Rebel Traders 049 : Future Proofing Your Portfolio

Do you have a shield around your portfolio that gives you some level of future proofing? The Rebel Traders are going to jump in to the time machine and take a look down the road to see the opportunities ahead...

The world never stands still and those businesses not evolving and keeping pace they will be left in the dirt. So, in this week’s show Sean and Phil are taking a look in to the future and examining what opportunities and industries you should be looking at to add a wee bit of future proofing to your portfolio.

They are talking everything from emerging markets to China’s infrastructure and expansion, from 5G to Space travel and everything in between. It’s time to jump in that Delorean and accelerate to 88…

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Sean Donahoe: It's time to jump in that DeLorean hit 88. You're ready to rock? Let's do it.
Automated: Rebel Traders takes you inside the world of two underground master traders who take an entertaining and contrarian look at the markets 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, this is Sean Donahoe, and welcome to the Rebel Traders Podcast. I'm joined by my partner in podcasting, the man with his finger either on the post or in the podcast or where …
Phil Newton: On the spot, so I know you were going to say.
Sean Donahoe: We could just leave that undelicate pause right there just so you can let your active imaginations picture the rest. Mr. Phil Newton how are you doing sir?
Phil Newton: We're starting early this week.
Sean Donahoe: We are indeed. You know it still makes me laugh that we had that review on iTunes this idea, this is like the buddy show for traders and it's all good fun. We do poke fun at each other a lot.
Phil Newton: Well, we say quite regularly behind the scenes I mean let's face it this is a bloody boring subject; finance. I mean there is only three things that's going to happen; how many different ways can you say it's going up, down or sideways. We might as well have a jolly good time talking about the three ways that the stock market can go at any given point in time.
Sean Donahoe: Pretty much.
Phil Newton: Let's face it our amusement is the only thing that matters.
Sean Donahoe: Absolute-damn-lutely.
Phil Newton: The fact that you're sitting here listening is a bonus.
Sean Donahoe: Absolutely, you get to, it's like having that two way glass window on a padded cell that's the way I'm seeing this right now but it's all good. We're having a blast, but we're also talking about a lot of different important things. Today we're going to be talking about a question. A question that you might or might not already have, but do you have a shield around your portfolio that gives you some level of future proofing. That's why we're making the reference to the DeLorean. We're looking …
Phil Newton: I was just going to say is there some Star Trek reference we can squeeze in here since you're talking about shields?
Sean Donahoe: Well we could do …
Phil Newton: Faces on stunner cling-ons the star but bower something.
Sean Donahoe: Well indeed yeah, I mean flashback to that I'll say early 90s song Star Trek is …
Phil Newton: Does it spit an image? Yeah, trekking across the universe.
Sean Donahoe: No, I think it was the farm it was called, but yeah the same kind of along, it was a parody song and yeah. Basically we are going to be chopping in look according to time …
Phil Newton: Boldly going forward.
Sean Donahoe: … boldly going forward because we can't find reverse. We are going to be jumping forward in time looking down the road a little bit to see what opportunities there are laying ahead.
Phil Newton: We've also got the Rebel Trader mail banquet which is your trading questions all answered. As always it's still my favorite, my favorite section is the bullshit of the week. We call it the hype of all the shenanigans, the nonsense, the nuisances and somewhere amongst all of our own high jinxes we're going to try and answer the core question of where is the trade.
Sean Donahoe: There is going to be a lot of them or a lot of opportunities in today's show. We're really going to dive into what is shaping the future.
Phil Newton: That's what the whole show is about; where is the trade, yeah.
Sean Donahoe: It really is. The problem is this; a lot of people look at the right now and history, we do say hey look back in history for repeating purpose.
Phil Newton: The book bar of mine consistently is the forex example, people touting it's the best thing since sliced bread well it's not. Looking at the now is the big problem there, isn't it? Sorry I'm just kind of go ahead, you've triggered me very early this week Sean.
Sean Donahoe: Yeah, he sits in the corner shaking until it's just gone.
Phil Newton: I was on a hair trigger, I was already on a hair trigger and you triggered it.
Sean Donahoe: Absolutely.
Phil Newton: Yeah, just people focused on the now I think just generally in life people focus on the now is just how you can fail at life generally speaking. Just how about just lift your head up and look at the horizon, just you'll start to be a better performer in life let alone the financial markets.
Sean Donahoe: Absolutely. Now, one of the things that I mean with all of the hats that I wear and all the different businesses, one of the aspects that I would certainly say I am is a futurist. I'm always looking down the road and this is kind of why I wanted to do this show a little bit, because a lot of this that I'm looking at, is I'm looking at opportunities that lay ahead. Not just the immediate obvious ones, but the side opportunities that come because of will appear, manifest themselves because of opportunities and tectonic shifts in every aspect of the world we live in. I'll give you an example though in a few, I'll give you several examples in a few minutes.
The first thing I want to do is again one of the hover around this topic of not looking forward and I'll give a perfect example is companies that don't adapt.
Phil Newton: I was going to say even trading just to keep it on point just before we think about future pacing from a broad perspective. I think the textbooks are partly to blame when it comes to charting or information about how to trade. Again, I understand that you've got to give here's the perfect example of the thing that you're obviously trying to describe.
I get that, but then that creates the problem of the looking at the now and that perfect illustration of let's just say it's a commoner garden triangle, asymmetrical triangle type pattern. Triangles are quite common for people to look for in technical analysis; it's essentially two converging tread lines and prices squished in between them if you've never seen one before.
Well, that perfect is a perfect illustration of what we're looking for as per the author's description. That creates the problem of looking in the now because you as the students of that pattern to try and find the trading opportunity are looking for the perfect after the fact example. See where I'm going in the show?
Sean Donahoe: Indeed.
Phil Newton: It's not after, because you're looking for the after the fact here is what it should look like and what we want, we don't want that here is one I prepared earlier scenario. We want the messy in the kitchen example. We want the partly constructed and I've nearly finished it and this is what it's going to look like in the future. We don't want that this is what it's going to look like in the future, the here is one I prepared earlier we want the it's nearly finished. We just need to, we're just going to be looking for that missing IKEA part that's someone has pushed onto the couch but it's nearly there.
That's what we want as a trader; we're trying to forecast and to look to the future of what it might look like. I think that's one of the bigger overarching problems when we're thinking about charting or technical analysis as a means to find their opportunity, because you're looking at the now and thinking that that's going to create the future. The opportunity that we're trading was yesterday or last week or last month, but it's not now because we've got that perfect here is one I prepared earlier experience. Usually by that point it's too late.
Sean Donahoe: I agree absolutely. I absolutely agree 100% and that's one of the things that is a big weakness for a lot of traders, is that inability to take that extra step. I agree, a lot of it is the way that you know?
Phil Newton: That sort of a slaver of it, yeah.
Sean Donahoe: Yeah, the textbooks do show I create that in yeah. It really does create that little mental block, but that's what we're here today to talk about. That's what we're going to try and unblock for you. We're going to be the drainer former here, we're going to be the Roto-Rooter to try and clear that path and that was really a bad analogy, but we're going to move on very swiftly. Anyway one of the things …
Phil Newton: I don't like the sound of my roto are being rooted thank you very much.
Sean Donahoe: Indeed.
Phil Newton: It sounds like I need to go to the doctor if I've got that experience.
Sean Donahoe: If you actually look up online what Roto-Rooter is, my God you'll probably regret that statement anyway. We're looking at the failure to adapt first of all and the problem is a lot of businesses are also in the same predicament of not looking to the future and the adoption of their business models. A perfect example of that recently is Toys"R"Us. It's a sad fact Toys"R"Us has been a staple.
Phil Newton: Wait, before we get going Sean I'd just like to say I just realized I looked behind me I've got a fax machine nicely freshly buckled up if you want to get in on this ground floor opportunity.
Sean Donahoe: My God I have not sent a fax in forever.
Phil Newton: It reminds me just to have a Britishism for a moment surprise, surprise two Brits talking to each other. It reminds me of Only Fools and Horses and Del Boy looking at the I've just got a job load of betamax and video players.
Sean Donahoe: Indeed.
Phil Newton: You're 20 years too late on the ground floor opportunity.
Sean Donahoe: Yeah, it's about right, but the problem is a lot of businesses do get stuck. They don't adapt to the environment they're in. I mean think about Toys"R"Us; one of the biggest toy stores in the world, they have lots of physical stores, lots of products. I mean they are main stay for people going to buy toys until they're not.
Phil Newton: Until they weren't.
Sean Donahoe: That's the problem, they didn't look ahead to see okay we need to switch online and they had a deal with Amazon that fell through.
Phil Newton: Frank & Albert's have changed; Frank & Albert's have quite literally changed in the last 15 years.
Sean Donahoe: Well, they did a merger at some stage with Amazon. I can't remember the exact details, but then they broke free of that relationship. The problem is they didn't then continue to create a solid online presence to the point where they couldn't adapt in time. They kept their focus on the physical stores.
The problem is the physical store approach in an environment where everyone is looking and price shopping and everything else is a very expensive model. Now you've got dwindling sales if you've got these overheads that are increasing because of hey inflation and what have you and you're getting less and less people in the stores.
Phil Newton: Minimum wages go and open price and products and all the rest of it and if the sales are going down it's that seesaw effect on the balance sheet.
Sean Donahoe: Well it's not so much a sea fall in this case as you can say instead of a seesaw it's more like a bloody, it's more like a catapult.
Phil Newton: Yeah that's right when you put it in that perspective, but yeah you are absolutely right. I keep thinking it's a mine and the other messing with, that's where the physical products, there is probably lots of examples. The physical products are probably going to get bought but as you are describing it's the how people buy the product and people maybe go, well to be fair thinking about my own buy now, but I go into the store to pick it up and squeeze it and put it down again and then I go and order online. It might even be from the same shop, but what if I you know surely and this is what Amazon has got into which I'm really you know them moving into a physical location type thing.
Sean Donahoe: Yes.
Phil Newton: Where they're providing that go and pick it up squeeze it, put it down on the shelf but order online.
Sean Donahoe: Yes, an amazing little thing yeah.
Phil Newton: In store the ordering online and it's just that was what was missing because and Best might try to do that but they were very late and it was very clunky and very cumbersome for them to try and do it. Where you could go and pick up the store the thing, talk to a shop assistant and get what you want but then order online. They tried to do that but they just didn't have that ease of connecting the dots if you like.
Sean Donahoe: Yeah.
Phil Newton: Again, thinking about more of a digital product they or what could a product could be digitized the one that always springs to mind, because it's near and there because it was my first real job was the Blockbuster failure. That was …
Sean Donahoe: That's an epic …
Phil Newton: I mean the chief executive is almost famous now for getting it wrong, because hey that Netflix thing that will never get going.
Sean Donahoe: Well I've told you this story a million times. I've mentioned this in the past …
Phil Newton: offline, postal sales and digital sales. I mean Netflix they really were looking down the road when they thought about the business model.
Sean Donahoe: This is the major point, but yeah I mean talking about Blockbuster I actually spoke with the CEO. I was in Tokyo we were at a dinner party and everything else and I was saying, "What are you going to go about streaming when the internet gets faster?" "Oh it'll never happen," that was …
