -
Phil Newton: It's a good decision, yeah.
Sean Donahoe: ... trim the fat, focus on what works, cut what doesn't. It's basically they're not going to disappear.
Phil Newton: That's good business practice. Yeah.
Sean Donahoe: Right now, they've had a stock dive because a lot of investors are pulling their money out and saying, "Well, that's not cool." At the end of the day, I also think that could present an opportunity, if this new CEO makes smart decisions. I think that once the panic sell off kind of dies out and everything's telegraphed of what their intent is, it might well be an investment or a trading opportunity, but keep an eye on it, be aware of what's going on, and it could be, again, I'm thinking, maybe an investment opportunity long-term if there's a lot more-
Phil Newton: If it's done right, yeah. It's certainly-
Sean Donahoe: Exactly.
Phil Newton: ... one to watch.
Sean Donahoe: At the end of the day.
Phil Newton: This bullshit turned out to be a, "Where's the trade?" We got a two-for in there.
Sean Donahoe: It's two-for Tuesday or two-for Thursday, or whatever the hell day you're listening to this on.
Phil Newton: If you're listening to this on Tuesday, it's two-for Tuesday.
Sean Donahoe: All good. All good. With that being said, that's it for this week's show, hope you've enjoyed it. We had a lot of fun with this one, the four horsemen of the trading apocalypse. I've got to give Phil credit for coming up with the name for this show, I thought it was a bloody good one. Please remember that this show is not free, we give a lot of information out here, a lot of insights, a lot of strategies, a lot of things that you can do to make your trading more profitable and more successful. If you want to talk about your trading, don't hesitate and go to tradecanyon.com/rebeltraders, give us a call, we'd love to help you with your trading, give you insights, and show you exactly what we do. And, this show is not free.
Phil Newton: As I like to say, Sean, we've got a lot of time for serious traders.
Sean Donahoe: Absolutely.
Phil Newton: Even if it's just to point you in the right direction. Sure, we've got a business, we get that, but at the same time, we like also, equally like, to just try and point you in the right direction. If it's to point you in the right direction somewhere else, that's cool, because our objective is to help traders become better traders. It might be that you just need a lot better spit and polish on what you're doing, and we'll tap you on the backside in a rather sportsmanlike fashion, and we'll wave you on your merry way. It all starts with, give us a call. If we can help you, we will.
Sean Donahoe: Absolutely. Again, this show is not free, it will cost you a little ranking and review on whatever platform you're listening to it.
Phil Newton: We'd love to hear your thoughts, give us your feedback. Yeah, a five star review would be welcome, very welcome. You can get that at tradecanyon.com/rebeltraders.
Sean Donahoe: Absolutely.
Phil Newton: If you'd also like to share the show, as well, and help us out, spread the word to more traders just like yourself, and ... We just want to spread the word to the world.
Sean Donahoe: . So, with that being said, in next week's show, we're going to be talking about being lost in translation. Now, I guess that makes me Bill Murray here, and if you've ever watched that movie, it's a great movie, but we are going to be lost in translation a little bit and we'll be covering that.
Phil Newton: I wanted to name this Lost In Space, just so we could have -
Sean Donahoe: Danger, danger, Will Robinson.
Phil Newton: ... the intro of the, "Lost in space," but it's Lost In Translation.
Sean Donahoe: There you go. I used to watch that in the UK, every Sunday that would be on, and I loved that show.
Phil Newton: It was Sunday mid-mornings, wasn't it?
Sean Donahoe: Yeah, love that show, but I hated the remake movie, but hey, I loved the original show. With that being said-
Phil Newton: What can you do?
Sean Donahoe: Yeah, what can you do? With that being said, we'll rock on out of here. Take care and we'll see you next time.
Phil Newton: See you next time.
Automated: For more cutting edge trading advice and a free trader workshop to help you build a personalized trading plan, and make smarter trading decisions, go to tradecanyon.com now.
Automated: Futures, options on futures, stock and stock options trading involves a substantial degree of risk. It may not be suitable for all investors. Past performance is not necessarily indicative of future results. Trade Canyon Incorporated provides only training and educational information. If you actually understood and listened to this, then that means you are awesome. Congratulations and well done. Notice, this product may contain nuts.

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[00:00:10] Show Introduction

[00:56]Sean: How ya doing sir?

[01:18]Phil: I'm doing okay this side of the pond. It's been an interesting week. Funny story - Martin Luther King Day. The downside to trading the US markets when you're not in the US is at the open of the markets, I was raring to go. I'd blown the dust off a few old strategies. At the opening bell, there was no opening bell. I thought there was something wrong with the internet - no data coming through. Two minutes later, I ask Google 'are the markets open today?' No, you muppet.

[02:26]Sean: I can't laugh because I've done that before myself.

