Rebel Traders 052 : One Year On…

It’s time to break out the Kazoo’s and funny hats as the Rebel Traders celebrate the one year anniversary of the show and take a look back at the last year in trading and how the landscape has changed in just a few short months (as well as the things that haven’t changed at all…)

So, episode 52… How the year has flown by! However, the Rebel Traders are not ones to sit on their laurels and in this week’s show Sean and Phil take a look back over the last 12 months and revisit some of the big changes that have happened in the markets and also take a look at the things that have not changed at all…

So queue the funky music, break out the party hats and come join us as we celebrate the 1 year anniversary of the Rebel Traders podcast. Buckle up buttercup, it’s going to be a hell of a ride...

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Sean Donahoe: It's time to bring out the kazoos and the funny hats, as we celebrate the one year anniversary of the Rebel Traders podcast. 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. And now, here are your hosts, Sean Donahoe and Mister Phil Newton.
Sean Donahoe: Hey, hey, hey. This is Sean Donahoe, and welcome to the Rebel Traders podcast, the 52nd episode. It is the one year anniversary, and I've got to do this. Phil, brace yourself, son.
Phil Newton: I'm strapped in.
Sean Donahoe: Okay, get the guitars going. Light is in the air, everyone. Light is in the air.
Phil Newton: We just need a breathy Marilyn Monroe singing Happy Birthday to us, now don't we? (singing)
Sean Donahoe: Happy birthday, Mister President.
Phil Newton: Mister Donahoe.
Sean Donahoe: That's probably the scariest thing I've ever heard, or probably will ever say on this show. But yes, we are celebrating. We are breaking out the funny hats and the kazoos, and as always I am joined by my party partner in crime, Mister Phil Newton. How are you doing, sir?
Phil Newton: I've brought the poppers, party poppers of course.
Sean Donahoe: Party poppers.
Phil Newton: Nothing else.
Sean Donahoe: I was going to say, it sounds like a little drug related, there.
Phil Newton: It sounds like I found a friendly local drug dealer to get a little pick-me-up from.
Sean Donahoe: That's it.
Phil Newton: I mean party poppers, with the streamers in. That's the one.
Sean Donahoe: Yes. Good enough. Actually, it's weird. We're not ones to sit on our laurels, here. The year has flown by. It only seems like we started this podcast yesterday, but we have covered a lot of ground over the last year. We're going to look back over the last 12 months, revisit some of the big changes that have happened in the market, and also take a look at the things that haven't changed at all.
Phil Newton: And we've also got our Rebel Trader mailbag that hasn't changed, Sean. You'd be pleased to know this, Sean, we've got the Rebel Trader mailbag. We've got some questions that need answering. That's what we've got, there. We've also got the Bullshit of the Week. We call out the hype, the hype-able, the shenanigans. It's official, now. You're not the nuisance. It's my turn to be a nuisance, this week. I might even break out the bongos.
Somewhere amongst all the bongo banging we can answer the core question of, "Where is the trade?"
Sean Donahoe: That's funny. Yeah, after last week's show, which was banging the drums, I actually, while we were on the show I ordered Phil, because he was banging on the bongos ...
Phil Newton: A pair of bongos. You know what, if you just give me two seconds, I'll literally break out the bongos.
Sean Donahoe: That was funny. It was a little dire straits last week, we going on about different things that we talk about a lot in these shows. We're covering a lot of ground, little things we talk about all the time, but I could not resist. I had to go buy a set for my good friend here. And he's, I think he's off, going to grab those right now.
Phil Newton: I am literally breaking out the bongos. I'd like to say it's live on air, but we can decide to leave this in or not leave it in. You know what, this works better on video, now I'm thinking about it, the unboxing. What's the other phrase? I've got a face for radio.
Sean Donahoe: Exactly
Phil Newton: The smell is wonderful, so I can only assume that they're leather covers.
Sean Donahoe: Yeah, they should be.
Phil Newton: They've got a nice fresh smell. But yes, I am the proud owner of a set of bongos. It's like a chipmunk and a chicken, here.
Sean Donahoe: That's it. Yeah. We're going to expect some rhinos running through the studio in a moment, or something like that.
Phil Newton: The Rock should be coming through in a moment.
Sean Donahoe: Yeah, giving the eyebrow. Funny stuff. But yeah, we have covered a lot of ground over the last 12 months. And goofing around aside, we had a lot of fun on this show. Again, we get a lot of great feedback from you guys, traders, fund managers, and everything in between, but we're really focused on the retail traders.
Phil Newton: Well, they're not fund managers. I like to call them fun managers, because I know we always rip into them, but they've got to have a sense of humor to do what they do.
Sean Donahoe: Abso-bloody-lutely, and the thick skin, that's for sure.
Phil Newton: Very , yeah.
Sean Donahoe: What we're going to do is, we're going to start off and going to kind of dive back in history a little bit, to the very first show. The very first show we did was talking about Amazon buying out Whole Foods, right on the back of Blue Apron's IPO.
Phil Newton: You're actually ... Just, in true fashion, Sean, I'm going to interrupt you straightaway.
Sean Donahoe: Well, why break the habit of the year?
Phil Newton: without me jumping in. Just thinking back to the beginning, you have me ... Let's just set the scene. Let's go. Cue '80s movie reference, The Goonies-
Sean Donahoe: I don't-
Phil Newton: ... where Chunk was asked about, start from the beginning. Oh, could get it. Anyone else started in fifth grade. No-no-no. Not that far back, just 12 months will do, Sean, is what I was going to say.
Sean Donahoe: Yeah, there you go. We were, on episode one, talking about
Phil Newton: on the Apron, weren't we? Yeah.
Sean Donahoe: Yeah. They had just announced they were buying Whole Foods. But after Blue Apron announced their IPO, again, Amazon said, "Oh, we're going to start our own meal delivery service, fresh meal delivery service," which they have the infrastructure for with Amazon Prime Now. Buying Whole Foods was the perfect resource for groceries, literally two days before Blue Apron went IPO. They ended up cutting their initial public offering price from $20 to $10. Ever since, we've had our year's reference.
Phil Newton: Let's just pause there. Let that sink in for a second, people.
Sean Donahoe: Yes.
Phil Newton: They halved their IPO. Now, there's usually always some type of adjustment, but it halved.
Sean Donahoe: It halved. They cut basically half their company's valuation, overnight, before going IPO. I mean, that was, that was a shot between the eyes.
Phil Newton: Now, just pausing there, again. Now, this makes me think. Now, we've spoken about the IPO. What usually happens is that-
Sean Donahoe: We did that, yeah, we did that. Usually companies
Phil Newton: What usually happens is the people who kind of helped raise finance for the launch, they're cashing out, they're making their money. The IPO is their endgame, so they're going to cash out when it's launched to the general public. And it just makes me think that, hold on, if they've halved their IPO price and they're still likely to be making money, because they're not going to do it where it's a loss ...
Sean Donahoe: No.
Phil Newton: Even if they just break even, what type of overvaluation was Blue Apron on the IPO, if it was $20 and they halved it to $10, whose pooch was being screwed is what I'm thinking.
Sean Donahoe: Oh, there was monkeys and footballs involved with that one, but yeah. At the end of the day-
Phil Newton: But this is the nonsense that goes around with IPOs, isn't it?
Sean Donahoe: Well, here's the thing. It's a company that can be replicated with a box, a couple of fruit and veg, and that's it. And a FedEx package.
Phil Newton: It was a bandwagon IPO, is what ... Looking back, they weren't doing anything that was outstanding-
Sean Donahoe: Revolutionary, no.
Phil Newton: ... or groundbreaking. They weren't likely to be a leader in the boxed home food delivery industry, whatever that's called. They weren't going to be the leader of it, where they could literally take the lion's share of the industry. They weren't doing anything revolutionary, but yet Amazon, Amazon did. Amazon can do. I mean, depending on where you are in the world, I can get food delivered in two hours. It's fabulous. You know, that's revolutionary. If you really need a bag of sugar, now I don't have to go around to the neighbor's house with a cup in your hand.
Sean Donahoe: Exactly. I mean, that's exactly it. Right now you can get food, you can get your groceries delivered within an hour. I've got a local supermarket, which is the predominant monopoly here in Texas, is H-E-B. And again, they do ... You just book your time slot. They'll do you $300 worth of groceries. Get everything you want, all hand selected and put in a car, and a delivery service brings it right to my door. I don't even have to go to the grocery store anymore. Great. Fantastic.
Phil Newton: Fabulous.
Sean Donahoe: And again, these are things that evolve in areas of the market. I mean, you've got Uber, for example, completely disrupted the cab.
Phil Newton: That was the word I was looking for earlier. They weren't shaking things up a little bit. Now, if you're doing something different, so I'm just again, just thinking about Blue Apron, if you're doing something different. They were boxing it, it was healthy, maybe there's a particular style of food rather than just trying to tap every demographic. But I heard whispers of local companies taking on this, to try and disrupt, in the local area they're finding chefs to go and prepare food for the ...
You know, it's a high end service, as you can imagine, but that's quite disturbing. You know, now, they're not only having the best food prepared and delivered to you, but you're going to get a chef come round and prepare you a meal. Again, I know it doesn't sound like ... Well yeah, there's those types of things. But it's that kind of boxed experience, with a little twist of a home delivery chef who's going to bring it round and make it all ding-dong, like it looks on the picture.
Sean Donahoe: Absolutely.
Phil Newton: Because that's the problem. When you do it, it doesn't look like the picture.
Sean Donahoe: Well, that's very true. Now, the interesting thing is ... Bloody hell, you're making me think. I've just came back from a wee vacation in New Orleans, where I went primarily for all the different food. And yeah, I must admit I went online just the last couple of days and ordered a crap ton of stuff to make crawfish etouffee, beignets, and everything else I had. It was like, "Oh my God, I've got to go make this at home," but that's fine because I can now order it and I can-
Phil Newton: Yeah, maybe not every day come round, but if they could come round and show you how to replicate that meal. There's a different twist on a common thing. It makes it a little bit unique, a little bit personal. You've not just got food delivered, you've now got an experience. And that's interesting.
Sean Donahoe: That's exactly what I was about to say, it's an experience. Yeah. I actually was going to go to a cooking school over there, but I didn't have time to go learn to make a couple of these things with a local chef, but what you're talking about is experience rather than now with just food, which is a necessity. That makes all the difference in the world. There's a lot of disruptive things that are out there, but again, when you have such a basic product that could easily be replicated, you have no unique selling point, you have no unique edge.
You don't have what Warren Buffett would refer to as a moat. You waste time. Now, here's the thing. If we look back now at Blue Apron's stock price, this is one of our rules with IPOs, is we don't invest in IPOs unless I'm in before
Phil Newton: Aren't the clues in the wording, there? You can invest in IPOs, invest, but from a trading look into profit from the swings in price we've not got track records to determine what the likely swing might be. And that's what we can't do with our track record.
Sean Donahoe: Exactly, but here's the thing is, case in point for a lot of ... From episode one, we said this is going to be a disaster.
Phil Newton: Surprise, surprise, surprise, surprise, Sean.
Sean Donahoe: What happened was, look 12 months on, because of everything we've just said, there's no barrier to entry for competitors, 12 months on the IPO is tanked. It's a penny stock, now. This entire company is only penny stock. It's trading at $3-ish.
Phil Newton: As we speak right now, yeah, a hair over $3, from $10 down to $3. And they'd already halved their expected IPO launch price.
Sean Donahoe: Exactly.
Phil Newton: So just from the launch, assuming it's around $10. You know, it's a 70 percent reduction. It's been lower; it's been down to $2. My word! It's shocking.
Sean Donahoe: Yes, it's picked up a little bit.
Phil Newton: You know, if this was a blue chip stock ...
Sean Donahoe: Yeah, it's picked up a little bit.
Phil Newton: ... we'd be talking about this in the same breath as reminding ourselves about Enron.
Sean Donahoe: I was going to say, Enron is worth .
Phil Newton: Yeah, but that's the sort of epic disaster, just looking at the stock price, that we're talking about. It's just, I'm exasperated, Sean, hence my own sound effects. Wherever you go. What can you say to it?
Sean Donahoe: Well, here's the thing though-
Phil Newton: It's just ridiculous.
Sean Donahoe: ... it's a perfect point in what we were talking about. For trading with IPOs, we avoid them until we have a track record. Now we got a track record, and we can see-
Phil Newton: And for investing, it was a nightmare as well. They were not going to be a category king, essentially.
Sean Donahoe: No. No-no-no, not. But now, if you want to flip the switch here a little bit, there was another one we mentioned in that same show, that launched in March, but we were using it as a benchmark as IPO craziness. That is SnapChat. Now, if you look at SnapChat, again, you can pull this chart up yourselves at home, if you want to follow along.
Phil Newton: You know, I'm just following along as well, Sean. I'm looking at the chart right now.
Sean Donahoe: Now again, the interesting thing is, flip that back and look back 12 months. I mean, yeah, they've had a recent pop. But again, from the 12 month state-
Phil Newton: They're holding their head above water, essentially. They took a dive.
Sean Donahoe: They took a serious dive.
Phil Newton: And just to describe the chart, they took a dive this time 12 months ago, from $24-ish down to around about $11-12. But they meandered sideways for the better part of the rest of the year. I'm just not quite positive, you know. That they're holding their head above water is how I describe that, and they're ...
Sean Donahoe: They've had about a 20 percent kickup with everything else, from ...
Phil Newton: But again, they weren't doing anything revolutionary that couldn't have been done, and wasn't already being done somewhere else. I think as I recall, Sean, the issue that we had here is there was no way for them to generate profits and monetize. That was the issue for the longterm profits. From an investor point of view, that would prevent them from jumping in. That's probably why we've seen the stock go sideways. It's just, no one's really committing to getting involved, but there is potentially prospects on the horizon, which is why it's not taken a swan dive like Blue Apron.
Sean Donahoe: Yeah. They got the initial pop of interest, but then everyone realizing, and it happened with Facebook because Facebook wanted to kick them in the, well, you know what. They released a feature on Facebook called Stories, which disappear after 24 hours. Hmm, sounds familiar. So basically, they replicated, with a much larger user base, the features of SnapChat. And you could put all sorts of little, you know, take photos for your story and put all sorts of little stickers on yourself.
The only thing that Snap has as a tactical advantage right now, and I say right now because it's going to be .
Phil Newton:
Sean Donahoe: But they have some pretty cool augmented reality type stuff. That's about it. That's their only edge, but that's not a feature. That's not something that is anything significant that's going to carry your company.
Phil Newton: But yeah, that is not commonly ... Yeah, it's not commonly replicate-able, because Yahoo got something like that, just not a common feature where you can kind of hold your camera phone open. It will augment set directions over the street view, for example.
Sean Donahoe: Possibly, yeah. I have seen the ...
Phil Newton: the day. That was the only reason why it comes to mind. It's not easily replicate-able, but right this moment it's a distinguishing feature. They can utilize that because not everyone has that type of feature.
Sean Donahoe: Yeah. And I mean there's been some ... I would say that through the year there has been some tradable opportunities, because it's been range bound, but they're very, very short lived. I mean, I would have avoided this company like the bloody plague, even as a trader.
Phil Newton: I think if you were a short term trader ... Sorry, Sean. There was a light there. I wasn't intentionally talking over you then. I think if you were more of a short term day trader, you know, two three days is your time horizon, then Snap has provided some great opportunities. But from my perspective, it's not doing anything that's that interesting. It's flatlined. I think when they figure out a way to monetize, I think that's going to bring the investors in. And then that will provide the types of swings that I would, that we would normally look for to try and jump on.
And it's now got enough history for us to maybe keep an eye on it and put it on our regular universe of stocks. If it starts moving and behaving in the usual way, then maybe we'll consider it.
Sean Donahoe: Yeah, exactly. I mean, here's the thing. They've got monetization with their app platform and everything else, but their primary audience are very young people who don't have any disposable income. That, to me, is a bad target demographic advertising to. And while there's a lot of people, and a lot of millennials and everything else on there, and it is there, the target demographic tends to be a younger audience, which over a period of time they get older, they start having more disposable income, but then they're not in SnapChat. They're moving to other platforms.
I think Facebook is having a little bit of a drop-off, as well.
Phil Newton: They're in a little bit of a snafu as well, aren't they? They're having a little bit of a drop-off at certain demographics. Probably, maybe a combination of the recent-
Sean Donahoe: Well, I think that's something that didn't help.
Phil Newton: ... that sensationalized.
Sean Donahoe: Yes, indeed.
Phil Newton: . It's probably all related in some way, but yeah.
Sean Donahoe: We can speculate a lot of different things in that.
Phil Newton: Yeah, we can speculate. I think we've got off the beaten track a little bit. I mean, it was an interesting fore idea. I mean, where's the trade? It's worth keeping an eye on Snap. Blue Apron, it's not worth the paper it's written on. You know, Snap has prospects if you can figure out a suitable monetization model, which they've, I think they're too late to the party on this. I would imagine that we could see it spiral slowly downwards, unless they can bring that monetization back.
It's good enough data in history for me to consider possibilities, you know, if the setups are there. The scans that we use will pull them out. I mean, to be fair I'm just looking at the automated part of our scan, actually. It has provided one, two, three, four, five, six, seven setups, loose setups without all the other stuff that we usually go through, but just the automated version of the strategy. You know, there's been a few setups. It has provided profitable swings, it just doesn't meet my, "It's got to be a certain dollar amount," requirements, because it's below $20.
Sean Donahoe: Exactly, exactly. That's kind of mine as well. And the one thing
Phil Newton: I think if you're trading stock and you didn't mind the swings, it'd probably be worth it. But for options it's, I can do other stuff. Yeah.
Sean Donahoe: Exactly.
Phil Newton: There's other things more interesting. Well yeah, I mean the moves are there. It's just whether you want to get involved with them.
Sean Donahoe: Yeah. I mean, for me as an investor, I wouldn't touch this with a bloody barge pole. As a trader there might be some short term gains but, like you said, I was going to say exactly the same thing. It's too cheap a stock; it's penny stock.
Phil Newton: I can go and do other things. Yeah.
Sean Donahoe: Exactly.
Phil Newton: To be fair, when would I get interested? When it moves above its base, and so $20 is a benchmark, an absolutely minimum threshold for the dollar amounts. Just a little bit of a quick tip of where's the trade, here. But certainly, stocks over a minimum of $20, ideally over $30. That allows me to at least have a minimum. I can expect certain swings because usually stocks of a certain dollar amount have more interesting swings, and that's what I'm looking for.
That's why I wouldn't trade this. It's not that it doesn't have the swings, it's just that it's not ... I can find other things that are more interesting. That's one of the main criteria.
Sean Donahoe: One thing we cannot ignore over the last 12 months is the rise and fall of cryptocurrencies and the hype. I mean, in 12 months skirt, I mean we've gone from massive boom to basically people jumping out third story windows and above, just trying to escape the panic of the bubble bursting. But we cannot ignore that, if you started on January 1st, just as a kind of point of reference, with Bitcoin, it closed at $999.36 per coin. Okay?
However, still today, even with it going up as far as $19,600 per coin, which is, again, you can't deny that is a significant-
Phil Newton: January 2018 is what you're saying?
Sean Donahoe: January 2017.
Phil Newton: 2017, yes. So, correct. I'm with you.
Sean Donahoe:
Phil Newton: No, I'm just looking at the futures data. It doesn't go all the way back, but it just gives me a little look back over the last two years.
Sean Donahoe: Yeah. I mean, even today it's hovering around $6,500 or so. I mean, that's 650. Even if you bought then and held, and you were part of the bubble bursting and you still held on, you're still up 650 percent. I mean, that's not insignificant.
Phil Newton: Most new traders don't look at it like that, though, do they Sean? They look at what they've lost, rather than what they've gained. So I mean, yes, you bought at say $1,000. It's now $6,500. You know, that's a big gain by anyone's measure. But what they're looking at is what it's come from, $20,000, down to $6,500. So they're looking at what they've lost, not what they've gained. And they're holding on for that, I want to see it hit $20,000 again. That's the sad part.
You know, the retail trader probably hasn't looked at, "Well, I'm up 650 percent and everyone's happy." In two years, that's a good trade, but retail traders aren't looking at it like that. That's the sad thing.
Sean Donahoe: It is very true. Now, here's the thing. You talk about the scale and scope of it. If you look at the chart, last time we were at $6,500 was at November of 2017, not that long ago and certainly not long before the bubble burst.
Phil Newton: And that's where the absolute peak of the hype machine from the news media and the outlets and, you know, your Uber driver is showing you his Bitcoin wallet or whatever it is. Everyone, everyone, you couldn't open your front door without someone walking their dog, checking their Bitcoin price.
Sean Donahoe: Exactly. I mean, it was insane. From November-
Phil Newton: I'm just saying, not from the price point of view but from the hype machine point of view, November-ish was when we were starting to really get concerned that, hold on, this is a sentiment extreme. Be cautious. You really, be very, very cautious.
Sean Donahoe: yeah.
Phil Newton: Yeah, I mean certainly from my point of view, not the first I'm seeing this. That's what we were talking about, back then. Sorry, Sean. I just wanted to kind of lay the groundwork for the hype machine.
Sean Donahoe: Oh, absolutely.
Phil Newton: And why I'm pointing that out, which is why we're talking about kind of the before and after and which is what you're going to comment on in a moment, is that people were regularly selling and mortgaging their houses, and it was in the news. Someone else has sold their house or remortgaged, and they've literally and living in their car with their family.
That was the news on every alternate daily basis, that someone else has done this. They were just the ones we heard about in the news. All the people that we've not heard about is what I feel sorry for. I'm just trying to, the foundation for why we're pointing out the price difference. So, back to you. Back to you, Sean, our man in the office.
Sean Donahoe: The man on the street, yes.
Phil Newton: On the street.
Sean Donahoe: It was a horrible, horrible ... I mean, if you were in early, great, but the problem is a lot of people got in after.
Phil Newton: With this hype machine around this time that we were talking about. Last thing.
Sean Donahoe: On the back of that hype, with the hype machine, and they're the ones who got screwed over. I was going to use a different word there, but they seriously got screwed over. And again, that's the problem with these bubbles. But at the end of the day, if you were in early enough and what have you, yeah, you still see magnificent returns.
Phil Newton: You're disappointed, but you still got good returns. But it's those people who were in ...
Sean Donahoe: Yeah. I mean, there's many funds would be, "Don't get anywhere near that." They're settling at 30 percent, and you're unhappy with that because that's alpha. That's beating the streets, so to speak. But yeah, it's unfortunate. A lot of people are still getting-
Phil Newton: What did you get for Christmas? Two Bitcoins. Really.
Sean Donahoe: Yeah.
Phil Newton: And now it's gone from $20,000 down to, well, the same $6,500 as we're talking right now. It's those people, I feel sorry for them because every bubble has this experience. It's easy to be the naysayer at the time, but now we're looking at it with, that bubble has burst. And it may get back to $20,000. It may get to $50,000 or $100,000. It's not going to do it with the same meteoric rise that we've see because that bubble, that freight train, has arrived to its destination, unexploded.
And that's the sad thing. You know, it's those people that I feel sorry for. So yeah, look. We're banging that same drum, to steal our last week show's line. Our viewpoint hasn't changed, and my viewpoint hasn't changed. It was a bubble. It was very clear it was a bubble. And there's individual opportunities, whether they be stocks or indexes or the markets, that have these characteristics. It's not the first time that you've seen them, but learn the lessons from them.
Be very cautious, you know, that was the thing. If you are involved in some type of hyped up opportunity, just be very cautious. Don't get complacent. It's the people who are remortgaging the houses to get involved as a long term investments, it was never going to work out nice. History tells us that these things do come to an end. It's not the first time it's happened. The first recorded is the Tulip Manias, the big one. You got the South Sea bubble in the 18th century, and there's many, many other occurrences on varying scales, all through history, that tell us this is a bubble.
It has all the characteristics and the hallmarks of a bubble. And to be fair, it may work out well again. It might be that we see a nice, steady growth as it's adopted as a trading or investment opportunity that has viability. That might cut back. That might happen, but history doesn't tell us that that is likely to happen, unfortunately.
Sean Donahoe: Unfortunately not, no. Again, another interesting thing from over the last 12 months that, again, you cannot ignore. And we haven't even talked about cryptokittens.
Phil Newton: If you've got it and you're in on it, well done. You got in and out, you did the right thing on a hair trigger, and well done you.
Sean Donahoe: God, I hope that a lot of people got out while we were doing the Scrooge McDuck prediction, and everything else in mid-December. That was what is like, "Please, for the love of God, get out now!"
Phil Newton: Absolutely, yeah.
Sean Donahoe: But, oh man. I mean, yeah, if you got in at the end, you didn't get out. That was a painful thing. But again, like you said, happens with every bubble. There's always this cycle. There's always-
Phil Newton: It happens with regulated markets, as well. It's not an isolated, I mean, it happened in Orleans in '03 or '04, driven by the Gulf conflicts, housing bubble. We're seeing another one, not to the same extreme, but we're seeing some of the characteristics there. It's just, it's all been overshadowed by the crypto .
Sean Donahoe: Absolutely. Now the next thing we're going to talk about, we're going to talk about the main markets. One thing I was doing, just as a comparison for this show, is the S&P 500. If you flip the chart over to weeklies, I mean, we're still subtly in an uptrend, despite the few ripples from January to present times, where we certainly had a little bit of pressure relief, as I like to call it. It's kind of like a pressure cooker. I mean, we have been on a massive bull run.
You know, there was a little bit of sideways motion, if you're looking on the weeklies, a little bit of sideways motion, a little bit of kind of taking a pause, like 2016.
Phil Newton: The weeklies point of view, nothing really to stress over.
Sean Donahoe: Exactly.
Phil Newton: Mind, it's the weeklies. It's just been two and a half months of stuck in the mud. But the reality is it's not going to lower, it's just a pause, a contraction in price. I always think these things are difficult to live through. It's easy to look back and say, "Oh, there's the consolidation. There's the breakout. It's just a contraction price. You'll be fine." When you're living through it, it's just been two and a half months of, "When will this end?"
Sean Donahoe: Well, exactly. I mean, if you look back at 2009 you can see, okay, so they sold it up and then the nose dive and everything else. You can see the same back in 2000, with those contractions. But I mean, this has been-
Phil Newton: Surprisingly, history repeats itself.
Sean Donahoe: My God. Say it isn't so.
Phil Newton: Who would have thought? Who would have thought?
Sean Donahoe: Well, I mean yeah. From 2015 to 2016, I mean that was kind of like the sideways and a little bit of a downturn if you like, but it was very range bound up until about mid-2016. Then it took off like a fricking' rocket, and it's been certainly choppy waters in the last few months from 2017, but looking back at scale, so to speak, we're pretty much back on course.
Phil Newton: Yeah. I mean, I'm just looking back at -- let me just get the -- I'm looking back at around August in 2011, from the weekly charts point of view. And I'm looking at similar points around January 2016. They're the two points on the chart that I'm looking at. One of the things that I like to look for is, or what is developing right now, is it similar to any point in history? They're the two points on the chart that kind of jump out at me as looking and behaving most similar to what we're experiencing.
You know, it's about normal. It's about the same, about two, two and a half months, price just kind of meandered, bobbed back and forth a little bit. It wasn't really going low, but it most definitely wasn't going higher. And now, as we're doing this, it's starting to move high. It looks like it's behaving like it did back in 2011 and 2016. You know, for all intents and purposes, nothing has changed. As you were saying, we're still in an uptrend. It looks like it's probably going to move higher.
Sean Donahoe: Yeah. And that's the interesting thing here is, you're looking at those two points. It's kind of like, okay, that's ... Like you said, 2016, 2011, those are like five year cycles that we talk about a lot.
Phil Newton: Surprise.
Sean Donahoe: Surprise. But it hasn't pushed lower. It was kind of pausing, giving a little breathing room, and then pushed higher. Again, I agree with you. I was going to say the same damn thing. Maybe that's what we're seeing right now. No one knows what the future's going to hold, obviously. But looking back at history, and certainly looking at all the weeklies, gives you a little bit of a, "Hmm, okay."
Phil Newton: Puts it into perspective. What we're experiencing is nothing to worry about.
Sean Donahoe: Exactly. And it's funny, because we've been calling for a bear market for a while, because we are overdue.
Phil Newton: I wonder if this is it. All right, and I know it's two and a half months, but maybe if this is the temporary bear market experience, where it doesn't really sell off, you don't see an economic contraction in the traditional sense. Maybe it just pauses for, you know, two, three, four, five months.
Sean Donahoe: Exactly. We have a lot of positive economic signs. We have record employment. I mean, when there's more jobs available than there are unemployed-
Phil Newton: People can't hire. That's what's crazy. People screaming for a job and yet they can't fill the positions that are available. What's going on?
Sean Donahoe: It's insanity. It's insanity, but it's good. I mean this is the highest-
Phil Newton: I blame , nothing else.
Sean Donahoe: Absolutely. Speaking as one, there, yes.
Phil Newton: Technically.
Sean Donahoe: Technically, he says, technically. I love the way he always qualifies that. Ah, we're not bashing on millennials, but at the end of the day, when we've had the highest employment since 1969 -- it's one of the stats I saw recently -- that's pretty damn impressive. I mean, that is, there's a lot of good economic news that is underpinning this economy.
I think that is stopping a lot of the bearish moves, because there's enough positive sentiment that, even in a shakeout, even in a pressure release where people aren't suddenly taking all the chips off the table, or there's really bad economic news, so everyone's suddenly shifted towards a bearish sentiment, I don't think there's enough of that.
I think if it was a different environment. If there was increasing unemployment. if there was bad, bad news across the economy and everything else, then I think we would be in a bear market. But I think there's, despite all the shakeouts, shakedowns, and pressure relieving, there's still enough positive sentiment that it's bolstering and underpinned what probably would have been a bear switch, a bear turn. So the question is, now is it going to continue?
Phil Newton: Yeah. I mean, I'm looking at the lower end of the market. I'm looking at Dollar Tree, for example. I'm seeing that that has been in, for most of this year, a bear movement. It's been down, down, down, and it's been gapping down. No one likes the stock. But yet, if you look at the kind of the Walgreen, Boots, I know it's not a direct comparison, but what I'm trying to look at is what's the stocks that are at the lower end of the economic markets. A dollar store.
You know, I'm not meaning it disrespectfully, but they sell stuff for $1. It's not great products. But then if you look at the companies that are at, say, the mid and higher end of the market, they're still thriving. That tells me that's where the money's being spent. People have money to spend, and that's being reflected in how the share prices are behaving. Just a little, again, perhaps a little side tip, is look at representations of segments of the economy.
People, when they've not got money to spend or save, they downgrade. They go from paying top dollar for food, maybe things that they don't need, not necessarily . I'm looking at food, in particular, where they'll downgrade from the higher end of the market down to the mid, or from the mid down to the lower end of the market. You know, this is what I'm seeing with stock like Dollar Tree. People are not buying cheap products. They're not going to the stores where they can get comparable products at rock bottom prices.
They're happy to spend money, and that's being reflected in the share prices of stocks that do have a higher price tag on comparable products that are, for the most part, essentials. Does that make sense, Sean? I'm not sure if I explained that concept.
Sean Donahoe: It does. No, I get what you're saying. I was looking at Dollar General, which is a competitor of Dollar Tree, just so I'm looking at the same sector. And again, very range bound with some serious gap down, along the same lines.
Phil Newton: Yeah. I mean, in the U.K. we actually had what kind of sparked this fault was in the U.K., Poundland, which is essentially U.K.'s version of something like Dollar Tree. Surprisingly, it's in the name, Poundland. Everything's a pound, or a dollar, however you want to describe it. They've just gone into bankruptcy. They've got lots of sites all around the U.K., and they're going bankrupt, or they've gone bankrupt. That just tells me that no one's buying stuff for a pound.
But yet, you're not seeing the higher end companies that sell comparable products for higher prices, they're still flourishing. There's no sign on the horizon that they're struggling. So where are people spending their money? The economy is telling us that they're happy to spend money. So it's not yet contracted. That's essentially my batshit crazy logic. People spend money on things that they don't need to spend that much money on. We can from various places. They're prepared to spend more money on the same things that they're buying every week or every month.
Sean Donahoe: Well, on the same token, it's good to compare around several different companies in the same space, just to make sure you're not getting a single company bias.
Phil Newton: An outlier, yeah. It could just be bad management, yeah.
Sean Donahoe: But at the end of the day, I'm comparing Walmart to Target, which are two of the ones over here, and then Dollar Tree, Dollar General, and then comparing and seeing similar patterns from what's saying so. You're looking at, you're into almost a converse fundamentals aspect, here. It can give you a finger on the pulse.
Phil Newton: Yeah, it's figuring the fundamentals through price action. Because I don't want to read the fundamentals, Sean, so this is how I read fundamentals. I look at price behavior and make a conclusive jump at what the fundamentals are like, based on price action and how it's behaving. That's the easy way of doing it.
Sean Donahoe: Yeah. No, it's an interesting thing. I'm looking at Bed, Bath and Beyond, and Best Buy which, again, consumables, all the consumer end of it, where disposable income tends to go. Bed, Bath and Beyond-
Phil Newton: Yes, it's house and home, isn't it? Yeah.
Sean Donahoe: Yeah. Bed, Bath and Beyond has been on a down track for a while, but that's prior to any of this stuff going on. It's been on a downturn since, say 2015. So if I was just looking at that one, obviously I'd be like, "Well, huh." And then before that it's been very range bound and what have you. But okay, so if I was just looking at that, just the side thing I was mentioning there, looking at one company isn't going to give you everything, but if you look at Best Buy, that's been on a uptrend.
Phil Newton: It might just confirm a hypothesis that you could then, okay, maybe I will take a look at the fundamentals on this occasion, and now is the time to dig deeper on what the implications are. Because price is telling you, hmm, something is going on here. It allows you to draw a hypothesis, or start a hypothesis, or start to draw conclusions. See, for me, okay, now it's worth my time looking at the fundamentals of this situation, and see if I can put some meat on that hypothesis that we're just kind of floating around.
Sean Donahoe: Exactly. Now, the other thing is, we're on a zero volatility environment. I mean, that changed after January. But when we recorded this show we were talking almost every week about the lack of volatility in this space. And we need some volatility to shake up, to do the pressure release. We certainly got that from January up until now, but we're back -- pretty much -- to zero volatility again. I mean, it's basically ...
Phil Newton: Guess who's back, back again. Well, actually nothing's back. That's the whole point.
Sean Donahoe: Indeed. Exactly. I mean, we had the shake out, and certainly some volatility, but we're back to almost no volatility again. I mean, we've got some seriously big world events going on. Come on, we've got possible trade wars with China. Well, intense trade negotiations and the threat of-
Phil Newton: We've got Trump and Kim playing patty-cake with each other.
Sean Donahoe: Absolutely. In Singapore, in a hot tub, having champagne. Mentally, you probably don't want.
Phil Newton: I know that Donald, he's the absolute world's best at patty-cake. So yeah, hey, why not?
Sean Donahoe: We're going to have better patty-cake, big patty-cake, better than everyone else's patty-cake.
Phil Newton: Don't look at these small hands. Don't let them fool you. I can play patty-cake with the world's leaders.
Sean Donahoe: That's exactly it. And little Kim wants his McDonald's. Let's face it, there's a lot of things going on right now that, I think there's a lot of over-hype, obviously, when it comes to this administration and the media coverage and everything else. I mean, let's face it. The mainstream media does not like the current administration. They do not like Trump, and every shot they can take ... I was even watching a thing yesterday which absolutely cracked me up.
Phil Newton: Well, they did it with Obama. Yeah, I saw certain similar with the comparing the news coverage with something similar, surprisingly history repeating itself yet again. Was it the Obama comparison that you ...
Sean Donahoe: No. I was going to say that they were actually making a reference to, they were even attacking what was on the menu at the summit, because in North Korea there are people starving and they're having these opulent dinners. Well, it's a bloody summit with world leaders. They're not going to have beans on toast.
Phil Newton: Unless you happen to like beans on toast. You know, for some people that's a gourmet meal. No, but I know what you're saying. What caught my attention, maybe it should have been a Bullshit of the Week segment, but it was, essentially they were comparing the Obama administration trying to start similar talks that the Trump administration has now succeeded in starting the talks. And it's just the dialog in that, from the media's point of view, was bashing Obama and what he was trying to do. It's never going to happen. And a very, very, extremely negative spin on what was trying to be achieved.
Now that it is being done, it's like Donald Trump's the best thing since sliced bread, and look how wonderful he is. It's just, it's the same media company having the exact opposite dialog. Well, it's not even dialog, the exact same narrative, but it's now swinging at the other extreme. And this just reaffirms the fact that, hey, maybe we shouldn't be paying attention to the news. Maybe they've got their own agenda. I know we bang on that drum quite a lot, but it just highlights for me the things that we constantly ...
I mean, this is one of the recurring things that we speak about a lot, and we have spoken about a lot in the last 12 months.
Sean Donahoe: Filtering, yeah.
Phil Newton: Yes. Just turn it off. What we've seen recently with this world event is yet another example of the bias that the news and the media gives you. It's exactly why I turn it off and try to ignore it at every opportunity.
Sean Donahoe: It's funny, because we've seen a lot of praise. I mean, over the year, obviously I follow a lot of these events.
Phil Newton: I'm not bashing the accomplishments. I'm bashing the coverage of the accomplishments.
Sean Donahoe: Oh, absolutely. I mean, it's been-
Phil Newton: I'm all for progress, I really am. Is it the Omega? Love him or hate him, I've not got a pony in this race, as the saying goes. I'm not in the U.S. But from the outside looking in, he's a deal maker. He's going to make some deals. In fair play, he's going to make progress. That's what this, as far as I'm concerned, is all about, people who are prepared to do the things that others have not done before them, or said they were going to do and backpedaled on the promises that they made.
As far as I'm concerned, politics, that's what it should be about. It's doing the things that are not popular but need doing.
Sean Donahoe: Well, absolutely. The coverage has been bullshit on both sides. Don't get me wrong. I mean, from all the positives, there's double standards across the board. I mean, like you say, I filter out a lot of it. I'm listening to it, I'm filtering it out and I'm taking it in the grain of salt.
Phil Newton: Because we want to be aware of what's going on, yeah, exactly. The actual bias and the slant.
Sean Donahoe: The main thing here, though, yeah. We've been talking about this for a while. While missiles have been flying and everything else, there's been, I think it was-
Phil Newton: The markets aren't reacting. That's the interesting thing.
Sean Donahoe: Yeah. I think it's been nine months since there was a missile fired. I might be wrong on that. Someone said that the other day, and I'm like, "Has it been that long?" If that's the case, it's been a while. But again, this has been a big situation in that region for a while. And when we've got all the trade stuff going on with China, and again-
Phil Newton: I was just going to say, if you think back to the Cold War, we go back to the Reagan and the '80s. It was just the threat of rockets. Just look at the political angst and the reactions of the markets. If you study history you can see, just at the possibility of the red button being pressed, which was always the fear that was being touted around. No actually, rockets were fired. North Korea eventually pressed the button and no one batted an eyelid. That's scary. That's scary.
Sean Donahoe: Yeah, it's insane. It's an insane world. It is. Landing in the Sea of Japan, first time equals a ripple in the markets, big spike volatility. Second time, no one gave a damn.
Phil Newton: And then no one, eh, meh, whatever.
Sean Donahoe: Yeah.
Phil Newton: That's scary.
Sean Donahoe: The interesting thing is-
Phil Newton: Really, that really, just pause and think about that. That is really tricky. For the best part of many decades, the fear of the possibility that something may or may not happen, we can neither confirm nor deny that something will or will not happen type of experience. And yet, when it did actually happen, no one cared. Literally, no one cared.
Sean Donahoe: Well, this is something I said in the book. We've been talking about this a lot, obviously from a geopolitical and global economic standpoint. But because North Korea is kind of a proxy for China, and China has a lot of influence and control in North Korea, there's a global economic theory talking about the panda face versus the dragon face, China being the dragon face. But they're using North Korea as a proxy for a lot of negotiation and working with American and everything else.
But the interesting thing here, whether you love this administration or hate this administration, one thing that I want to say that they've done through Pompeo, through Bolton now, who's now the, obviously got a lot ... John Bolton is one of our main elements in this. I'm not going to go into all the politics here, and Trump. Basically, what they've done is they're breaking the saber that China always rattles.
This is one thing I wanted to kind of put out there, which is, over the last 12 months with intense negotiations for the trade side, from all the other leveraging and this administration elbowing its way back into the global stage for trade, I mean they've basically walked into President Xi's house, given his prize attack dog a biscuit, put him on a leash, and walked him right out the door while Xi stands there with his mouth agape.
I read that somewhere, yesterday. I can't remember where the hell it was. I thought that was one of the best bloody lines to summarize exactly what's going on here.
Phil Newton: It does paint a certain picture, doesn't it?
Sean Donahoe: It does. The thing is that, if they basically ... Trump has offered to defend North Korea. This is one of the things that a lot of people haven't talked about. As part of the denuclearization agreement, basically defend against whom? Japan, South Korea are already part of this alliance. If North Korea throws in with us and officially ends open hostilities with South Korea, who's the most threatening big bad in the region? Well, it's China. So he's basically saying, "Hey, you want some money, if you want an opened up economy and everything else, throw in with us. We'll protect you." That's an interesting dynamic.
Phil Newton: It is an interesting thought. But the thought that you sparked is, as I'm wondering if we're going to see something similar to the German wall experience. You know, when the wall came down, what was it, 1989?
Sean Donahoe: Mm-hmm (affirmative). Around then. Yeah.
Phil Newton: Somewhere around there, around about that time. Are we going to see that same type of experience? It's going to be a joyous occasion when the wall does come down, which I think is kind of ironic since Trump's always pro-wall. They're now working against bringing in, as a byproduct, maybe the wall down in Korea. It just, it could be a great day. It could be a great day, momentous occasion.
Sean Donahoe: It's certainly significant, but again, who would have thought a year ago we would be in this situation?
Phil Newton: Yeah. I mean, a year on it's just, it is a momentous occasion. I think it's just worth pausing. In regards to who's making it happen, because to be honest I don't really care whose name is on the documents, but it's just-
Sean Donahoe: As long as it happens, yeah, that's a very ...
Phil Newton: As long as it happens. Yeah. It doesn't matter who, as long as progress has since been made, both locally and, in this case, internationally. It's got to be seen as a good thing. I mean, it's certainly a good thing for East and West Germany, which is a similar type of situation.
Sean Donahoe: And the interesting thing is this is only stage one. Let's just put it this way, this is phase one of a negotiation.
Phil Newton: It's a first date, isn't it? It's a first date. Let's face it.
Sean Donahoe: It is the first date, and they're confirming the things they talked about on the phone.
Phil Newton: Yeah, and we're stroking each other's egos and posing for photos. The real work is yet to begin.
Sean Donahoe: The details-
Phil Newton: Anyone with half a brain cell will get that.
Sean Donahoe: Yeah, I mean it's going to be interesting.
Phil Newton: Fox News won't, but we will.
Sean Donahoe: And let's not even mention CNN. Oh my God. So yeah. Both sides, it's just like, again, let's leave the news networks out of it because, God.
Phil Newton: Thinking about positive news though, Sean, is there any other positive news that we can think about, that's going on?
Sean Donahoe: Well, again, we've got the U.S. factory output, 13 year high. I mean, if you take about it from that. We've got the NASDAQ in small-caps.
Phil Newton: It just reaffirms what we were just talking about earlier. I mean, economically there's no contraction. The certain factory outputs. In poor farm boy language, stuff is being made. More stuff is being made every year than what we made last year.
Sean Donahoe: Absolutely. We've got the tax overhaul bill, which came in the last 12 months. I mean, the dollar took a huge hit over 12 months, but has bounced back some. Now, the interesting thing there is, the dollar taking a huge hit has made us more competitive on the global trade stage. Again, while people look at that as a bad thing ...
Phil Newton: It swings in roundabouts. That sort of thing always comes back and forth. That's just history repeating itself. I don't really see that as a headline. Being 12 years trader, I don't see that as a monumental thing. It's always going to swing back and forth to get political, sorry, economic agreements and deals. It's got to swing back and forth.
Sean Donahoe: Absolutely. And we've got the Nasdaq in small-caps hitting all time highs. I mean, tech is really leading the way. I mean, the one thing with small-caps, and this is one thing that we're talking about in the Happening Now Report, was they have the ability to pivot, where the companies in the S&P 500 have more exposure to global turmoil. But with the Russell 2000, that's all small-caps. They tend to be more domestic and focused
Phil Newton: They're leading the way then, yeah. Yeah. leading the way.
Sean Donahoe: And again, leading ahead. And you've got to be fair to-
Phil Newton: It would be fair to say, Sean, overall that America is currently great, at least from the financial markets point of view.
Sean Donahoe: I've got to say, and again, I'm not wanting to put on a MAGA hat or anything like that, because that's not my style, but you got to say, shit is good.
Phil Newton: No, I'm not. No, I'm not. I mean, I'm saying it from the point of view, it's looking good. Again, I'm on the outside looking in. I'm neither pro nor anti, in any political party, either, anywhere. Just from the financial markets point of view, things are looking quite rosy.
Sean Donahoe: Yeah. And that's really where we are 12 months on, and kind of wrap this segment up. I mean, we've got the oil markets settling in to be a bull market for the last 12 months. We've got, as I said, Nasdaq, small-caps, setting all time highs. The Dow and the S&P 500 are, you know, they're steadily growing. I mean, they've certainly had some turmoil, but they're still trending up, like we've said.
Phil Newton: Tentatively, tentatively, given the current talks that are going on, but they're still inching up. You know, the markets are not fearful of the talks. Well, it's kind of bullish, and the prices are moving higher. Everything's looking steady.
Sean Donahoe: Tax overhaul, yeah.
Phil Newton: Exactly. It does make you wonder, you know, what's in store for the next 12 months.
Sean Donahoe: Exactly. I mean, the thing is we don't know. All you can do is raise your awareness and look at, basically, trends. I mean, we talked about what's going to happen with trade and North Korea. I mean, if Kim Jong Un, or Little Kim as I like to call him, likes to-
Phil Newton: Little Kim, makes me laugh every time.
Sean Donahoe: Well, my two nicknames for them is Donny Two Scoops and Little Kim. But if Little Kim-
Phil Newton: that's what I expect to see in the next 12 months.
Sean Donahoe: That would be great. That would be fantastic.
Phil Newton: My little hands bring all the deals to the table, type of rapping. Oh, dear.
Sean Donahoe: My God. You know, there's going to be an epic rap battle. Someone's going to do that. Someone's going to do that very soon, and we'll post it here. But yeah, I mean if Little Kim does honor the commitments and everything else, which he seems to be leaning that way more than ever before. I mean, there's lots of things that have been talked about from-
Phil Newton: It would be foolhardy for him not to, but as you said in previous shows, he's just positioning himself to accept terms but position it as someone else's ... It's a mutual agreement, if that makes sense. I'm not sure I've explained that well. He accepting terms rather than a mutual agreement.
Sean Donahoe: Yeah. No. It's got to-
Phil Newton: Yes. That's the phrase I was looking for.
Sean Donahoe: He can't lose face. He can't lose face unless it's going to end up being a military coup over there, because you know there's a lot of Chinese influence and they're going to be watching this one, and very upset with some of this, I'm thinking. But again, it's the direction it needs to go. We'll see if he sticks with it. If he does, fantastic. But again, it's pretty much rosy news, unless you're listening to the news networks.
Phil Newton: Crisis News Network, yeah.
Sean Donahoe: Yeah. If you're listening to all the news networks, you'd think it's doom and gloom, and we're on the edge of Third World War but
Phil Newton: People out with sandwich boards, "The End is Now."
Sean Donahoe: Oh, man. I actually saw a couple of those.
Phil Newton: I mean, I know I'm all doom and gloom when it comes to, I predict the bear markets, but you can't deny things look great. I mean, I am very fearful of a bear market only because history repeats itself. I am a firm believer in that, and it's yet to repeat the bear market experience. But you can't deny the evidence. So, for the moment, as of right this moment, things look great.
Sean Donahoe: Absolutely. So, with that being said, let's rock the hell on.
Automated: And now, it's time for the Rebel Trader Tip of the Week, brought to you by 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. Look to the past but live in the now. We've had a lot of fun here today talking about the last 12 months and what's going on, but that's in the past. It's great to look back over history, as it can give us a huge clue to what's going to happen tomorrow.
Phil Newton: As I like to say, Sean, it's a statement of the obvious.
Sean Donahoe: It kind of is.
Phil Newton: You just say what's going on. And I think, to be fair, I think more people need to do that, just state the obvious, particularly the news networks. We don't need their opinion, we just want them to state the facts. That's what they should stick to doing. That's what they're supposed to do. But yeah, it's been interesting. It's been emotional, looking back over these last 12 months.
Sean Donahoe: Absolutely, but ultimately you have to live in the now and look to where you are going, not where you've been. Too many people get stuck looking backwards and get stagnant by worrying about the trades and the opportunities that were missed. We mentioned that with cryptocurrency as a prime example.
Phil Newton: Yeah. What have you missed out on? Be thankful for what you've got.
Sean Donahoe: Things that are lost rather than steering ... Exactly. Rather than steering the path forwards. Well, they're scared of the future because there are too many unknowns and -- don't get me started -- and they get afraid to press the buttons with the known knowns, the unknown knowns, the unknown unknowns. I had to do it.
Phil Newton: Yeah, you had to.
Sean Donahoe: I couldn't resist it. To badly quote Bil Keane, "Yesterday is history. Tomorrow is a mystery. Today is a gift. That's why we call it the present." So your actions and trades ...
Phil Newton: Aww, I've never heard that before, to be honest. I think that's the first time I've heard that. That's nice. I like it.
Sean Donahoe: I thought you'd like that one.
Phil Newton: I like that.
Sean Donahoe: But your actions and trades today are under your control. Let your strategy dictate the rest. So there you go, Rebel Trader Tip of the Week.
Phil Newton: That's perfect. That's the perfect way to finish.
Automated: If you've got questions, they've got answers. Sean and Phil dive into the virtual mailbag for this week's Rebel Traders Quick Fire Round.
Sean Donahoe: Okay, diving in the Rebel Trader mailbag, here's one thing for you, Phil. I think you're going to like this one. "How do you know if a strategy is actually a positive expectancy strategy?"
Phil Newton: There's only one answer for this, and the only answer is flippant. If you're making money, it's a winner. It's just how painfully you make money. There's the experience of that, because you can have large peak to valley draw-downs. A positive expectancy is just my fancy way of saying, on average, you make money. As we were just starting to touch on, that experience of making money can be quite emotional because you can big swings in kind of like a bubble going on in your own trading account, but multiple bubble rises and crashes, rises and crashes.
You know, if there's wild swings in your equity curve, that's a horrible experience. So the journey of that positive expectancy is also what I look at. Do you have big swings in the equity? You know, broadly speaking, positive expectancy strategy is one that's making money. Any strategy that makes money is a good strategy. It's just whether you have the ability to deploy it, based on the swings in the equity that I was just touching on.
Sean Donahoe: Yeah. That's exactly it. I mean, at the end of the day, if your strategy is one you're sticking to-
Phil Newton: That's a good strategy. And it makes money.
Sean Donahoe: If you're sticking to it, and you're not adding a lot of speculation or freewheeling it, or shooting from the hip or what have you, that's not a strategy. Okay? That's just pure dumb luck. Okay? You've got to look at it from the-
Phil Newton: Do it again tomorrow.
Sean Donahoe: Yeah, exactly. Is your strategy something you can regularly apply strategically, check box, line by line, can you do that and is it going to repeat those, are you going to exactly repeat that strategy? If you're adding lots of shoot from the hip stuff, that's not a strategy. That's a general guideline that you're not follow. And that is a big, big difference. If you get lucky, that's not a strategy. Okay?
You've got to look at what you're doing. Repeat it again today, tomorrow, next week, next month, next year. If you're doing that, and you're making money all the time, yeah, you've got a positive expectancy strategy. If you don't, then okay, look at where the holes are. Look at where things can be improved or, you know, find a strategy that does work. Simple as that, make sure it works with you.
What else is in the mailbag?
Phil Newton: Well, I'm thinking, Sean, it's kind of really the things we've touched on already, but do you think that we'll see an increase in volatility anytime soon?
Sean Donahoe: Who knows?
Phil Newton: I was just going to suggest, you might have to use the default answer here.
Sean Donahoe: No one knows.
Phil Newton: Literally, we don't know. No one knows what's happening tomorrow.
Sean Donahoe: You don't know what's happening. I was going to say. I was in New Orleans. I didn't go to any psychics over there, of which there are many. I didn't ask about a volatility environment with tarot cards or anything like that. But, you know, no one knows. Honestly, no one knows. Could be a big event tomorrow. Could be more missiles flying from North Korea.
Phil Newton: That's why it's called speculation.
Sean Donahoe: It is. No one knows.
Phil Newton: This whole trading and investing lark, it's why it's called speculation. You're speculating on what you think will happen in the future. Now, we base that on what has happened in the past, but the reality is no one knows what's going to happen next. No one. But, on average, we have an expectation of what could happen, and that's the best anyone can say. That's all we can say.
Sean Donahoe: The one thing I would say, though, it really can only go up from here. I mean, we're in almost zero volatility again. A baseline volatility is not much movement, nothing really going on. So yes, it will go up, but no one knows when.
Phil Newton: Saying that, Sean, there was that guy that was trading volatility, too.
Sean Donahoe: I was thinking that, too.
Phil Newton: As you were saying that. I mean, he has that bet and when the volatility
Sean Donahoe: It took a long time to recover it.
Phil Newton: It took a long time to make what, by comparison, a small amount of return on the risk.
Sean Donahoe: Yeah. It took a lot of meat to make that happen, a lot of meat to make that happen.
Phil Newton: It's only up from here, but when that up starts ... It's like me saying, "I think there's going to be a bear market." I've been saying that for five years. It's going to happen. I just don't know when.
Sean Donahoe: Exactly. Exactly. Can't get better than that.
Phil Newton: That's the best we can say.
Sean Donahoe: Okay, so here's one for you. "Does options trading drive the price movement of the underlying stock, or is it vice-versa?"
Phil Newton: I'm going to go with vice-versa. Let me just restate the question. Does option trading, so the actual trading activity of options, does that drive the price movements of the stock, or is the other way around? It's the other way around, I think is the answer. Essentially what happens is that options are a derivative of the stock or the stock's price, or derived from the stock price. The stock price moves, and that influences the price of the option in a variety of different ways, which are calculated for you.
So an option is a derivative of the stock price, which is impacted by the stock prices movement. I think that's it, Sean.
Sean Donahoe: That is pretty simple. Yeah. I mean, just keeping it ultra bloody simple, the main thing is that options are a derivative, so they're pegged against the underlying ...
Phil Newton: They're derived, yeah.
Sean Donahoe: Yeah. They're pegged against the activity of the stock. And the stock is kind of independent based on who's trading the stock. So, yeah.
Phil Newton: The way I like to think about it, while it's not technically accurate and people are going to roll their eyes when I say it, but you know if it is new to you, the options trading world, they're kind of like deposits. It's a deposit. You're not actually buying the item. You're just reserving it. Maybe you'll buy it at a future date. In that case, it's like a deposit.
If we used different wording, if I was to buy and sell deposits all day, will that change the price of my Xbox? No. If the retailer changed the price of the Xbox, that will adjust the price of the deposit that you have to pay. So it is the other way around, and in every example in the real world, it's the same.
Sean Donahoe: There you go. Okay, 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 and your question may be featured on a future show. Uh-oh, what's that smell? It's time to call out the Wall Street shenanigans, main stream confusion, and outright hijinks and hokum of so-called experts. Yep, it's time for Bullshit of the Week.
Sean Donahoe: Okay, Bullshit of the Week. Let me ask you a question, Phil. How is your pancakes? Oh, I mean your burgers?
Phil Newton: Well, I've got to admit, Sean, I quite like my pancakes. I regularly have practice pancake days. Unbeknownst to you, I really like a good pancake.
Sean Donahoe: Well, here's the thing. For those in America versus those in the U.K., we call pancakes crepes. Over here, the pancakes are a lot thicker, a lot fluffier, and everything else. There's one leader-
Phil Newton: I like a thick pancake, yeah. I don't generally prefer crepes, which is the French thing. They're usually quite thin. But, yeah. No, I like a pancake, a nice thick pancake. I do quite like them.
Sean Donahoe: Yeah, absolutely. I love them, too. And one of my favorite paces to go is IHOP, which has changed their name to IHOB.
Phil Newton: Really?
Sean Donahoe: A little bit of a publicity stunt, but yeah. International House of Pancakes, in a giant publicity stunt ... This is not really bullshit. I think this is actually a great little publicity stunt, but they changed their name because they want to highlight the fact that they're now doing burgers as part of their menu. They're well known for their pancakes and breakfasts and all day breakfast and everything else. Absolutely fantastic food. It's junk food, don't get me wrong, but I do love it. They do amazing, amazing meals for a cheap price.
Phil Newton: For really good prices.
Sean Donahoe: Actually, yeah.
Phil Newton: This show is suddenly sponsored by IHOP.
Sean Donahoe: Absolutely. But the funny thing is, you know, it's one of my favorite places to go, just for comfort food and everything else. And there's one right down the road. It's fantastic. However, they're catching a lot of ire from other fast food chains, got their butt hurt feelings here.
Phil Newton: They're throwing their teddies out the pram, are they?
Sean Donahoe: Oh, yes they are. They changed their name, temporarily, to International House of Burgers to raise awareness. In some places they've actually changed the signs, down in L.A. and everything else. But they really are just creating a little bit of buzz around their burgers. And I thought it was a great bloody little strategy there, to get a little bit of attention on what they're doing, I must admit.
Phil Newton: To get pancakes on the plate, as it were.
Sean Donahoe: Absolutely. pancakes on plates and burgers on the grill. Yeah, exactly. I thought it was a great little publicity stunt, that is catching the eye, because one of them was like, over in Texas. We have one here called Whataburger who says, "We're not going to change our name to Whatapancake," and stuff like that. This is ridiculous, and they're coming out. But, you know, at the end of the day-
Phil Newton: They're reacting to it, which is fanning the flames. Now you're talking about it, it's kind of genius. It's something quite simple, but it seems it's created quite a stir, and they're fanning the flames, if you'll pardon the pun, of the ... And other people seem to be offended by it, which is creating more hype around it.
Sean Donahoe: Absolutely.
Phil Newton: It's interesting. It's interesting.
Sean Donahoe: And I think it's absolutely fantastic. Well done.
Phil Newton: Yeah, hat tip.
Sean Donahoe: So, rock on. And that is it for the end of the show. A very short, sweet little cherries on top, little banana and a tale of crepes there at the end, but hey, what the hell?
Phil Newton: I've got to say, Sean, I like my pancakes traditional. It's butter-
Sean Donahoe: Lemon and sugar.
Phil Newton: ... lemon and sugar. And you know what the secret ingredient in that combination is, butter first.
Sean Donahoe: Absolutely.
Phil Newton: You've got to have a bit of butter first. I've had them in places and they don't provide the butter. You've got to get it separate. But that is the secret ingredient to a quality sugar, lemon, butter pancake. You know what I'm going to have later today, Sean?
Sean Donahoe: Absolutely.
Phil Newton: I think I'm going to be making pancakes.
Sean Donahoe: And I think I'm going to be doing the same.
Phil Newton: The funny thing, before we were kind of tossing ideas around for the show, I was actually talking about pancakes. I think I'll be making some. I'm definitely going to be doing them later today.
Sean Donahoe: Yeah. You see, me, I love crepes. I do it with a little bit of lemon, a little bit of sugar, and a dollop of ice cream. And I mix that and let that melt in. And oh my God, yeah. That's ...
Phil Newton: Now, how I do mine is, I make mine crepe size, just trying to use it, so pancake size.
Sean Donahoe: That's fricking' huge.
Phil Newton: So the crepe size, but pancake thick.
Sean Donahoe: That's funny. That's funny.
Phil Newton: And I've perfected the consistency for the three necessary ingredients for a good pancake mix.
Sean Donahoe: Nice job. Well done, sir.
Phil Newton: Yeah, it's .
Sean Donahoe: good. So this ...
Phil Newton: And you've got to roll them. You know, it can't be fancy.
Sean Donahoe: I was going to say, so this has turned into a cooking show, rather than a trading show.
Phil Newton: I know.
Sean Donahoe: But hey, pancake.
Phil Newton: for the latest trading recipe.
Sean Donahoe: Yeah, there you go. All good. But yeah, that is it for this week. Thank you for listening to the show. Please remember the show is not free. It will cost you a five star review. Just go to and you can subscribe, review us, all in your favorite way to hear the show. As always, this helps us get this message, which we feel is an incredible value and hopefully you do, too. Two more traders and investors, just like you.
Phil Newton: And if you'd like to connect with us on social media, unless they've gone the way of SnapChats, Facebook and Twitter machine are our preferred social media platforms, but you can Snap me, wink-wink. You can find all the details at the same link,
What have we got coming up next week's show, Sean?
Sean Donahoe: Well, we are rocking and rolling, and we're going to show you how you can level up. A little bit of gaming
Phil Newton: Super Mario style. Take some mushrooms.
Sean Donahoe: I was going to say, don't take mushrooms, don't do .
Phil Newton:
Sean Donahoe: Say no. But yes, we're going to be leveling up. How you know when you can level up your trading, what it requires to level up and take that next step to improve your trading. So, with that being said, we'll see you next time. Take care for now.
Phil Newton: Bye for now.
Automated: For more cutting edge trading advice, and a free trader workshop to help you build a personalized trading plan and make smarter trading decisions, go to now.
Automated: Futures, options on futures, stock and stock options trading involves a substantial degree of risk. It may not be suitable for all investors. Past performance is not necessarily indicative of future results. Trade Canyon, Incorporated, provides only training and educational information. If you actually understood and listened to this, then that means you are awesome. Congratulations and well done. Notice, this product may contain nuts.

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

[00:10] Show Introduction

[00:04:24] Sean: We’re going to dive back in history to the very first show talking about Amazon buying out Wholefoods right on the back of Blue Aprons IPO.

[00:05:18] Sean: Amazon said we’re going to start our own meal delivery service which they had the infrastructure for with Prime. Literally two days before Blue Apron went IPO they ended up cutting their initial public offering price. We’ve had our year’s reference.

[00:05:46] Phil: Let that sink in, they halved their IPO.

[00:05:56] Sean: They halved their company’s valuation overnight before going IPO.

[00:06:06] Phil: We’ve spoken about the IPO, what usually happens the people who helped raise finance for the launch, they’re cashing out, they’re making their money. The IPO is their end game, so they’re going to cash out when it’s launched to the general public.

[00:06:54] Sean: It‘s a company that can be replicated with a box, a couple of fruit and veg, and that’s it, in a Fed-Ex package.

[00:07:06] Phil:They weren’t doing anything that was outstanding or groundbreaking.

[00:07:50] Sean: You can get your groceries delivered within the hour. You just book your time slot, all hand selected, and the delivery service brings it right to my door.

[00:08:39] Phil: I heard whispers of companies taking on this to try and disrupt in the local area and finding chefs to go and prepare food. It’s a high end service, they’re having the best food delivered to you and a chef come round and prepare you a meal.

[00:10:26] Sean: When you have such a basic product that can easily be replicated, you have no unique selling point. If we look back now at Blue Apron’s stock price, this is one of our rules with IPOs, we don’t invest in IPOs unless I’m in before it goes public.

[00:10:47] Phil: I think the clues are in the wording. You can invest in IPOs - invest - but from a trading, looking to profit from the swings in price, we’ve not got a track record to determine what the likely swing might be.

[00:11:04] Sean: Case in point, from episode one, we said this is going to be a disaster. Twelve months on, the IPO has tanked. It’s a penny stock, it’s trading at three dollars.

[00:12:20] Sean: When trading with IPOs, we avoid them until we’ve got a track record.

[00:12:39] Sean: There was another one we mentioned in that same show that launched in March and that is Snapchat.

[00:14:40] Sean: The only thing that Snap has as a tactical advantage right now - and it’s going to be replicated - they have some pretty cool augmented reality stuff.

[00:15:55] Phil: If you were a short-term trader, two-three days is your time horizon, then Snap has provided some great opportunity. I think when they figure out when they find a way to monetize that’s going to bring the investors in.

[00:18:54] Phil: When would I get interested? When it moves above its base, so twenty dollars is an absolute minimum threshold as a quick tip of ‘where’s the trade’. Usually stocks of a certain dollar amount have more interesting swings and that’s what I’m looking for.

[00:19:54] Sean: We cannot ignore that if you started on January first with Bitcoin it closed at $999.36 per coin. Even with it going up as far as $19,600 per coin which you can’t deny is significant. Today it’s hovering around $6,500 or so, even if you bought then and held and were part of the bubble bursting you are still up 650%.

[00:20:49] Phil: Most new traders don’t look at it like that though. They look at what they’ve lost rather than what they’ve gained.

[00:21:56] Sean: You couldn’t open your front door without someone checking their Bitcoin price. From the hype machine point of view, November-ish was when were were starting to get concerned.

[00:23:28] Sean: If you were in early, great but a lot of people got in after on the back of that hype.

[0:27:20] Sean: We’ve got to talk about the main markets. One thing I was doing as a comparison for the show is the SNB500. If you flip the chart over to weeklies, we’re still suddenly in an uptrend despite a few ripples from January to present times.

[00:28:07] Phil: I always think these things are difficult to live through.

[00:30:30] Sean: No one knows what the future is going to hold but looking back at history and certainly looking on the weeklies, gives you that ‘ah okay’.

[00:36:06] Phil: I don’t want to read the fundamentals so I look at price behavior and make a conclusive jump at what the fundamentals are like based on price action. And how it’s behaving.

[00:41:00] Phil: One of the reoccurring things we speak about a lot is the bias that the news and the media gives you.

[00:47:23] Phil: It doesn’t matter who as long as progress is seen to be made both locally and internationally.

[00:48:16] Phil: Is there any positive news?

[00:48:20] Sean: We’ve got the US factory output thirteen year-high.

[00:48:30] Phil: Economically there’s no contraction.

[00:49:23] Sean: Tech is really leading the way.

[00:51:00] Sean: All you can do is raise your awareness and look at trends.

[00:53:29] Rebel Trader Tip of the Week

[00:53:48] Sean: Look to the past but live in the now. We’ve had a lot of fun looking back over the last twelve months but that’s in the past and it’s great to look back over history as it can give us huge clues as to what is going to happen tomorrow.

[00:54:10] Phil: I think more people need to do that, just state the obvious, particularly the news networks. We don’t need their option, they should just state the facts. It’s been emotional looking over these past twelve months.

[0:54:30] Sean: Too many people get stuck looking backwards and get stagnant by worrying about the trades and opportunities that were missed rather than steering their path forwards. Or they’re scared of the future because there are too many unknowns and they get afraid to press the buttons.

[00:55:32] Quickfire Round

[00:55:43] How do you know if your strategy is actually a positiveexpectancy strategy?

[00:55:58] Phil: There’s only answer if you’re making money, it’s a winner. Any strategy that’s making money is a good strategy it’s just if you have the equity to deploy it.

[00:58:06] Phil: Do you think we will see an increased volatility environment any time soon?

[0:58:16] Sean: No one knows! There could be a big event tomorrow.

[00:58:48] Phil: No one knows but on average we have an expectation of what could happen and that’s all we can say.

[00:59:10] We’re in almost baseline volatility so yes it will go up but no one knows when.

[00:59:53] Sean: Does Options trading drive the price movement of the underlying or vice versa?

[01:00:11] Phil: It’s the other way around I think is the answer. Essentially what happens is options are derived from the stock price.

[01:02:07] Bulls**t of the Week

[01:02:13] Sean: How’s your pancakes, erm I mean burgers?

[01:02:20] Phil: I quite like my pancakes.

[01:03:38] Sean: So International House of Pancakes are catching a lot of ire from other fast food chains because they changed their name temporarily to International House of Burgers to raise awareness.

[01:04:20] Sean: I think it was a great little publicity stunt.

[01:05:00] Phil: It’s created quite a stir.

Resources & Links Mentioned in This Week's Show

3 Key Takeaways From This Show

  • Keeping an eye in the rearview mirror can help you see what is ahead when it comes to the markets
  • IPOs are only really worth trading with a track history to examine
  • To badly quote Bit Keane "Yesterday is history, tomorrow is a mystery, today is a gift, which is why we call it the present.”

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