Phil Newton: That will never happen, yeah.
Sean Donahoe: I just remember …
Phil Newton: For the first time he had said that wasn't the only time, he has very publicly said that. You've got all this just thinking about it from Netflix point of view, technology wasn't there but they had the vision which is what you're talking about and then technology caught up to the vision. That takes some doesn't it?
Sean Donahoe: Exactly and that's it does and it's positioning and that's one of the big things. Again, one of the things that is important is looking at businesses that are adapting, but not just adapting to the future but creating their future. Before we get more into that one of the things that has to be coming in the future, we've talked about it a lot in the show is a stock market reset. They overdo bear market.
Phil Newton: That's a fancy of saying it's going to be painful for a short while, but down the hutches.
Sean Donahoe: It's going to be a TSA cavity search without any warning. You know it's not going to be pleasant except for some people who might enjoy that kind of thing.
Phil Newton: What I would hate to happen is a crash. We're always banging this drum; I wouldn't want and wouldn't wish a crash to happen because it does mean that the common old garden folk like you and me we're at the shop end of that crash. It is the it impacts the most. We were talking before the show about many nightmare stories that we've heard and people actually bailing out at the bottom of the turn or if they held it's taken nine years just to get back to where they were before the crash. It's a painful experience.
That slow healthy bear market, that is good and it's painful don't get me wrong but it's good because it's slow, it allows people to adjust, people to get used to it. As far as losing weight you're going to do another notch on the belt, then another notch on the belt, then another notch on the belt you get leaner and leaner and leaner and that is healthy. Anywhere from six to 18 months is a normal cycle for a bear market and we've skipped it. This is going to be the third time we've skipped that economic contraction and it is healthy for future growth of any economy.
Sean Donahoe: It really is but again, I was going to say in the other side of it by the time you look at it you got to have the recovery and that is again you've got two big opportunities in and around that which is okay I've got my reset and okay that's painful. We don't like it and you may be gone through it, if you are not already prepared for it which if you're watching this show you bloody well should be. If you listen to this show and you follow what we're talking about, you are aware it's coming so there is not a bloody excuse you've got to be aware.
If you look at the markets so this is the one thing that really is telling to me is if you look at over the last, even the last 20 years what's the stock market going to look like in 20 years? Well if you look back I always throw back on the monthly charts because I always love this view, is if you look back say to 1998 I mean we were about say the S&P 500 we were about a thousand. We've had a few actually no where were we? I'm looking back at this 2000.
Phil Newton: I'm just getting the chart up myself .
Sean Donahoe: Yeah 1,500 on the sorry I'm looking at the S&P 500 SPX. Again, we have doubled since then. We're literally just doubled since 2000. If you're looking about, that was about 1,500, 1,600 I'm actually where is it let's see. 2000 first ..
Phil Newton: Just a little above 15, you know let's split the difference 15 and a half.
Sean Donahoe: 15 and a half so we're almost …
Phil Newton: We're just trying to eyeball this very quickly.
Sean Donahoe: Very quickly for the show.
Phil Newton: This is a bit impromptu isn't it?
Sean Donahoe: It is. If you look about it, yeah we had from there to about 2009 it was actually declined if you look at it because it was the deep of the market it was about 798 as of March 2009. The net effect in there was yeah a big decline because we had the crash from 2008 and everything else and the whole mortgage backed securities crisis. There was a couple of resets in there which we have not seen.
I will, if you want to see like history not repeating itself here it did for the first part around about 2003 or 2001 to 2003 because of everything else that happened with 9/11 and everything else then we had the mortgage backed security crisis. Before that it was also the internet, sorry the dot com bubble breakdown and everything else; there was lots of other pressures.
Since then we've been on a bloody tear and you can see just how much of a tear, but in any regards even from 2009 to now we have way over double. We've almost gotten to triple where we were in 2009.
Phil Newton: It's a straight line as well.
Sean Donahoe: It is a straight bloody line pretty much.
Phil Newton: Particularly from the beginning halfway through 2015 it's looking at it on the monthlies I would be tempted to be thinking bubble.
Sean Donahoe: Exactly, it is insane and this is …
Phil Newton: You could put this and well let's just think of the recent current bubble that we're currently in. You could put this and Bitcoin next to each other and that meteoric work exponential curve it's only going up type of experience. It just doesn't look right and you just put 100 year chart on. It doesn't look as vertical hockey stick however you want to describe it. I'm looking out on the monthlies which I've not done for a long, long time Sean and it has me worried.
Sean Donahoe: It does because if you're looking at it we're riding in the line of the top of the bellies all the way through. We had that reset in 2015 which was right around, sorry 2016 we're in top and the bottom of the bellies, but we're riding that bloody line all the way up and it's only the recent couple of months we've had a little bit of a reset and little bit of pressure relief. I always look at the monthlies to look where I can see yeah every time I see this I think about the bull rug we've been on. It's like it keeps cementing that we are going to turn around, but in any turnaround any bear market there is always that recovery as well.
Once you got the healthy shake off or even in a crash if you look at 2009 and the rapid descend. Again, that buying at the bottom and looking at those reset points is a giant opportunity. That is where a lot of money is going to be made and this is one thing that I find absolutely fascinating is looking to that future is planning in the short term for a bear market, but also planning on positioning myself on the flip side for the recovery and the recovery is always a beautiful thing.
If you look from say well right through the 90s, if you look then from 2002 onwards end of 2002, 2003 and up until the mortgage backed security crisis and then if you look from 2009 up to now those are stellar recoveries. Those are really nice.
Phil Newton: If you listen to any investor type talk because I've got one, believe it or not Sean I've got one or two invest type people that I actually listen to on the old casting. If you listen to them they are as frustrated as we are because they're waiting for their buy the deep opportunity. Their buy the deep opportunity is a bear market six month, eight months, 12 and they are looking at 10, 15, 20 anywhere up to 50% decline in the broad markets and that's what they're looking for is they're by the deep opportunities.
When we're talking about we're just looking for a couple of percentage points really when we think about how we're looking for a correction to join the move, join the party. When you start looking further afield you need a bigger retracement. That's what the bear market is, that's the buy the deep opportunity. The investors again note the word I'm using and almost gagging on it Sean investors are looking for.
Sean Donahoe: Indeed.
Phil Newton: You know this is what we're looking about. This looking down the field and it's not even down the field, we're looking in the next field open maybe a couple of fields over to try and see what this opportunity is. That's when that bear comes rolling over, the ball is a couple of fields over stick with the tenuous example. You've got to have your head up looking for the opportunity and this is in a roundabout way this is what we're talking about. Where is that opportunity and you got to be prepared for it? Just having the awareness to know that it's coming and it's a possibility; that honestly for most people is enough.
Sean Donahoe: Indeed and one of the things that might drive this and I'm looking down the line what could drive this next bear market.
Phil Newton: Perhaps the concern Sean is this recent round of the last two cycles of our earnings. The paper profits it's a manipulation of results, of a actually paper profits is a cash back, is it government handouts, is it just accounting, creative accounting that's putting more earnings per share? The other whiskers. The other whispers that come out of the street for a lot of business, now there might be genuine profits out there but for a lot of companies they're creative accounting profits.
Sean Donahoe: Well, there is a lot of creative accounting as we know and a lot of these things.
Phil Newton: I know it goes on but you know what I'm saying here Sean, it's because there is by bucks going on and they've got excess cash and companies file handouts and that's what I mean by it. It's not something that happens on almost blanket scale, I mean companies will do that and they will profit because of it. It just seems to be artificial profits.
Sean Donahoe: Well, the one that is getting me is a lot of the Q1 basically earning season that just was. Again, a lot of these companies beat expectations and they did resoundingly well, but we haven't seen that married in the market so to speak. We had last few days have been very good.
Phil Newton: The indexers aren't all saying that they enjoyed it.
Sean Donahoe: Exactly.
Phil Newton: They did, the more I would have imagined I was hoping if the profits were genuine and not creative accounting which is what my suspicion is now, that's my conspiracy theory Sean don't take it away from me.
Sean Donahoe: I was going to say he's got the ten floor high, but go ahead.
Phil Newton: I know I've got it's on in this regard, but the consolidation that we're seeing at the moment that perhaps would have broken have there been a genuine we're doing great this cycle, it's been great profits and it's not just creative accounting. That would have here is that word again triggered the next leg of the movement and that's not happening.
As we're looking at things right now the markets are off, where we've concluded for all intents and purposes another exceptional earning season. For the market the index haven't reacted as if it's been an exceptional earning season, it's like they don't like it. It's like it didn't happen.
Sean Donahoe: Yeah, the one thing I'm seeing though is we are having higher high right now. I mean as we are right now we are having higher highs in this recent kind of reset. The small caps like the Russell 2000 is one thing I was talking to Andrew about is the small caps are trending up. I mean it's higher highs, all time highs and everything else.
Phil Newton: That's okay they are the only ones up there.
Sean Donahoe: They are the ones again setting higher highs and all time highs but the Dow, the S&P 500, the NASDAQ they're tracking the feed but they're also going sideways. They're just kind of like you said consolidation here and range bound, but they are pushing those highs just a little higher which is giving me optimism that this is not where we're looking at right now. I mean volatility is still really low, but the one thing that is concerning me is the fact that we're not definitively in the broad markets pushing higher.
Now this might be an healthy environment, right now this could be a little bit of bear shakedown we were tickling that 200 day moving average for quite a while for a few months since the beginning of the year. We touched that a few times and it held that point of interest for us, our level of interest we like to call them rather than resistance or support. It was an interesting point that made it's hovering right around that being a guiding light, but it didn't punch through which was a reassurance that we're not quite there at the bear market stage but by God we need that. I think we really need that just to do a shake off.
This is a great pressure valve right now, but I'm curious where it's going to be. I'm looking to the future where everything is going to be in 10 years. I mean the one thing that I think is going to tip over the bear market right now, the one thing I've got this on my radar is the tech sector. Basically where we are right now with and we're talking about this more in funny enough next week's show about more about unicorns, so I don't want to label the point here too much. We are looking at a lot of the tech sector being bigger than the 2000 tech sector and that again has a lot of risk.
Phil Newton: We're not just talking technology for the sake of technology, because I think the dot com bubble was technology for the sake of technology. That was broadly speaking and just to try and sum up the whole debacle in a sense. It's got a dot com in it well it must be good. There was no substantial business model, but it was tech for the sake of technology and if we can put a dot com at the end of it then certainly you're a technology company.
Just like if you can put crypto or block chain somewhere in the name you certainly got this magical crypto thing experience. We've seen that a few times, but thankfully I think this time round the various governing bodies have slapped wrists and slapped some heavy fines down when people have tried to manipulate the situation. I think this time I think what's got me excited about tech this time round Sean is not just that technology is bigger, but there is new technologies. Not just the different version of the same technologies, there is quite literally new technologies.
