Investor's Edge with Gary Kaltbaum - 2022 Market Lessons

Episode Date: December 29, 2022

Follow Gary on GaryK.com or http://garykaltbaum.com

I earned my degree online at Arizona State University. I chose to get my degree at ASU because I knew that I'd get a quality education. They were recognized for excellence and that I would be prepared for the workforce upon graduating. To be associated with ASU, both as a student and alum, it makes me extremely proud and having experienced the program I know now that I'm set up for success. Learn more at ASUonline.asu.edu. Investor's Edge with Gary Cultbaum. Straight talk about you and your money.

Now from the BizTalk Studios, here is Gary Cultbaum. And welcome once again to Investors Edge. I'm Adam Sarhan, in for Gary Kay, who's out today. Today is Thursday, December 29th, 2022, and we've got a great show for you tonight. We want to thank you very much for being here. Before we dive in, as you know, this is a show about you and your money and all the fun points in between.

Just as a quick reminder, If you don't get the show in your city, you can go to GaryK.com, listen live or archive 24-7 on any device you want. We're live Monday through Friday, 6 to 7 p.m. Eastern. Also at GaryK.com, you can follow Gary on Twitter by just pressing the button. You can subscribe to Gary's morning notes sent to your inbox for free. And you may also email Gary, ask about his money management services, or join his premium service, which is convictionleaders.com. and that's where he updates members several times a day, does in-depth market webcasts,

where he shows you charts, lets you know what he sees. Basically, you can see the market from his point of view. It's a phenomenal service that he puts out. I'm very happy he does that. I read it and I like it a lot. All right. That being said, Gary's out today,

so he asked me to fill in. I've got a lot to cover. It's the end of the year. Those of you that know when I cover the show typically on Fridays, I like doing end of month or end of week. If it's the end of the month, I do end of month. If it's the end of the year, I'm going to do an end of the year. So you're in for a treat, if you like, that kind of wrap up.

So first, let's talk about the market today. It was a big update. What ended up happening? You get the biggest updates in history occurred during bare markets. And what does that mean? Why? I was just speaking with somebody at CNBC actually earlier today about that. And there's a confluence of three factors.

first, you get short covering. What does that mean? There's a lot of people that are short the market, and it means you sell something first, and you want to buy it back later. Hopefully, you buy it back if the market or the stock that you're short goes down, you make money.

If the market or the stock that you're short goes up, you're losing money. So shorts, just like when you're long, it's the exact opposite. Just think of it the exact opposite of being long. Shorts, when they want to exit, they have to buy. So that's what the important point.

here is when you're short something, you enter it by selling it first, and when you want to exit, you buy. Well, all right, when the markets just had a big drop, like what just happened here, it's perfectly normal to see it bounce. So people that are short, or people that shorted late to the party like yesterday, they see it going up, they cover their shorts, and they exit. They do that by buying. That's one big force. Second, you get value investors that show up. And value investors, folks, buy for the reason that, oh, stocks are cheap. They had a big drop.

Let's buy. So there's a second big buying force that enters the market. And then all of a sudden, more people that are short cover, biggest stocks are going up, not down, that leads to more buying. And then the value investors that bought are rewarded because, oh, look, I was right, stocks are cheap. Let me buy some more. And then more shorts, cover, so on and so forth. Those are the two, that becomes a self-fulfilling prophecy. Then all of a sudden, stocks are going up now on a very short-term basis.

Then you get momentum traders to come in there and just pile in because of one reason, one reason only. Stocks are going up. Well, all right. Those are three very powerful forces that, in my opinion, lead to the very strong. up days that we see on Wall Street in bare markets. It took me, I think, 10, 12 years to put those three pieces together. And logically, that's the best that I can deduas as far as looking at the different scenarios and understanding the mentality behind it and the logic and the reason why, you know, the mechanism, the forces, if you will, for lack of a better word, that are at play.

So when you get that situation where the NASDAQ is up two and a half, percent, that's a big move. It's not normal to see the NASDAQ on a normal day go up two and a half percent. So a normal day, a percent, half a percent, three quarters of percent, a percent and change maybe would be a considered a bigish day. A percent and a half move in the NASDAQ for the day would be pretty big. Two and a half percent. It's a big day. So that's the NASDAQ. It was up 264 points, close at 10,000, 478. then the S&P was up 1.75% closed up 66 points to 3849. The Dow was up 1% or 345 points to close at 33,220.

