Do markets echo or rhyme with previous regimes?

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• 0:00Speaker 00

  Hey everybody, it's Michael Martin. Thanks for being here. So, got a good email from someone and said, "Hey, you know, Michael, having seen everything that you've seen and knowing the people that you know and this and that, like, from a historical perspective, like, what keeps you up at night?" And I thought that was a good question. I appreciate... It's from Erica. Thank you, Erica. "So, things don't keep me up at night. Obviously, I have my worries about the world and how everybody seems to be super polarized and, you know, the media just sucks, right? They just constantly, you know, fomenting hate between people.

• 0:41Speaker 00

  Everything's very polarized. We have to get reactions now. Somebody does something, and then someone's gonna have a reaction to that, and somehow that becomes a news item. Like, I don't find it entertaining or informative." So, you know, it's like Brad Pitt's line in "The Ocean's..." I don't know if it's Ocean 11 or Ocean 12, when he's talking about Casey Affleck and Scott Cahn. And, you know, George asking him, "How are the twins doing?" And he said, "I think they're having a hard time filling the time along those lines." "I don't let things get to me because I know how to manage the risk. You know, I'm powerless over what goes on. I'm powerless that people have to go to social media

• 1:24Speaker 00

  and spew a bunch of bullshit that doesn't matter. I guess it feels good. I just don't know how you make any money with that." Like, when I was younger, and it wasn't like I was polarized. Obviously, I've had my opinions. It just wouldn't occur to me to take valuable time from my day to go fighting into these kind of endless loop conversations that don't go anywhere. Now, it's... First Amendment rights are precious, and I believe in them 1,000%, but...

• 1:54Speaker 00

  You know, if you're younger and you had a family, you know, and you wanna build a family, or you're trying to build a trading career, in my humble opinion, First Amendment rights or not, you don't have time for this. You don't have time to be flying off the handle at everything that you don't like in the world. Right? So that, that, that concerns me for younger people who haven't, who've been sucked into it. See, I had the benefit of not having the internet. I had no mobile technology, therefore, we had no mobile apps. Right? So I couldn't see what someone's shouting their face off about politically, or about transgender rights and trans people in, in sports and athletes. And whatever the issues are of the day, like, we, we knew they, the issues were out there,

• 2:39Speaker 00

  but we, we were insulated on some level, cuz we was all, the only thing we could do is really read newspapers.

• 2:47Speaker 00

  There was no place to get scrolling news headlines in the morning, so that's what I'm saying. Like, day trading is really a late 90s kinda phenomenon, right? It's not been around that long. There wasn't, we wouldn't know what to do. You could put on TV and see, there was Lou Dobbs and CNN FN, as it was called, financial news. Then the upstart CNBC. But no one really knew how to use that. It was kind of an interesting, kind of a curiosity. I don't know anyone that was getting trading ideas. It was interesting to see certain managers, you know, very, very early, you know, Jim Cramer, when he was running money for Kramer Berkowitz and, and all that. But we had to originate our own ideas. There wasn't a place, you know, there wasn't a pod, there wasn't a meetup.

• 3:30Speaker 00

  And so, when I think about all of this, I like to think that traders are strong individuals, right? From a philosophical standpoint. And each of us needs to know what we're gonna do. Like, we all might make a certain recipe, but we're gonna make it in our own style. So just like, you gotta know your position size, how much capital do you have? What's your risk per trade? You know, what's your exit when you're losing? How do you take profits? What do you do to manage the trade? Are you gonna add to your winners? You know, if you ask a hundred traders that question, you're gonna get a hundred different answers, and that's okay. My, my fear for the market isn't about the market, right? It, I have echoes of 2000 in my head right now, for where we are in the world.

• 4:17Speaker 00

  You know, when it started to think like when I watched the the earnings reaction to Micron, like, my goodness, they couldn't have put up better numbers. They absolutely smashed. Now, granted, the market was up one hundred and fifty percent, up to the point where they announced. But then they certainly punished the stock after the numbers came in. So I'm like, OK, I've seen this before. I don't know where the rollover is going to end.

• 4:42Speaker 00

  So, you know, my my thought would be, be careful and make sure that you can define a lot of those things that we spoke about last Tuesday. And what what would you do under specific situations? The the parallels from now and to two thousand are kind of similar. You know, we have groundbreaking technology that's very, very new. People know it could be an issue. They just don't even know where it's around in their lives. For most people, if they haven't even gotten on to say something at the low end of like ChatGPT, forget the other ones like Claude or otherwise. Their experience with AI could be if they're on a website like Amazon and they're trying to find an order

• 5:24Speaker 00

  and they're interacting with an AI bot that's in client service. That's where the majority of people are, you know, coming across AI. How to actually use it for productivity, that's something that the corporations are really taking on. And everyone's excited about it, just like they were about the internet. And they're like, we got to get involved. We need AI exposure. But you can't be blinded by ideology. That's kind of what I was getting at in that episode and and and lose sight of good risk management. You have to remember, and one day I'm going to do a massive study on it. I just have to get the data and it's harder to get because they the the data companies take out the delisted companies. I don't know if you know that or not.

• 6:06Speaker 00

  So if you go and subscribe to even, you know, a premium, you know, charting package and you type in some old tickers, the charts don't come up because they they don't they don't include them. So if you wanted to go see like what did Enron look like or Bear Stearns? E and E was Enron, BSC was Bear Stearns Corporation. Then you have the winners like Bank Boston, BKB, which I owned a lot of, especially after Glass Steagall, because I knew it was it was a good bank. It had a good dividend. And I knew it was an acquisition target. And yes, it was eventually acquired by Fleet Bank. So you'd wanna see like, what do those charts look like coming up to those periods of time, too? It does, for those of you that do your own backtesting, you know that there's survivorship bias, right?

• 6:50Speaker 00

  Because the only thing that you can see are survivors, right? It would be good to know, would your instincts, you know, lead you to wanna buy stuff in downtrends, for example? And what would that look like over a longer period of time? Thinking, again, that lower prices is somehow more valuable. Well, it wasn't for Enron, it wasn't for Bear Stearns. So you kinda have to be careful, because you can't predict what's gonna happen. And if anyone told me, back then, from the, you know, ninety-eight to, say, two thousand and three, two thousand and four, that, you know, those companies would've been out of business, or Lehman Brothers, I would've been like, there's no chance. How would that even happen?

• 7:32Speaker 00

  So, I think people are blinded by the ideology, like they are in a lot of things in life, and they just don't have the flexibility to see things from several different angles. That's why, again, last week, I think it was Tuesday, we talked about, you know, you need to have a plan for every possible outcome, and know what you're gonna do ahead of time. Because then, it's like, well, what's new that could possibly come out? Right? What is new that could come out? That news that could hit the tape, or be revealed about the company that I'm not prepared for? Because when you're prepared, it's like, okay, look, I might have to make an adjustment going forward, but at least now I know what I'm doing.

• 8:15Speaker 00

  I can see, you know, there's asset classes, and certain stocks that are, you know, just hyped, because they're part of, of, uh, they're like with the in-crowd. And that can lead people to turn a blind eye to good risk management, and it opens them up to losing a lot more money, because just like the folks thought in nineteen ninety-nine and early two thousand, that the internet was here to stay, it's the new economy, you know? And they were right. It was here to stay, and it is the new economy, but they still lost an enormous amount of money. And I know plenty of traders that just said, you know what? I'm not actually cut out for this. I thought I knew what I was doing because I was making a lot of money in the late 90s.

• 8:58Speaker 00

  It was hard to lose money when you were trading equities that were evolved in technology. Keep in mind that from 95 to 99, the market was up quite a bit. And then from early 99 to early 2000, it doubled again in a year. That's how rare this kind of situation was. So people were just sitting back saying, "Man, I smoke in bed." You know what I mean? Face down. So it's like, fuck, you gotta be careful. You know, you have to be careful. You have to have a plan. You have to, and I learned this from an editor when I was writing my book. They said like, "Look, this is a good chapter. It just doesn't fit in the book. So you kind of have to, pardon the expression, you have to kill your babies." And I didn't understand it at the time.

• 9:42Speaker 00

  So I'm like, "Yeah, it's a pretty good chapter. Maybe it'll fit in another book at some point." But you have to do that with your portfolio too. Nothing lasts forever. So you have to be objective enough to say, "Hey, this vehicle was good. It's made me a good chunk of money up to a certain point." But again, if you want to do yourself a favor, go to whatever free charting you're looking at, order your paid one, type in QQQ, look at monthly bars, and then look from March of 99, watch it go from 50 to 120, and then crater. Like, how are you going to handle that if that looks like some of the names that you've been in? Because you need an answer to that as well. You might not want to think about it because it's like you get married

• 10:26Speaker 00

  because you hope you're going to live happily ever after until you get divorced, right? So how is that gonna happen? So think of this as like a bit of a prenup. Think of how you need to create a bit of a prenup with yourself and the market on how you're going to manage risk and not get caught up, right? Everyone has their Facebook story about getting caught up. Anyway, please like and subscribe. I appreciate everybody. Thank you for all the kind remarks. And please keep, you know, your emails and your comments coming. I'll do what I can to help you. See you tomorrow.