Jason Hartman: Welcome to the Creating Wealth Show. This is episode number 275 and 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 some financial guys here. Those are our guests today 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 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’s share of property transactions nowadays is phenomenal. In fact, I think – and I’m going to share some data 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’s side of the business.
A lot of people are recognizing the opportunity. There are still many who don’t, but there will always be people that get it and those who don’t, and fortunately all of you listening get it. Now, in terms of the six ways out of the mess, I’m going to talk about one of them right now. This is a very positive one. I don’t know if you remember or you watched 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 work for NASA or go into the sciences or something. I guess I would have had to pay attention too much in school. 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. 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 always – I knew every episode. I had the blue prints of the Starship Enterprise on my walls in the room, all the architectural blue prints of this fictional spaceship and 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, “Beam 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 – remember, when we see something and 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 see and perceive as red or blue or yellow or green or whatever the color is. And so, a video camera pics 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 on to a hard drive, a solid state ship, a magnetic tape, whatever it might be, and hard drives are magnetic, too. But when it broadcasts this data — all of this 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 when we had the author of the show — [unintelligible 4:51] abundance a few episodes ago, we were talking about this and this is really exciting.
So maybe, folks, 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 that has just occurred in the world of technology and we’ll tie this is with what it has to do with being a good investor in just a moment here. So, this is a news article. Actually, I got a couple of news articles I want to share with you today and this one says that, “New quantum teleportation record wows scientist,” and 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 the 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 reassembling 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 beam you up to the Starship Enterprise, at least not yet, but scientists are able to tweak ‘entangled’ photons…” photons are 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. Then European and Canadian scientists said they had done it 89 miles. Although their study is not peer reviewed, what’s the upshot of this for the rest of us? Research is still ‘In gee-whiz exploratory phase’; note Scientific American, but outer space teleportation could allow us to beam quantum information up to satellites in the blink of an eye. And what is that quantum information they are 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.
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 you choices here? Number one, default. All the government promises that they cannot keep; Medicare, Social Security, et cetera. They would just, “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 time ago. Number three, have a yard sale. The USA could sell off assets to raise money. Remember when we were talking a few years ago about selling the ports to do buy? The Bureau of Land Management, the 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, steal. 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 in Iraq, which didn’t really happen, I guess. But remember that whole pitch was we’re going to pay for the war, win their oil, we’re going to free the country and then – whatever happened to that idea, I don’t know. I 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 going to 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, too. This may be the mission, where we actually discover that there was life on Mars or there is life on Mars. Who know? We’re getting close to knowing 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, too. That’s all DNA really is, is information, in creating life forms and devices and things to colonize space through particle replicators. It’s kind of a higher tech version of 3D printing, really. 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, 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 crony capitalism and a bunch of wasted, wasted money where criminals can come in and steel from the government largesse and steal the taxpayers’ money essentially. But it’s gotten better. Solar is a lot more efficient than it was 20, 30 years ago. I remember as kid I had the Radio Shack little kit that had a little solar panel and capacitors and resistors on it and I would play with that. You could actually produce energy from solar. It’s just never been enough to pay for the cost of the solar panel. It just doesn’t work. There’s not enough energy in sunlight so far. But maybe energy will 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 Hedonics Index, which I have taught you about on prior shows. But what would they 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. It would have widespread adaptation, people would have widespread access to it, and it would be really inexpensive. Remember the first plasma flat screen TVs that came out? They were $20,000 for a 42-inch and now you can buy a 42-inch LCD TV for just a couple hundred bucks. It’s amazing, right? 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. Technological breakthroughs, in my humble opinion — and I’m not totally conclusive on this, by the way. 