[02:48]Phil: Of course, that's why there was no pre-market activity.

[02:49]Sean: Yes, I think every trader has done that at some stage. In this week's show we are discussing what would happen in four very dangerous scenarios and show you what you could do to protect yourself and get a tactical advantage and position yourself for profits.

[03:20]Phil: And we've got the usual Quickfire Round where you trading questions are answered. The Bullshit of the Week continues to be my favorite section as I mentioned last week, where we call out the hype, the hyperbole, and the shenanigans of the industry. Somewhere in all of this excitement is the core question, where is the trade.

[03:42]Sean: Awesome. So, where is the trade? Let's have a look. Okay so do you hear it? The sound of hooves galloping across the markets? The four horsemen of the trading apocalypse ride. So, we're gonna stand firm and show you how to out-maneuver many of these scenarios that could wipe out your portfolio and get the Rebel Trader edge. This isn't biblical, we're not getting religious. It's just a bit of fun. We're going to be breaking down the four different horsemen of the apocalypse, again we're not talking about the lamb of god breaking the seven seals. Let's start off with the first horsemen. Funnily enough, in the book of Revelations (I'm not religious, just for reference), they actually said the first horse was actually conquest. It's been changed over popular culture and references to pestilence. But let's go with pestilence. In this reference and scenario is the noise and pollution of news media and making your decisions based on reactive input. Now, hyperbole.

[06:14]Phil: I think that's one of the biggest downfalls you can have as a trader if you've not got a systematic approach to evaluating news.

[06:43]Sean: It's the problem of punditry. Think about the cycle. Something happens. You have the pause, the period, it's hit the news media, then you're cemented in opinions. But then, the news media have to take both sides. There's no conclusion, just argument. But what happens? Time passes, you're looking for more information to confirm your cognitive bias.

[08:03]Phil: Usually the move that you're evaluating because of the news has already happened. All you're doing is trying to chase the shirttails. While I've got my prejudices, I know a lot of good traders who use the news to their advantage. So, the trap is chasing the news item and being far too late on it. You can go the other way. Evaluate news in the headlines and pay attention to the wording and suggestion that something might happen, the press releases, the news that comes from the horse's mouth. If you can get in the news cycle as close to the source as possible and evaluate the wording that's used, it might give you a hat tip. That's a better way to use the news in my experience. Hope is horrible. Get ahead of it.

[09:50]Sean: One of the things we talk about is raising your awareness of potential. I always look at the sentiment, the tone, the rigidity of language or the specific focus people have. If someone is talking about Brent, or OPEC, or privatization of the Saudi oil conglomerate - if I put all of these elements together, those are three pieces of an oil jigsaw, what could that mean? It raises my awareness of a bullish move or a continued bullish move with oil. Maybe that's something I can use to get a tactical advantage. Having an awareness, you can gather disparate information to create an idea. You can use it as an awareness grower, but don't trade on the news unless you're using it like we've talked about to get out a trade you're already in. The news is the last to know. Information overload. If you know nothing about the oil sector, filter it out. That's just adding bandwidth to an already congested line. That's more water in a bucket that's already overflowing. A lot of traders fall into total information overload. If everything's bold, in terms of font, nothing's bold.

[12:54]Phil: It's a classic case of instead of looking backwards, you should look forward and try to look for the clues. You can do this from a day-trading point of view, looking at the daily news, and look at it from a lazy and more long-term viewpoint.

[13:33]Sean: Another thing that adds to the noise is having too many indicators and contradicting signals. Information overload.

[14:50]Phil: Most of the time I'll have a conflicting signal anyway, which is a problem. What you'll find is a lot of the tools and indicators will conflict. They're designed to interpret price differently because they use different formulas. We suggest to use them as they're intended - an interpretation of what might happen. If you can stack them, you get a greater interpretation, rather than use them as signal generators.

[16:07]Sean: The way to combat this is with focus. Develop strategies that cut through the noise. Be robotic. You will avoid that first horseman. Let's move onto the next one, war. In our environment, we have rumblings from North Korea. What happens if we go into a new theater of war? Did you hear about what happened in Hawaii with the wrong button being pushed?

[17:14] Phil: I'm on news fast. I've trimmed the fat off everything that comes my way, to reduce the stress. I did hear a whisper of it but didn't explore it.

[17:44]Sean: It was all over the news here. Someone in Hawaii pressed the wrong button that said it's not a drill, nuclear missiles are flying. That must have been terrifying. I can't blame them. If that happened in the US and said we are under attack, holy Moses.

[18:27]Phil: To be fair, you lived in the 80s and 90s in the UK. We had a lot of terrorist type incidents growing up as a kid. It was a horrible experience.