And the Russell 2000 closed up 2.5% as well, 2.55% up 43.93. So let's just say about 44 points to 1765.95. So just to correct, the NASDAQ was up 2.59%. So a few things here. What do we buy? Right? Stocks are going up. Let's buy.

There's so much damage in the market right now. If you're a bottom feeder, you want to go out there and, you know, buy the stocks that are beaten up and so on and so forth. That's one thing. It's not really my area of focus. I was speaking to a friend just about an hour ago and I was going through some charts and showing them what I do and how I look at markets and stocks and so on and so forth. And he bought, he's not a market. guy at all, Tesla yesterday at 112. Well, he feels like a genius because it went up 10 points today,

you know, it's at 122 in the aftermarket close at 121.82. Well, all right, good move on his part. He made money, right? Sure. But who's to say the stock is going to go down even more? And I told him, I said, great, you bought it. I'm glad you're making money. But what are you going to do if the stock goes down to 70 or 80 or 90 or below your entry point? He didn't have a plan. He didn't know. So the most important thing that I've learned that I want to share, and I wrote about this in my book, psychological analysis, you can go on Amazon and get it, is to respect risk. I'm fascinated.

I love to learn, right? So people ask me my story. How did you know? How did you get involved in the business? Blah, blah, real short, I started trading in the 90s. I didn't know anything. And I was a teenager at the time. All right.

Now I'm in my 40s. Well, all right, what happened? You learn a few things by staying in the business and surviving multiple bare markets and bull markets and studying successful people and so on and so forth. I didn't go to Harvard or Yale. I started the business in my dorm room and grad school. And unlike Gates and Zuckerberg, who both started in their dorm rooms, they've had monster of success. I've had a fair deal, a good deal of success. I'm very grateful for it.

But what I've learned is that the number one most important job, everybody, just about everybody at Wall Street, has, in my opinion, is to manage and respect risk. That's it. So not going, not coming from a big bank and not having the traditional route that most people take, I knew I didn't know. And that became my biggest strength. So I had one job. And that jobs to learn. The market is a tremendously humbling environment because I'm not the richest person on Wall Street. I'm not the smartest person on Wall Street. But guess what? That's okay. I still. can compete and I still can win as long as I do my job and I have rules in place, system that follow, a system that I follow, and that you can follow too, and have guard rails that help us

minimize risk when we're wrong and maximize our wins when we're right. It really is just that simple. You could talk about entries and exits and I know people from all walks of life on Wall Street. Right? There's no one of the other beauties of this business is that it's an infinite game, meaning it's not a finite game. A finite game would be a game of chess. There's agreed upon number of players, two players in chess, and there's agreed upon a number of pieces on the board, and there's rules you can't just take the king and jump over all the other pieces and knock out the king and that's it, games over. You can only go one square at a time and so on and so forth. Every player or every, excuse me, piece on the board can go certain amount of places.

Same thing with football. There's a beginning of the game. There's an end of the game. fixed number of players soccer, basketball, doesn't matter what you're tennis, doesn't matter whatever your sport is golf, it's all the same thing. Those are finite games. There's a beginning, there's an end, and there's a finite number of players. And there's certain rules to the game. The market's an infinite game. There's a really good talk on YouTube if you go on YouTube and type in Simon Sinek and type

an infinite game. He explains it in great detail. But basically, the rules are different. Meaning, here, anybody can enter the market and exit the market at any of the market at any point in time. They're free to do so. And there are no quote-unquote rules, as long as you're doing something legal and ethical, and I mean, those are the two rules. But my point is, you can buy and sell anything you want that's liquid and publicly traded on an exchange at any point in time. There are no quote-unquote rules. You bought this. You have to sell it here and you bought,

you can't buy there. So my point is that it's really important to have structure and to come up with structure. Why? Because that structure gives you the ability to navigate this endless environment or the infinite environment gracefully and sets you up to win. Because when you respect risk, guess what? That becomes a superpower. It really does. Because most people aren't even aware of that. Up next, we've got a lot more to talk about and talk about some stocks, some sectors, the year review, I'm Adam Sarhan, and this is the one and only Investors Edge. Hi, I'm Gary Kalbaum, hosted a nationally syndicated radio show Investors Edge. We're not just handsome radio people. We manage investors' money for a living,

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is not getting you to where you would like to be, call us to make an appointment for a complimentary portfolio review. The number to call is 888-4-2-5-59. That's 8-8-4-2-5-9. That's 888-4-22-55-9. investment advisory services offered through call bomb capital management. This message is brought to you by the Capital One VentureX card. Venture X offers the premium benefits you expect, like a $300 annual Capital One travel credit for less than you expect.

Elevate your earn with unlimited double miles on every purchase, bringing you one step closer to your next dream destination. Plus, enjoy access to over 1,000 airport lounges worldwide. The Capital One Venture X card. What's in your wallet? Terms apply. Lounge access is subject to change. See Capital One.com for details. This episode is brought to you by Spreaker. The platform responsible for a rapidly spreading condition known as podcast brain. Symptoms include buying microphones you don't need, explaining RSS feeds to confused relatives, and saying things like, sorry, I can't talk right now, I'm editing audio. If this sounds familiar, you're probably already a podcaster. The good news is Spreaker makes the whole process simple. You record your show, Upload it once, and Spreaker distributes it everywhere people listen.

Apple Podcasts, Spotify, and about a dozen apps your cousin swears are the next big thing. Even better, Spreaker helps you monetize your show with ads, meaning your podcast might someday pay for, well, more microphones. Start your show today at spreeker.com. Sprinker, because if you're going to talk to yourself for an hour, you might as well publish it. It's time to switch on the integrator units and get the brain cells working. You're listening to Hey, this promises to be fun.

Investors Edge. The last bastion of quality programming. With Gary Cult Bomb. It doesn't get better than this. And welcome once again to Investors Edge. I'm Adam Sarhan and for Gary Kaye, who's out today. In case you missed any part of the show, you can go to GaryK.com and you can pause, rewind, fast forward. I know I speak fast sometimes, but I have a lot of covers, so I would do one.

to share it with you and we have a very little amount of time. So, and I'm not on every day. So there's, you know, there's just, anyway. So feel free to go there. You can pause it or wind it fast forward. If you missed anything, you can get it over and over again. So we spoke about the importance of managing risk. Every major investment bank in 2008, the entire investment banking model crashed, right?

Every major investment bank, the five big ones, got knocked out in business or had the change to commercial banks. Why? Because they didn't respect risk. It doesn't matter if they were buying MBS or L MNOP or Housy or CDOs or... It doesn't matter. What matters is they didn't respect risk. Think of it. It was Bear Stearns, gone, gobbled up.

Merrill Lynch gobbled up by Bank of America. Right? Lehman Brothers failed. Left you with Morgan and Goldman. Well, they had to switch to commercial banks. They're still around. They still were left standing. But they had to switch over. from investment to commercial banks. All of them, same reasons, didn't respect risk.

Now, the ones that are able to survive decades, like Warren Buffett, for example, and these big banks that are still standing, they understand the importance of respecting risk and the fact that it's an infinite gain. You don't have to force it. The environment changes, The market state changes. I talk about this in my book and psychological analysis. Think about your state. Your state changes. Sometimes you're happy. Sometimes you're sad. Sometimes you have a lot of energy. Sometimes you're low energy. Sometimes, you know, anything on the spectrum of emotions or states you can possibly think of. You know what you've experienced it. Same with the market. Down in Florida, there are hurricanes. Happen every once in a while, every few years. Okay, great. Well, when there's a hurricane outside, I've lived through several hurricanes.

Trina actually passed over South Florida before it went to New Orleans and Wilma and all these other ones when I was living there back at the time. And then central Florida, same thing. They rain, rain, rain, rain, rain, rain. And then the eye of the storm goes over you. It's quiet. Just cloudy. All the wind is gone. All the rain is gone.

Power is knocked out. So there's no TV. On the radio, this was back in 04 or 5-ish when the specific story happened. They tell you, hey, don't when the eye of the hurricane actually crossed over. like I experienced it, don't go outside because the back half of the hurricane is still coming around. And the back half, those outer bands are even stronger than the front ones. Well, why am I sharing the story with you? The environment changed.

If I want to stay dry, I'm not going to go outside in the middle of a hurricane or when it's raining outside. It doesn't make any sense. Instead, I'll wait for the hurricane to pass. And then when the hurricane passes, what happens? You get some of the most beautiful weather ever. same with the market the state changes the good news with us in the market is there's only three states the market can be in at any given time it can go up down or sideways bull market goes up bare market goes down sideways choppy environment goes sideways and you don't have to be involved

all day every day cash is a position if you choose if that's appropriate for you right i don't know you so i'm not getting everything is general nothing specific here but But cash can be a position if someone chooses to have cash as a position. So after a huge rally, since really 2009, you had a brief bare market that lasted a few weeks during COVID, March of 2020, and then it kind of recovered a few weeks later. I think it was five, six, seven, eight weeks later, whatever it was, we had a few months at the most before you broke out above the February 2020 high. You pretty much have been going straight up.

You had a brief down period in 2018 to fourth quarter. you had a brief COVID sell-off, but pretty much in March of 2009, you've been going straight up. That's happened before throughout history, rare, but it's happened before. Where you get the 90s was a very strong period. Brief bear market, 98, with the Asian financial crisis and long-term capital management, and then ban markets took off afterwards. Kind of like a blow off top. Similar to what happened with COVID.

09 to 2019, 2020, huge rally. COVID little sell-off, just like 98. March in, sorry, August of 90, the summer of 98, and then bam, you got this huge rally. The stock market doubled after COVID, after having a huge run since 2009. Then 2021 rolls up, you know, comes into play. At the end of it, stock market tops out. And Gary's been on this, well, quite on rice for you. And then what happens?

You start going down. And area after area after area is topped out and then starts falling. just about every single area on Wall Street this year is down except for I believe energy is up let me look some health care is up that's about it insurance could be up Chubb is up a little bit PGR's progressive upper travel is up a little bit yeah that's really it

some aerospace and defense so lock Martin's up, North and Grubbitt, you know, Raytheon, that kind of stuff. And then some farming, deer and caterpillar. Some other areas, beverages, some stocks are up there too, but pretty much it's been a very, very widespread selling. But the vast majority of the selling has occurred in the NASDAQ. And that's why the NASDAQ is down more than the other indices.

But the NASDAQ is not an equally weighted index. Apple, Amazon, you know, the big stocks make up the vast majority of the index. So under the surface, a lot of tech stocks got mauled during this bear market or got, you know, destroyed or sold off really hard. Nobody knows how deep these pullbacks are going to be or how deep these bare markets are going to be. But we do know if you study history, the market history, that is, that bare markets happen.

They're part of the infinite gain that we're in. And the mindset of a player or a participant in that infinite game is really different than the mindset of a player in a finite game. In a finite game, you want to score as fast as possible to get as many points on the board as you can and beat the opponent. But in the infinite game, time can work for you, but time can also work against you. Patience is a virtue. It is extremely important to understand. time and use it to your advantage because that's what the smart money does. I talk about this in my book as well. It's called time arbitrage. Arbitrage is a fancy Wall Street term that just means a

difference between two prices. So you can have gold going up a lot, gold socks are going down. There's an arbitrage play there, right? You can sell one by the other, so on and so forth, right? All right. Time arbitrage, in my humble opinion, I just created this concept, put it together, is when use time to your advantage. Most people are looking at the leaves and the trees and they miss the forest. The leaves on the trees are tick, tick, tick, tick, tick, tick. What happens intradate? The forest is what happens month to month, year to year, quarter, quarter, you know, longer term horizon. So it's really, really important to step back, understand the environment and understand time and use time to your advantage. Up next, I've got a lot more to talk about.

I'm Adam Saran, this is the one and only Investors Edge. This message is brought to you by the Capital One Venture X card. Venture X offers the premium benefits you expect, like a $300 annual Capital One travel credit for less than you expect. Elevate your earn with unlimited double miles on every purchase, bringing you one step closer to your next dream destination. Plus, enjoy access to over 1,000 airport lounges worldwide. The Capital One Venture X card. What's in your wallet? Terms apply.

Lounge access is subject to change. See Capital One.com for details. This episode is brought to you by Spreaker. The platform responsible for a rapidly spreading condition known as podcast brain. Symptoms include buying microphones you don't need, explaining RSS feeds to confused relatives, and saying things like, sorry, I can't talk right now, I'm editing audio. If this sounds familiar, you're probably already a podcaster. The good news is Spreaker makes the whole process simple.

You record your show, upload it once, and Spreaker distributes it everywhere people listen, Apple Podcasts, Spotify, and about a dozen apps your cousin's swears are the next big thing. Even better, Spreaker helps you monetize your show with ads, meaning your podcast might someday pay for, well, more microphones. Start your show today at spreeker.com. Spreaker, because if you're going to talk to yourself for an hour, you might as well publish it. This message is brought to you by the Capital One Venture X card. Venture X offers the premium benefits you expect, like a $300 annual.

Capital One travel credit for less than you expect. Elevate your earn with unlimited double miles on every purchase, bringing you one step closer to your next dream destination. Plus, enjoy access to over 1,000 airport lounges worldwide. The Capital One Venture X card. What's in your wallet? Terms apply, lounge access is subject to change. See Capital One.com for details.

You're listening to. America is talking. Investors Edge. He's got to be pleased with that. The crowd is just. on his feet here. He's a Cinderella boy. With Gary Colbomb. It comes highly recommended. You're going to feel better if you talk to him. And welcome once again to Investors Edge. I'm Adam Sarhanen in for Gary Kaye, who's out today. So in case you're just joining us or miss any part of the show,

I'm going through some timeless concepts here as we approach the end of the year. We look back and really just take some time to pause, reflect on the year that just passed and set our stage for, of course, for the year that's coming. So, time arbitrage, we left speaking about that. And again, if you miss any part of the show, you can go to garyk.com, rewind, fast forward, and re-listen to anything you want. Time arbitrage is that concept of using time to your advantage. Most people get in the stock and they're very impatient and they want to get out right away. Or the stock goes up until they buy it at 100, it goes to 105 and they sell it. Why? Because they're fearful. They're going to lose their profits and they go down to 95 or down to 50.

or whatever it is. And the opposite is also true. They buy it at 100. It goes to 95. Instead of selling it, when they're fearful, that it's going to go lower, they're hoping it's going to go back up.

They're praying it's going to go back up. Please, God, get it back to even. I mean, if you've been trading long enough, probably have done that before. I know I have. When I first got started, I was doing that all the time. But it's full,

It doesn't help. Warren Buffett talks about it. You want to be fearful when others are greedy and greedy when others are fearful. And what he means by that is to do the exact opposite of what I just explained. When you buy it at 100, if the stock's going to double a triple,

which is the goal, why would you sell it at 105 or 110 or even 120? If it's acting well, get out of your own way and give it the benefit of the doubt as long as it's earned the right and it's going up, it's rewarding you, it's making you money, and it's acting well, it's respecting its moving averages,

it's moving up in a nice orderly fashion and so on and so forth, don't be fearful when you're at 105 and you have a 5% cushion and you're fearful that you'll lose those profits. Maybe move to stop the break even if you want to, but let the winners run. And conversely, you buy it 100, it goes to 95, don't hope it's going to go back to 100, do something. If you have risk management process in place, you want to sell it, depends on where.

5% loss, 8% loss, 10% loss at the most. I would recommend smaller ones, but you do whatever it's appropriate for you. But my point is, is have an exit strategy. That lesson, folks, this year would have saved just about anybody from getting knocked out. I know people that got knocked out of the game this year, down 70%, down 50%, and some worse, because it's a great company, Adam, it's going to come back. Tesla's down 40% in the last few weeks. I think it's down, I don't even know what the year-to-date the client is for Tesla.

It's a great company that make great cars, down about 70%, I think. Is that right? 68%. I'll check. I'll get back to you in a few minutes here. all great stocks that on the way up, eventually history shows us there's a time when they should be sold because they don't keep going up forever. Now, if you're comfortable having a 50, 60, 70% drawdown, which is a decline or, you know,

and having your money sit there for 10, 20, 30 years or 15 years or, I mean, every stock's different until it quote unquote comes back. That's up to you. But I'm not. understanding yourself is the next major lesson here. Know thyself. What may work for me might not work for you. Yeah, Tesla's down about 70% this year.

Sorry, let me just go back from its all-time high. And that was in 2021. So since November of 2021, the stock was at 414. It's now at 121. But it's a great company. sure, it's not a great stock anymore. It was a great stock, just like the environment changes, the state changes, the market state changes. And if you have that protective, that risk management that I spoke about at the beginning part of the show nailed down, you're not going to lose

70% of in a stock. Remember, taking responsibility is paramount to being successful. It's really, really important. Why? Because successful people take responsibility. They don't play the victim card. And you know that. If you're listening to Gary's show, you know, you understand these principles. It's really, really important to understand, focus on what you can control. And a friend of mine who's from overseas down to Peru, they had, I think the president was overthrown or something like that's like, you follow the news, you see what happened? This was a few months ago or a few, sorry, a few weeks ago. And I was briefly. I mean, I was briefly. I mean, from far away. He said, sure, yeah, I kind of, you know, I read the news, I read the newspaper

every day, I know what's going on, but not details. I don't know, you know, dive in deep. He's like, what about, doesn't that impact your business? He said, yeah, to a certain extent, but my focus is America. My focus is USA. I want to see what's happening in the markets. Politics is a sideshow. Sure, it matters. Sure. But for me, you know, I'm speaking the language of, I want to stay focused. I'm speaking the language of money. I want to focus on the market. I want to, that's what I'm interested in. I can't be focused on a hundred different things and be the jack of all trades and the master of none. I want to stay hyper-focused on the markets and what impacts our bottom line.

What shows up in your statement every single day when you get your statement is the price you paid for the stock, your entry price, and then the current price. And the difference between those determines whether you make money or you lose money. Everything else, in my opinion, is secondary. But it's a great company, the earning. and this, that, great. Stock going up, if you're long. Tesla last quarter, their earnings were up almost 70%. Sales were up 56% year over year.

Return in equities, 38.5%. Phenomenal numbers. Stock's down 70%. What shows up in my statement? Price. That's what determines my decisions. Because you can have a great company and a lousy stock, and vice versa.

Can you have a lousy stock? And a great, you know, sorry, a great stock and a lousy company. I mean, the company loses money. But you can still make money in the stock. So understanding the stock is a different animal than the company is really, really important. Now, if you wanted to buy the business and you don't care about the stock, sure, different way to play this infinite game. And that's the other beauty of this business.

There's an infinite number of ways to make money in the market. Your job is to find one that works for you. and stick to it. Avoid what they call style drift where you're drifting back and forth depending on, you know, what's working, the next shiny object. It's not really a winning strategy

to just jump, oh, today I'm a value investor, tomorrow I'm a growth investor, the next, you know, find something that works for you and stick to it because that'll give you success over the long term. So if you can put these pieces together, there's time arbitrage we spoke about,

We spoke about, we spoke about a lot of things. I won't cover it all now. But let me talk to you about another piece. Respecting risk, I'll go through a few of them. Understanding the big lesson for me in 2022 is just reaffirms the importance of respecting risk. If you keep those losses small and stay out of the environment when the environment's not conducive and get back in when it is conducive, you can do over time. the odds of you doing well increased dramatically. Dramatically.

So what am I looking for to get bullish going forward in 2023? There's three things. I was interviewed the other day and I shared it. I shared it my finely stock's report also. So first thing, I want to see the S&P 500 get back above its 200-day moving average. One. Number two, I want to see the S&P 500 start making high. highs and higher lows. And number three, I want to see new stocks break out, new leadership.

New stocks break out of sound bases and blast off and go to the moon. Why? Because the stock market is made up of stocks. Yes, there are certain stocks like Apple or Amazon that make up a disproportionate amount of the index on a waiting basis. But The stock market, if you start seeing new stocks, new highs, and they're breaking out and they have innovative companies and they're doing this and they're doing that and stocks are going up, the market has no choice but to follow over time. So that new batch of leadership, the S&P 500 making new highs, higher highs and higher lows, and then the SEP to get above the 200 day and stay above the 200 day moving average. Those are the three things I'm looking for. There's the music up next. We've got a lot more to cover. I'm Adam Saurhand. This is the one and only Investor's Edge. This message is brought to you by the Capital One Venture X card. Venture X offers the

premium benefits you expect, like a $300 annual Capital One travel credit for less than you expect. Elevate your earn with unlimited double miles on every purchase, bringing you one step closer to your next dream destination. Plus, enjoy access to over 1,000 airport lounges worldwide. The Capital One Venture X card. What's in your wallet? Terms apply. Lounge access is subject to change. See Capital1.com for details. This episode is brought to you by Spreker. The platform responsible for a rapidly spreading condition known as podcast brain. Symptoms include buying microphones you don't need, explaining RSS feeds to confused relatives, and saying things like, sorry, I can't talk right now. I'm editing audio. If this sounds familiar, you're probably

already a podcaster. The good news is Spreaker makes the whole process Simple. You record your show, upload it once, and Spreaker distributes it everywhere people listen. Apple Podcasts, Spotify, and about a dozen apps your cousin swears are the next big thing. Even better, Spreaker helps you monetize your show with ads, meaning your podcast might someday pay for, well, more microphones. Start your show today at spreeker.com. Sprinker, because if you're going to talk to yourself for an hour, you might as well publish it. This message is brought to you by the Capital One VentureX card. Venture X offers the premium benefits you expect, like a $300 annual Capital One travel credit for less than you expect.

Elevate your earn with unlimited double miles on every purchase, bringing you one step closer to your next dream destination. Plus, enjoy access to over 1,000 airport lounges worldwide. The Capital One Venture X card. What's in your wallet? Terms apply. Lounge access is subject to change. See Capital One.com for details. You're listening to.

What are we waiting for? Well, what are you waiting for? One, two, ready, go. Inversters Edge with Gary Culper. And welcome once again to Investor's Edge. I'm Adam Sarhan in for Gary Kate today. As always, I want to thank you very much for being here. Cover a lot on the show so far.

We've got a few minutes left. We're going to introduce another topic here. We spoke about what I'm looking for to get bullish. and another thing I'm looking for to get bullish, which I may sound surprising at first, would be another leg down on Wall Street. Typically, well, Adam, you want stocks to go down? Not really, but yes, in the short term. Why?

It paves away for the next bull market. Typically, going back and studying every major bull market in the U.S. stock markets history, which I've done multiple times, and other bull and bear markets, outside the U.S. stock market, other bare markets and economic cycles, so on and booms and busts and so forth. It's all human nature. That's why in the book it's called psychological analysis. There's fundamental analysis and technical analysis, right? Fundamental analysis, you study the company, the earnings and so on and so forth.

The technical is you study the stock, the chart patterns, et cetera, et cetera. But that's not enough to beat the market. But those are the two prevailing schools on Wall Street. The third element is self-mastery. And that's a psychological analysis. To master thyself, to know what makes you tick, pardon the pun, and then of course, understand the market, the psychology of the crowd, because we're all investing in the same place.

So, just about, just about every major bear market in history ends with capitulation. What does capitulation mean in English? A big move down. Rothschild, the famous Rothschild family, a while ago, decades, hundreds of years ago, has his famous saying, you want to be buying when there's blood on the streets. Well, it's not literal blood on the streets now.

Red, maybe stocks go down. You want to say that's blood, sure. But what's the idea there? The idea is some of the best opportunities in history come in the early stages of a new bull market. In order for the new bull market to show up, you typically see what we're seeing, now followed by a big move down. And that big move down becomes this forced liquidation

environment. Maybe the October low holds and we don't have a big move down and that's it. The bear market's over. We could retest it and they go. Or this could be it. This could be a higher low right now and then we just take off and go. I'm open to anything. My friend Jim talks about maximum flexibility when it comes to markets. Anything can happen anytime and being extremely open mind and being able to shift almost on a dime is really important because nobody knows what's going to happen tomorrow. No one knows what's going to happen next year. But we know what's happening right now. We can react to it. And then of course we can plan for what's going to happen next week. It goes up. It goes down. It goes sideways. That's it. What are you going to do if it goes

up? What do you do if it goes down? What do you can do if it goes sideways? That's how I plan everything. I do the work on the weekends when the markets are closed. That works for me. That's a system that I've developed. That works for me. Now, sorry, I didn't develop, but I created it. No, others before me had used it. Nicholas Starvis used it from a great book called How I Made $2 million in the stock market published decades ago before I was even born. I think it came out in this. I can't even remember. But anyway, it came out in, I think he was trading in the 50s or 60. I don't even know. The point is this. This is the system that I use. I didn't create it. I don't take ownership over it, but I make my decisions when the markets are closed. And I plan for one of those three

scenarios. Mark goes up, goes down, it goes sideways. And the big leg down sets the stage for the next bull market. It doesn't have to happen. And the other thing is, most bear markets typically end in March. I don't know why, but, you know, new bull markets are born in March. In the last 20 years, the last two big bear markets really ended in March. The 08 crisis or financial crisis ended in March of 09, and that was a birth of the massive bull market we saw. And back after the dot-com bubble crashed, it bought in October of 2002,

and then it kind of retested it again afterwards, but really didn't get going until March of 2003, which was the invasion of Iraq. So that March 03 is when the mojo came into the market, and we saw some really heavy-duty buying, and bam, the bull market was boring. So wouldn't surprise me at all if the market goes down in January-February-ish, March-ish-ish. We get that big leg down, and then bam, bottoms and it takes off. Now, it doesn't have to bottom in March.

It could bottom in October. It could bottom in July. It could bottom any time. So I'm not making any predictions or throwing, you know. I'm just saying, hey, historically, we've seen markets bottom in October, which this, boom, market so far has bottomed in October if the lows hold and then we see a big boom higher in March or they've just bottom in March but not all of them there's some but then some have bottomed at other points in the year so would it surprise me at all to see another leg down and

then we bottom in March not at all would it surprise me if the October lows tested and holds not at all either way maximum flexibility this bare market could drag on for two years. There's no rules that say the bear market has to end right now. And the other thing I'm looking for, people ask me all the time, what are you looking for? What are you looking for? What are you looking for? Inflation has to come down. Housing prices have to come down. And the other thing is unemployment goes up. I don't want anyone to lose their jobs. I don't want housing prices to go down. But typically, bear markets end when there's economic duress, when there's economic stress, when people feel pressure financially. Now the average person doesn't

feel pressure. I can tell you from experience. I'm at Disney World in Orlando. places packed, sold out, resorts sold out. Nothing available, zero. That typically doesn't happen during bare market bottoms. Could this one be different? Sure, anything's possible. But the Fed wants inflation to come down. People have to stop spending.

How do people stop spending? They don't have a job. Or their house, their biggest asset, most people are the biggest assets their house, goes down significantly. Oh, wait a minute, my house isn't worth a million bucks more, it's worth $700, $600, $5,000, that kind of mindset kicks in. Then all of a sudden, inflation comes down. Then the Fed stops, they pause, they start easing, and then the next boom starts, and so

and so forth. It's just cycles. You know, Ray Dalio's got a great book. It's called Principles, where he's the biggest hedge fund manager in the world and start in his two-bedroom apartment. And in it, he outlines his principles, and it's a great next-level thinking-style book. and he talks about, just about everything in history, it's another one of these or another one of those.

It's happened before. You might not have experienced it, but it's happened before. So, want to take the time, wish everybody a very, very happy, healthy New Year, prosperous New Year, enjoy your family, put the market where it belongs on the sidelines,

take care of the important things. The biggest bull market's in front of us. We don't know when, but we know it's in front of us. Happy New Year, everybody. Speak to you again, soon. This has been Investors' Edge with Gary Cult Bomb on BizTalk. To listen to past episodes or to get in contact with Gary, go to GaryK.com. That's GaryK.com.

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