Stig Brodersen  1:22  

Oh boy, Preston. Exciting times. I have to say, going into the first topic here today, how we were positioned before and what we thought about the market before it all started. I don’t think I took it seriously enough. If anyone had told me a month ago that we would be where we are today, even what we knew about the coronavirus at the time, I would still be pretty surprised. How about you?

Preston Pysh  1:45  

Back when we aired the conversation and we recorded this conversation back in January with Eric Townsend, I was extremely concerned about what this was going to do globally. I think people probably heard in that interview with Eric, the reason I was concerned is because I was seeing the videos mostly on Twitter. I was seeing the videos coming out of China. To me, it looked like a military exercise. I had participated in chemical and biological military exercises back in the day in the army, so I’ve seen what those look like. 

I’ve been in the chemical mass and I’ve gone into the chemical chambers. When I was watching videos coming out of China, I was saying, “This is a chem bio military drill that’s going on over there.” 

The fact that they took Wuhan, which has a population of 9 million people, and had literally barricaded the entire city off, to me, logistically that was not even fathomable. It was insane. 

It was interesting when we were talking to Eric that he was seeing the exact same thing. He was also saying, “Hey, this is going to disrupt all the supply chains coming out of China.” 

Therefore, early on, I’d say January or February, I was looking at this and saying, “I don’t even care if they would get this under control.” I think that the impact logistically from the supply chain management standpoint, 80% of medicines that we use in the United States come from China. 

If the whole place is on lockdown, and no one’s working, and that’s what all the videos were showing us, that’s what all the data was showing us is that they were seeing a drop in manufacturing. We were seeing that data in February that the manufacturing data was coming down by 80% in some industries. 

For me, personally, I thought this was going to be a total whopper. I didn’t think that they were going to be able to control the spread. And so, I think it was in February, maybe the beginning of February, the market was still screaming higher with all the things that they’re doing with the repo operations and everything. I was telling myself, “This is not a time to have much exposure to anything.”

In fact, after we aired the episode with Eric, and we posted on Twitter, the comments from everybody was,  “You are fear mongering.” So, I was kind of questioning myself, “Am I crazy right now? Am I the person who’s looking at this way too negatively?” 

But in the end, I wasn’t. It was accurate. It was very hard to go through all that to be quite honest with you emotionally as I was thinking, “Am I overreacting to this? Or is this really as bad as I think it is?” It turned out it definitely was. In fact, it was worse than I thought it was.

Stig Brodersen  4:33  

I would like to talk about how I was positioned before and then later in the episode, I would like to talk a bit more about what I’m doing now in the financial markets, which is probably what everyone out there is thinking about.

I unfortunately didn’t go 100% in cash. In hindsight 2020, perhaps I should. I did start piling up cash here some time ago, so I was around 20% in cash. Like many other investors, I always struggle with how much to keep in cash. 

Looking back, it might seem like it would be the right decision to just go 100% in cash. I generally don’t think that’s more or less ever a good decision to do. I didn’t do that either. I do think it’s very important for us as investors that as much as there are special emergencies, special situations like this, that we more than anything, think about a long term strategy. 

I know it sounds like it might seem silly of me to say that at this point in time, but I do not think that the old buy and hold strategy in any way is out of fashion. I will just go a bit back in history and we are going to talk a lot about history in this episode, just so we can relate to something else.

However, I think it’s important to keep in mind that when the Dow closed at 300 in 1928, the stock market was also overvalued. So when you feel the pain of everything that’s happening right now, I do think it’s okay, if you have been closed or fully invested. 

If that is your strategy going into all of this, that you don’t know what’s going to happen, you can’t understand, won’t understand pandemics and so many other things, and you bought stocks years ago, and you want to keep it for next 30 to 50 years, whatever. I think that’s still a solid strategy. 

For me, it’s been very tricky. As much as I’ve been looking at the market, I’ve seen it to be very expensive, and I’ve been accumulating cash. I didn’t want to be in a position where I was just waiting for that big crash, and then plow in on money. I just don’t think I have that ability. 

You could even make the argument that the market was overvalued to some extent when the Dow was trading at 18,000, then be 100% in cash and you still wouldn’t have been better off even with where we are today here on the 19th of March. I guess that’s how I position myself here before this dreadful month. 

Later, I would like to talk a bit more about where I actually docketed some of that cash and what I’m seeing in my own portfolio. 

I’m curious, Preston, but going a month back, were you in a place where you said, “I want to be in different types of currencies,” or just not really have any exposure at all? 

Preston Pysh  7:17  

Yes, so in February, when the market was still going higher, then this was looking like it was going to spread, that’s whenever I started minimizing any exposure that I had in the market. I wouldn’t say it was a complete liquidation by the middle to the beginning of February, but I was starting to pull back positions because I was expecting this to be very bad. 

We have a momentum tool on our website with TIP Finance. Having written the code that this works off of it, it’s looking at the volatility ranges, and then it’s looking at statistical moves that are outside of normal volatility. 

And so, I was paying very close attention specifically to the S&P 500 and the Russell 2000 on our TIP Finance momentum tool because once that turned red, for me, at that point that was confirmation that what we’re seeing is not normal volatility. It was probably going to be something deeper and worse than we were expecting. 

I was anticipating that to turn red. I was just waiting for it to do the math and show me that was a reality. So that tool turned red on the 26th of February. I want to say the market was down maybe 10% from a tie at that point. That’s when I went completely into cash through the use of that tool. 

The only thing that I was holding at that time was Bitcoin. Bitcoin from its high for 2020 has gone down significantly. I want to say it dropped 50% for that specific position, but if I was going to caveat that, the position for the year was already up 35% since the start of 2018. 

If you were then looking at the performance from the start of the year, that Bitcoin position was only down 15%, which was from… and we’re recording this on the 19th of March, that Bitcoin position was only down, call it 15% for the year. Therefore, the performance was actually really good compared to everything else from the start of the year if you’re looking at it in those terms.  

I still have the Bitcoin position. I’ve added to the Bitcoin position after a drop of 50% and I still have everything else in cash that’s not in Bitcoin. So my portfolio, which probably sounds absolutely ludicrous to a lot of people right now, and through the event was cash and Bitcoin. 

I would argue that most of the reason that I’m in that position right now and it’s so different than any type of position from a portfolio standpoint that I’ve been in the last 10 years, is because I’ve got major massive concerns about fiat currency and fixed income markets that I think are on the cusp of a total meltdown at this point in time. 