Imagine for a moment that I'm going to steal your thunder here Sean because you've typed it out and it's been on my mind recently because I have been looking into it. If you imagine that you could just have a recreational visit to Mars. I'm going to spend a month on lunar it might or just a trip to space. It's not quite the price of a lioness I get that, but it's affordable even at today's meteoric pun intended prices.
What I was reading the other day Sean thinking about it going the other way. Tourists are visiting the Titanic because it's now affordable, all right it's still out of most people's price ranges I get that that but it's affordable for, it's at an affordable level is what I'm trying to say. It's not going to cost you a couple of million, it's got to cost you a couple of thousands to get down and go have and a little tour around and have a look at the Titanic or various places, because the technology is better and it's affordable for the masses.
That's what got me excited; it's new technology, ground breaking technology news stuff that has been very quickly become affordable. Again, that's exciting for me Sean as you can probably gather by my, well my excitement.
Sean Donahoe: Well indeed yeah and everyone is looking for Jack's skeleton that's what it is.
Phil Newton: I know and I could also touch a little bit on health. So many health advances, again new technology and it's this field and we've spoken about this before in the past. It's just how does this new technology come about; it's diffusion of two sectors colliding.
Technology and printing for example and brick laying; you've merged those two together and you've got principle buildings. You can now go and effectively program up a concrete printer and it will lay the foundations and pretty much do the bulk of the heavy lifting and print you a house. What? In what world does this come from?
It sounds really trivial because we're in the western world we're around it on a regular basis, but you can transport that to a third world country and you can solve … I'm thinking of South Africa I wonder if it goes to there, there is lots of slums and shanty towns and the big project out there was to develop cheap affordable stable housing that wasn't literally and sheets put together with a 10 roof and scrap metal. If you could take that out it's affordable cheap sustainable housing and it's for the masses because it's needed. It solves a very viable problem and it again comes back to it's affordable and it's cheap.
These are the things that have me wondering what things can you fuse together to create new technologies and new innovations in broadly speaking at the technology sector.
Sean Donahoe: Indeed and this is what we're going to talk about kind of move the topic along to is; the different tech industries, the different future industries, the emerging industries that are laid out in the future and see what opportunity there are. Now I mean 3D printing, 3D printing houses is an amazing technology and again can solve a lot of different issues. When you think about it I actually watched one the other day and it was an entire 3D printed dome and again because of the engineering structure of a dome its pressure, resistance and everything else it's …
Phil Newton: That's right yeah.
Sean Donahoe: Well, but it's also because it's so easily printed you can have a entire house ready to rock in four days, that's it. Insane technologies. Let's look at some of the big boys right now; now we've all heard of the FANG stocks but in the future what's going to be the …
Phil Newton: I know you want to do your Dracula impression blah, blah, blah.
Sean Donahoe: There you go blah, blah, blah but we'll look, but the thing is that that was an acronym for the big companies which is; Facebook, Amazon, Netflix, Google and then they …
Phil Newton: In my perspective Sean full bullshit stocks just so that it can spell out the word FANG, it doesn't matter what the stocks were it's just because it spelled the world FANG bullshit as far as I'm concerned that is my thought.
Sean Donahoe: We've talked about that in the past.
Phil Newton: We've talked about this before, it's a headline that the talking heads can get behind and it's the FANG bulk who cares.
Sean Donahoe: The thing is that those are market leaders, so who are going to be the market leaders coming up? What are the criteria? Well, one of the things that we look at these companies with is where they're disrupting or leading or creating new tech.
Phil Newton: Or merging as we were saying, because that was the problem with the Blockbusters and the Toys"R"Us. They weren't evolving and adapting and if it wasn't clear that's what we're talking about. It's this merging of technologies, merging of sectors almost to create a new innovation in what could be a new space. That's going to be the innovation that's going to drive the leaders of markets and industries; otherwise they're just going to be maybe the next item I don't know.
Sean Donahoe: Well, a lot of these are also creating monopolies and this is one of the fascinating things. If you look at and this is what …
Phil Newton: I don't think that's a bad thing, everyone sees that as a negative. I mean if you're genuinely providing a good service and you're cornering the market as well, I don't see much wrong because you're creating free competition and that's going to bring the game up for other people to knock the monopoly out of that market leader of the moment. If they drop the ball on what they're doing and they lose market share, they are not going to be the market leader for longer if they are not innovating.
Sean Donahoe: Exactly.
Phil Newton: Word is you capture the monopoly. I think that's a good thing personally, because that's going to bring people up to a standard whereas the government intervention with monopolies it holds people down to a lower standard. I think that's a bad thing personally.
Sean Donahoe: I do as well funnily enough we both agree on that, because at the end of the day it's going to force you to keep innovating to maintain. Here is the thing when you're number one …
Phil Newton: Restrictions on monopoly hold people down to a lower standard and that's bad thing broadly speaking in society as a whole.
Sean Donahoe: Well absolutely.
Phil Newton: You want to be brought up to the best of the best, the best opportunity and this is why entrepreneurs in any industry, in any walk of life this is why entrepreneurs are so pivotal because they're driving, they're the driving force behind a driving vision to shape the world in a different way to what it is now and that lifting of that particular area. Again I'm wholly behind it.
Sean Donahoe: Well, the thing is and this is what I was trying to say is when you're number one there is only one direction and it's going back to number two. You've got to hold that number one position which means you are forced to innovate, to shape unless you are so far ahead no one is ever going to have a chance of catching you up. Now one other thing about that you can take a Warren Buffett moat.
Phil Newton: Then that's the reward isn't it?
Sean Donahoe: It is. It's a security of being that far ahead, but if you look at; Facebook, Amazon, Netflix, Google I mean if you look at any one of these one of the common things they are doing …
Phil Newton: MySpace springs to mind.
Sean Donahoe: Well there you go, but if you look at what are the commonalties between them it's AI, it's the machine learning, it's the other things that they're doing to push ahead. Now Netflix yeah they are still in AI, there is a lot of AI in and around the content that you're shown or that you're exposed to. The machine learning of what you're interested in and everything else. Now, the other ones …
Phil Newton: I think Amazon is the most obvious at doing this; the people who bought this bought also like that product or the people who watched the Netflix cases or the people who watched this also watch these types of programs. They're trying to forecast and predict what you might like or the tastes and would be more interested in. It sounds really simplistic but there is a lot of thought goes into that technology to make that happen.
Sean Donahoe: Well it's not only that, but think about the distribution. Think about and this is where again internet speeds is going to come into this again. Let me go off on a little bit of a geek side note here, but this is again the unintended consequences.
When we're looking at new technologies, new emerging technologies like 5G; 5G is the big thing by 2020 okay. Mobile speeds 10x where they are right now that's the promise. Which means again streaming content, streaming, I mean which is the biggest 70% of internet traffic is streaming video, which is why the whole big debate about net neutrality and everything goes came up.
Phil Newton: Instantaneous high definition streaming.
Sean Donahoe: Indeed, so when you've got that …
Phil Newton: That's pretty impressive from a data transference point of view.
Sean Donahoe: The problem is the infrastructure is not quite there yet to be able to handle a lot of this or it's having to continuously evolve. Which means internet service providers are going to have to get; more powerful and faster routers, cabling, fiber optic and what have you other distribution points of data. Switching and that is significant, but that's going to be one of the biggest shifts in technology over the next 20 years because the demand for more and more data, for more and more storage and everything else all of this and around that is growing.
Phil Newton: It's not necessarily the technology is not there, because it is. It's the infrastructure for the technology is not there. That's what's going to take; exactly, that's what's going to take time. It's not that technology is not available, it's just our ability to use the technology on a mass scale isn't there.
Sean Donahoe: Exactly, because it's bloody expensive.
Phil Newton: What we're starting to see now is it's cheaper to build new cities with this infrastructure in place and they're already doing experiments in cities in various places around the world.
Sean Donahoe: They are doing it in United Arab Emirates.
Phil Newton: It's cheaper to do that.
Sean Donahoe: In Dubai yeah.
Phil Newton: It's cheaper to do it.
Sean Donahoe: It is, but then Netflix one of the ways they're doing, they're using machine learning is they actually with a lot of ISPs they have these giant hubs, these boxes that store all of the content that Netflix has. They can predict the demand in any one city for particular content so they can update their boxes. Rather than coming from one central hub and distribute it from there, they've got all these nodes situated with ISPs all over the country and located all over the world which are updated locally with the most in demand content.
Again, machine learning and predictability they can anticipate where the most demand is going to be and these boxes get dynamically updated with all of the content, the entire library of Netflix. Now, if you think about this with content and this is one of the other areas is content creation. Content creation which again is not just the big TV networks or the movie networks; Amazon Prime is doing dedicated Amazon Prime shows that they are making, Netflix is doing them.
Phil Newton: They are not quite exotic shows and what I mean by exotic is not like all fancy and exotic. I just mean like bespoke interests is what I mean by exotic, because as far as the old example is the underwater basket weaving is what I used to use in the 90s. It's something crazy enough to wall and out them and probably no one was interested and because everyone has used it as an example for so long and because of the communication ability, we find a lot of people around the world now have got an interest in under water basket weaving.
Sean Donahoe: There is a market for everything if you fund it a little bit.
Phil Newton: There is a market for everything, but that's only … The point is I suppose you can find the people who would be interested in that type of bespoke exotic type of programming because it's now, again it comes back to it. It's now affordable to create and distribute, whereas previously the distribution mechanism just wasn't there. It was you had to appeal to the masses; otherwise you would go broke trying to just satisfy that small group of people who wanted to watch something about under water basket weaving.
Sean Donahoe: Yeah, this is where YouTube comes in and Twitch. I mean if you look at there is this people eSports is another thing.
Phil Newton: Yeah, Sean I mean watching other people like future games.
Sean Donahoe: Well indeed but there is lots of other stuff on Twitch as well. Businesses are using Twitch now because it's part of Amazon Prime, Amazon bought them and now you can with your Amazon Prime subscription actually get custom access to certain channels that are business related. I mean businesses are using Twitch now to do live streaming. When you've got user created content and ways for users to actually make money either with like a Patrian account or …
Phil Newton: Yeah, YouTube Red springs to mind yeah.
Sean Donahoe: Well, YouTube Red is the paid version to get rid of all the ads, but YouTube just announced in just this week that they're now offering the ability to sponsor a channel. They're kind of now taking the shot of Patrian who was the leader in the user content creation side. They realized there is an opportunity, now they're creating their own sponsor this YouTube channel. Now this is putting money in these user created content pockets, the people who are dedicating thousands of hours of content creation to the masses. Phil can get his subscription to his underwater weaving channel and what have you.
