On this Flashback Friday episode, Jason Hartman interviews Dr. Chris Kacher & Gil Morales, Managing Directors of Virtue of Selfish Investing, LLC and MoKa Investors LLC. They discuss their views on markets, particularly commodities. Chris and Gil share their general outlook on the stock market and their philosophy and approach to investing.
Jason Hartman 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
Jason Hartman 0:09
Hey, this is Jason Hartman, thank you so much for joining me. Do you know what day it is? Yes, it is flashback Friday, where you hear the best of the creating wealth show and you hear some good prior episodes, some good review. Remember, we’ve got almost 500 episodes out. And you know what? iTunes doesn’t even hold them all if you’re an iTunes listener, if you are listening on Stitcher, thank you for joining us. So we want to bring you some good review stuff. Now. What’s interesting about flashback Friday, it’s a little scary for me. I got to be very, very candid with you on that. Because you the listener, you get the chance to hold my feet to the fire. Did I make any predictions? Was I right? Was I wrong? I’ve been right about a lot of things, but I’ve been wrong about a few. So you can give me a hard time about that if you wish. But it’s flashback Friday, and we will give you the uncensored Best of the creating wealth show with a prior episode. So let’s dive in. Here we go. Remember, this is not current. It’s flashback Friday.
Announcer 1:22
Welcome to the creating wealth show with Jason Hartman, you’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions, this program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 2:11
This is your host, Jason Hartman. I appreciate you joining us today. And we’ve got a good show for you. We’re going to talk about or we’re going to talk with some financial guys here. Those are our guests today. And, and we’ll have them up in a few minutes. But first, a couple of things I need to talk to you about. Now, you know, I have talked about many times about the six ways out of the mess that we’re in, and we are certainly in a big mess, aren’t we folks, no question about it. Things are, in so many ways, very bleak, and very gloomy. And it’s obvious that the economy is starting to sputter again and have problems it seems like it had a little reprieve here for a while the real estate market, though, is not the same thing as the economy, I can tell you that for sure. The real estate market and business in general is booming. as investors are really leading this market, the investor share of property transactions nowadays is is phenomenal. And in fact, I think and I’m going to share some data with with you on this in an upcoming episode, probably the next episode, actually. But I think it may be the highest it’s been in history, the investor side of the business. So a lot of people are recognizing the opportunity. There are still many who don’t. But those people there will always be people that get it and those who don’t. And fortunately, all of you listening, get it now in the in terms of the six ways out of the mess. I’m going to talk about one of them right now. And this is a very positive one.
And you know, I don’t know if you remember, or you watch the show or the movies, but when I was a kid, I used to be a real sci fi buff. In fact, I’m kind of surprised I didn’t go to work for NASA or go into the sciences or something. I guess I would have had to pay attention too much in school, but but I really always liked science. And I like science fiction as well. And I used to really love Star Trek, I watched every single rerun of that show, you know, they used to play the reruns on TV. Fortunately, I’m not old enough to have watched them when they first came out. But I did watch the reruns and I would always I knew every episode I had the blueprints of the Starship Enterprise, on my walls in the room, you know, all the all the architectural blueprints of this fictional spaceship. And you know, I had the concordance book and all the things I was a huge fan of the show. And I remember the time that I finally figured out as a kid the way the transporter room worked, do you remember be me up Scotty Kirk would say and the transporter room I finally one day figured that out. That it was like a video camera broadcasting for television because all a video camera really does is it takes light reflections and it turns those reflections of light you know remember when we see something We see that the color is red or blue, we’re not actually seeing the color, what we’re seeing is what is not reflected by that color. That’s what we see and perceive as red or blue, or yellow, or green or whatever the color is. And so a video camera picks up this difference in light, a microphone like I’m talking on now to you picks up differences in sound. And if it’s something that’s recorded, it just records it onto a hard drive, a solid state chip, a magnetic tape, whatever it might be. And hard drives are magnetic too. But when it broadcasts this, this data, all it is, is data. It’s just ones and zeros binary code, right? All it does when it broadcasts this data is it takes this data and then transmits it over the airwaves, well, what am I getting to here?
Remember the six ways out of the mess, right? One of them is technological innovation. And you know, when we had the author of the show book abundance on the show a few episodes ago, we were talking about this, and this is really exciting. So maybe folks maybe just maybe out of the massive fiscal mess we are in maybe technology will actually save us. And here’s another inkling of that. This is an amazing thing that has just occurred in the world of technology. And we’ll tie this in with what it has to do with being a good investor in just a moment here. Okay, so this is a news article. Actually, I got a couple news articles I want to share with you today. And this one says that new quantum teleportation record, wow scientist, and this is basically folks, this is basically the transporter room. See, as I was saying before, as I was talking about video cameras and television transmissions, and audio transmissions, all they’re doing is taking a person in the transporter room and decoding that data of that person, and then putting it into transmittable form. That’s all a video camera does for television, and then transmitting it through the air and then re assembling it in another location. Well guess what? Scientists are actually doing this now. It is amazing what is going on? Maybe the transporter room isn’t so far off. Here’s what it says quantum teleportation won’t be new up to the Starship Enterprise, at least not yet. But scientists are able to tweak quote, entangled unquote photons, photons or light particles at greater distances than ever before. Scientific American magazine reports in case you haven’t been freaked out yet, scientists can separate two photons by dozens of miles, measure one of them and find at the speed of light that the other has moved into an opposing orientation. Back in May, Chinese scientists reported quantum teleportation at a distance of get this folks 60 miles Are you a commuter? That could be your commute. My comment there, then European and Canadian scientists said they had done it it at nine miles, although their study is not peer reviewed. What’s the upshot of this for the rest of us? research is still quote in gee whiz exploratory phase on quote notes, Scientific American, but outerspace teleportation could allow us to beam quantum information up to satellites in the blink of an eye. And what is that quantum information they’re talking about? It may be you, you may be the information that gets beamed just like it did in the transporter room. So it’s really an amazing time we’re living in what does that have to do with real estate investing a lot. Here’s why my six ways out of the mess.
Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday.
Number one, we have this massive debt, we have massive entitlement obligations, we cannot possibly pay them. We will never pay those obligations without a huge technological breakthrough that is America centric. So what are our choices here? Number one default, all the government promises that they cannot keep Medicare, Social Security etc. They would just say no, sorry, we can’t pay. This is very unlikely, in my opinion, because it’s too harsh and it’s politically unpopular. Number two, raise taxes. Well, they cannot possibly raise enough taxes to pay for the problem. The problem is far bigger than tax. increases, that boat left the shore a long, long time ago, number three have a yard sale, the USA could sell off assets to raise money. You know, remember when we were talking a few years ago about selling the ports to do by the Bureau of Land Management, they sell land to developers. From time to time military equipment sold to Libya, we’ve talked about that before. Unbelievable. These sort of Rogue regimes later become our friends, then they become our enemies, again, when they have all our great equipment, toll roads owned by Chinese companies. Number four steel, well, the American military could just be used as a way to basically steal assets from other countries, as we’ve been accused of stealing oil, you know, in Iraq, which didn’t really happen, I guess. But remember, that whole pitch was we’re gonna pay for the war with their oil, we’re gonna free the country. And then and then, you know, whatever happened to that idea? I don’t know. Never heard much about it lately. Number five. And this is what I was just talking about technological innovation. The hopeful areas of progress are energy, biotech, and nanotechnology. Now, I think some of the most exciting stuff going is the concept of the quantum teleportation which I just talked about. And although it’s a lot less sexy than that, 3d printing, and nanotechnology, this is a big deal. And 3d printing is not expensive, that is coming pretty fast. We’re gonna have 3d printers available to produce all kinds of great parts and pieces really fast. In fact, something similar to that is the way that some have said that we will do deep space exploration, not exactly 3d printing, but it’s through what they call particle replicators, where these tiny little devices like nanotechnology, space probes, instead of being like the Curiosity rover that landed on Mars just recently, what an amazing thing to this may be the mission where we actually discover that there was life on Mars or there is life on Mars, who knows, we’re getting close to knowing that, you know, whether it is true or not, but particle replicators basically, would land on some foreign planet, maybe an asteroid, maybe whatever, and then start creating devices, and maybe life forms, believe it or not, because that’s just information to that’s all DNA really is, is information in creating life forms, and devices and things to colonize space, through particle replicator is kind of a higher tech version of 3d printing, really. So that’s the technological innovation, the exciting angle, and technology may save us to some extent.
The question is, though, and this is the real question that I’m wrestling with here, like I talked about on a prior episode, just recently, my neighbor, who’s in the energy business, I mean, maybe the cure to the world’s energy problems will be solved in the near future. And folks, sorry, to burst your bubble if you’re a believer, but it’s definitely not going to be in solar, or wind, or anything like that, unless there’s some massive shift in that technology. Because the bottom line is that the only real way you see solar panels anywhere, are in government buildings, universities, which are pseudo governmental or governmental, or because of huge tax credits. Solar just doesn’t work economically, it just doesn’t work. Look at all of these solar companies, Obama funded that are all now obviously turning out to be a bunch of crony capitalism, and a bunch of wasted wasted money, where criminals can come in and steal from the government large s and steal the taxpayers money, essentially. But you know, hey, it’s gotten better solar is a lot more efficient than it was 2030 years ago, I remember as a kid, you know, I had the Radio Shack, little kit, and it had a little solar panel and capacitors and resistors on it. And I would play with that. And, you know, you could actually produce energy from solar, but it’s just never been enough to pay for the cost of the solar panels. It just doesn’t work. There’s not enough energy in sunlight. So far, but maybe energy will be solved another way. And if it is, is that and here’s what I’m wrestling with, is that inflationary? Or is it deflationary? Because if energy got really cheap, or healthcare got really cheap through biotechnology, or whatever form of technical advancement got really cheap, where it became possible to do all kinds of great things for a lot less money. Well, of course, that would adjust the hedonic index, which I’ve taught you about on prior shows. But what would that do would it be inflationary or deflationary? I don’t know the answer.
But here’s a thought. I think at first, it would be deflationary because everybody would have, whatever the benefit of the technology is, and they would have it really inexpensively. And that would be a wonderful thing. Okay, it would have widespread adaptation, people would have widespread access to it. And it would be really, really inexpensive. You know, remember the first plasma flat screen plasma TVs that came out, they were like $20,000 for a 42 inch. And now you can buy a 42 inch LCD TV for you know, just a couple 100 bucks. It’s amazing, right? And you know, that was only a few years ago, folks. So technology obviously gets cheaper. So at first, I think it would be deflationary. But then people might become so prosperous because of the technology that ultimately would become inflationary, because people would have other money, that that technology freed up other money to spend on other things like maybe to buy or rent housing. And if they did, that would likely create an inflationary environment. Because remember, inflation occurs when you have a large amount of currency or dollars chasing a limited supply of goods and services. So the more prosperity you have, the more inflationary it is. So technological breakthroughs in my humble opinion, and I’m not totally conclusive on this, by the way I haven’t. I’m not sure I’m right. By the way, I guess that’s the way I just want to put it but my sense of it is that at first, they’re deflationary, that ultimately, ultimately, they’re inflationary, okay, as prosperity occurs because of them. So the final thing, the sixth way to get out of the mess, the most likely one is our inflate our way out of it. Significant inflation, to keep all the promises the government has made in nominal dollars. Well, the promises are largely worthless and real dollars. And that is the urgency in why we have to plan for our own future and our own retirement.
Okay, enough of that. Jennifer Love Hewitt. Do you know this is well she’s an actress and I used to have a big crush on her years ago. And the reason I bring this up is because she just listed two of her properties for sale, and for lease, okay, and these are in Toluca Lake, California, an area and kind of the Valley area. You know, I had friends there when I was growing up in that area, so I am familiar with it. And the reason I bring this article with you, is because Jennifer Love Hewitt really should listen to my podcast or come to one of my seminars because she has gotten herself into a pretty bad real estate deal. Check this out. She put one of her she owns two houses right near each other in Toluca Lake. Okay, and one of them. She just put it up for lease for $12,500 a month. Now this house is only 30 216 square feet. It’s a Spanish style home with four bedrooms and four bathrooms. Amenities include an office with a separate entrance and music room, a gym, a swimming pool and a lakefront dock, plus use of the actresses powerboat and her kayaks. Gosh, I guess you get to be like her neighbor. Maybe I should rent this house. I don’t know. But here’s the interesting thing. She purchased the house in 2005 at the peak of the market for $5.5 million. And Jennifer Love Hewitt is 33 years old. She was in the series Party of Five from 1995 to 1999. And I Know What You Did Last Summer, the movie in 1997 98. She started the Ghost Whisperer from 2005 to 2010. This is all reported by the LA Times. And then this year she starred in the client list, which has been renewed for a second season now. Here’s the interesting thing. Why do you think I bring this up to you because you know the math you listeners? You’re smart you get it? You know how this stuff works? Most people don’t get it. Maybe Jennifer Love Hewitt is rationalizing to herself Well, I’ll keep this other house rather than sell it because it’s in a very desirable area like Toluca Lake, and people will always want to live here.
I think I’ve heard a lot of people in Newport Beach say that have an eye and they suffered pretty badly from that belief system. So So anyway, here’s what’s interesting, Okay, first of all, RV ratio, the rent to value ratio. Now, granted, I’m sure the house isn’t worth 5.5 million anymore, because she did buy it at the peak of the market in 2005. I don’t know if she got a good deal or a bad deal at the time, but let’s assume she paid market value at the time. It’s probably worth maybe, I don’t know 4 million now. It’s probably gone down a bit. Okay. I’m just throwing out a number there. And it 1% Rv ratio based on the original price, most of our properties that you can buy at Jason hartman.com, slash properties, those would have an RV ratio of 1% or better, maybe even as high as 1.4 or 1.6%. But let’s just go with a conservative number here of 1%. Well, Jennifer, By my calculations at the $5.5 million price, you should be renting your property here for $55,000 a month, and you’re only getting $12,500 a month. So you are losing $42,500 per month, almost $600,000 per year, just rounding off. Ouch, that hurts now, I’m sure Jennifer Love Hewitt makes a lot of money. And I’m glad she does. She’s a beautiful lady. But you see how high end rentals just don’t work? Okay, it’s not her fault. It’s just because she’s got a high end rental. I mean, don’t rent if you’re going to own high end property. Like if any of you are listening to me now, in my old hometown. If you’re in Orange County, and you live in Newport Beach, Corona Del Mar, Laguna Niguel, you know, any of the nice areas in say, San Diego or Los Angeles or, you know, up north in the Bay Area, San Francisco area, folks, these properties, it’s better to rent them as to live in them yourself. Okay, like I do with my swanky penthouse, okay, I’m getting a great deal, it’s much better to rent this place than to own it. And then it’s better to own a lot of low end properties that you can rent to other people. I mean, not only is the RV ratio on that property, terrible, but guess what she paid per square foot for this property.
Remember, she paid 5.5 million for it, and it’s 30 216 square feet, do the math now just divide it per square foot. And you know, it may be on a big piece of land. And obviously it’s on, it’s got a lakefront dock. So you know, obviously there are very nice amenities here. Um, you can’t just do it purely on square footage. But just note that she paid 17 $110 per square foot for this property, whoa, ouch, that’s expensive. 17 $110 per square foot with properties you can buy for about $55 a square foot or so nowadays. So pretty amazing. There, I just wanted to point that out how high end rentals just simply don’t work? Well. I’m going a little long here, I’ve got some other stuff I wanted to share with you. But in the interest of time, let’s get to our guests. I just want to remind you our Atlanta property tours coming up. And that is at the end of September at the beautiful Grand Hyatt Atlanta, we’ve got the creating wealth seminar on Saturday. And then we’ve got the property tour on the Sunday last weekend of September, register at Jason hartman.com. That event is pretty full, we actually extended the room block with those $129 night rooms for you at the beautiful beautiful Grand Hyatt Atlanta. So we hope to see you there many, many many of you have registered. So this is this is going to be a pretty big event. And we’re very excited about it and look forward to meeting you in person. And then of course, we will announce a date soon for our meet the Masters event, which as you heard about on a couple episodes, we’re changing that up a bit. We’re going to do those in January now to start the year off, right. And we’re going to be doing more non local creating wealth boot camps. And combining those with property tours. In our different markets. We’ve had some great feedback on that we hear you like it a lot. So that’s what we want to do. We want to get out to other areas so you can see them. And so we can meet you in different parts of the country. So that’s it. And we will be back with our guest in just a moment.
Announcer 23:56
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Jason Hartman 24:21
My pleasure to welcome Dr. Chris Kacher to the show. And Gil Morales, and we are going to talk about investing today we’re going to talk about commodities, maybe gold some stock market info as well. And welcome you guys. How are you?
Chris Kacher & Gil Morales 24:34
Great to be here. Nice to be here. Jason. Yeah.
Jason Hartman 24:36
Good to have you. And so Chris, you’re in London and Gil, you’re in Southern California, right?
Chris Kacher 24:41
Yes, I’m in Playa Del Rey, which is basically an Oceanside suburb of LA.
Jason Hartman 24:44
Fantastic. Tell me a little bit about what both of you do.
Gil Morales 24:48
You first, Chris.
Chris Kacher 24:50
Well, I mean, that’s kind of an open ended question. We run a number of companies. We’re involved in wealth management for private individuals and institutions. We run selfish investing.com, which is an investment website that includes our own views on the stock market, as well as stocks that we see in real time that are actionable that is on the short side or the buy side. We also host webinars through that website every week. And we are also published authors and we’re just coming out with our latest book for the Wiley john Wiley and Sons fall lineup, which is in the cockpit cockpit with the O’Neill disciples how we made 18,000% of the stock market.
Jason Hartman 25:33
18,000% not bad. Now Ayn Rand wrote a great book entitled the virtue of selfishness, which I highly recommend. It’s a collection of essays. And I suppose the title of your website virtue of selfish investing.com maybe was inspired by that?
Chris Kacher 25:48
Yeah, absolutely. Actually, I came up with the name and why was it a big fan of Ayn Rand, I’ve read most all of her work in college, and in my early 20s, and I created virtual selfish investing.com in 1994. And yes, that that book, virtue of selfishness is definitely in my, my top 10. So it was definitely inspired. The name was inspired by that very book.
Jason Hartman 26:12
And oddly enough, the title has very little to do with a book. But I highly recommend that anybody read the essay on the monument builders in the virtue of selfishness is just fantastic. So 18,000% return in the stock market? I mean, are you kidding? Well, first of all, what time frame. What time frame?
Gil Morales 26:33
Jason, I think it’s fair. And I have to disclose that, that Chris, and I made a lot of money, mostly in the 90s, and some in the early 2000s. But for the most part, if you look at the market of the 90s, it was a parabolic market, that went nuts in 1999. And we both fully capitalized on that move. And that’s where we made our stock market market fortunes. The 2000s have been a much more difficult period. And since Chris and I both left O’Neill, I left in 2005, he left in 2001, and went off to start hedge funds on our own. And it’s been a challenging environment. So I should point out that that performance, like like a surfer, you know, surfers ride is only as only as good as the size of the wave and the shape of the wave. And the same thing occurred with us, we had a great decade during the 1990s fully capitalize on that. 2000’s are challenging. So our performance has not been as great as it was in the 90s. But I think we are able to find our way through a difficult environment. So I should point that out. So
Jason Hartman 27:29
Fair enough. No, I appreciate the sort of, Yeah, and and but just to go back to that 18,000% return, what time period exactly what years,
Chris Kacher 27:39
That was from 1996 to 2000. So it was a it was a four and a half, let’s see 679 Yeah, four and a half year period. And KPMG stepped in and did the the the count verification on all my returns, since it even even in those years, I remember, they were still quite unbelievable. And actually that those years don’t comprise the entire return of I did six years, six years of triple digit returns from 1995 to the year 2000.
Jason Hartman 28:09
And, were you doing in that timeframe? That was the start of the.com bubble? Were you investing a lot of tech stocks?
Chris Kacher 28:15
Yeah, absolutely. I mean, I, I go where the money is flowing. So I don’t care if it’s retail, tech, commodities, if I sense that there’s a new trend beginning, in a vested interest on the part of institutions in a certain area of the market. That’s where I’m going to put my money.
Jason Hartman 28:33
What has your experience been the last 10 or 12 years then since since the meteoric returns. What have you done since then?
Chris Kacher 28:41
I’ve gotta say that, that I’ve absolutely loved the last 10 12 years, even though these last 1012 years are hated by so many. And simply because if it weren’t for the the challenges that the market is thrown at us over these years, then I wouldn’t have come up with the these ideas like the pocket pivot concept, which allows one to buy early in the base before the breakout. It also allows one to add to their position effectively as a stock moves higher. And there’s also the Buyable Gap Ups, which that came shortly after the Pocket Pivot concept in 2005, simply because the tools that I was using in the 90s weren’t working very well in 2004 2005. Those were very compressed sideways markets. So a lot of bass breakouts were failing, and just out these these ideas were born out of frustration. And I love that about challenges because you could look at challenges as something that, you know, that gets you down. Why, you know, why is life challenging me, but I think challenges offer an immense growth growing period for any investor.
Jason Hartman 29:47
And what are some of your secrets? I mean, you just alluded to the Pocket Pivot. What is that?
Chris Kacher 29:52
The Pocket Pivot? Like I said, 2004 2005 were very compressed markets. So breakouts weren’t working. If you, what I did was identify within the stocks basing pattern, favorable entry points that shortly precede an actual breakout in the stock. So in other words, instead of buying at say the stock breaks out of 30, you’re going to be buying at maybe 28, then it breaks out at 30. It allows you to buy a second position, so your average cost is 29. Actually, in practice, sometimes a spreadsheet is even greater because these bases are not usually that thin. So you know, if your average cost is say, if you bought first a 25, then you bought at 30, your average cost is 27 and a half, and then the breakout doesn’t work, you might actually close your trade out at a small profit. So instead of getting nickeled and dimed, like I was getting in, into in early 2005, I started becoming profitable. And then when late 2006 came along, I don’t know if you remember, but this huge window of opportunity opened. Starting in late August, early September, I was able to use Pocket Pivots to run up my account 115% in about three months. And I gotta say, I mean, that is not something I did with regularity, even in the 90s. So I was very, very happy with that the concept was proving out.
Jason Hartman 31:07
So you both run hedge funds then?
Gil Morales 31:09
Well, today, we actually run to money management firms, MOCA investors, LLC, which is a, shall I say, a private money management management firm, I can’t really go into any details on what we manage because of SEC restrictions. But virtue of self investing LLC is a separate, wholly owned subsidiary of MOCA investors. And we do have a managed accounts program, there were in a minimum account size 100,000, all that usual stuff for managed account, we do run that there for your average investor who can’t afford to put up the large numbers that are required to come into a hedge fund or meet them the net worth requirements. So that’s what we do right now. We do run some money, we have about, you know, 15 20 million under management, currently relatively new firm. Chris and I actually teamed up again in 2009, after going our separate ways from O’Neal. But while we were at O’Neal, we’re very effective team very powerful team at the firm. And in 1999, we were both up over 500% for the year, and we led the group, the internal money management group. So coming back together after having some difficult periods during the early 2000s to mid 2000s. Since then, we’ve come together, form these two companies. And like Chris said, the beauty of the 2000s is that we have to recognize that we were raised in an environment where you had a parabolic upside market in the in the 90s. And it was an easier environment to invest in. And so the 2000s have forced us to kind of look back and reassess all of that and come up with better methods. And so that’s why Chris is able to come up with the Pocket Pivot, there are Buyable Gap Up as well. And all these have been codified as a result of Chris’s statistical studies. So we can actually implement them as strategies, and they’re very effective. And I would have to say that coming out of, you know, coming through the first decade of the 2000s, we actually are very pleased with where we’re at and where we’re headed right now. And I think a lot of that is due to the way the 2000s have forced us to adjust and really change our mindset in terms of realizing that we grew up in a in a very easy parabolic market environment. And things are more difficult. Now, like Chris said, it’s very gratifying to be able to have that three month streak of performance using the tools like the Pocket Pivot and the Buyable Gap Up so to us, it confirms that the work is sound. And as long as we continue on this track, we should be able to achieve similar success going forward.
Jason Hartman 33:26
And what so what is your general outlook for the stock market? I mean, do you short stocks? Or do you generally go long? I mean, are you momentum investors or what’s the philosophy behind
Gil Morales 33:37
Define momentum? Well, define momentum.
Jason Hartman 33:40
I’m no expert. But you know, that seems to be the follow the money philosophy.
Gil Morales 33:44
Well, I would say in terms of momentum, we buy stocks when we believe they’re there and commodities when we believe they’re beginning a trend. So if that’s momentum, then I guess we are momentum investors because I think anybody who buys into a downtrend or buys into essentially a flat environment, like say, anybody who owned Microsoft for the last 10 years, I think they’re just foolish and so I don’t really use the term momentum investor. I know sometimes that’s used pejoratively to to somebody, you know, and I’m not saying that’s what you mean here, but that is because it is a commonly used term.
Jason Hartman 34:16
Well, I was just I was just following the William O’Neal kind of concept.
Gil Morales 34:20
A lot of people say it’s momentum, but to me, if it’s up fast and in a hurry, it’s momentum and you are buying stocks as they are first emerging from sound, sideways, consolidations, and bases. Such as Apple coming up through what was that Chris, coming down in the four hundreds like 430 coming out a new breakout in January, that’s where we would be buying a stock like Apple right? And it has a nice move. So you know, that’s really what we do. We buy trends and we try to buy the trend as it’s developing. And then pyramid our position as a trend continues and begins to accelerate and that’s how we make big gains. In 2011, most people were down we were up to over 24% and we basically used silver as the silver trend from April to May is just a one month trend maybe a little more than that, to achieve those gains in 2011, when most other managers were floundering. And so that’s what we do. We find trends, we find them right at the point of say, inception, if you will, and we ride them for all they’re worth. And okay,
Jason Hartman 35:15
so the question is, yeah, fair enough. So the question is, do you have a name for your method? Is there a, is there a name for it? Does it follow one of the commonly known names, I’m just trying to
Gil Morales 35:27
In our book Jason, we we actually, you know, obviously, having worked for ONeil, he’s the man who trained us and taught us our methods for the most part and gave us the foundation for our methods. But I would say that our ethos, our philosophy, and our approach is really use a combination of three well-known investors, Jesse Livermore, the great trader, Jesse Livermore, from the early 1900s, to mid 1900s, Bill O’Neil, of course, and then Richard Wycoff. And so we, we take the last names of each of those O’Neill, Wycoff, and Livermore, we come up with our OWL, is our investment ethos. And so I guess what we would say is we’re owls, for most part, and if you read any of the books by any of those gentlemen, you can see that our work is derived from there. But we do believe that we have expanded the work and built upon the foundation that we were provided.
Jason Hartman 36:15
Good, good. I just want to get your take in your outlook on the stock market. And sounds like your commodities guys, as well. Right? Are you sort of
Gil Morales 36:24
We’re trend followers. Yeah. And I think one of the unique things about the, you know, the 2000s, is you have a lot more ETFs, and they’ve created ETFs, for trading commodities, and you have single commodity ETFs, like the SLV and the GLD, for silver and gold respectively. I think it opens up new opportunities to play developing trends in commodities. And so the 2000s have been great for precious metals have been a nice secular trend since pretty much 2001, I believe. And so it’s been useful there. We’ve never played any other commodity. So in that sense, we’re not really commodities guys, or commodities, traders, per se. But if we see a single, a single commodity ETF, or even a small, a smaller base, ETF that may be the CRB index, or maybe the USO, which is the crude oil ETF. We might try playing those, but we haven’t yet. So but we do have an outlook on commodities and stocks.
Jason Hartman 37:15
So that’s what everybody wants to hear. Tell us what that outlook is.
Gil Morales 37:19
Chris, you okay with me doing this?
Chris Kacher 37:21
Yeah, sure, go for it.
Gil Morales 37:22
I mean, right now, we use a market direction model, which has had some trouble in 2012, along with a lot of other models, because the market is a little bit anomalous here. But it is on a buy signal. And the markets obviously coming off today, but we have to remember the markets been up very sharply off the lows over the last three weeks or so. So right now, we would have to say that the trend is up until proven otherwise. And with the pullback today, what we’ll do is just watch our stocks and some of our major holdings or stocks, like say Facebook is actually up point 6%. Today, right now as we speak, another stock mellanox is only down 1%. So when we look at the the stocks relative to what the markets doing today, we could say possibly This is just an index phenomenon in the short term, and that will start an upside trend. Again, we’ll see what happens we could shift to a cash or sell signal if the market continues to deteriorate. But I think with the potential for a new administration coming in in November, you could have something similar to the reagan rally in 1980, when the market began to realize that there would be an inflection point in government policy with Carter going out in November and Reagan coming in. And there was a nice rally between April and November of 1980. We see potential for that here. But it could be a choppy ride. And so we think that’s something that needs to be taken into account by investors. So we’re constructive on the market here. But we’re also ready to react any fresh evidence if the situation deteriorates quickly, because you are in sort of an anomalous period where anything could happen coming out of Europe. And there’s a great deal of fear and anxiety out there and a lot of news oriented movement within the markets.
Jason Hartman 38:57
And was that what you just said. Did that apply to stocks or commodities as well?
Gil Morales 39:02
To stocks. And commodities really are going to depend on whether you see more QE coming out of the Fed and thus the dollar deteriorating. So primarily, we might look at stocks and be constructive on them right now but we’ll have to see how the action pans out in the coming days given what’s going on to a but but you’re in a position where the market could back and fill for a little while as it tries to confuse investors. So but but right now I say we’re we would say the market is in an uptrend stocks are in an uptrend, therefore we’re constructive on stocks, whereas commodities may be another issue altogether.
Jason Hartman 39:35
So commodities not as rosy then you know, you don’t think there’s an uptrend for commodities?
Gil Morales 39:40
Well, if it’s some big QE push than an end, declining dollar, I think that you would see commodities start to rally again, and that’s something to to watch out for.
Jason Hartman 39:49
Yeah. Well, speaking of quantitative easing, your outlook on inflation and the value of the dollar.
Gil Morales 39:53
Chris, go ahead on that one.
Chris Kacher 39:55
Well, I’ve said on other newscasts that these are the major currencies, the Euro, the pound, and the dollar, it’s almost like they’re a race to zero because all the major central banks are printing money. And there’s no sign that they’re going to be abating that money printing, simply because a lot of these, there’s no choice between default or devalue, I mean, they’re not gonna default. So they’re going to continue to print money to pay their debts. And that, in turn will cause hard assets to rise, since currencies will fall. And we’re going to see the dollar. I mean, if you look at the long term trend of the dollar, it’s been down, a lot of people don’t know that the US dollar actually lost 40%, well close to 40% of its value against major world currencies between 2002 and 2007. And the euros, life expectancy is probably limited, simply because of the structure there. And the UK pound isn’t a whole lot better off the UK is severely in debt, as well. So I see the central banks, as they actually said the other day, they will they will come together and print as needed to deal with the new crises as they occur.
Jason Hartman 41:10
Every currency is a fiat currency and every politician panders to buy votes by giving out their large assets. And it’s just I don’t know how we could have faith in any currency for the future. Because that just seems to be the wave is structure, you know, of the whole system works. But I know you guys have to run into another broadcast. One quick question for you, I want you to give out your website again to and tell people where they can learn more. But just very simplistically, the whole Wall Street thing. It’s so complicated, there are so many different ideologies. And you know, there are so many different scandals and scams going on all the time, if one group or one individual has really sort of mastered the market, as it seems that you two gentlemen have where you’ve, you’ve earned some exceptional returns, why doesn’t every other individual and every other institution just follow that plan? And then, of course, you have had to have a counter transaction on every side of it. which ultimately seems like if everybody were to follow the plan that actually works, you know, ultimately, it wouldn’t work. But in the initial stages, you know, why doesn’t everyone just sort of follow the one plan that works? I don’t understand. Just very simplistically why that doesn’t work that way?
Chris Kacher 42:27
But it’s a good question. And I mean, the short answer really, is that everyone has this different risk tolerance levels. So a style that suits me might not suit someone else, my style might be too aggressive, or maybe not aggressive enough. And I’ll my position sizing techniques and pyramid techniques, and money management techniques are all a fingerprint of my trading personality, and every investor out there has to figure out their own fingerprint for themselves. And we always tell that to selfish investing.com. members and non members, we have a investor education section on there, that’s free to everybody. And it’s all about figuring yourself, your trading personality out so that you know how much you want to risk. And if you risk too much, you’re going to get thrown out of your position prematurely. And it’s all about that learning curve. And everyone’s got to commit a certain amount of money they can afford to lose to put their emotions on the line and figure themselves out. And that process is going to take, you know, at least a good year just to start getting acquainted with your trading personality.
Jason Hartman 43:26
Okay, give out your website, selfish investing.com. Well, thank you so much, Chris. And Gil, appreciate having you on the show. And good luck on your other broadcast.
Chris Kacher & Gil Morales 43:35
Thanks, Jason. All right, thank you take care of it.
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