I guess when people hear this and are saying, “Well, that’s just crazy. That’s not a safe way to invest.” I mean, from my vantage point, we are in one of the most unique market environments we’ve seen in more than 100 years. I think it’s only going to get more unique as the months come ahead. So yes, that’s my position. I’m in cash in US dollars specifically and Bitcoin.

Stig Brodersen  10:34  

Thank you for your transparency on this. I remember we had this discussion a month ago or so and you were very frank, as you always are, with what you were doing. You said this is not the time to be exposed and as so many other times, I decided not to listen to you. Then I realize afterwards that I probably should have.

When I look at my portfolio, the part that was in equities obviously took a hit. I have some other investments and private deals that are looking more attractive. I guess it’s almost impossible not to these days, but I have a strategy of buying long term compounders. I have a position in Berkshire Hathaway, Google companies like that. Obviously, like the rest of the market, they have taken a hit. Of course, I don’t feel good about it.

I’m actually adding to my compounders because I do think that the price levels you see right now are attractive. I guess my strategy is for a lot of different reasons very different than Preston’s. 

We talked about the momentum tool, which I think is very important to understand. We talked about jumping in and out of the market and how to do that. I would like to caveat that discussion, I do not live in the States, I live in Denmark. I do pay 43% in capital gains. So it’s not as easy for me when I’m sitting on a lot of capital gains to jump in and out. If the market should jump 20%, even if I knew that I might still be “better off” not doing it depending on how you measure it. Therefore, it’s a different situation we’re in.

Preston Pysh  12:00  

I think that is a super important point for people to understand is the calculation of capital gains in your portfolio because we have nothing close to 43% capital gains for a sell here in the States. That completely changes the way a person should invest in a major and unprecedented way.

Let’s say you have a 50% gain, right? Then you got to pay a massive tax on that 50% gain, transition into something else with that sell order. You have to be right in order to continue to progress in your portfolio. 

People, when you are transitioning you’re looking to make a sell, you have to ask yourself, “What am I transitioning this into and what is the expected return I want to get in that investments, after I pay my capital gains and after I take that frictional hit, for Stig it’s 43%?” That’s super high. 

It then changes the way you invest significantly. If it’s not, you’re probably not accounting for everything you need to be accounting for in a way you’re working it.

Stig Brodersen  13:10  

Thank you for mentioning that, Preston. It is definitely true that in many countries here especially in Europe, where we have higher tax rates, we need to account for that. We can’t be as active with some decisions as you can in the States. We have a long term capital gains tax of 15%. 

I have one quick thing here to Bitcoin that I know we’re talking about back and forth. I was a little surprised. Then perhaps not of how much that it crashed here together with the stock market. 

One of the reasons why I’m saying that is that if we saw what gold did in 2008 to 2009, it crashed together with everything and then it rallied afterwards. Perhaps Bitcoin is doing the same thing. 

For the time being, it’s not rallying, but it definitely crashed with the rest of the stock market. So in a way, what’s expected and in a way, when we look at the historical data, it will strongly suggest that it was not correlated to the stock market. It seems like it has been. How do you look at that, Preston?

Preston Pysh  14:07  

I think this was absolutely expected that you would see something like this because when you get into these market crashes, what’s actually taking place is you’re having an absolute massive run to fiat currencies. [The reason is because] what you’re having is the derivatives market is blowing up and all those positions are getting re-accounted for, as to what should be long and what should be short.

When all of the demand was coming offline, and the world was saying, “There’s so much supply,” all the underlying futures and derivatives that basically make those markets and protect all these companies, insurance policies for all these companies, those are assets and liabilities on various people’s balance sheets. 

When you then have a massive disruption in supply and demand, now all those assets and liabilities are, well the liabilities, getting impaired for people that are not positioned appropriately for this supply-demand shock. 

When you have that happen, all the people that are getting impaired on their balance sheet now have to liquidate other positions in order to come up with the fiat, which is what all of these are denominated in. So that’s why you have a huge run to the dollar, you have a huge run to the euros and yen. 

Every major fiat currency in the world has a big bid, and everything else has a sell off because they have to come up with the underlying monetary baseline money that actually sits in these fiat currencies in order to adjudicate all this impairment that’s happening on the balance sheets. 

Gold then acts the exact same way. You’re seeing the bond market sell off right now. You’re seeing the stock market sell off right now, so why wouldn’t you see Bitcoin, which none of these financial derivatives are denominated in Bitcoin today? They’re not.  

Guess what? Bitcoinis going to sell and it’s going to sell in a major way in order to adjudicate these delinquencies that you’re seeing in the derivatives market and all this impairment that’s happening on the balance sheet. 

Now, the reason I think that you saw Bitcoin drop so much is because it has such a small market cap. So look at the gold market, it’s a $7 trillion market cap where Bitcoin is $100 billion, so it’s literally 170 of the size of the gold market. 

Who’s in Bitcoin? Believe it or not, you have a lot of institutional money, you have a lot of Wall Streeters, and you have hedge funds that want some type of exposure to Bitcoin. If these other people that have that exposure, also have derivative positions and also have these exposures in other areas.

Bitcoin is a place where they can sell in order to raise fiat, they’re going to do it and they did do it. 

Here’s what I find a little fascinating is in the last three days, you’ve seen gold and Bitcoin specifically become completely uncorrelated to the S&P 500. Like yesterday, and I know this is a super short timeframe, but yesterday, the S&P 500 was down 10%. I think Bitcoin was up 1% or .5%. 

On that day, it outperformed by 10%. I kind of expect and again, we’re recording on 19th of March, I expect that you’re going to start seeing a drastic, uncorrelated take between Bitcoin and the S&P 500 from here moving forward, because I think all those liquidations that we saw initially to cover for all the derivative failures that people were swapping their positions into fiat to make good on those, all that impairment, I think that has subsided and I think it’s over. 

Now I think you’re going to see a drastic outperformance if you compare it to the S&P 500 moving forward.

Stig Brodersen  17:51  

So let’s talk about what we’re doing now. For the first part of the episode we talked about how we saw it before, and let’s talk a bit more about what we’re doing now and what we see. 

Now, I haven’t sold anything. More than anything I’m looking to buy and I think that is important for most strategies. I know we have a lot of value investors here in our community. I think when you’re listening to this, as much as you might get some takeaways in terms of what we think you should do in terms of going along with this or that, I think my first piece of advice would be do not panic and do not sell. 

If you have already heed that advice, I think you’re already way ahead of a lot of people just knowing that. 

I think it’s also important to keep in mind that even though we’ve seen the third percent drop. Here I’m just talking general stock, whether we’re going to miss it on Dow Jones or S&P 500. It’s sure not as expensive as it has been, but it’s not super cheap. I mean, we are far from the March 2009 scenario. 