Phil Newton: High street shoe shop sorrows.
Sean Donahoe: Yeah, exactly.
Phil Newton: Which is my other fetish. You know it just, we're talking about quite off the wall type of experiences for most people, the lay person. This is the opportunity in the future, the generation that are currently being born now they are going to have all of this. All this stuff that we're talking about, this is going to be a normal for them. I mean if you think back 20, just 20 years I mean I remember buying my mobile phone in the kind of mid 90s and I was so excited but I was so scared to use it really.
Sean Donahoe: You got Nokia didn't you? Like you got a Nokia.
Phil Newton: It was so damn expensive, no I actually had what was, I think it was a Motorola at the time but it was like a really posh sleek. It was one of the thinnest ones on the market at the time or at least it was available to me anyway. Anyway, the point is, is that who would have imagined that I was carrying this phone around and I could call anyone that I wanted but I didn't. I could call anyone from anywhere and anyone could get in touch with me and it was just the thought of it was mind boggling.
You know I know we had them in the 80s, but this was the kind of the first experience of it for the mass appeal. Anyone could have one of this in their pockets and for 20 quarter amounts even back then that was quite cheap, but for 20 quarter amounts I could call pretty much anyone anywhere that I wanted at any time that I chose. Now that you're plugged, today you're plugged into the matrix. If you don't have a mobile, back then I was an anomaly I'm very proud of myself for being able to say that word.
I'll try it a second time; I was an anomaly but these days the opposite is true. If you don't have, if you're not plugged into technology you are missing out. That's what we've grown up with, but now as you're being born this technology, these visions of and futuristic future, well futuristic futures Jetsons type experience. It's that, that's mind boggling for us right now as we're talking about it but that's what the opportunity is.
If you can figure out where the sectors are going to merge and what the opportunity as an investor in technology, in sectors, in the future of what could be. Then the opportunity to buy that deep just to be simplistic in the sector, in a new stock, in emerging technologies, in merging technologies pretty much we're focusing about more than anything that's the opportunity in the future. What we are talking about is going to be normal for most people in 20 years time.
Sean Donahoe: Well indeed, I mean let's take a look down 20 years from now think about …
Phil Newton: These are present things already. I mean today people are printing, they're downloading schematics of the internet and printing a working functional prosthetic arm that understands how the muscles behave. They hook them to the muscles and with a fork they can now drinks link with lift a cup and have a drink that they never previously would have been able to do and it's downloading off the internet.
For me that's mind boggling, but in 20 years time that's going to be this arm's crap I'll get a new one and you just download the copy. That's amazing. I don't like my arm; I'm going to get a new one. You don't want the one that you're born with, so you are going to get a new one, a stronger arm and have it cybernetically installed. That it sounds crazy and …
Sean Donahoe: I think that's a little more than 20 years away, but you never know.
Phil Newton: No, but you know what I'm saying but we're getting closer everyday and that's the future, that's the opportunity.
Sean Donahoe: I mean if you're looking at like 20 years down the line you're talking about healthcare. One of the things, again this is another opportunity.
Phil Newton: Don't get me started there Sean, don't get me started there.
Sean Donahoe: I'll try not to, but one other thing that we're looking at there is again 20 years, 30 years, 40 years in the future is increasing life spans. Think about the healthcare industry as people are getting older and older we're developing new technologies, new drugs. Where again you've got gene editing, you've got retirement planning, you've got all of the consequences of a population that the usual cycle of births and deaths are going to decline because people are living exponentially longer. The strain it's going to put on; economies, healthcare, the shifts in regards to that.
I mean just talking about everything from prosthetics; I mean the technology that's developed out of this is absolutely insane. I mean healthcare is going to be one of the biggest sectors in the future because we are all living longer and here is the thing; we're getting healthier.
Phil Newton: Go and print myself a kidney.
Sean Donahoe: Well, actually they did this the other day and I saw it, I was reading an article about this. There are robots right now that they're developing that are growing and sustaining human organs, now that is insane.
Phil Newton: I approve, but it's boggling. Absolutely mind boggling.
Sean Donahoe: It is mind boggling, but think how many people right now as this technology increases again this is …
Phil Newton: I can always imagine someone's head blowing off their shoulders as we've just triggered them at the possibility and they don't approve.
Sean Donahoe: Well, think about how many people right now are waiting for organs. I mean funnily enough my physical therapist and my professional trainer.
Phil Newton: Well, the same to as you're born to keep all the excess stuff that comes out with birth. I'm trying not to be too graphic Sean, but all the extra stuff that comes on with above. The sound that you should keep that on freeze so that they can do, they can culture a kidney that you might need at some point in 50 years time.
Sean Donahoe: That's interesting.
Phil Newton: Just in case. I mean that's the soul of technology or we don't have it today, but in 20 years you're ready for it. I need a new kidney well we'll just go and culture one from your, I can't remember the right wording for it whatever the …
Sean Donahoe: Your placenta.
Phil Newton: Yeah, no it wasn't the placenta but yeah it's the …
Sean Donahoe: The stem cells.
Phil Newton: Stems that's the one, the stem cells or my cartilage is a bit tricky I'll just go and grow a new cartilage and get a stem cell injection from my own stem cells, you know imagine that.
Sean Donahoe: From the umbilical, yeah the umbilical cord is where a lot of those if my memory is right is stored but yeah I mean it's amazing. I mean my physical therapist and personal trainer just tore out her ACL just in the last couple of weeks and just had to get literally a transplant someone else's ACL and tendon reattached. I had no idea that they were taking someone else's ACL that has disease to put that in.
If you could grow new tendons and again get your own tendons, put back in so to speak and there is a way with nanotech; which is one of the big things that's going to be in the future where you can actually just re-grow them inside yourself. Which is one thing that they're talking about with certain nanotech, it's going to be fascinating. I mean that's one area where I'm looking at.
Phil Newton: I was reading a study about there is a fish. What is it, there is a fish in, a type of tropical fish in South America that is one of the few species that has genuine regenerative abilities. They've been looking at that kind of to try and figure out how it happens.
Sean Donahoe: Re-grow its own limbs, yeah.
Phil Newton: Yeah, but I think it was, but they were looking at it from the heart point of view. Rather than give people heart transplants and if you've had a heart you've got scarring, how to get rid of the scarring so it gives you a healthy heart back without having to have surgery in the traditional sense. If you could re-grow the cellular level, the damage bits it's just and he's not talking about all this stuff. It sounds absolutely completely bizarre awful, but they are genuinely testing these things out. It's just .
Then you realize, I mean I read a lot of Sci-Fi's you know Sean and you read some of these things. I mean I was reading something and it was a character in a book that I was reading a couple of years ago. It's close to my heart I've got Crohn's disease, but I was reading about this character and she'd had all her intestine replaced with an artificial intestine which basically means she couldn't get drunk so she was a bit pissed off about it.
The point is you've got your whole digestive tract is artificial for me that's mind boggling. Back then I just kind of skipped past the possibility, but now I'm more open to the idea of what's available with health and the technology and re-growing stuff.
Now you know what? My intestines are probably going to pack up on me at some point in the future. That gives me hope that I could get it replaced and not have to wait, have to take it from someone else because for that to happen someone else has to pass away and I don't really like the thought of that to be quite honest.
Sean Donahoe: No.
Phil Newton: If Sean could grow me a customized new intestine, that gives me hope. I'll bind that technology right now.
Sean Donahoe: Exactly and think about how many people are on waiting lists for organs and everything else. If this technology gets to the point of …
Phil Newton: Let alone the black market.
Sean Donahoe: Yeah, indeed.
Phil Newton: I mean that's a different kind of fish all together, but it goes on.
Sean Donahoe: We're not talking about people lying in a bath of ice after their kidneys have been forcefully removed, no. I mean that's not exactly …
Phil Newton: No, but it's, I find it amazing Sean. The possibility of the future, a realistic future, not just a crazy unexpected possibility. It's a realistic possibility in my life time, I think that's what I'm excited about. In my life time I could see a lot of these things because they're being checked and tested. Maybe I'll live till I'm 180, 190, 200 who knows and I'm certainly gunning for 160 myself. What's your number while we're on this subject Sean?
Sean Donahoe: I'm going to live forever; I'm an islander you know.
Phil Newton: All right islander, you're Conor McLeod.
Sean Donahoe: Yeah, that's it funnily enough. I mean I want to be around forever, so I'm going to find a way if they have immortality by the time I'm old enough to appreciate it, then I'm going to buy that. That's fine, I'll take them all. I'll take that then.
Phil Newton: That'll be available for everyone.
Sean Donahoe: I'll be like one of those, I'll be like what's the Futurama where their heads in a jar.
Phil Newton: All in because I watched that Altered Carbon recently. All that kind of be living for a thousand years and having your consciousness downloaded and transported to different worlds. Now that, I think that is out there with moments, but hey if all we are is a representation of, if we can digitize the soul we could certainly transport that's the wrong way of saying it but you know what I'm saying. You could digitize what we are, because all we are is electric currents at the end of the day.
Sean Donahoe: Currents and chemicals that's really it, it's just the way we translate it. I mean talking about …
Phil Newton: I think we're well into out there territory now.
Sean Donahoe: We are but let's bring it back down a bit, but we're …
Phil Newton: Let's bring it back down where is the opportunity? Where is the trade?
Sean Donahoe: Well, let's look at the chip speeds. We're talking about the brain being a computer here, but at the end of the day one thing that is increasing is chip speeds and one area I'm particularly looking at and I'm invested in a couple of companies that are involved with quantum computing. This funnily enough in the tech sector …
Phil Newton: .
Sean Donahoe: … and areas I'm looking in …
Phil Newton: X joke from Terry .
Sean Donahoe: Well indeed out of cheese era, but the quantum computing is something that I'm absolutely fascinated with. I think it's going to be the next step in computing and it comes down to the way that the chips are ... I mean here is the thing, we are going to hit the singularity in our life times and this is where computers are smarter than humans. I mean we are rapidly drawing in that area, but that tipping point is going to come really with quantum computing. I won't go geeky but I will for a moment.
Phil Newton: Too late Sean, but carry on.
Sean Donahoe: Yeah, too late but I'm trying to be nice to our loving listeners. Most chips are binary, you have one or zero. That's the state, it's binary simple. Here is the thing with quantum computing you can have one, zero as well as one and zero and this extra stage allows infinitely more power and speed in our chips because right now they can only get these chips to a certain density. There is a point where they say these chip speeds double in speed every x number of years, you know this Moles Law.
Phil Newton: The Moles Law, yeah.
Sean Donahoe: They are getting faster and faster, but it's getting to a point where we're running out of RAM of their compression. The amount of space in chips they can cram everything into per square inch and it's like, okay how many extra elements can we put in that. Well quantum computing is going to or basically atomic level computing is just going to exponentially increase speed. It's going to be the next big leap forward.
Now right now it's insanely expensive and it's only experimental in labs, but when that shift comes and we have it in our desktop computers, we have it in our cell phones which is probably good 30 years away but that is going to be significant.
Phil Newton: Bio integration is already what we're talking about and experimenting with connecting. I think if that was to happen, I think technology supporting decision making process and having that kind of cyborg experience. You know that is the next kind of, that is a bit bizarre but it's a possibility when that leap when that gap is jumped.
