YouSaid · the spoken record

Dr. Richard Smith

lines on the record: 33
first: 2018-08-19
most recent: 2018-08-19
sittings or episodes: 1
sources: podcast

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“We have a special page set up for your listeners at tradesstops.com forward slash tip. So anyone who's listening to this podcast can go to tradestops.com forward slash tip, learn a little bit more about kind of how our tools can apply to the type of investing that you guys like to talk about and also get a special offer for your subscribers.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“What I call irrational profits instead of irrational losses. That saying that the markets can stay irrational longer than we can stay solvent. Well, let that market irrationality work for you. Like let your profits defy your wildest expectations instead of letting your losses defy your wildest expectations. So you get some 10, 20 baggers in your portfolio instead of 80, 90% losers in your portfolio. So, being able to really stick with what's working, like Buffett and Apple and buying more of Apple, that is probably the single biggest change in my own behavior as an investor that I think has made me a more successful investor today than when I got started 20 years ago.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Don't sell your winners. The gentleman that I learned about trailing stops from is Dr. Steve Sugarud. And so he publishes a newsletter, great newsletter. It's called True Wealth. He has a great track record. And I was studying the 25% trailing stop strategy. And I went back and looked at his performance when I applied a mechanical 25% trailing stop strategy, exit strategy to his recommendations. And I found that it significantly improved his performance. And it was like, well, why? How could that be? I know he uses a 25% trailing stop strategy. And it was because he wasn't using the trailing stop strategy to stay in his winners, right? So because that bias that I mentioned that we are risk averse when we get profits and we start to want to pull those profits off the table, you know, sticking with your winners and experience.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“They just released the data what's happening, right? So it's hard to find alpha when you're looking in the same place as everybody else.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I would ignore that. And what I found is that digging into the 13F data, the information that you can get has value six months, twelve months, eighteen months out from when the events take place in the investor portfolios. Even think about the 13F data that's coming out yesterday or in the last couple of days. Like I said earlier, one of my favorite approaches is to kind of narrow down my stock selection universe to a couple hundred two or three hundred different ideas. I just don't think it's that useful to look at what's happening 48 hours after this data is released. I think looking three to six months out from like looking back at what happened in the one queue data is actually there's still a lot of alpha in there and it's not where most people are looking stig. Most people are looking at, oh my God.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And then it brusts through a trillion dollar market gap, and he's still buying it. So I think that's a great lesson for individual investors to that we can take from investors like Buffett. I also have done a little bit of analysis on the kind of what the billionaires are doing overall sector-wise. So I have a little bit of data on that so far. It looks like they've kind of backed out of the consumer discretionary sector a little bit. So that was one that I had talked about back in February, kind of cut their position there by about 15% or so. Really increased their position in industrials and in energy and in materials. So those were smaller parts of their portfolios overall. But the biggest increases that I'm seeing are in industrials, which is interesting because the industrials have been so beaten down, especially the Dow and energy as well.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The data is still very fresh, Stig. I haven't done a deep dive on it that I ultimately intend to do. The one easy one here for me is the fact that Warren Buffett is buying more apple. And I think that is a really great lesson for individual investors to hear because you see, you know, Apple is at all time highs. It just passed the trillion dollar market cap. And Buffett continues to buy it. And I think so many of us who get involved in the markets succumb to the very unfortunate idea that, oh, it's at all-time highs. I can't buy it here, right? And so seeing Buffett continue to pile into Apple, you know, it just crushes that mindset that you can't buy at new highs. You know, look at what he's been doing. He's been accumulating it for a couple of years now.