[18:59]Sean: It was. There was a time when we were in Hampshire, near the military base. My father was ex-military. We were told to look under our vehicle because they were targeting ex-officers. It is terrifying. It's not something that is easily ignored, but the markets tend to ignore them.

[19:45]Phil: We talked about it. They get conditioned. That's what we saw with North Korea and the rocket over Japan. The first time, they went crazy. Two weeks later, nothing. It's probably because of the speed of information, the willingness of the public to accept it. We have a constant stream of information.

[20:57]Sean: I was thinking about a conversation I had with Andrew in one of the Futures Reports, about the volatility index, the VIX, the fear index. We've got the S&P 500. The data collection has now gone back to the 80's and is not taking into consideration some of the big war events like the Gulf War, and how it's reacted to some instances of real war. With Kim Jong Un, the threats of nuclear attacks. We've just moved B52 nuclear strike bombers to Guam. The B 52 stratford came into service in 1955. They're extending its service to 2044. That's almost 100 years of service for a plane. They're saying there is nothing that can replace it, which is insane. This is a plane that, they've modified it over the years, will be a 100 year old plane. We're looking for opportunities - at military spending, and what would happen if we did enter into a war. We have to assume that we don't end up in a nuclear war with North Korea. The administration was looking at giving them a bloody nose, first, with tactical encouragements.

[23:37]Phil: I think the popular phrase is pre-emptive strike. It puts me in mind, I've got no horse in this race, so I think I can get away with saying this. Let's think back to 1982 to war games. The movie with Matthew Broderick, they were playing tic tac toe against thermonuclear war games. We're having the same conversation 35 years later. It's not a new conversation, it's just the speed at which we could deploy arms is ever-increasing. That's pretty scary.

[24:49]Sean: It is. Anytime there are rumblings of war and with the current administration... a lot of people are against the war machine. The current administration is looking to modernize the military whereas the previous administration, it could be argued, they decimated the current military and its control. But, again, there are rumblings where we need to modernize the military force, there's a lot of development on UAV (unmanned aerial vehicle) technology, modernizing the infantry, the technology - there's more push to keeping people out of harm's way where possible.

[25:55]Phil: Autonomous warfare - the phrase I've heard. In one way I think that's better because people's lives aren't being put into risk, but on the receiving end, they are. It's ironic, trying to prevent lives from being put into danger by killing. I don't get it. From a where is the trade point of view, it's arms dealership. There's plenty of businesses that will benefit from the fear of war, or modernization of arms, not to get into the philosophy.

[26:43]Sean: We could get into the philosophy here, philosophic debate.

[26:48]Phil: For or against. Let's just leave that on the shelf. Purely from the market's point of view, there's opportunity for the fear of war. We can profit from that. It's not the gun race to get more modernized weapons. Maybe there's ancillary benefits. When I say benefits, I don't mean there's a benefit to war. It's just that the markets will appreciate or depreciate. If we think back to 2003, 2004, oil went through the roof. The Gulf War, the Iraq conflict. Will it create new opportunity, speed of technology? Speed of communications? Maybe there are companies specializing in speed of communications, military encryption.

[28:24]Sean: The percentage of GDP spent on the military has actually decreased dramatically since 1955, the first Korean conflict. However, obviously, in terms of monetary expenditure.

[29:16]Phil: Comparing these figures, I think they can be a little misleading sometimes. Let's not go there. I interjected.

[29:25]Sean: That's fine. The money has gone up, the GDP has gone up dramatically so the percentage has gone down.

[29:33]Phil: Compared to GDP, that's definitely the case. I'm struggling to think where is the trade. The opportunity is abundance when there is war on the horizon. I'm not making any judgements for or against it. It's just a statement of fact. Is there an opportunity? Of course there is. Throughout history, the people who have benefited the most are the people selling the weapons. As sad as it is, when the sabers are being rattled, you want to be the one selling sabers.

[30:17]Sean: Well exactly. Compared to this, this is how you can take advantage. Here are some ways to position yourself. There's three ETFs outside of the individual components, places like Honeywell, Northrop Grumman, Boeing, a lot of the other firearms manufacturers. There's three ETFS - PPA (Powershares Aerospace and Defense), XAR (S&P Aerospace and Defense), and the ITA (iShares Aerospace and Defense). If you look at each one, they have steadily gone up since inception. Continuously and in this current environment, and I would expect continued growth in those. If there was more saber-rattling and events, look to the volatility index, there may be an interesting play there. But also, something a lot of people haven't considered. If there was continued conflict with North Korea... South Korea, we've got the Winter Olympics happening later this year. We've got lots of tension between us and China. We talked about this in the Happening Now Report, released earlier this week, our conversation with Andrew in regards to China downgrading US debt. Think about this from a trade relations standpoint. China has been a big supporter of North Korea. This administration, lots of the Western World, has been putting pressure on China to do something about North Korea and their nuclear intentions and to put pressure on them because they are trading with them. Despite the UN sanctions, any conflict with North Korea will put pressure on US/China relations, and possibly Russian relations. If you look at that, what other aspects are there in terms of trade deficit or trade issue or monetary and US debt issues. With our booming economy we have right here, right now, why would China downgrade US debt? In doing that, is that retaliation against the trade? Or because of the pressure we're putting on them in regards to North Korea? If we go into conflict... I think there's warfare going on behind the scenes with intelligence gathering, but anything outside of the covert, you've also got to look at the international relationships. Where does that put the US markets? That's what we're focusing on in relation to the other trade deficits, the downgrading. Will that further impact the dollar? Will that prevent or provide trade opportunities? And then are there any other ancillary trades or investments in and around that for longer-term plays. So again, in any global conflict situation, don't just look at the immediate, look at the ancillary, the infrastructure that could be impacted. Are there any major deals or relationships that could provide opportunities? There are lots of ways to position yourself to take advantage of any of the scenarios we've just mentioned. Okay moving on - death.

[34:13]Phil: Everyone's friendly, hooded side-wielding person.

[34:21]Sean: I have a conflict here. I either think of death from the Terry Pratchett books, or I keep thinking of Monty Python. Uh, I've got Mr. Reaper here, he's here for the reaping. But anyway... I'm going to take this into the death of the markets. What if we have a major correction or a crash?

[34:49]Phil: What if the markets stop trading? It happened prior to or during the first world war they literally halted trading.

[35:05]Sean: If a nuclear missile went off, I imagine that would cause that scenario.

[35:11]Phil: It would cease trading because.... Because.

[35:15]Sean: I can't even. I hate to sound like a millennial, but I just can't even. Everything else would become irrelevant. What do I do? Where's my family? It would now come as, oh god, what next. Your investments, your trading, would become unimportant instantly. But,

[36:14]Phil: That also creates a level of panic in the markets

[36:18]Sean: Yes, and that would be devastating. I come from a military family so I look at it from a tactical standpoint. North Korea allegedly has a very good cyber warfare unit. They could attack. What happens if they do use cyber warfare against our power grid or any of our infrastructure? But let's keep it less drastic.

[37:20]Phil: Let's keep it light and airy. This is worst case scenario.

[37:47]Sean: I'm also gonna throw this out to put some tinfoil hats on. This is stuff that's actually happened. There has been penetration of the markets, security concerns that hackers have had access or have hacked the markets like the NASDAQ, the NYSE, continuously under cyber attack. Imagine what could happen if these incursions succeeded and they triggered a flash crash, or wiped out the exchange.

[38:38]Phil: Something nefarious. I mean, we've seen what happens when someone pushes the wrong button. Fat finger trades or HFT activity creates a cascade of order. It has happened. What if they're deliberately triggered? People will literally lose the shirts off their backs. Margin calls will be called in. Look at the round of people who are mortgaging the house, investing it in cryptos. People are literally selling their life's belongings and putting it into some financial vehicle in the hopes for a better and more prosperous future. What if the worst case scenario happens and you're caught holding the bag at the top of the market, suddenly you end up owing someone a lot of money. It's not a pleasant experience.

[39:56]Sean: Where we are right now with Bitcoin, it's down from its high, dropped over 50%. For the people that were mortgaging their houses... We've now cracked down. Panic sellers have kicked in even more and this is what I was warning some friends about. We're down at 9,400 at 19,500. That's $10,000 in 2 weeks. People are now in panic and it has dragged down all the markets.

[41:15]Phil: This is what happens. This is the death of your trading account. This is what happens when markets move dramatically in a very short space of time. People lose their life savings. I suppose the lesson with worst case scenario, even in a short-term trading opportunity, if it goes south... your life savings are in jeopardy. Your life savings, wealth, and quite likely, you'll owe your broker money if you're trading on margin. It's not a pleasant experience. Always been in business tomorrow. Don't put all your eggs in one basket. Have some diversity in the number and type of positions. Just spread it round. If something happens in one area, it won't be detrimental. You want to be only mostly dead.

[43:12]Sean: I would like to point out two things here. The crypto market was in a bubble. Lots of people said it wasn't. John McAfee is probably concerned about his prediction. But the pressure burst and it dropped dramatically. We have been bearish for a long time on the general markets for a while. You can't ignore the fact that it's gone up. 2017, the DOW posted, as of December 29th, its ninth straight monthly gain, the longest streak since 1959. The tech sector and the fang stocks specifically were the main driver of the S&P's growth over the last year. The tech sector actually provided more than 40% of its gains. We've been in this bull market, bit of sideways in there, end of 2016. We've not had a major correction. What we have here, and it's really hard to quantify in terms of it being rational or irrational exuberance and optimism. We've seen 2018 kick off some major gains. There's no denying that we have been on a major push up in the markets. Gravity has to kick in. When? It's mirroring now that we are pushing into this ultra-low volatility environment. We are definitely in need of a major correction and some rationality to be injected back into this market.

[46:08]Phil: In a perfect world, I would like a steady, healthy, corrective bear market, rather than a shock and it all happens at once. That would be the death of a lot of people. If we could have a steady and healthy decline.

[46:23]Sean: Controlled demolition.

[46:23] Phil: If it could do that, it would be healthy. It would be painful, but tolerable. That's the nature of a bear market. We don't want a crash. That will be painful in an extremity.

[47:39]Sean: You can profit from a bear market, as you can from a bull market. You can profit from a crash. What you do need is a balanced portfolio. You need an awareness of the environment. Don't overextend, certainly on margin. I am against trading on margin.

[48:14]Phil: I think we should distinguish. There's nothing wrong with using a margin account, but leveraging the money because of margin, that's where the danger is.

[48:24]Sean: Indeed.

[48:26]Phil: But I don't leverage the money that the margin allows me.

[48:37]Sean: Absolutely, yeah. When people overextend themselves, they take risks.

[48:49]Phil: Leveraging your money, because you've got a margin account, that's a fool's error.

[48:56]Sean: And always be prepared to change your mind. New information, new data that might influence where you are, if you are predominantly long, don't get locked into those positions if everything turns south.

[49:15]Phil: If your viewpoint changes with new information...

[49:20]Sean: I see too many people hold onto trades that are no longer valid.

[49:35]Phil: Because of the way that we trade these days, we like to trade options that have expiration dates. I don't make a habit of rolling positions. My turnaround time is about 30-45 days max. At the end of 45 days, and my viewpoint's not changed and the trade's not worked out, then there's something wrong with my viewpoint. So I have this built-in time out. It's gonna expire worthless. You get the benefit of seeing what happens without having to hope that something will happen. We're not being stopped out or unnecessarily prolong a painful trade. If it's not working, it gets cut.

[50:34]Sean: Okay, so. Last horseman of the trading apocalypse is famine. In this case, we've mentioned the low volatility environment. They could introduce some serious volatility if there was war, but right now, there isn't. Why are the markets so fearless right now? A lot of the fear index, the VIX, is measured off of options volatility on the S&P 500. That is where a lot of the concern is because there isn't much volatility and a lot of traders and pundits are decrying these positions saying it's impossible to profit from. I call bullshit on that.

[51:57]Phil: I agree. Just because it's low volatility, doesn't mean there's not movement. Predominantly, like, I trade for direction. But that still doesn't mean there's not opportunity or not movement. When most people talk about volatility, particularly the options sellers, they're talking about the sell side because the premium is less rich. There's usually a lot of options sellers bitching and moaning because they're not getting as much money for the same trade.

[52:31]Sean: I could agree that the profits have gone down from the seller side because I sell a lot of options.

[52:40]Phil: It doesn't necessarily mean... It's not a good thing or a bad thing. It's just the environment we're in at the moment. I think it's a misnomer - a false scarcity.

[52:58]Sean: I agree with that in certain scenarios.

[53:04]Phil: There needs to be a clause there. It depends what you're doing. But for directional trades, there's plenty of movement. It's just in a low volatility environment. What are people referencing when they talk about that? The complacency? The lack of concern? No one's scared there will be a crash is what that means.

[53:31]Sean: We've seen these conditions. We've seen these conditions before if you look at 2007, 2008. We are in desperate need of a shakeup. But there are opportunities everywhere and simple ways to find them if you look at individual stocks, rather than, like what everyone else is doing, what's the average volatility of the S&P 500 options. There's volatility in little pockets, movements everywhere. We look at stocks that have hit extremes of their own volatility. We look at individual items, stocks that are two standard deviations away from their mean, and that implies - without going into the specifics - in many ways, an implied volatility on that particular instrument, without getting into implied volatility, which is a completely different topic.

[55:17]Phil: One's the ghost of Christmas past in that it looks backwards at history, which is bollinger bands looking at price volatility. And implied volatility is like the ghost of Christmas future. It's basically a math formula that suggests what might happen and it's not set in stone, constantly in flux and changeable.

[55:35]Sean: Great way to look at it. But again, by having a strategy that allows you to filter through the noise, then you can find those opportunities. Here's where we always have the edge over the vast majority of traders - we don't care. We cut through all the noise. We look at exactly what's happening with our strategies. We have an awareness of what's going on, but if we don't want to worry about it we don't need to worry about it. It allows us to focus, find, filter and sort stocks the way we do, move on and take advantage of these situations. If everyone else is throwing their money into the markets, I'm quite happy to take that money out of the markets from them. So, there you go, ladies and gentlemen. Those are the four horsemen of the trading apocalypse. That's how you can position yourself to take full advantage of these scenarios. With that being said, let's move on.

[00:48:20] Rebel Trader Tip of the Week

[57:22]Sean: The Rebel Trader Tip of the Week! It kind of rolls in perfectly with what we've been talking about here. Avoid groupthink. If you're uncertain about a particular topic or event you're looking to explore for your trading, the one thing I want to say is don't look for advice from those who are in the same position of uncertainty. Group think is dangerous to your portfolio. It's too easy to affect what you're doing. It's generally lazy, safe, and often times, wrong. Now, Phil, what's your opinion on that.

[58:19]Phil: I think we can describe it as 'me too' analysis. That's what I was thinking. But look at it this way. You've either got to do your own analysis or research, but if you start to take someone else's viewpoint on your existing position, you're passing your power off to them. That doubt, that uncertainty starts to creep into your decision-making and it's a horrible experience. And arguably, it's why we say, turn the meteor off and the talking heads because they're trying to make it interesting and entertaining. Let's face it, this is a pretty dull and boring subject for most people. You start getting drawn into that hype and the shenanigans that go on. If you're talking to other people but you don't know that strategy or their experience, you can get sucked into that other person's viewpoint. Their view does not matter. It's your money. If they can provide you with a new piece to the puzzle that maybe compliments your decision, then yeah, go for it. Most of the time, it's just noise. It would be comparable to the regular guy, who, it's not their job trading the markets. They're not an expert, but they're giving you advice. Why would you want to listen to that?

[1:00:24]Sean: Exactly. You have no way to validate their experience, knowledge, etc. Me too analysis. The point he made, you're transferring not only your power, but your decision-making process and absolving yourself of responsibility. That is not a way to trade. So, don't do it. Be firm. If you don't know, research, validate your ideas. If you can't, move on.

[1:01:27]Phil: If in doubt, dune out. It's a northern thing.

[1:01:41]Sean: It's a northern thing indeed, as he puts on his flat cap and gets out the bloody sheepdog. If that makes you Wallace, I end up being Gromit. Works for me. With that being said, let's rock on.

[01:00:04] Quickfire Round

[1:02:06]Sean: Diving into the mailbag this week.. first question, Phil. What is the difference between a growth stock and a value stock? I'm pulling out the Benjamin Graham books here and am going to virtually throw it into the ether. Go ahead. Explain.

[1:02:40]Phil: To be fair, I've never found a satisfactory answer, value stock would be a company that has value in it, like a blue chip style company. They're established, they've got a long track record, their share price would be pretty stable. They've got good dividend payments. It's not going to go bankrupt overnight, whereas a growth stock, as the name suggests, has opportunity to grow. An IPO might be an obvious example of this. A new listing on the stock market might be seen as a growth opportunity simply because it's a new stock listed. They just got a cash injection. They're looking to grow the company. That would potentially increase the value of their share price. Maybe they become a value stock in the future and part of that blue chip category. It's not a perfect answer. Growth has the opportunity to increase its share price quite dramatically. Value stock would be undervalued. If you've got a million market cap, but your assets are valued at 5 million, that might be undervalued. You could invest and hope that the market catches up with the valuation. There are a few opportunities there. Just a quick version of it.

[1:04:39]Sean: The interpretation I have, simplified -

[1:04:45]Phil: I'm not happy with the general explanation of what is one versus the other, because ironically, a growth stock could also be a value stock as well. The undervalued from net assets could be considered a growth stock as well as a value stock.

[1:05:14]Sean: The way I think of it is, if I can pick up a dollar's value for $0.50, that's a value stock.

[1:05:25]Phil: The Warren Buffett approach.

[1:05:30]Sean: Exactly. He is probably the most well-known public investor for value stocks. And then a growth stock is, okay, some changes in the fundamentals of a business. They've got a great management team. We're expecting that from where they are maybe it is a combination of value and a growth stock but from where they are, we're looking at acquiring that. A good example would be AI. Are there market leaders in there now? Their projections and fundamentals are lining up. We're expecting that one to keep on growing and gathering market share. Amazon, prime example.

[1:06:31]Phil: They're looking to capture market share, to grow. I'm gonna say, the clue’s in the name.

[1:06:45]Sean: Okay, so what else have you got there?

[1:06:47]Phil: I've got an interesting question. I'm chomping at the bit to throw this out there. As an investment, should I trade stock or cryptocurrencies?

[1:07:06]Sean: First part of the question, you have to decide between investment or trading. Two different things. An investor has a different intent of time horizon. If I wanted to buy 1,000 Amazon shares today, I'm looking to hold that for 3, 5, 10 years. I'm looking to the future, not to care about individual moves happening over the next week, month, or even year. I'll have an awareness, and if new info makes me change my mind on that investment, I take my money off the table. A trader on the other hand, is looking at short-term movements, anywhere from a minute to months.

[1:08:48]Phil: As you were saying that, to use a real-world example, if you're buying a house, you're probably going to have that for many years. But if I was buying a secondhand car with the purpose of selling it to someone else, I want to get rid of that as quickly as possible. That would be like trading the car. Two very distinct differences between what you're doing long-term versus short-term. The question, as you pointed out, has conflicting opinions inside of it. Should you invest or trade? You need to decide what your time horizons are.

[1:09:51]Sean: We are primarily swing traders. Both Phil and myself do occasionally day trading when we have time to sit in front of the screens. We don't generally like to do that, it's not our preferred thing. For me, I have investments in a lot of different things. Sometimes, that money can be more efficiently traded. We only trade for about 30 minutes to an hour a day. I've got all my other business concerns and I don't want to be glued to the screen. Identify where you want to be and what you want to do as a trader. Now, to the last part of your question, stock or cryptocurrencies. Raise your awareness. Where is the best place to put your money. What is going on? Do you want to be high risk, high reward? Cryptos are the most volatile and risky instruments to be in right now. Even in the last few weeks, we've seen a 50% drop just even in Bitcoin. That's dragged down every one of the top 100 coin, because China has said they're considering banning all cryptocurrencies. They make up the majority of the crypto mining, and trading. If that happens, it causes a catastrophic event. In one term, if you wait for the turnaround, that might be a great opportunity. It might be the second run to get into crypto, but you better wait until it's a confirmed turnaround and the bubble has found its turnaround.

[1:11:52]Phil: As I like to say, crypto's on, despite my prejudices, it's not a starter business. It's a rollercoaster. You're gonna develop high blood pressure. If you wanna dip your toes in, go for it. Who am I to say no? I'm all for capitalism. At the same time, I wouldn't put all my eggs in one basket.

[1:12:34] Sean: I would also add into that, when you're starting out, you want stability. You want to minimize your risk, maximize your rewards. I would push you towards options - options trading on stocks. Cryptos are a crapshoot. It's very high risk. I see so many money into one crypto or spreading it across several different ones and losing their shirts. If you've got significant money, put it into a stable market with a positive expectancy. Everyone loves to go to Vegas and roll the dice. That's a gambler mindset. Most people in the crypto space are in that mindset. They're not professional traders. They're not strategic and that's why you see the panic selling. I've still got my money in a lot of crypto. I've taken a lot of my money off the table. I saw the bubble about to burst. I did it right before Christmas. I've put some money back in and pulled it back out while I'm seeing all these major corrections. In fact I was day trading Ripple, for an example, to take advantage in some of the panic selling. Crypto is a one-sided market. Traditional markets are two-sided, which means you can be long and short and take advantage of both sides as they move. You can't do that with crypto, unless you're trading the futures, which is cash-settled. It's not really trading crypto, it's trading a side bet.

[1:14:24]Phil: Alternative instruments. There's CFDs. There are ways around it, but a very different conversation for a very different day.

[1:14:35]Sean: Absolutely. Decide on your time horizons. Do you want to be a trader or an investor. Do you want to be active in the markets? I would suggest looking at options trading as your first part so you can minimize your risk, maximize your potential, come at it with a strategic strategy. Hop on a call with us. We'd be happy to help you. But I would not start with cryptocurrencies. That is, as you can see, a blood bath right now. If you do want to put part of your portfolio in cryptocurrencies, definitely wait for a confirmed bottom and the recovery to have started. With that being said, another question from the mailbag. What is the difference between earnings per share and dividend on stocks? This is an interesting one, from I think, another new trader, looking for clarification on some of the terms they may have heard. We're going over a little bit of fundamentals. What would you say is the core difference?

[1:16:13]Phil: Clue's in the name. The earnings per share - all companies are looking to turn a profit. They divide it by the number of shares that are available on the stock market. Then that gives you the earnings the company has made per share.

[1:16:36]Sean: Absolutely. Dead on. That's almost like the Phil-topia Encyclopedia here.

[1:16:47]Phil: Perfect. So, the dividend, then, is if you own shares of stock in the company, you are part owner of the company. One of the rewards as an investor, if you're holding those shares for a slightly longer period of time, is you become eligible for a part of that profit that's issued as a dividend.

[1:17:17]Sean: It's kind of like a nice little bonus.

[1:17:25]Phil: It's a little hat tip. Thanks for investing in our company and here's a share of the profits and that's called a dividend.