Sean Donahoe: You know we're talking about biointegration that is an entirely different area in the industry.
Phil Newton: Well, people are already doing it now aren't they?
Sean Donahoe: Well, they are. They are putting our RFID chips in their hands and stuff like that and there is all sorts of actual physical biohacking that is very, it's a sub culture right now.
Phil Newton: No but weird.
Sean Donahoe: It's a sub culture, it's kind of like …
Phil Newton: It would look weird.
Sean Donahoe: … weird tattoos that people are putting in, but they are actually making them suck at both. I mean I saw one the other day which was, just a random bio hack and nothing to do with trading at all but it's just popped in my head, is people are getting sound waves tattooed on their arms.
Phil Newton: Yes, I've seen them.
Sean Donahoe: They can read them and it's like the voice of their, someone heard the voice of their mother who had passed away tattooed on their arm. When they scanned it with the phone it was like a barcode, it would actually play the sound wave of the tattoo. It was freaking creepy to be honest, but I thought it was also very cool at the same time and absolutely there is no trade or anything there, it was just a random side bar.
Where again, that's because of new technology where you could read that sound wave from your phone. If you can think about all the different things that are innovative and disruptive that's pretty cool. I mean we could talk about this for another hour easily and I've actually got a crap ton of notes and we've barely even schemed the surface.
Phil Newton: Exactly, yeah you don't even limit it … I think when we're thinking about the future and I'm looking and bring it back to trading opportunities, you were only limited by your imagination of what could be. Then it's just a case from an investment point of view, is do you have enough time to wait.
Sean Donahoe: The other flip side of it is you don't have to look at what could be, look at what's happening right now. The innovators I mean …
Phil Newton: Merge of sectors in technology that to me is the obvious thing.
Sean Donahoe: Yeah, I mean look at Tesla, I mean Tesla is on the race to electric cars. Where is the trade? Precious metals, the actual car manufacturers themselves. I mean Tesla, GM and Ford are the three largest car manufacturers. GM has a market cap of I think its 59 million also as of February. Tesla has 54 billion, these are billions so 59 billion is for GM, 54 billion.
Phil Newton: I'm holding my little finger to the corner to my mouth as we speak Sean.
Sean Donahoe: Yeah, exactly. Tesla who came out of nowhere, Ford is 42 billion but if you look at this GM and Ford had been around for 100 years. They're well established car makers. Tesla coming out of nowhere creating these electric cars has almost and on one stage had eclipsed and was the number one car manufacturer in the country.
Now, you could go on about Tesla, the model three production we've talked about that in the happening now report and stuff like that. Tesla is more of the luxury car range because these electric cars are bloody expensive, but they're getting into tracking …
Phil Newton: I think he sells it.
Sean Donahoe: … and the automation the driverless cars.
Phil Newton: Yes, you get but what I was going to kind of point out is who wants to go east literally shooting for the moon or in this case Mars.
Sean Donahoe: Well, he is.
Phil Newton: What does he need to get there? Where is the opportunity, all right it's just some crazy eccentric billionaire wants to kind of fire a rocket to Mars and see if we can get a human there. What does he need to get in there? He's building up battery powers, electric cars, he's got the, what's the hyper loop thing that he's doing.
Sean Donahoe: The Boring Company I love that, the Boring Company.
Phil Newton: Exactly yeah, the Boring Company because he's going but because probably we are going to, guess what because they're probably going to live on the grounds when they are on Mars because the surface living arrangement might not be the best thing. He needs to dig underground so hence the Boring Company.
Sean Donahoe: Which he's getting paid for.
Phil Newton: Yes, literally it's boring.
Sean Donahoe: Now here is the thing you talk about this, but …
Phil Newton: Everything he took has got a purpose. When you think about the vision it takes to do that and what he's going to need to get to Mars and then live on Mars and then grow an industry Mars, everything he's doing right now is supporting that future and we're benefiting from that now. That's the opportunity; there is the opportunity right there. It's not too late to participate in that. All right Tesla might seem over priced and overvalued, but look at all the supporting companies that are helping drive that vision of getting to Mars in this lifetime a reality.
Sean Donahoe: Well, look at the, I mean just take Elon Musk's disruptor right now. Let's take a step back here, he's got SpaceX which he's created the company because he wants to get to Mars, but the thing is he's now the biggest support industry for NASA. I mean right now he's putting all the sound lights in space, they're resupplying the international space station. They have a 28 billion market cap, they're talking about space tourism, but again all of this technology is being paid for by his endeavors and again eclipsing blue horizons which is Amazon's version Virgin.
Google is acquiring companies are looking asteroid mining in the future. I mean that's way off in the future, but SpaceX they reckon by the end of next year to 2020 they're going to have people in space travelling low earth orbits. Got to be shooting around the moon and everything else. He already put a Tesla in space; I mean you saw that not too long ago. He put one of his roam star in space. Again, great .
Phil Newton: Because he can that's why he did it, because he can.
Sean Donahoe: Well, here is the thing and I…
Phil Newton: .
Sean Donahoe: Well, here is the other thing I didn't trigger this or I didn't notice this until recently. I went back and watched an old movie, I don't know if you've ever watched it Phil; Heavy Metal.
Phil Newton: It's a little old and a hot tip to one of the things in it isn't it.
Sean Donahoe: Yeah, the very first sea which is a covet in space which is driving down from a spaceship and he's heading back to his planet, but he's up there in the space suit and everything else in a covet flying through space. I'm like I didn't twig on that one immediately until I saw, well I sat down and watched the movie I'm like you bastard. You magnificent bastard, I love that.
Yeah, again he's disrupting that, he doesn't think Jetsons is going to be a thing where we're flying, you know having flying cars. He doesn't think that's practical, because people are not going to maintain the car that's going to come off. Stop act like a bloody guillotine from space and hit someone or from the air should I say not space. Again, he thinks that flying cars are impractical, so he's creating this hyper loop …
Phil Newton: Hyper loop.
Sean Donahoe: … which is going to be ultra fast transport, subterranean transport that allows you to get from A to B and do all sorts of crazy stuff. Again, hyper fast transport and I was reading an article …
Phil Newton: It solves a very real congestion problem.
Sean Donahoe: Yeah, I mean LA has the world's worst congestion, I'll put that up against Mumbai or Bangkok any day of the week for congestion it's a night mare. One of the things here is that he's developing new technologies that again have to beat magnificent challenges. Most boring machines right now the actual tunneling machines, they are slower than a snail. A snail is 10 times faster than the average boring machine.
Phil Newton: I remember the channel too it was, you know they would directly go and look at how these giant machines were tunneling under the channel and they're digging a hole to France from the UK and vice versa. It was watching, it was worse than watching paint dry. I mean what can you do with that? If you can improve on something which is what he's doing, if you can make it go more than and it's travelling an inch a day we'll come back in 20 years shall we when this tunnel's made. It's now certainly not that impressive anymore.
Sean Donahoe: Well, this is a challenge that he's overcoming is most boring machines as 10 times slower than a snail and a hundred times slower and a snail is 100 times slower than a human. He says well we've got to beat the snail, so what they're doing is they're developing technologies but not only when they're boring the ground out. They've got the challenge is to be far as fast as a snail. That their mascot of the company is Gary the Snail, they are actually half a snail in an aquarium.
The thing is that even with this what they're doing is they're developing, they're using the earth on the dirt that they are creating while boring out the way to create bricks. Almost like a Lego type bricks that people could use in their guns. They are also using it to the reinforce the tunnels as they're building it. What they're doing is they're developing innovative technologies that most people don't think of. You think of a boring machine you use the example of a channel tunnel.
Phil Newton: I need to dig a hole, here is the shovel.
Sean Donahoe: Exactly and that's the technology or what's the channel tunnel rollers. Well, they're just bigger boring machines, but he's developing technologies that then innovate and then solve other problems are related to it. Again, just changing the scope of an entire industry that then becomes an industry leader later on. I mean I've got to give …
Phil Newton: Hasn't he thinking about then what can that . Here is the merge, the merge then is to take that technology and remove it from what is essentially underground transportation I think. Then move that into the mining industry.
Sean Donahoe: Yeah, exactly I mean …
Phil Newton: Then suddenly the ability to access fossil fuels safely or say more safely in a speedier fashion might make that a viable, a more affordable means of I know it's fossil fuels. I know that this is going to be someone binded on dream about that. If you can get out the ground cheaper, then we're going to have less of a fracking problem. Which I think is worse than just digging out a ground and have another .
Sean Donahoe: There you go, I mean there is all sorts of …
Phil Newton: It's the lesser of the evils as it were.
Sean Donahoe: Indeed.
Phil Newton: Even just getting to veins of pressures or semi-pressures and metals or iron or things like that. Those are the reasons for digging a hole in the ground, but certainly you've got the possibilities and you've got the fusion and this is what we were talking about earlier. Where is the opportunity? In the fusion of having that technology affordable to be licensed or mass produced or mass used elsewhere. It's that fusion of two industries; there is the opportunity.
That's why it's worth looking to the future to figure out what's on the horizon or if this is disrupting one industry on Elon Musk in the news for probably all the wrong reasons than he should be in the news for. How can we take what he is doing or something similar and use it somewhere else and that's the revolution.
Sean Donahoe: Absolutely, so there you go ladies and gentlemen. We'll wrap it up right there because like I said we will go on about this forever is one of my most impassion topics as you can tell. Again, look to the future, look for opportunities, look for the fusions of industries, look for technologies, look for the sideways impact. We didn't even get into AI and robotics and the lives of employees and what goes fast in terms of jobs and surging unemployment.
Phil Newton: Even touch on block chain.
Sean Donahoe: Yeah, we did I mean there are so many aspects but again.
Phil Newton: There's all sorts of things.
Sean Donahoe: There is lots of lots of different aspects that you can consider, but look to the future. Those in lies the opportunity is when you can see, not only what's direct impact but side impact as well. With that being said, let's move on.
Automated: Now, it's time for the Rebel Trader tip of the week brought in my, 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 Rebel Trader tip of the week; as you can tell little impassion section here today. Here is the thing, always be learning. Outside of the technicals and chart analysis I'm always wanting to learn about; certain businesses, certain industries even certain products as you can see from today's show. I'm always fascinated by the advances in technology, but on the flip side the implications and the ramifications that those developments have on industry.
Here is the thing, most people don't think as we said in the beginning of this show that far ahead and this is where the opportunity to see things actually is and consider things before they become mainstream. When you're able to look ahead, when you're able to take off the blinkers in the blinders somewhat and have a full view. Start to kind of determining and learning about different industries, different markets and allow yourself to have a deeper understanding of what drives those businesses. What those businesses are about, what their long term goals are.
I like listening to a lot of the different symposiums that a lot of these industry leaders and innovators have, because I like to hear their vision because they are determined to make those visions happen. Which gives me insight to say, “Okay, well if that happens, what happens here?”