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And then I just don't have the 10 and 20 year time horizon patience of a Warren Buffett, you know? So, I think my attention span is a little better than maybe the average millennials. I'm more Generation X myself. I think we've been having a deteriorating attention span now through the generations. Anyway, my sweet spot is holding a stock for 18 months to maybe five, six years max. That's what works for me. I think that's an interesting kind of time range for a lot of people in the world today that aren't necessarily, you know, that are interested in investing but aren't necessarily going to be Warren Buffett”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So, one of my strategies is to sort of limit the universe of stock ideas that I'm choosing from to the universe of what the world's greatest investors are choosing from, right? So if you take 10, 20 of the world's greatest investors and you just kind of aggregate what they're invested in, you can come up with a list of a couple hundred stocks, two or three hundred stocks. And in my mind, those stocks have been vetted for value by the world's greatest investors. So I would like to take that universe of opportunities that have a value bias to them and then apply my own kind of quantitative strategies to that smaller basket of ideas. So, you know, personally, when I've tried to do value investing, I've gotten caught in the value trap more time. And I care to admit and ridden a stock down to just unacceptable losses.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And price action. And yet, everybody thought he was just a deep value investor. So kudos to Mr. Miller for looking into all the things that might really work, right? On the value side, for me, I just don't really have the stomach to be a deep value investor myself, but I do value fundamentals, but I really look to other people to make sure that I have an element of value in my investing strategy. We're both interested in billionaires.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“If you can start a positive uptrend with good momentum and you've got this kind of extra volatility or extra noise or worry that you can measure in the stock, that extra worry can really fuel a new uptrend that can be more enduring than typical uptrend. So that's an area that I've been personally exploring and seen some pretty compelling evidence that it's a cool strategy.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Mechanical strategy as I see it, but it's a great place to start to consider how are you deciding about how much to invest in different opportunities? Kind of my focus on volatility. I will say one more thing which I've found, you know, you mentioned kind of volatility going up being a good thing. I think that can be a good thing. And recently I've been exploring something that I call kinetic volatility or kinetic VQ. And it basically means like when a stock has gotten above its historic average volatility, that can be a really interesting sign. When you have positive momentum,”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“But you got to put the right amount of money into it so that you can still sleep at night, so that you can be in that stock for the long run to actually capitalize on the opportunity that's really there, right? So just as a simple illustrative example, if I may, you know, a stock with a 50% volatility quotient, if you want to risk $1,000 on that stock, you can put $2,000 into that stock. If that $2,000 investment falls 50%, you're down $1,000, right? On the other hand, if you have a stock like Walmart or Johnson& Johnson that's a 10% volatility quotient stock, you can put $10,000 into that stock. If that $10,000 investment falls 10%, you're down $1,000. So this is a much more advanced strategy for the individual investor than I think, you know, most of us have considered before. You know, it's not necessarily a”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Volatility that automatically helped me to put more money into the less volatile opportunities and put, I like to say, just the right amount of money into the more volatile opportunities and more speculative opportunities. And a big part of that for me is about being able to sleep at night, you know? So I love the idea of swinging for the fences on some small cap speculative opportunities.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The stocks that we are most excited about are the ones that have great stories. The reason they have great stories is in part because there's a lot of speculative fervor around the opportunity, right? And you can really spin a good story when you basically don't know what's going to happen. So I found this measure of the volatility quotient to really help me understand kind of how much noise or how much uncertainty I had to put up with for the stock if I wanted to be invested in it. And so it became something bigger than an optimal trailing stop strategy for me. It was like, man, that's 50%. Do I really want to be in a stock that's essentially got that much uncertainty or that much noise? And what I found in my back testing is that if I allocated my capital, so I was putting the same amount of money into taking the same amount of risk on each opportunity based on”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“For each of the stocks in my database, it started to change the way I thought about my investments and change the way my subscribers thought about the investments. So just to see like, you know, Johnson and Johnson, Walmart 12% small cap energy stock 50%. It was like, whoa, what does that mean, right? So that was very interesting to see those numbers and go, oh my God, that stock has a 50% volatility quotient, 50% VQ. Maybe I shouldn't put half of my portfolio into it, you know? Because, and again, we tend to want to put more money into the stocks that we're most excited about.