[1:17:34]Sean: A lot of my investment portfolio are all dividend-paying shares. I always prefer that because they can add to your portfolio quite nicely. What I tend to do with that is reinvest it in the stock that are in my portfolio. It's just free money that's increasing my holdings.

[1:18:18]Phil: That is one style of investing people will seek out. They're looking to collect an income off the dividends, assuming you've got enough funds to justify doing it.

[1:18:35]Sean: One thing I want to highlight, when they send out the shareholder letters, is can the company actually afford it? Are they actually growing?

[1:19:02]Phil: My gripe is that any company that has debts on the books from borrowed money or loans shouldn't really be paying dividends. Warren Buffett talks about that. If you pay the debt off, the share price will go up. You'll get value delivered in the company because you're reducing your cost of business. Just buyer beware.

[1:19:52]Sean: I'm debating creating a Rebel Trader investment course to look at the longer-term stuff as well. That will give a lot of how insight into how I evaluate companies over the short-term and long-term historical track record and the way I manage my portfolio and one of my keep focuses is the debt the company holds and are they paying down principle. What are the interest payments? How's the management? A lot of CEOs in publicly traded companies are all about making the shareholders happy. For me, I want them to make the business happy.

[1:20:47]Phil: If you have a successful business, you'll make the shareholders happy. It just seems daft.

[1:20:52]Sean: A lot of CEOs feel like giving every shareholder a reach-around so that they can keep their job and their bonuses. With that being said, let's rock on.

[01:21:30] Bulls**t of the Week

[1:21:46]Sean: Talking about mismanaged companies, I'm gonna be talking about the GE breakup. It is one of the most establish blue chip companies. They have their fingers in every pie, but they are talking about a breakup. This is the monolith cracking and turning into pebbles. I used to be an investor in GE until some of the decisions that Jeffrey Immelt, who is the CEO, started making. The way he was talking got me to pull my money out. I really started seeing a lot of bad moves. What's happened is there's been issues over the last few years. They have their finance department basically crushing the company. They took a 6.2 billion dollar hit from their insurance arm and they've tried to cover it. The new CEO has come in and said this is a mess. They're trying to cut loose some of the things but it's not working and they're not looking at breaking up the company. A lot of bad decisions that were avoidable. They've got their fingers in everything from lightbulbs to MRI machines. They are literally very diverse globally. It's that unfocus and a lot of bad decisions that have left them very vulnerable.

[1:25:00]Phil: You're trying to juggle too many balls and they end up dropping them.

[1:25:06]Sean: It was a freight train that was well-telegraphed, but if you look at the balance sheet...

[1:25:18]Phil: Because it's one of those blue chips and a household name, they've maybe got away with it. They think they can get away with things newer companies wouldn't dream of doing. It's the culmination of a mindset that is not adaptable to business.

[1:26:04]Sean: You look at GE and all their assets. They have a lot of areas of viable business. They've got to trim the fat, cut what doesn't work. They've had their stock dive but it could present an opportunity if this new CEO makes smart decisions. Once this panic sell-off dives out, it might well be an investment or trading opportunity long-term.

[1:27:05] Phil: This Bullshit of the Week turned out to be a where's the trade.

[1:27:15]Sean: With that being said, that's it for this week's show. We've had a lot of fun with this one. Please remember this show is not free. We give a lot of information out here, a lot of strategies, a lot of things that you can do to make your trading more profitable and more successful. If you want to talk about your trading, give us a call.

[1:27:53]Phil: As I like to say, Sean, we've got a lot of time for serious traders, even if it's just to point you in the right direction. Our objective is to help traders become better traders. It might that you just need a little bit of spit and polish on what you're doing and we'll tap you on the backside in a rather sportsman-like fashion and we'll wave you on your merry way. But it all starts with, give us a call. If we can help you, we will.

[1:28:35]Sean: This show is not free. It will cost you a little review on whatever platform you're using.

[1:28:39]Phil: We'd love to hear your thoughts. Give us your feedback. A five star review would be welcome, very welcome. You can get that at https://tradecanyon.com/rebeltraders/ and if you'd like to share the show, spread the word to the world.

[1:29:00]Sean: Absolutely. With that being said, in next week's show, we're going to be talking about being lost in translation. I guess that makes me Bill Murray here.

[1:29:19]Phil: I wanted to name this Lost in Space.

[1:29:33]Sean: I used to watch that in the UK every Sunday. With that being said, we'll rock on out of here. Take care and we'll see you next time.

[1:29:51]Phil: See you next time.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Being Strategic and Aware allows you to adapt to any market conditions
  • You can find opportunities in any market conditions despite the low volatility environment
  • Always be prepared to change your mind. New information always allows you to reevaluate your opinion and positions.

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