The reason why it looks so attractive is because we have sort of become accustomed to crazy valuations. We have sort of become accustomed to if you have a company that makes no money, you can still have a market cap of $100 billion. 

We have become accustomed to a lot of free money and by free money I mean like a non-existent interest rate and just crazy bull markets in equities. So keep that in mind when you look at the valuations today. Don’t just look at where the stock market was a month ago try to zoom out if you can. 

I would like to talk a bit more about what I’m looking at right now. I actually just put out a limit order on Bitcoin. I just would like to be completely front with that. I know here on the podcast that I tend to bash Preston whenever I can, just in general. I want to do that for Bitcoin because I would really like to have a more balanced conversation, with all that being said. 

I previously said how Preston forced me to buy Bitcoin a long time ago, which I was really happy about. I happen to have a new limit order for Bitcoin. 

I would like to talk about a few different things that I see in the market. So not too long ago, I sent out a newsletter to all our subscribers, and everyone can sign up at tipemail.com. It’s a free email and you can see how Preston and I see the financial markets. We even put it on TIP Academy if you want to check that out. 

This was right after the travel ban. I talked about how I was very interested in buying airlines. I think that most people probably read that and thought that was the most ridiculous thing that they ever read, because who wants to buy airlines right after there’s a travel ban? 

So keep in mind that the rest of the market knows that too. Like there was a travel ban and what happened the next day was that major airlines dropped 20%. This was already on top of… I think the market probably crashed 10% or 15% by then.

Airlines have really been punished. Now take a company like Delta. Delta traded at 60 plus, not too long ago. I think a few months and I think yesterday they closed at 23. 

Now, some of this is definitely fair. It’s not as attractive, especially Delta is not as attractive as it has been, not just because of the travel ban. There’s been a lot of different problems.

However, I think it’s also important that when you look at stocks, they’re facing a lot of headwind. You have to ask yourself, has the business fundamentally lost its intrinsic value? 

Let’s just use airlines as an example. I think it’s pretty safe to say that 2020 would be really ugly for airlines. Though I think it’s also important to keep in mind that when we value a stock, we are discounting cash flows from the remainder of the asset’s lifetime. So you have to make that calculation when you are thinking about exposing yourself to something like airlines. 

I would argue that as much as it seems impossible for us to ever board an airplane again, I would say that you won’t see a fundamental shift in people’s behavior long term. Obviously, if we will start to get pandemics every other year we probably would.

However, without knowing too much about it, I don’t necessarily think that’s going to be the case. I think it’s also very important to know that if we look at the infrastructure, it’s just not something we can just say, “Oh, let’s just stop doing that.” We already had the current administration being out and talking about the support of the industry. 

So it’s not my way of saying pile all your money on airlines. I think that would be rather ridiculous. There’s definitely more risk attached to that compared to say a stock pic like Berkshire Hathaway. 

Though as it often is, the potential upside, when everyone is freaking out, it is also that much higher. 

That was just one thing I’d like to talk about.  I would also briefly like to talk about Berkshire Hathaway. I’ve gotten a ton of emails from people talking about that now is the time to buy Berkshire Hathaway. 

I do think that the stock is trading and at an attractive level so at the time of recording, it is trading at 172. That’s definitely a lot more attractive than it has been for a long time. 

Just to give you a reference point, Buffett bought back the shares of Berkshire Hathaway in Q4. That’s the latest numbers that we have from Berkshire Hathaway. He bought back at the average price of 215. He bought back shares for $2.2 billion and the market cap of Berkshire Hathaway right now is $460 billion. 

I think it was very interesting to kind of have that as a reference point. Now, keep in mind that everything is always a question about opportunity cost. So yes, Berkshire in many ways is a lot more attractive than it has been, but so are many other stocks. 

The other thing I want to say is next week, we’re going to do an episode about the intrinsic value of Berkshire Hathaway. Without giving too much of a spoiler alert, we would talk about intrinsic value, perhaps in the $250 to $300 range for *inaudible* shares. But Berkshire Hathaway is definitely interesting. Though it probably won’t be as undervalued as other stocks would be right now. So please keep that in mind when you’re looking at it. 

Any comments or thoughts on that? Or what do you think, Preston?

Preston Pysh  24:09  

I guess I’m seeing what’s happening from a much different lens than maybe most investors. I personally think that we’re seeing a 100 year kind of thing going on right now. 

What I mean by that is, I think that fiat currency is going to have a major unprecedented meltdown in the coming year, two, or three years, whatever. 

I have a fundamental thesis on why and this is my fundamental thesis. I have the opinion that fiat currencies specifically fail when three main things happen. First, when the currency has no peg, it’s a fiat currency. That’s the first condition. 

Second, when the country has the receipts that are receiving for all their tax revenues, they are not nearly enough to meet their fiscal spending habits. The fiscal spending habits are running amok. They’re running out of control and they’re not raising enough money. So that’s number two.

Number three, and this third condition, all three of these have to be met to be put into this position where your fiat currency is going to fail. The third one is there’s no interest rate yield left for the fiscal debt that’s being issued. 

When you have all three of those situations and all three of those metrics being met, my opinion is that the fiat currency becomes vulnerable. You’ve seen time in the past where countries have met all three of these conditions, call it Japan. They haven’t had this big meltdown scenario. 

I would tell you the reason why is because when you look at other fiat currencies, and everything in the world is fiat currency at this point, nothing is pegged. There were other interest rates where that capital on that fiat currency could run into other countries, call it the United States or call it Europe up to a certain point. 

Now, at this moment in time, anywhere you go, and I’m talking about rates from a real standpoint, not nominal rates, but real rates. Anywhere you go in the world, you have negative interest rates in nominal terms. And so, all three of these conditions are now met. 

You then have this event that comes along, the coronavirus. You have all these markets that are super saturated with money that’s just been printed. It’s been printed in a manner that it’s been inserted at the top through quantitative easing, dropping interest rates down to nothing. 

Now you come along and you prick that pin into that big bubble, and it pops. Well now you’re in a unique situation where the weapon of choice for central banks moving forward is going to be QE. They’re going to continue to do QE. They’re going to continue to keep rates at nothing. But now, they’re going to have to do universal basic income. 

We’re already seeing this rolling out globally all over the place. My opinion is that when UBI starts hitting every single bank account in the country, if you have a pulse, you’re going to get a check of a thousand dollars, right? That’s happening, not just in the US. That’s happening globally. 

I think what you’re going to find is that, from an inflation standpoint, this is going to wreak havoc, because not only are they going to have to do that, but now they’re going to have to do bailouts for these companies. 

You have Boeing, for example, they’re asking for $50 billion. Guess what? There’s a high probability, I’m not saying it’s going to happen, but there’s a high probability that the government’s going to give that to them. They’re not going to just give it to them. They’re going to give it to every other company that is going to fail through all of this chaos. 

I think that when you look at the fact that people, especially like restaurants, small businesses, the traffic flow that sustains their businesses, and these are low margin businesses that probably get by every month with just making it, are not going to have that traffic flow anymore because everyone has quarantine inside of their house and there’s no vaccine that’s potentially going to hit at scale. 

That’s the important part. They’re already working on vaccines, but vaccines at scale are not going to hit for another, I’d say at the earliest six months. I think that that’s probably being aggressively optimistic. It’s probably a year, right? 

It doesn’t even have to be real. People just have to think that it might be real to change their buying habits and their spending habits. If you pull those back, companies are not going to be making anywhere close to the revenues that they were making before. 

So long story short with all of this, I think the governments are going to print at unprecedented levels. That’s going to then drive inflation expectations and how this bond market that is yielding nothing because the bond market is completely based as a premium above inflation. 

Okay, so if inflation goes from zero to 2%, well guess what? Whatever the bond was previously priced at, it’s going to go up, as a premium to that change in inflation. That’s how bonds get priced. 

If interest rates then start going up, the valuations of everything on the planet start going down, whether it’s a bond or a stock. 

One of the beautiful things about the momentum tool that we have on our site that’s looking at the volatility is it also tells you when it turns green, because there’s been a statistical change in the volatility to the upside. 

We have not seen that on a single ticker and our entire TIP finance tool to date, everything. For the most part, there’s a few that are green, right? That are still performing and they’re the ones, the mask company, stuff like that. That stuff’s going to perform. 

However, for the most part, almost every single pick on our entire TIP finance tool is red at this moment. I don’t know how it could possibly turn green in the coming month, let alone two months or three months. I think that this thing is going to work itself out at the earliest by mid summer, based on the numbers that we’re seeing. 

The critical turning point is watching the medical facilities work through all the patients that they’re going to have. So the reason everyone’s at home is to slow down that rate of people showing up in the hospitals. That’s the whole reason everyone’s quarantined in their house right now,and that they’re not at work and they’re not spending money out on Main Street like they used to. it is because the medical facilities cannot handle the speed of patients showing up with this virus. 

If we’re going to look at a turning point when the government’s are going to say, “Hey, you know what? You can go back to work, because we don’t have that concern anymore,” I think the earliest you’re going to see that as in the summertime here in the United States. 

I mean, look at Italy, they’re nowhere even close to working through the amount of cases and the amount of people that are waiting to get into the facilities. In the US, I think you haven’t even hit max capacity and you’re ramping up in an exponential way that you’re going to probably hit max capacity by the end of April. Then it’s going to probably take a couple months to work through that. 

Therefore, as long as that condition is still in place, from my vantage point, you’re not going to have normalcy in spending in the markets or anything, but you are going to have a whole lot of bailouts to the tune of trillions of dollars a year in a state. You might even have state governments that start to go under because they’re not using their own currency. They’re using the dollar. They’ve made some very poor fiscal spending habits, and they’re not raising enough money as it is. So you might start seeing bailouts. 

In that regard. you’re going see bailouts to the individuals through the universal basic income. As all these things are playing out, the last place that I want to be is pretty much in any kind of stock, any type of equity. I definitely don’t want any exposure to the bond market, if I expect inflation to start taking hold with the amount of printing that’s taking place. I just see it so differently. 

If you have a stock and it’s gone down a lot. The question now becomes how much more do you think it’s going to go down and what’s your exposure to the scenario that I just described? Is your 10% down, 20% or 30% down I’m going to turn into another 30% down? I don’t know. 

That’s for you to decide and you’re going to have to look at what that industry is. Also, you’re going to have to think that industry is going to be impacted by everything that I just described, which is a just disgusting scenario. Though in my opinion, it’s reality. We have to make investing choices based on reality. 

Let me talk real quickly about what I think is going to happen after the hospital rates subside, and you start getting some normalcy back, which for me at the earliest is going to be in the summertime frame. 

What I think you’re going to see then at that point is you’re going to see a transition to demand coming back online and you’re going to see the exact inverse of what just happened. You’re going to have this massive shortage of supply. 

Let’s just talk about the oil market. Let’s say it’s July or August and demand is now coming back online. People are now driving their cars way more than they were before. You got oil liners moving in the ocean. All those things. Transactions are occurring again, right? People are moving and you have consumption taking place. 

However, what you’ve had is an industry that has cut back on what they’re manufacturing. So now, you have a shock in the exact opposite direction. 

My expectation from a commodity standpoint is that you’re going to see prices absolutely rip in an unprecedented way to the upside. Then I’m just talking oil. I’m not talking to oil companies. I’m talking about the price of oil per barrel. I could see that going to $100 a barrel in a very fast and dramatic fashion. 

So now, when people see this, how are you gauging inflation? How are you measuring inflation? Well, it’s the delta. It’s the change of what the price was yesterday to the price today. I know this sounds unbelievable, but if you go from $10 a barrel of oil, okay, which I think is actually in the cards, we’re going to see here on the horizon, you’re going from $10 a barrel of oil to $100 a barrel of oil, what that looks like, from an inflation gauge standpoint? These bond markets are going to lose their minds, absolutely lose their minds. 

The stock market, which is priced based off of interest rates, right. Remember, interest rates are based on inflation. The stock market is going to go down because everyone’s yield that they’re pricing into their CAPM models, it’s going to be drastically different than the zero percent everybody’s using today. 

Therefore, even though you’re having a recovery, you come back online, you’re going to  see things that perform in such a dramatic shift that again, what happened in the past and with the derivatives market, it blew up. 

The derivatives market had drastic supply demand changes, and therefore it got repriced. Then everybody who had a lot of liability on their balance sheet from a derivative standpoint got impaired. Then you had a huge sell off in order to account for that. 

What makes you think that when this rips the other way, which is my opinion, and I could be dead wrong. But if I’m right and this rips the other way from a commodity price standpoint, that the derivatives market is not going to have another massive sell off, in order to account for all the positioning that went the other way that we’re seeing right now. 

I think that’s what you’re going to see by the end of 2020. I think that scenario is going to play out and I think it’s going to play out in such a dramatic way that no one is expecting that today. 

However, let me tell you, that’s what I’m expecting today and that’s just going to be yet another shock to the system. So this brings me to what I think is playing out here and this is a highly controversial opinion. I understand that a lot of people are not going to like the opinion but this is what I think it is. 

I think what you’re seeing is you’re seeing the start of an inflationary event that’s not going to be slow, but that’s going to be insanely dramatic. It’s all the result of fiat currency breaking down. 

Here’s a quote out of Ray Dalio’s book, I’m going to read this. This is a quote out of his book, “Big Debt Crises.” I highly recommend that everybody reads this book, quote says, this is a strong word, but I’m going to use it:

“Investing during hyperinflation has a few basic principles. Get short the currency, do whatever you can to get your money out of the country, buy commodities, and invest in commodity industries like gold, coal and metals. 

“Buying equities is a mixed bag. investing in the stock market becomes a losing proposition as inflation transitions to hyperinflation. Instead of there being a high correlation between the exchange rate and the price of shares, there’s an increasing divergence between share prices and the exchange rate.

“So during this time, gold becoming the preferred asset to hold shares is a disaster, even though they rise in local currency, and bonds are wiped out.”

That last part there where he’s saying shares are a disaster even though they rise in local currency. So nominally, this is going to be the next controversial thing that I’m saying right now is, let’s say we play this out, and we’re in the middle of the summer or end of the summer. We’re seeing the medical situation subside, and the demands coming back online, it would not surprise me in the least bit to watch the stock market make a new all time high. I think that could happen by the end of 2020. Maybe even into the early part of 2021. That could happen. 

However, what people aren’t accounting for is that those numbers are going up in nominal terms compared to Bitcoin, or compared to gold, or compared to the price of oil and I think we’re going to see is a… I don’t know if you want to call it hyperinflation, but you’re going to see a lot of inflation globally. 

From that key milestone and I’m calling it the key milestone when the demand on the hospital starts to subside. You’re comparing the performance of the stock market now just say the S&P 500. To those underlying commodities, the stock market is going to be down if you’re majoring in those terms, but if you’re majoring it back to the dollar, it might be higher. 

However, your buying power is what we’re talking about here. We’re not talking about nominal dollars. When you get into a situation like this, this is all about your buying power. Make no mistake about it. Anyone who’s listening to this that lived in Venezuela, or down south in Argentina, or any country that has experienced these inflationary events, knows exactly what I’m talking about right now. 

What I’m talking about is preserving your buying power. That’s what this is all about. I say this as humbly as I can possibly say this, I could be dead wrong about this, we are seeing something that I have never seen in my entire lifetime. I have never lived through anything like this, but I’ve read some history and I’ve read some different books that suggest that that’s what we’re seeing. From my vantage point, that’s how I’m positioning myself.

Stig Brodersen  39:15  

I think it’s very interesting for people out there, perhaps you’re on both sides of the arguments, as you mentioned before you see this very differently than I do. Time will tell who’s right or perhaps if we are both wrong, who knows? 

I would like to talk a bit about history. I think that’s a good way of talking about what happened and I reread “Big Debt Crises.” I got very different conclusions out of it, which is, I guess, interesting in itself. 

When I look at what happened just like the last financial crisis, let’s say from October 2007 to March 2009, the stock prices fell roughly 50% from peak to trough. And so far, the *inaudible* We are seeing around a 30% drop. I have no idea if the mark would temporarily drop to 50% from recent peak, but I do want to say that this happens in very, very rare situations. Perhaps it is one in a lifetime kind of thing, as Preston was saying before. 

Therefore, in that sense, I don’t necessarily disagree with him. Over the past 100 years, we had 12 crises over 20%. Now it’s 13%. So this is also my way of saying that those 50% crashes only happen a few times per century. Perhaps this is one of them, perhaps not. 

I look at the coronavirus crisis, whatever you want to call it differently. If we just continue in the comparison to 2008, I think it’s very different. The economy back then  was overheated, and it was much weaker than anticipated. Whereas the economy today, before the crisis, obviously before the growing crisis, we’re doing much better. It wasn’t fantastic, but it was definitely doing well and speaking again, specifically about the equities, I do think that it was priced for a correction or a bear market at some point in time relatively soon. 

So whatever you see here is not really crazy cheap, which is also why I think it might slide even more. But it is different and it’s the same issue compared with 2008. 

The 2008 crisis was the banking crisis, it was a real estate crisis. This is very different because it hits all sectors very differently, and people spend less money and people might lose their income and whatnot. I then don’t know when this is going to blow over. I don’t know what Preston is referring to, if this will happen in three months or six months or when we’re going to have those vaccines, I don’t know. However, I do think it would be back to business in relative terms in many ways. 

I would like to address the thing about the occurrences afterwards, because I don’t necessarily think that we’ll be back to business. But I do think that a lot of things would go back to normal and I do think that today is a good time to continue adding to the compounders that you have, which is now a much more attractive level.

Preston Pysh  42:07  

I want to address your comment about us kind of coming up with different conclusions after reading “Big Debt Crises.” So when you read this book, let me just start off by saying this is not a simple read. If you’re a person who’s not really into this financial valuation and market stuff, you’re going to maybe buy this book and say it’s a very hard read. It’s a very technical read. 

I think most people who read it probably walked away with the idea that you either have an inflationary bust or you have a deflationary bust. When you read the book, you would probably come to the conclusion that in the US, you’re seeing a deflationary bust based on the way that the book talks, but I personally think there is a really, really important paragraph in this book that addresses something that I think most readers are going to miss. 

It’s a three-part book and this comes out of part one, page 40. This is the quote: “Can reserve currency countries, call it the US, that don’t have significant foreign currency debt, have inflationary depressions? While they are much less likely to have inflationary contractions that are severe, they can have inflationary depressions, though they emerge more slowly and later in the deleveraging process, after a sustained and repeated overuse of stimulation to reverse deflationary leveragings.” 

So I think that paragraph was put in the book to describe exactly what we are seeing on a global scale today. Nowhere in that book is there a scenario for what we’re seeing right now. There isn’t. There’s never been a global inflationary scenario where every country goes through it, okay? There’s not a single example in the book because it’s never happened. 

But Ray did squeak that little paragraph in there, page 40, book one. There was nothing else that was mentioned other than that paragraph. I underlined that paragraph. I highlighted that paragraph. I tagged all corners of the page in the book on that paragraph, because, in my very humble opinion, that paragraph is describing what we’re about to see on a global scale. 

That’s why it’s so different from anything else that you could study because think about it, in that quote, he’s talking about these deflationary deleveraging that is happening, and how that’s exactly what it looks like we’re having in the US right now. Therefore, they’re using quantitative easing in order to stimulate, and so is everybody else. 

How did we get here? How did the whole global market get correlated, so that we’re all having the meltdown at the same time? For me, the answer is really quite straightforward. It was Bretton-Woods in 1944. The dollar was pegged to gold, and every other country pegged their money to the dollar. So guess what? They were all correlated. They were all coordinated together. It just didn’t happen for a few years. It happened clear up till 1971. 

You had this harmony of currency manipulation that has happened since that time. We’ve had fiat currencies ever since 1971 on a global level, and we’ve had interest rates that have been then declined clear down to zero percent, harmoniously across the globe. Guess what? They’re now all at zero percent and they’re all fiat currencies.

[In addition], the fiscal spending in every single country is exceeding their revenues and, therefore, my opinion, total meltdown of fiat currency globally, and all the ramifications that come with it, which results in hyperinflation. 

Now I think the globe has to position themselves in a way that prepares for global hyperinflation. You’re not going to find a scenario in the entire book that talks about it because it’s never happened.

Stig Brodersen  46:12  

Pres and I actually after reading the book the first time we did an episode about it, and we’ll make sure to link to that in the show notes. We talked both about the deflationary cycle and inflationary. I also just want to keep in mind that Preston is talking about an inflationary scenario in the US which by definition is deflationary because it’s a global reserve currency. 

The other thing I want to say is that Ray Dalio very recently did a write up about interest rates hitting zero and the coronavirus. We’ll make sure to link to that in the show notes too. That is a fantastic read. 

It’s very interesting to hear what Ray Dalio is talking about these days. He’s also hinting that perhaps the time is right to take a position in gold and perhaps that is for those reasons that Preston also mentioned before, because you want to maintain that purchasing power. 

The only thing I would like to highlight here is that when you are betting on the stock market, and now we’re talking about more normal conditions, then I would actually like to address Preston’s point about the fiat currencies that might be slightly different. 

When you’re doing that it’s not so much a bet on stocks or the stock market, it’s really a bet on the world prospering. I have to go back and look at history because I don’t want to have too much availability bias. People are panicking around me, I should panic too. I will do what I can to zoom out a little. 

If I look at the past just 55 years, 51 of those years we have seen GDP growth to be positive. Now, would that happen in 2020? Probably not. At least that’s not the projections right now from the World Bank. 

There are so many reasons why we see a positive GDP growth and why we can expect to see that and I’m talking about real numbers. I’m not talking nominal numbers. A lot of that comes back to technology. 

I know I’m just making it very simplistic, there are so many different things you can put into growth and what happens. But if we just take one of the big ones, technology, it’s very important for global growth and therefore in turn also in the real growth of the stock market. Can we imagine a scenario long term where we stop innovating? Can we imagine a scenario where that just doesn’t happen that we become more productive, because of whatever kind of intervention? 

Here we can just think, assembly line, steam engine, however long you want to go back in history, that’s probably not going to happen. 

So I do want to say for those of you who are listening to some of this, and again, Preston might be right and I might be wrong. People listen to this, at least, that’s my vantage point that it will blow over. We will have somewhat normal conditions again, both in real and nominal terms. We will see people holding assets to be better off than holding cash, everything else equal. 

Now, Preston said something really important before. He said: yes, it might be better to hold equities. Actually to be fair to Preston, he was quoting Dalio in his book. Equities might be a mixed bag, it would be better than cash. 

When I say cash, I’m just talking US dollars here, but it won’t be as good as real assets. Real assets being oil and gold. I wouldn’t necessarily say Bitcoin. Ray Dalio is very critical about Bitcoin specifically. However, the idea is still the same here. 

I do think that it’s very, very concerning that right now we see zero rates in the US and negative rates in Europe and in Japan. 

Let me give you one example, here, the 12th of March, everyone expected the ECB, the European Central Bank, to lower the leading interest rates from negative point five to a negative .6. That didn’t happen and the Euro soared as a result of that. 

Now, I would like to explain a bit more about that, because that might not make any sense at all. The way that currencies work is that it’s always in comparison to something else. But what they did say was that they wanted to increase the net asset purchase at that time about 120 billion euros until the end of the year. 

In preparation for this episode, I put down and made sure to check the news on a daily basis and see whenever they’re going to buy back more. That was 10 or 12 hours ago before we started this recording, they increased that to 750 billion. 

The chance of that working to Preston’s point is very, very limited. I would even say it’s very limited at best because bonds can’t be pushed much higher because of the environment that we’re in. That is a huge, huge issue. 

ECB also said that they continue to expect QE programs to run as long as necessary. In all fairness, they also did say that before the coronavirus, and they also provided temporary capital and *inaudible* leave for banks. 

So, in a way, you might say that the ECB is not that much more constrained, but they were still in a very bad place. 

Now, if you compare that to the US, I do think that there are some serious concerns that we need to address. Again, I want to go back in history just to talk about that. Back on the third of March, the Fed lowered the interest rate by half a point to 1%. 

This was the first time since the financial crisis that it was announced. Then, not too long after, it was lowered again by hundred basis points or fancy way of saying 1%. That was the biggest since 1982. But keep in mind that the interest rate in 1982 was very, very different.

What they also did was they increase the holding of Treasury securities by at least $500 billion and mortgage backed securities by at least $200 billion. It seems like a lot of money and it sort of is. It’s around the market cap of Google, all in all. However, it’s very simple. 

What you see right now is that monetary policy can stand alone, especially at a time where you don’t really have that much back in the toolkit. What you have probably won’t work, because what I’ve said before.

What you see right now, is that through fiscal policy, and I just like to explain that whenever I say monetary policy, think about interest rate, think about liquidity pumped into the market. When I talk about fiscal policy, it’s universal basic income, it’s new government programs to stimulate growth. That’s the difference here.

What Ray Dalio would say, in his book, is that it’s very, very important for a government to be extremely expensive in the fiscal policy to mitigate that effect that you have from people who are spending a lot less money. You are hearing hundreds of billions of dollars and just yesterday there was talking about a new package with a trillion dollars. When you hear that, it is a lot of money, but you also need to consider how much is redrawn in the economy. 

What the good policymaker would do and this is very, very difficult to do, and Ray Dalio acknowledges that too, is that you need to make sure that you can stimulate growth. So you don’t fall into this deflationary depression that could be a risk in the US. 

Now, this is how I see it. This is how I read the book. This is how I read the news right now. So I look at it as mitigating that deflationary pressure more than what Preston is doing. I hope people will then consider what they think is the most plausible.

Preston Pysh  53:33  

Yeah, so I completely agree with what you just said. 100%. I think what we’ve seen up to right now has been exactly what you described. We’ve been in this deflationary depression type scenario, where they’re using QE they were using stimulus. 

I think right now is the transition point to that paragraph that I read, where the deflationary depression type scenario is now not going to take place. I think you’re going to watch a pivot from the status quo of what has been to this now inflationary scenario globally, that’s going to start playing out. I think right now is that moment. 

I want to tell people so it’s always fun to come on here and kind of talk about our theories on what’s going on, what’s not going on and whatnot. But at the end of the day, I want to tell people how I plan to position myself in the coming year. 

Like I said earlier, I have two positions. I’ve got US dollar cash, and I have Bitcoin right now. I know that portfolio sounds obscene, but that’s what it is. I’m just being honest. Moving forward, there’s some more things that I’m going to buy. This is the event that’s going to probably trigger it. As of today, this is how I stand. This is what I’m looking to take a position on. 

So I think the huge milestone event that I was saying earlier is when it looks like we’re going to finally start to get relief on the medical front, the demand on the hospitals… 

They’re going to start sending people back to work. That event for me is going to be the turning point in literally the entire direction that the markets are currently in. I expect them to continue to trend in until this event takes place. 

When that takes place, and you start to see people go back to work, I think the position to take is to buy gold miners, and I think to buy the underlying commodity oil, not oil companies necessarily, but the underlying oil. I’m also going to do long term call options on both of those, on gold miners. 

I think silver might also do well, silver miners, but the gold miner specifically. I’m reading some things that there’s some issues with the derivatives around gold right now, separating from the underlying prices. 

So for me, I’m staying away from GLD. I’m staying away from these ETFs that track the price of gold because I think there actually might be some issues with them not actually having what they say they have, as far as… I guess, the trust around those vehicles, I’ve got some concerns with.

If you are going to own gold, I would tell you to own it physically in your hand based on those concerns. But the thing I like about gold miners, is that you don’t have that risk, because you’re basically trading the valuation of the company. 

For me, I’m going to own the gold mining companies and I’m going to have call options on the gold mining companies. I’m going to own oil long as a call option, as well. 

The timing for all of that is going to be whenever we see people start going back to work and you see the medical facilities actually start to get some relief, and I’m obviously going to continue to own Bitcoin. 

Just one final note on oil companies. I tell you, I’m interested in buying oil, the commodity long. I have reservations about oil companies simply because I’m concerned about the demand, coming back to what we saw before all this crisis took place with the coronavirus. 

If all this is playing out and you’re seeing basically a dislocation of the status quo and the norm, you’re going to see spending habits, I don’t think come back to where they were before all this. So call at the end of 2019, whatever their spending habits were, I do not see those spending habits being the same. Moving forward in the coming two to three years, I see the spending habits being lower. 

So if you have oil prices, sky high, and you got companies like Exxon Mobil that are now going to absolutely capitalize on those higher prices… I’m talking probably a year from now or nine months or whatever that is. If that scenario plays out, and those prices go higher, not only do they have to have higher prices, but all the previous demand has to come back online in order for those oil companies to pop in price. 

I think you’re definitely going to see a pop from whatever the low end ends up being for oil companies. I just don’t know that it’s going to rebound to the level that you saw before all this happened. That’s my concern, but it absolutely could. I just don’t feel like I have enough confidence in that happening because I have concerns with demand coming back to the way it was.

Stig Brodersen  58:17  

Alright, so with that said, I think it would be good to play a question from the audience also, because specifically this question is about LEAPS. LEAP is an acronym for “long term equity anticipation.” 

You can more or less seed as a bet on where you think a price for something like gold or oil or a specific stock for that matter is going. Let’s play a question from the audience from Philip. 

Audience 1  58:41  

Hey, guys, thanks for picking my question. I’m a huge fan of the show. As I record this, the market had its worst trading day since 1987 due to the panic caused by the Coronavirus. This has definitely opened up some attractive value opportunities. What is your opinion on buying long term call options like LEAPS instead of just the underlying stock itself? Also, how frequently do you guys protect your own long positions and equities with butts? Thanks in advance. 

Preston Pysh  59:09  

Philip, love the question. It’s a very pertinent question for what’s going on. I really like LEAP. When I say LEAP, it’s basically a two year call option is what we’re talking about here. 

I have some rules, and they were completely adopted from Joel Greenblatt’s book, that he does not allow himself to take more than 15% principle. If you got a $100 portfolio, he’s not going to allow himself to put more than $15 into call options. 

His other rule is that he only does call options. He does not do puts. I personally don’t do puts. I only do call options. That’s really kind of the simplicity of it. 

The reason I can’t stand puts is because they have unlimited risk. If you’re using it in the manner that you described, I see it as kind of just a frictional insurance policy. If I have concerns with the company, offset my stop at whatever I think that “insurance policy” is. Also, if it has too much volatility, well, then maybe it shouldn’t be in my portfolio if I don’t have conviction on it anyway. 

So when you’re talking about doing this, especially at this point in time, like I mentioned earlier in the episode, I plan on using these LEAPS in these long term call options, and I plan on using them for gold mining companies. I plan on using them for the underlying oil price, but I don’t plan on doing that until that specific milestone in time.

Today, I have no exposure to these things. I think putting that on right now, based on my thesis that you heard me say earlier, but I think putting that on right now for any equity is just premature. I think there’s more pain on the horizon simply because no one’s working and all of that still being priced. 

Mark *inaudible* had an awesome tweet that I really liked. He said when you get in a situation for a market that’s going down, it’s almost like taking a ball and rolling it down the steps. The bounces at first are very small. But as the ball kind of gains more energy as it goes down the steps, the bounces in the ball get more violent and more volatile as they get to the bottom of the steps. 

When you’re looking at this, I think that there’s probably more pain on the horizon. When I say that, it could be a month, it could be 15 days, I don’t know, based on everything kind of revolving around people staying at home and all that demand dropping off. I think the market is trying to figure that out and price that accurately and that’s why you’re seeing the violent swings.

However, as long as you see the market go down 10% , then the next day it’s up 5%. Then the next day it’s down 7%. Then the day after that it’s up 3% when you’re seeing that volatility in the movement, or the trend is going down and it’s staying inside of that volatility range. I’m not going anywhere near that with buys until I feel like there has been a statistical change in that trend. 

I would tell you a great idea, it’s going to be a very lucrative idea if you do it right. But you’ve got to provide yourself the most advantageous timing in order to do it. I would much rather show up a little late and miss the price capture on the bottom by being late. 

Then if you put this on too early and you totally misunderstood how bad the coronavirus is, and you get timed out on your call. So I would tell you, you want to be on the right side of that V and not on the left side of that V. It is just my personal opinion.  

Stig, what do you got, man?

Stig Brodersen  1:02:39  

Especially in times like these, it is very important to understand both the impact of a LEAP but also potentially buying a put.  I think that when we are talking about puts, you can sort of think about it as insurance to your portfolio. 

In situations like this, you might say because of your put exposure, your portfolio wouldn’t go down as much as it otherwise would, and it looks very attractive these days. It hasn’t been looking attractive for years when we have the bull market.

 So let’s just zoom out here a bit and talk about should you buy insurance? I think the best example I can make is to use a real life example of should you or should you not buy travel insurance. 

Like so many other people, the intention was to go to the Berkshire Hathaway event. Unfortunately, that’s been canceled. I’m a value investor so obviously, I found a very cheap ticket, it was around 500 bucks. I could buy insurance for another 50 bucks. So I could cancel it if needed, which I didn’t buy because I thought to myself, “I can afford to pay that $500 if everything goes wrong.” 

Don’t even get me started on if there is a severe crisis. You might even be able to be paid back in any case, which might be the case here. 

The reason why I’m using that sort of silly example is whenever you’re considering whether you should buy put options or not, you can think about it as travel insurance. Can you afford if your portfolio would temporarily go down 30% before it bounces back? 

If the answer to that is yes, you probably shouldn’t spend money on something like a put. That is sort of like the overall theory on this. 

That being said, whenever we’re talking about LEAPS, which I find a lot more attractive than puts because your risk is limited and it’s a very different bet. 

What I want to say is that the way that options are being priced, this is basically what is called an option. You’re thinking about different scenarios and the market price in a different way. 

The price of an option is based on multiple factors, including volatility and something called a strike price, which is something I would like to talk about here shortly. But my main point first about this model is it’s proven to be quite accurate within the year. 

When you go out for more than a year, it tends to be wildly inaccurate, which is very interesting if you have a very good opinion on something like say the price of oil when everyone is thinking it’s just going to go down. The oil price is here to stay at this low level or whatnot. That’s whenever you can really get a very interesting return if you think that the oil price, like Preston mentioned before, will go to something like $100.

Preston Pysh  1:05:15  

Stig,I just have one other thing to add there. So think of it like this, if you were going to have let’s just say you had a company C right was your was your stock pic and it’s trading at $100. You have concerns about the downside and so you want to buy a put on it.

I think for me the cost to put those puts on in order to protect that, you have to see how volatile the pick is. If the pic is really volatile, and the cost for that put option is more advantageous than a stop, that’s very volatile. Let’s say that the company has 30% volatility and let’s say that to protect that volatility, the put is really cheap at the strike price that you’re at. Well then the put makes all the sense in the world. 

But let’s say the put is expensive. relative to that annual long term volatility range, I would tell you, you’re going to get a better return on your money to protect that by putting in a stop. That would be 10%. Or let’s say the volatility on it’s 5% or 10%, put in the volatility, put in the stop based on that, to protect your downside. 

It might be more advantageous from a price standpoint, you have to do the math on that, to understand which one is more advantageous, based on the price of the option. Then based on the volatility range that you’re looking at that you would say, “All right, there’s a statistical change to the downside, and I need to sell it at that point.” That’s how I would look at that scenario.

Stig Brodersen  1:06:40  

Just to follow up on that, Preston. I think it’s also important to understand that the way that these options are being priced is for practical reasons. You typically do that on historical data, how much do they fluctuate? We are in a very different situation right now, which of course also, to some extent is being priced into the options market. So you can’t necessarily use that today as under other conditions, specially, if you have a different opinion on that.

Preston Pysh  1:07:06  

And especially if something is punished or really popular, so let’s talk about oil. So I’m saying that I’m going to take an oil call here in the future, when I think that all the demand and everyone’s going to come back to work. 

Well, those options are going to be priced really advantageously because they’re going to have been so punished through this move. So that’s something else you got to consider when you’re looking at using options as an insurance policy, is depending on how punished or how exuberant your company is, at whatever point in time, might dictate whether you’re getting a sweetheart price on the put, or maybe it’s way overvalued and the stock would make more sense. 

It’s on a case by case basis, but I think those are the variables that you have to use and you have to think about as you’d be putting something like that on to kind of relative compare to each other.

Stig Brodersen  1:08:02  

Just to round it off, I think it’s very important for people to understand strike price and the concept of being in and out of the money. So when we’re talking about options, it’s not paid out like on a one to one basis. It’s all a question about probabilities. 

So if we were talking about a strike price on the barrel of oil of $80, obviously, that would be priced very lucrative in these conditions. I think that for people who are considering taking advantage of all the uncertainties that are right now and might be interested in real assets, because of the reasons that Preston said before, not necessarily today.

However, I do agree that in the next few months to come, you will get some very attractive valuations that you haven’t seen in the options market for a very, very long time, especially if you are of the opinion that real assets would spike dramatically, because that is definitely not what the market is expecting right now.

Preston Pysh  1:08:56  

All right, so Philip, that’s all we have for you. We’re going to give you free access to our TIP Finance tool. We’ve talked about this a lot on the show today and what we’ve talked about specifically on it is this momentum tool that’s looking at the volatility that’s helping you understand what the annual volatility of the companies are. 

This tool will tell you stock prices that will help you understand when the company is moving outside of its statistical volatility range to help prevent some of the things that we’ve seen in the markets. 

Like I said earlier, using this tool, the 26th of February, our tool went from a green status to a red status saying, “Hey, the S&P 500 and also the Russell 2000, also went red on the 26th of February on our tool.” The market had only dropped. I don’t even know that it had dropped 10% on the Russell 2000 and it had turned into a red status and would have protected you from some of the chaos we’ve seen recently. 

I personally use the tool. In fact, we designed TIP Finance for ourselves. Stig and I use it personally and thought there might be some other people that want to look into the tools that we’re using as we find them so valuable. We’re excited to be able to give that to you for free. ad thanks for the awesome question.

Stig Brodersen  1:10:12  

All right, guys, this was definitely a fun episode. We will definitely make sure to record a lot more of them in the near future. Guys, that was all that Preston and I had this week’s episode of The Investor’s Podcast. We’ll see each other again next week.

Outro 1:10:26  

Thank you for listening to TIP. To access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.