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, great question, and I think this is a really interesting area for investors to be looking at. So I kind of stumbled upon volatility as a way to help me in my investment decision making because I started out with trailing stops. And so initially my interest in volatility was to find the optimal trailing stop that I could use on any stock. So I was using 25% trailing stops as a strategy and I was like, well, it doesn't make sense to use a 25% trailing stop on all stocks. If I'm investing in a small cap energy company or I'm investing in Walmart or Johnson& Johnson, those are totally different stocks. So I used volatility and I came up with this volatility quotient that I call it that was an optimal trailing stop loss strategy to use on any stock. But when I saw that number,”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Big believer in shorting myself. It's not that I'm not a big believer in it. I'm not that comfortable with it personally, Stig. You know, to me, going to cash is my form of shorting, right? So I will look for indicators. When I see the market starting to fall apart across all market capitalizations, all sectors, I will be looking to go to cash. And basically going to cash is my form of shorting the markets.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I do still have a concern about kind of large caps and industrials in the US stock market right now. My momentum indicators told me that the S&P 500 and the Dow fell more than they should have fallen just based on normal noise in the market. And I use volatility to define noise here. So I've been kind of very cautious about large caps for a while. Obviously, the bottom didn't fall out of the market, right? And the S&P 500 is actually hasn't made new highs yet, but it's getting close. But I still saw strong momentum in the Nasdaq 100 and in the mid-caps and the small caps of the market. So I really didn't see the market breaking down as a whole. I think momentum is starting to return to the market overall in spite of what we've seen for the past week, right, with some prices falling. I'm not a”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Investing and speculating. And it was because oil was a lot more volatile than I realized, right? So I have this indicator that I call the volatility quotient or the VQ. And oil, you know, it's typically like 30% on average. You don't think for a massive commodity like oil that it can swing around 30% in a year just because of noise in the market, right? But it does. So once I understood how volatile oil was and that it wasn't something that you could basically kind of short-term trade, that really helped me out in terms of being able to understand the oil markets better. So oil's been on a nice uptrend, has had good momentum for 18 months. That has started to transfer into energy stocks itself. So XLE. I look at the spider sector ETFs to kind of understand the sectors of what's going on in the markets XLE has”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“In the case of energy, I'm looking at both. Oil has had positive momentum now for at least a year, probably 18 months, and that's a trend that I've been all over since the beginning. And it's an area of the market that I really get excited about in part because I used to be oil, used to be my total nemesis when it came to.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I totally agree, man. I totally agree. Let me take one step back and just share another sector of the market that I'm excited about personally, and that's the energy sector. So I see a lot of strong momentum in the energy sector right now. Energy for me is something that is kind of particularly interesting. It's been beaten down for years. You know, it's really just starting to show positive momentum now. And I think the energy sector is a very exciting area of the market right now.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And then make sure that you're ignoring that noise. And then noticing kind of when it's not noise, when it's moved beyond just noise, right? So my goal is to tune out as much noise as possible, but have my ear open for a win, it's signal, and not noise.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Well, I'm a mathematician by training, so I'm attracted to quantitative strategies, right? I'm running a business. I have three kids that are still in school. I'm married. I don't have time to be watching the markets on a day-to-day basis. And I believe that, you know, watching prices flicker during the day is bad for your wealth and bad for your health unless you're a day trader, right? And I think that the best way to do that is to focus on a little longer time horizon than most people are focused on. I think there's this kind of push to the shorter term timeframes because it's more exciting. You can stoke more greed and fear and the media can really grab your attention on a constant basis, you know. And I want to tune all that out. A lot of my work is about figure out how much noise you have to put up with in order to be in the markets.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Try to get back to break even. But we are risk averse when it comes to our winners, right? So we get up 50%, 100%, and we start to feel like, oh my God, I better take those profits off the table before I lose them. That is a incredible bias that seeps into every investment decision that most individual investors make, and not just individuals, professionals too. And so a simple strategy like a 25% trailing stop strategy reverses that. It makes you risk averse with your losers and risk seeking with your winners. So those are the kinds of things that I've come up against personally as an investor that I think these quantitative strategies, even like a simple trailing stop strategy or a simple moving average strategy, have alpha for individual investors because of the behavioral biases that we bring to the market.