I like to stop and sit and think about this stuff, no again because of the way we trade it gives us time to do this kind of thing. We're not glued to the screens, but it allows me to not only see the opportunities outside of the usual channels that may present themselves, but it also helps keep your mind sharp and that's a good thing for life and in trading. I mean what of you Phil.
Phil Newton: I mean as Poirot said it's good for those little gray cells.
Sean Donahoe: Indeed.
Phil Newton: No, but I mean a good example of this is from a trading perspective is to think about what's going to happen next as you said. Being able to have a broad spectrum of things that are going on in your life, it's going to keep you engaged intellectually as well. It's going to keep the mind sharp and maybe you spot an opportunity like we were talking about in the main section. Maybe you spot an opportunity of two converging sectors that might create a new opportunity in the future
I mean in my own personal experience trying to look forward into the future; that was the reason why I was trading currencies when I did. I was trading index futures at the time because hey, I didn't know any different but trying to think about what the opportunity was. It was going to be an explosion of the currency markets and we saw them go wild back in 2002. I was a little bit early but eventually by 2004, they took off literally in a wild way.
It was just a technological explosion in their own little way; they had their own bubble because of a technological explosion that made the affordability for everyday people to trade currencies. It's still it's gotten the lowest buyer into entry. It became affordable, technology was there, it made it easy to access the markets and it just caused a wild ride for around about seven, eight years.
Anyway, so thinking about where the opportunity is we've always spoken on it in the past. Again, just don't focus on what is the hot thing now I guess, but we could say this with anything, couldn't we Sean? Don't focus on what the hot thing is now, trying to be thinking of what the next thing is.
I always Wayne Gretzky skates to where the puck is going to be, not where it is. There is lots of cliché phrases to use and this is what we're trying to advocate throughout today's show and every other show, is to be like little boy scouts and be prepared. You know look for the future, plan for the future, plan for the opportunity, plan for the possibility that's something that you hope well it doesn't happen or something you hope would happen comes to fruition. That's what we're trying to focus on.
If you are driving a car you wouldn't look at the speedometer, you wouldn't just look at the gearstick you just wouldn't look at the radio all the time. Well, a lot of people just do look ahead down at the mobile phone these days which is a danger and you're going to wonder why they are crashing. They're head down looking up what they're doing in the moment and not looking as far down the road as they can see to see opportunity or avoid danger or see if someone in front of them is breaking. You can take this analogy in a lot of different ways. Sorry kind of rambling Sean, but I think we all get the point now don't we?
Sean Donahoe: Abso-bloody-lutely, so with that being said I think that's a good way to wrap up this segment. Let's rock on.
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mail bag for this week's Rebel Traders quick fire round.
Sean Donahoe: Okay, so Rebel Trader mail bag kind of a quick ravage around here and I've got the first one for you here; when selling options, how do you decide on your exit strategy? Now, I love this one and I'm going to fire this one at you because I know you've probably got a range of flippancy.
Phil Newton: A few different ways of answering it, right. Yeah, I mean when do you want to take profits, is the flipping answer. Whenever you got a profit you are happy with. Understand with selling options though the only way you will make maximum profits, so what's maximum profit first of all? If you sell the option and you receive a premium of say a dollar. A dollar per share, so for every option contract with a hundred shares you receive a hundred dollars.
The only way you will get to keep that hundred dollars because while you are given it on day one for example, the only day you get to keep all of it is on the day of expiration if the option expires out the money. You've got to be right in your view points on the day or expiration. Let's just say that you buy 45 sorry, you sell 45 days worth of time on a particular strike and you collect a hundred dollars, that's got to expire out the money and you've got to be right. Not just at any point in 45 days, but you've got to be right in 45 days on the day of expiration to collect and keep a hundred dollars. That makes sense first of all, so that the …
Sean Donahoe: That's solid.
Phil Newton: … how you get max profits, maximum profit on the day of expiration. Now let's change the goal post suddenly, what if we just want to get some profits at any point between now and expiration, then that gives us 45 days to be bright. Whereas we've only got to be, whereas to get maximum profit we've got to be right on one day in 45 days time.
If we want to take some portion of that a hundred dollar maximum profits at any point between now and in 45 days time, then we only need to be right briefly. That all happened with maybe a market swing all time decay. A usual and suitable exit strategy is to take a percentage of the maximum profit and what's becoming quite commonly accepted. I'm going to name drop tastytrade here because they've done a lot of research on this and I think they actually broke the ground on the research on this. I think they're worth mentioning as option sellers.
Sean Donahoe: Credit where credit is due.
Phil Newton: Yeah, I got to give credit because they've done, I've got to admit that little hats have been there and they did break the ground on a lot of the research and they do give a lot of research out as premium sellers that's primarily their focus. Anyway, so they advocate selling 50% of maximum profits. What that means is, is you can increase the probability of your success by taking a smaller profit at some point between now and expiration.
I think you only got to be right at some point, any point in the next for example 45 days whereas if you want to collect all of the profits you've got to be right on one day in 45 days which is a harder task.
Sean Donahoe: That's a much smaller target, that's trying to shoot that two meter exhaust ball on the dead star.
Phil Newton: Yeah, I mean in fairness the probability is still favorable if you do it right with the strategies that we teach, it's still doable but it's not as advantageous. You get like a little and a level opposite where if you just want to take a smaller profit at some point between now and expiration. Again, what's becoming commonly acceptable is to take 50 or I think is becoming commonly acceptable I've been doing it for quite a few years now is to take 50% of maximum profit.
What I've noticed is that if you're selling a strike that gives you a 70% probability of success on the day of expiration, which is your worst best case scenario by closing out at a reduced profit, 50% of max profit in this case. Then it usually increases by about 10 bases points is what I've noticed it is …
Sean Donahoe: That's about right yeah. About right by my research too
Phil Newton: That's kind of like my practical experience rather than theoretical experience. It gives you again the main reason is, is because you've only got to be right at some point in the next 45 days versus being right on the day of expiration in 45 days time. Yeah, that's where I'm at. That's my I am not so flippant and long winded answer for how do you decide on your exit strategy, look at the numbers; what's working, what's plausible.
Sean Donahoe: Absolutely okay, what else is in the mail bag?
Phil Newton: We were talking about Tesla early Sean, so is Tesla a good long term buy and hold stock? Again, we're talking more about investments, so maybe five, 10, 15 years down the road, the long term investments what say you; is it worth getting involved in it right now?
Sean Donahoe: Well, first I'm going to have to say that we are not financial advisors yadi-yadi-yada usual disclaimer.
Phil Newton: Yeah, this trade might be right not for you and all that .
Sean Donahoe: Yeah, absolutely.
Phil Newton: we are not going to answer this question, it's your own research.
Sean Donahoe: Here is the thing and we'll talk about this in future shows a little bit, but disrupter companies tend to be volatile. That means they're open to a lot of criticisms, speculation, they're open to a lot of different problems because they are not only disrupting, they're innovating. They are creating new markets which means they have to take excessive risks and trail blades.
Now, as a growth stock I mean they have truly redefined the car industry. I mean we were talking about earlier on, they've got a $54 billion market cap compared to GM which is and Ford which is 59 billion and 49 billion respectively. I mean that's a significant disruption, they're pushing technologies the other car companies are now forcing themselves to catch up on. They're innovating and finding …
Phil Newton: They are the Heineken of the car industry.
Sean Donahoe: They truly are, there you go.
Phil Newton: They are reaching the parts that other cars can't reach.
Sean Donahoe: I was, yeah I was going to say, nice job there on fun there, but yeah. At the end of the day they are very exciting and interesting company. There is a lot of people saying, again looking at the balance sheet. They are close to having issues financially, they are …
Phil Newton: Like they've had issues financially several times in the past, yeah.
Sean Donahoe: They have and they've hit that.
Phil Newton: In fact they've been very close.
Sean Donahoe: Yes and again they've got production problems with the model three and again trying to hit targets there. They are adapting, they are switching to 24 hour production. The fundamentally to my mind it's a risky investment. I trade Tesla all the time. As an investment which is two very clear differences and I have a lot of respect for Elon Musk and his determination, his vision and his grit and I mean even …
Phil Newton: He's an eccentric character …
Sean Donahoe: He is and I mean …
Phil Newton: … or batshit crazy. If he was poor he would be batshit crazy, because he is an Uber wealthy he is rich and eccentric.
Sean Donahoe: Yeah, that's a very good point.
Phil Newton: I don't know that's a broad definition.
Sean Donahoe: Yeah, there you go but I mean one of the things that I see there is I have a lot of respect for him and even with his last earnings report which people say they are going to miss target and everything else. There is short sellers putting out information and he again, he came pretty cool and they exceeded expectations and again they were getting their model three production problems under control and everything else. I always say don't count Elon Musk out, because I again the guy is very good at what he does and the industries he's going into are from everything we talk about here; SpaceX, Boring Company, SolarCity which is, yes, it is SolarCity isn't it?
Phil Newton: Yes, the Canadian solar isn't it?
Sean Donahoe: Yeah and I mean the innovation this guy has his fingers in so many different pies. He's an innovator and a disruptor, so he's always going to have …
Phil Newton: Worth watching.
Sean Donahoe: … something worth watching. As an investment I am ultra conservative, me personally if this was me asking myself this question is it …
Phil Newton: It's not your primary strategy is it?
Sean Donahoe: It's not, I would I have a portfolio.
Phil Newton: I think that's the difference is worth pointing out. Whereas someone else their primary strategy might be long term buy and hold. It comes back to what we were saying before; this is my opinion, these are our opinions, this is what's right for us but for someone else who's got more long term investment strategy maybe this is a good opportunity for them.
Sean Donahoe: Well, I've got a couple of things I want probably caveat too.
Phil Newton: You've got to evaluate it yourself.
Sean Donahoe: I've got to finish the answer I was going to give here. I have an aggressive portfolio for investments; I have a conservative portfolio for investments. This would not meet the criteria for my conservative because there is so much inherent risk. I have a 10% of my investments in aggressive speculative and slightly riskier things, but it's not the vast majority. I have an allocation to stocks like this that are on the riskier side; they are innovators, they're the ones that are look into the future as possible either acquisition targets or possible investments that have a higher risk profile. Fundamentally I look at the future of this and they are by and hold.
I do have that in my portfolio, I do not have Tesla because right now even in my aggressive portfolio the financial profile is to my mind too risky. However, that is going to vary based on your intents. Your goals are going to be different than mine. This is one of the things that I would …
Phil Newton: That's what I was trying to say.
Sean Donahoe: Yeah, but I wanted to give kind of a rounded answer from my perspective but yeah. Again, your goals are going to be different from my goals. My goal is ultra conservative but growth. I will trade Tesla all day long. I will look for opportunities with Tesla; it's in my usual watch list of stocks to watch and when it hits a certain series of check boxes I'll put that trade on every damn day because of its volatility. As a long term investment I'm a lot more cautious and while I mean we've talked about Tesla and Musk's products here today right now I'm more about that.
Phil Newton: Maybe some of the support businesses or support sectors. If you want to kind of have a connection to Tesla without actually trading Tesla, that might be one way of doing it.
Sean Donahoe: Yeah, now here is the thing a full disclosure I actually had an investment in Tesla when they first went public. Well, after a certain amount of time obviously because we wanted to track history data. Once I got some of that data I'm like you know what this is going to grow, this is going to grow relatively fast and it did. It wasn't my investment portfolio for a while. However, as they leveled off and again as more and more concrete was laid in the foundations of this business I pulled out. Again, that was okay my money can be better suited elsewhere, don't make any jokes there.
Phil Newton: Exactly, it did what you thought I was going to do in the time you expected, so the time to cash out and reallocate yeah.
Sean Donahoe: Move out to other opportunities, yes absolutely. Right now I mean that's my opinion on this.
Sean Donahoe: Which is I mean this is the mindset, that's sums up their mindset even with the investment approach that you described but this is the mindset that we're looking for. Where is the opportunity; if the opportunity as you were saying it's stagnated, your money was at that point locked up. Maybe it could be better used elsewhere, so you went in, cashed out and looked elsewhere for an opportunity.
I mean this is what we we're talking about all the time, just because now something is moving like it's on fire. I mean Tesla yo-yoing back and forth is a great ride if you want, the high blood pressure spot that it is and what do you want from your trading? I mean from an investment point of view personally if I was going be more inclined to investing which as the years go by I am more inclined to more longer term view point Sean and just because I think because my patience is getting not thinner, fatter is that the opposite?
I'm getting more patience is what I'm trying to say, so I think I'd be more inclined but I won't be more inclined so I'll be waiting for the bear market. I'm waiting for that six to eight month, six to 18 months intact bear markets and then I'll be looking for investments. That would be what I would be looking for, looking for that major correction to fill your boots and load up the ship and see what happens.
Sean Donahoe: Absolutely, so okay last question of the day and this one is for you because you mentioned this earlier on funny enough. I think there were kind of full shadowing yourself a little bit here. What is …
Phil Newton: I only do full shadowing so.
Sean Donahoe: What is time decay when it comes to options? That's the question.
Phil Newton: Time decay when it comes to, I think for the lay person while it's not entirely accurate but just to help someone here who's probably new to options, which I'm going to guess they are because they are asking these type of question is that an option is like a deposit. You're kind of reserving in this case a hundred shares. Like you would go into a car dealership; I like that car, I can't afford it today but I'll let you know at the end of the month whether I want the car. You got to put a deposit down.
Let's just say that that deposit is for 30 days, so I'll let you know at the end of the month. It's the first day on the 30th, I'll let you know if I want that car and don't sell it to anyone else. You've reserved it and that's where the deposit is.
An option is the financial trading equivalence of we're reserving a hundred shares. Today you buy it, at the end of the month you are going to let me know whether I want the shares, that's what the option is for you right, but not the obligation to buy or sell those shares. Then tomorrow you still got the option but it's now worth 29 days and then the day after it's going to be worth two days less, it's going to be worth 28 days.
If you wanted to sell that option back to the markets or close the position or buy it back, depending on what you've done it's worth two days less. There is less premium and that's what time decay is, just to kind of keep it nice and simple. Again, it's not entirely accurate with the factors at play but time decay is as the name suggests it's the rates at which the option loses value because everyday it's worth less.
Sean Donahoe: Yeah and then you can also take into consideration that the value, the potential value shift in the underlying asset at that time between the value of your option and what is going to shift.
Phil Newton: We'll assume that the stock price remains absolutely stagnant, again just to keep it as simple as possible.
Sean Donahoe: Fair enough.
Phil Newton: It's not entirely accurate, it's not a minor decay as well as just kind of fore go that hold on Phil. Well just for simplicity if the idea of this is new, it's just to help you kind of chew the idea around and just get used to the idea.
You know the time decay literally is you're essentially buying time like you would with the deposits and then time decay is everyday that that deposit is worth less. If you wanted to re-sell or sell it back to the markets, it's going to be worth a little a bit less because when you bought it, it was worth 30 days now it's only worth 25 days.
Sean Donahoe: Exactly, that's good one that will do it. With that being said, rock on.
Automated: Don't forget if you have a question you want to ask Sean and Phil, just go to questions and your question may be featured on a future show.
Uh-oh what's that smell? It's time to cool out the Wall Street shenanigans, mainstream confusion and outright high jinks and outcome of so called experts. Yeah, it's time for bullshit of the week.
Sean Donahoe: Okay, so bullshit of the week and this one gets my go. Okay, here is the thing.
Phil Newton: Do you have a go choice?
Sean Donahoe: I have …
Phil Newton: For it to get …
Sean Donahoe: You know with the amount of bullshit that we deal with in this show, I probably have an entire freaking field with the bastards, but okay so we're looking at one person who I really you know …
Phil Newton: Is a leader.
Sean Donahoe: He's a self appointed leader of every bloody sector he steps into. I have, I mean he's helped a lot of people over the years, he's the self-help. I would say the leader or the number one person in the self-help industry, but when he stepped across to become the financial guru of everyday and he positioned himself, re-positioned himself as the king ding dong. Yes the …
Phil Newton: Yes the king
Sean Donahoe: Okay, I'm trying not to use expletives here, but he's full of shit. Okay, so anyway, Tony Robbins you know what stick with self help, you're good at that and you know fine you've helped a lot of people with motivation. I mean honestly I've lost a lot of respect for this guy over the years, what I've seen a lot of the stuff that he's done.
Phil Newton: What he is doing is my and I have nothing against Tony Robbins. Personally I don't know him, never met him probably once but my gripe just broadly with what he's done is it's why I hate a lot of people. It's people coming into a space or an industry or are vertical and they've got zero experience but they pretend to be the guru. Just tell us you are not the guru, just say, "I'm a respected person, I speak to a lot of the important people. One of them happens to be financial experts and this is what," if he said that maybe we'd have more respect for it.
Sean Donahoe: He kind of does that he is, because well I've spoken with Warren Buffet; I've spoken with all these financial experts.
Phil Newton: Well good for you.
Sean Donahoe: Then he assumes that he's got all their knowledge and then he's now the expert.
Phil Newton: I've absorbed I am now Warren Buffet in disguise.
Sean Donahoe: Exactly.
Phil Newton: It's a little bit of slap of hand in the messaging and I think that's probably why we both are on the same song sheet with this, because I'm not just a poor farm bourgeois and I'm very plain speaking with the occasional explicit as you well know. I just I don't want to be hoodwinks or feel like I've been hoodwinked.
Sean Donahoe: Well, this is it so I saw a video yesterday again pushed out by a few different networks and it's Tony Robbins says this is how to get rich when the market tanks.
Phil Newton: .
Sean Donahoe: Here is the thing, he's echoing a lot of the I mean I'm not going to knock the message. This is the weird of thing; he's saying a lot of things, same things that we've said for a long, long time on this show. Market's overdue for a correction and that is and we've even said it in this show.
Phil Newton: Many times.
Sean Donahoe: It's going to be a great opportunity when the market does decline is to get back in from the investment standpoint. I've talked about it, we talked about the different opportunities from 2000 to 2008 and then from 2009 to now.
Phil Newton: History repeats itself, it's not an old opportunity. What we're talking about is the writing is on the wall there, we know it's going to happen and just be prepared for it.
Sean Donahoe: When he comes in to this industry spouting off the same stuff that a lot of experts are talking about like he's the only one who has come up with it and he is out there banging his drum. He is a great presenter; he is a great orator and everything else. Yeah, Tony step out, okay just … Okay I mean his entire book Master the Money Game could be summed up in just few words. Actually, let me just, well it's …
Phil Newton: Bites yes. I mean by mutual fonts as we all know isn't it?
Sean Donahoe: Four words; buy index match mutual funds five words that's it. That's his entire book in one bloody nutshell. You don't have to go and buy it, don't give him more bloody money.
Phil Newton: He's got a course you can also buy if you want Sean.
Sean Donahoe: I'm sure and all the mentoring he can do for $30,000 to sit and run with him to hear and well actually to hear other coaches and other people who want to pitch you more products. I mean it's just ridiculous, it's sad.
Phil Newton: It reeks off bandwagon to me.
Sean Donahoe: Absolutely.
Phil Newton: It is, I did respect him from a distance. I don't buy into his philosophy. I don't believe in hustle, hustle, hustle, grind, grind, grind which is very much his angle on life and living it and that's fun it worked for a lot of people but it doesn't work for me. I did admire him from a far, but when you start to kind of regurgitating the message of other people and pretending it's your message that's where I lose respect.
Sean Donahoe: Yeah, it's kind of hard. I mean listen there is a lot of people with the same message.
Phil Newton: Sure, it's a fine line and we're trying to point out this fine line but he has jumped over it and he's saying, "Look at me, look how great I am and I'm the only one saying this." No you are not; you know anyone with half a brain who pays attention can figure this out for themselves.
Sean Donahoe: Yeah, it drives me nuts. I mean literally I was clinging when I watched this video and we'll put the link of that one.
Phil Newton: I mean it's vital here, I mean look at how to get rich when the markets tank. I mean I appreciate it's marketing and you've got to attract people to the message and then give them what you really want to give them. Which is here is the opportunity, be prepared it's going to be fun not to crash. I understand why sometimes you guys don't book. You know just because of who it is, it just reeks of bandwagon look at me ground standing and it's the disappointments more than anything.
Sean Donahoe: Yeah and trust me bloody nuts, but there you go. Anyway that's bullshit of the week and that's the end of this week's show. I hope you've enjoyed it, I hope we talked about some stuff that's going to give you some insights and interest into what's coming down the line the future and give you some awareness which is what we're aiming to do but please ….
Phil Newton: Maybe just a little different perspective on the world.
Sean Donahoe: Indeed.
Phil Newton: Look for those opportunities that we keep talking about. Maybe we should show up some Tony Robbins stock here, can you show us the other stock you were going to show.
Sean Donahoe: No, it's too bloody told to show it and there you go.
Phil Newton: Just on principle.
Sean Donahoe: There you go. Please remember this show isn't free ladies and gentlemen. It will cause you a five star review, just go to traders where you can subscribe and review us on your favorite way to hear the show. This helps us reach more traders and investors just like yourself and that's what we do every single bloody week.
Phil Newton: You can also connect with us on Facebook, Twitter we've got the pen and paper pigeon method if you want to do it the traditional way as you well know I mentioned earlier I've got a fax machine in my office. You can fax us if you want and we might not read it but there you go. You can connect with us in any method you prefer at the same link; and what have we got coming up in next week's show Sean?
Sean Donahoe: We have, we are going unicorn hunting. We're locking and loading and we're going over to the unicorns.
Phil Newton: Oh no not the unicorn nonsense.
Sean Donahoe: We're going to dive a little bit more into details.
Phil Newton: What happens to you, what have you done to, what have the unicorns done for us the desired hunting?
Sean Donahoe: Well, we are going to be all Val-des-Monts here in, which one was it? Yeah, I think it was the Sorcerer's Stone here. We are going to go hunt some unicorns. We're going to go talk about the tech sector, what's going on with the unicorns, why this could be the biggest risk in the markets and how it could tip us over into a true bear market. We'll talk about that next week, for now take care, rock on. We'll see you next time.
Phil Newton: Bye for now.
Automated: For more cutting edge trading advice and a free trader workshop to help you build a customized trading plan, and make smarter trading decisions; go on to now.
Automated: Futures; options are our future. 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.

(Click the time stamp to jump directly to that point in the episode.)

[00:06] Show Introduction

[01:42] Sean: Do you have a shield around your portfolio that gives you some level of future proofing? We’re boldly going forward, looking down the road to see the opportunities ahead.

[03:12] Sean: What is shaping the future? The problem is, a lot of people look at the right now and history.

[03:28] Phil: This is a bugbear of mine consistently. Looking at the now is how you can fail in general. Lift your head up and you’re start to be a better performer.

[04:13] Sean: With all of the hats that I wear, one of the aspects I would certainly say I am is a futurist. I’m always looking down the road, at opportunities that lay ahead. Not just the immediate, obvious ones but the side opportunities that manifest themselves because of tectonic shifts in every aspect of the world we live in.

[05:10] Phil: The textbooks are partially to blame when it comes to charting or information about how to trade. As a trader we’re trying to forecast and to look to the future of what it might look like.

[07:18] Sean: That’s one of the things that is a big weakness for a lot of traders, that inability to take that extra step. The textbooks do create that mental block and we’re going to try to unblock it.

[08:08] Sean: We’re looking at the failure to adapt. A perfect example of that recently is Toys r us.

[09:20] Sean: They are the mainstay for people going to buy toys until they’re not. They didn’t look ahead to say we need to move online. They did a kind of merger with Amazon and then broke free of that relationship but didn’t continue to create a solid online presence so they couldn’t adapt.

[12:39] Phil: With Netflix, technology wasn’t there but they had the vision and then the technology caught up with the vision. That takes some forethought.

[12:52] Sean: It’s positioning and again it’s looking at businesses that are not just adapting to the future but creating the future. One of the things that has to be coming is a stock market reset, the overdue bare market.

[13:35] Phil: What I would hate to happen is a crash. That slow, healthy bare market is painful but it’s good. It allows people to adjust. Anywhere from six to eighteen months is a normal cycle or a bare market.

[14:55] Sean: You’ve got two big opportunities which is your reset, that’s painful and if you listen to this show you are aware it’s coming.

[18:55] Sean: In any turnaround, any bare market, there’s always that recovery. Looking to that future, is planning in the short-term for a bare market but also planning on positioning myself on the flip side for the recovery.

[21:18] Phil: Just having the awareness to know that it’s coming and it’s a possibility, for most people is enough.

[21:31] Sean: What could drive this next bare market?

[21:39] Phil: The last two cycles of earnings - the paper profits - it’s a manipulation of results. Are they actually paper profits, is it cash back, is government handouts, is it creative accounting that’s putting more earnings per share on?

[22:05] Sean: There’s a lot of creative accounting as we know.

[23:42] Sean: The one thing I’m seeing is we’re having higher highs in this recent reset. The one thing that is concerning me is that we are not definitely pushing higher.

[25:30] Sean: The one thing that’s on my radar is the tech sector. We are looking at it being bigger than the 2000s tech sector and that again has a lot of risk.

[25:57] Phil: I think the dotcom bubble was technology for the sake of technology. There was no substantial business model. What’s got me excited this time, is there’s new technology.

[29:52] Sean: Indeed, we’re going to talk about the different tech industries, the different future industries, the emerging industries that are laid out in the future and see what opportunities there are.

[30:43] Sean: Let’s look at some of the big boys, we’ve all heard of the FANG stocks. It was kind of an acronym for the big companies Facebook, Amazon, Netflix, Google.

[31:05] Phil: Or just so it can spell out the word fang.

[31:23] Sean: Those are market leaders, so who are going to be the market leaders coming up, what are the criteria? One of the things we look at these companies with is where they are disrupting, or leading, or creating new tech.

[31:42] Phil: That’s the problem with Blockbusters and Toys r us, they weren’t evolving and adapting. It’s this merging or technologies, merging of sectors. That’s going to be the innovation that’s going to drive the next leaders.

[33:35] Sean: When you’re number one, there’s only one direction to go back to number two. So you’re forced to innovate.

[35:16] Sean: 5G is the big thing by 2020, mobile speeds 10x that’s the big promise. The problem is the infrastructure isn’t there yet. That’s going to be one of the biggest shifts over the next twenty years.

[42:08] Phil: Nowadays, if you’re not plugged into technology you’re missing out. If you can figure out where the sectors are going to merge as an inventory, in the future of what could be, that’s the opportunity in the future.

[45:02] Sean: The technology that’s developing, health care is going to be one of the biggest sectors because we are all living longer and we’re getting healthier.

[51:58] Sean: Talking about the brain being a computer here, one area I’m particularly looking at and I’m invested in a couple of companies that are involved with quantum computing.

[56:13] Sean: The other flip side is you don’t have to look at what old be, look at what’s happening right now. Look at Tesla, with the race to self-driving cars so where’s the trade - precious metals, the actual car manufacturers themselves.

[58:45] Phil: Look at all the supporting companies that are helping drive that vision of getting to Mars in this lifetime a reality.

[1:03:08] Sean: They’re developing innovative technologies that most people don’t think of.

[1:04:40] Phil: Where’s the opportunity? In the fusion of having that technology affordable to be licensed or mass-produced or used elsewhere, there’s the opportunity. What’s on the horizon?

[1:05:25] Sean: Look to the future, look for technologies, look for the sideways impact.

[1:06:04] Rebel Trader Tip of the Week

[1:06:52] Sean: Most people don’t think that far ahead. When you’re able to look ahead and have a full view, start learning about different industries, different markets and allow yourself to have a deep understanding of of what drives those businesses.

[1:08:15] Phil: A good example of this, from a trading perspective is to think about what’s going to happen next. It’s going to keep the mind sharp and maybe you spot an opportunity of two converging sectors that might create a new opportunity inn the future.

[1:10:59] Quickfire Round

[1:11:10] Sean: When selling options, how do you decide on your exit strategy?

[1:11:25] Phil: Understand that with selling options, the only way you will make maximum profit, the only day you get to keep all of it is on the day of expiration. You’ve got to be right on the day on the day of expiration. A usual and suitable exit strategy is to take a percentage of the maximum profit.

[1:15:25] Phil: Is Tesla a good long term buy and hold stock? By long term, I mean 10 to 15 years.

[1:15:38] Sean: First, I’m going to have to say, we’re not financial advisors. Disrupted companies tend to be volatile. They’re not only disrupting, they’re innovating, they’re creating new markets, which means they have to take excessive risks.

[1:18:16] Sean: I have a lot of respect for him. Don’t count Elon Musk out. The industries he’s going into, he’s an innovator and a disruptor. As an investment, I have an aggressive portfolio for investments, I have a conservative portfolio. My goal is ultra conservative but growth.

[1:24:03] Sean: What is time decay when it comes to options?

[1:24:10] Phil: Not entirely accurate, just to help they lay person if they are new options, an option is like a deposit. An option is a financial trading equivalent of, we’re reserving the shares. You’re got the the right but not the obligation. Time decay is the rate at which the option loses value because every day its worth less.

[1:26:59] Bulls**t of the Week

[1:27:20] Sean: We’re looking at one person, he’s a self-appointed leader of every sector he steps into. So, Tony Robbins stick with self-help. I’ve lost a lot of respect for this guy over the years.

[1:28:25] Phil: My gripe is, broadly, people coming into an industry and they have zero experience but they pretend to be the guru.

[1:29:43] Sean: Here’s the thing, he’s echoing a lot of the things that we’ve said for a long time on this show.

[1:31:40] Phil:When you start regurgitating the message of other people and pretending it’s your message, that’s where I lose respect.

[1:32:51] Sean: And that’s the end of this week’s show. Thank you for listening to the show!Please remember that this show is not free.It will cost you a five star review on just go to you can subscribe and review us on your favorite way to hear the show.This helps us reach more traders and investors just like you.

[1:33:41] Phil: You can also connect with us on Facebook, Twitter, e’ve got the pen and paper traditional method. What have we got coming up in next week’s episode Sean?

[1:34:06] Sean: We’re going Unicorn Hunting and why this could be the biggest risk in the markets and how it could tip us over into a true bare market.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Don’t get stuck in the now. Look to the future and the ramifications of industry shifts
  • Learn about different businesses, industries and products and build awareness of opportunities
  • The future is bright and there are always new opportunities but those that don’t adapt to the future get left behind

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