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 then ultimately they’re inflationary as prosperity occurs because of them. So the final thing, the sixth way to get out of the mess, the most like one is 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 in 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 who 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 is up is because she just listed two of her properties for sale and for lease. This is in Toluca Lake, California, kind of a valley area. I had friends there when I was growing in that area, so I’m familiar with it, and the reason I bring this article up 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 owns two houses right near each other Toluca Lake and one of them, she just put it up for lease for $12,500 a month. This house is only 3,216 square feet. It’s a Spanish style home with four bedrooms and four bathrooms, amenities include an office with a separate entrance, a music room, a gym, a swimming pool and a lakefront dock, plus use of the actress’ 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 starred in the Ghost Whisperer from 2005 to 2010. This is all reported by L.A. 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 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 an a very desirable area like Toluca Lake and people will always want to live here.” I think I’ve heard a lot of Newport Beach say that, haven’t I? And they suffered pretty badly from that belief system. So anyway, here’s what’s interesting, okay? First of all RV ration, 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 and 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 $4 million. It’s probably gone down a bit. I’m just throwing out a number there. At a 1% RV ratio based on the original price, most of our properties that you can buy at jasonhartman.com/properties, those would have an RV ration of 1% or better, maybe even as high as 1.4% or 1.6%. 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 – many 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, any of the nice areas, say San Diego or Los Angeles or up north in the bay area, San Francisco area, folks, these properties, it’s better to rent them as to live in them yourself, like I do with my swanky penthouse. 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. Not only is the RV ration that property terrible, but guess what she per square foot for this property. Remember, she paid $5.5 million for it and it 3,216 square feet. Do the math, just divide it per square foot. It may be on a big piece of land and obviously it’s got a lakefront dock. Obviously there are very nice amenities. You can’t just do it on square footage, but just know that she paid $1,710 per square foot for this property. Ouch! That’s expensive, $1,710 per square foot. We have 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 guest. I just want to remind our Atlanta Property Tour is 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 Sunday, last weekend of September. Register at jasonhartman.com. That event is pretty full. We actually extended the room block with those $129 a night rooms for you at the beautiful Grand Hyatt Atlanta. So we hope to see you there. Many of you have registered, so this is going to be a pretty big even and we’re very excited about it and look forward to meeting you in person. And then, of course, we will announce dates soon for you Meet the Masters even, which is – you heard about them a couple of episodes. We’re changing that up a bit. We’re going to do those in January 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.
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Jason Hartman: My pleasure to welcome Dr. Chris Kacher to the show and Gill Morales, and we’re going to talk about investing today. We’re going to talk about commodities, maybe gold, some stock market info as well. Welcome, you guys. How are you?
Gill Morales: Great to be here, Jason.
Jason Hartman: Good to have you. And so, Chris, you’re in London and Gill, you’re in Southern California, right?
Gill Morales: Yes, I’m in [unintelligible 23:20], which is basically an ocean side suburb of L.A.
Jason Hartman: Fantastic. Tell me a little about what both of you do.
Gill Morales: You first, Chris.
Chris Kacher: 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 selfishinvesting.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 with our latest for the John Wiley & Sons fall lineup, which is in the cockpit with the O’Neal disciples, how we made 18,000% in the stock market.
Jason Hartman: Not bad, 18,000%. 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 virtueofselfishinvesting.com maybe inspired by that?
Chris Kacher: Yeah, absolutely. Actually, I came up with the name and I was a big of Ayn Rand. I’ve read almost all of her work in college and in my early twenties and I created virtueofselfsishinvesting.com in 1994. And yes, that book, Virtue of Selfishness is definitely in my top ten. So the name was inspired by that very book.
Jason Hartman: And oddly enough, the title has very little to do with the book, but I highly recommend that anybody read the essay on the monument builders in The Virtue of Selfishness. It’s just fantastic. So 18,000% return in the stock marker. I mean, are you kidding? First of all, what time frame”
Gill Morales: Jason, I think it’s fair and to disclose it – Chris and I had 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 fortunes. The 2000s have been a much more difficult period and since Chris and I both left, I left in 2005, he left in 2001 and went off to start hedge funds on our own. It’s been a challenging environment, so I should point out that that performance – like a surfer, you know, a surfers ride is 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 capitalized on that. 2000s are more challenging, so our performance has not been as great as it was in ‘90s. But I think we are able to find our way through a difficult environment. So I should point that out.
Jason Hartman: Fair enough, I appreciate sort of disclaimer there. Just to go back to that 18,000% return, what time period exactly? What years?
Chris Kacher: That was from 1996 to 2000, so it was a four and half-year period and [unintelligible 26:28] stepped in did the account verification on all my returns. Even in those years, it’s still quite unbelievable. Those years don’t comprise the entire return of – I did six years of triple digit returns from 1995 to 2000.
Jason Hartman: In that time frame, that was the start of the .com bubble. Were you investing in a lot tech stocks?
Chris Kacher: Yeah, absolutely. I mean, 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 and 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: What has your experience been the last 10 or 12 years then since the meteoric returns? What have you done since then?
Chris Kacher: I got to say that I’ve absolutely the last 10, 12 years even though this last 10, 12 years are hated by so many. And simply because if it weren’t for the challenges that the market has thrown at us over these years, then I wouldn’t have come up with 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 the stock moves higher, and it is 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 and 2005, and those were compressed sideways markets. So, a lot of base breakouts were failing. These ideas were born out of frustration and I love that about challenges because you could look at challenges as something that gets you down, why is this life challenging. But I think challenges offer an immense growing period for any investor.
Jason Hartman: And what are some of your secrets? I mean, you just alluded to the pocket pivot. What is that?
Chris Kacher: The pocket pivot – like I said, 2004 and 2005 were very compressed markets, so breakouts weren’t working. What I did was identify, within the stock’s basing pattern, favorable entry points that shortly precede an actual breakout in the stock. In other words, instead of buying at – say, the stock breaks at a 30, you’re going to be buying it maybe 28. Then it breaks out at 30, it allows you to buy a second position. So your average cost is in 29. Actually in practice, sometimes the spread is even greater because these bases are not usually that thin. So, you know, if your average cost is s—if you bought first at 25 then you bought at 30, your average cost is 27.5 and then the breakout doesn’t work, you might actually close your trade out at a small profit. So instead of getting a [unintelligible 29:09] like I was getting 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 got to say, that is not something I did with regularity even in the ‘90s. So I was very, very happy that this concept was proving out.
Jason Hartman: So, you both run hedge funds then?
Gill Morales: Well, today we actually run two money management firms, MoKa Investors, LLC, which is a private money management firm. I can’t really go into any details on what we manage because as you see restrictions, but Virtue of Selfish Investing, LLC is a separate subsidiary of MoKa Investors. And we do have a manage accounts program there where minimum accounts has $100,000, all that usual stuff. For manage account, we do run that there for your average investor who can afford to put up the large numbers that are required to come into a hedge fund or meet the net worth requirements. So, that’s what we do right now. We do run some money. We have about 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 were a 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, the mid 2000s, since then we’ve come together and formed these two companies. And like Chris said, the beauty of 2000s is that we have to recognize that we were raised in an environment where you had a parabolic upside market in the ‘90s 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. That’s why Chris was able to come up with the pocket pivot, there are buyable gap ups as well, and all of these had be codified as a result of Chris’ statistical study so we can actually implement them in strategies and they’re very effective. I would have to say that coming though 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 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 months streak of performance using the tools like the pocket pivot and the buyable gap ups. 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: 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?
Gill Morales: Define momentum.
Jason Hartman: I’m no expert, but that seems to be following the money philosophy.
Gill Morales: Well, I would say in terms of momentum, we buy stocks when we believe they’re end commodities, when we believe they’re beginning at trend. So, if that’s momentum, then I guess we are momentum investors because I think anybody who buys either into a down trend or buys into a essentially a flat environment like anybody who owned for the last 10 years, I think they’re just foolish. So I don’t really use the term momentum investor. I know sometimes that’s used – and I’m not saying that’s what you mean here, but because it a commonly used term.
Jason Hartman: I was just following the William O’Neal kind of concept.
Gill Morales: A lot of people say it’s momentum, but to me if up fast, in a hurry is momentum and you are buying stocks as they are first and emerging from sound sideways, consolidations and bases, you know, such as Apple coming up through – what was that, Chris? Somewhere down in the 400, it’s like 430 coming out of a new breakout in January. That’s where we’ll be buying stock like Apple and it has a nice move. 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 the trend continues and begins to accelerate. 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. It’s just a one-month trend, maybe a little more than that, to achieve those gains in 2011 when most of their manage 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 their worth.
Jason Hartman: So the question is, do you have a name for your method? Is there a name for it? Does it follow one of the commonly known names?
Gill Morales: In our book, Jason, we actually – obviously having worked for O’Neal, he’s the man who trained 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 a combination of three well-known investors; Jesse Livermore from the 1900s to mid 1900s, Bill O’Neal, of course, and then Richard Wyckoff. And so we take the last names of each of those, O’Neal, Wyckoff, and Livermore and we came up with OWL, O-W-L. That’s our investment ethos. And so, I guess what we would say is we’re owls for the most part. And if you read any of the books any of those gentlemen, you can see that our work is derived from that, but we do believe that we have expanded the work and built upon the foundation that we were provided.
Jason Hartman: Good. I just want to get your take and your outlook on the stock market. It sounds like your commodities guys as well, right?
Gill Morales: We’re trend followers. Yeah, and I think one of the unique things about the 2000s is you have a lot more ATFs and they’ve created ETFs for trading commodities, you know, single commodity ETFs like the SLV and 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. It’s been a nice secular trend since pretty much 2001, I believe. It’s been useful. We’ve never played any other commodities. So in that sense, we’re not really commodities guys or commodities traders, per se, but if we see a single commodity, ETF, or even a smaller base ETF, maybe the CRB Index or maybe the USO, which is the crude ETF, we might try playing those but we haven’t yet. But we do have an outlook on commodities and stocks.
Jason Hartman: So that’s what everybody wants to hear. Tell us what outlook is.
Gill Morales: Chris, you okay with me doing this?
Chris Kacher: Yeah, sure, go for it.
Gill Morales: 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 market is obviously coming off today but we have to remember the market has 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 – Facebook is actually up 0.6% percent right now as we speak. Another stock, Mellanox, is only down 1%. So when we look at the stocks relative to what the market is 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 a sale signal if the marketing continues to deteriorate. But I think with the potential for a new administration coming in this November, you could have something similar to the Regan rally in 1980 when the market began to realize that there would be an inflection in government policy with Carter going at it in November and Regan 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 investors. So we’re constructive in the market here but we’re also ready to react to 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: What you just said, did that apply to stocks or commodities as well?
Gill Morales: Stocks. And commodities really are going to depend on whether you see more QE coming out of the Fed and is 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 pens out in the coming days given what’s going on today. But you’re in a position where the market hit back and fill for a little while as it tries to confuse investors. Right now 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: So commodities not as rosy then? You don’t think there’s an uptrend for commodities?
Gill Morales: If you get some big QE push and declining dollar, I think that you would see commodities start to rally again and that’s something to watch out for.
Jason Hartman: Well, speaking of quantitative easing, your outlook on inflation and the value of the dollar –
Gill Morales: Chris, go ahead on that one.
Chris Kacher: Well, I’ve said on other newscasts that the major currencies, the Euro, the pound, and the dollar, it’s almost like they are raised 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 going to default, so they’re going to continue to print money to pay their debts and that in turn will cause the 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 U.S. dollar actually lost close to 40% of its value against major world currencies between 2002 and 2007. The Euro’s life expectancy is probably limited, simply because of the structure and the U.K. Pound isn’t a whole lot better off. The U.K. is severely in debt as well. So, I see these central banks, as they actually said the other day, they will come together and print as need to deal with the crises as the occur.
Jason Hartman: Every currency is fiat currency and every politician panders to buy votes by giving out their largess 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 way the structure of the whole system works. I know you guys have to run and do another broadcast. One quick question for you — I want you to give out your website again too 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 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 earned some exceptional returns, why doesn’t every other individual and every other institution just follow that plan and then – of course, you have 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. In the initial stages, why doesn’t everyone just follow the one plan that works? I don’t understand just very simplistically why that doesn’t work that way.
Chris Kacher: It’s a good question. The short answer really is that everyone has 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 my position sizing techniques and pyramiding 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 selfishinvesting.com members and non-members. We have an investor education section and that’s free to everybody. It’s all about figuring yourself, your trading personality 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. That process is going to take at least a good year just to start getting acquainted with your trading personality.
Jason Hartman: Give out your website.
Chris Kacher: Selfishtesting.com.
Jason Hartman: Thank you so much, Chris and Miguel. I appreciate having you on the show and good luck on your other broadcast.
Chris Kacher: Thanks Jason. Take care.
(Top image: Flickr | epicharmus)
The Jason Hartman Team
Transcribed by: Renee’