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Reflects back to sort of my personal journey into getting where I am today. I started by advocating a 25% trailing stop strategy. It's a mechanical strategy for individual investors to sell when the stock falls 25% from its high, don't sell if it hasn't. And I was just amazed how when I would apply that to portfolios, newsletter portfolios, individual investor portfolios, I would almost always see improved performance. What I eventually figured out why is because of a insidious bias that we bring to every investment decision we make. And two Nobel Prizes have basically been awarded for this in economics now, the first to Daniel Kahneman and then Richard Thaler, right? We are risk seeking when we're losing. So we want to take more risk when we're underwater. We want to put more money into these positions. We want to double down.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, so just taking a step back for a minute, I am a big believer in a moving average strategy. And the main reason is because it's an improvement over the behavioral biases that all investors bring to investing, right? We think we can go into the markets and make shoot from the hip decisions about what to do that somehow we're smarter than the markets. And it's just not true, right? You have to get run over by the markets a few times before you go, man, that just doesn't work. And I don't want to do that again, right? So I think what a moving average strategy does at its most basic level is it lets us behave better in the markets more consistently, right? And behaving consistently, following a system is going to put you in the minority of market participants, right? So that's how I see it. And I think that is so important.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Days and that is also over trading is one of the biggest reasons that individual investors tend to underperform the markets. It's so easy to just click a button and make a trade today and we always have this urge to do stuff, to fix things. And as Jesse Livermore, I think it was said, the investor that can be right and sit tight is going to be more successful.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I came up with a proprietary momentum indicator a few years ago. It's a moving average type of indicator. It tends to be a little longer moving average, but it is unique for each asset that I apply it to. So it's not just a 200-day moving average. It's not just a 50-day moving average. We actually look for the moving average that has the best bounces off of trend. Okay, so when a kind of price falls down, hits the trend line, and bounces back up. That's what I'm really looking for. So I want to see strong bounces off of the trend. a range of moving averages for every different asset in our database and look for the moving average that has the strongest bounce off of trend. So those tend to be a little longer, say between 100 and 300.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I think that the retail investor has an opportunity to really look into individual small cap stocks. So of course there are ETFs. There are ways to invest in small caps broadly. I think finding a good source of small cap ideas and then applying some of the strategies that we'll probably be talking about today like momentum and volatility to individual small cap ideas is where I'm personally very interested myself.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Looked sector of the market, right? And it's really a unique section of the market that we have an opportunity to dig into ourselves and to invest in that a lot of the bigger institutional players can't really maneuver in that small cap space. So small caps is one area of the markets that I'm really excited about.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, there's a couple of areas that I'm excited about. One is small cap stocks. So one of the things I've been looking at is market capitalization. And back in kind of the early part of the year, right, when we had the correction back in February or so, I got really worried about large cap and industrials. I was very struck by the fact of how well mid-caps and even better small caps were doing. So I think small caps have probably the strongest momentum in the market right now. And I think there's a kind of viable economic reason for why that might be the case. I think they are less threatened by all the trade war concerns that are going on around the world globally right now, a little more domestic focus in the small cap stocks. So small caps is an area of the market that I am very personally attracted to right now.”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think I got two out of three. Consumer discretionary and technology have both outperformed the SP 500 since we last talked. I think they're up about 13% and 12% respectively. Financials have flatlined. They're up about 4% versus about 10% for the S&P 500. Two out of three ain't bad, huh?”
2018-08-19 · We Study Billionaires · TIP204: Momentum Investing Strategies w/ Dr. Richard Smith (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT