Lead-Lag Live

Market Signals and Bear Market Warning Signs with Vincent Randazzo

• Michael A. Gayed, CFA

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The market is sending clear warning signals that shouldn't be ignored. Technical analysis expert Vincent Randazzo reveals how deteriorating market breadth—a critical measure of market health—suggests we've entered a bear market that could persist longer than most anticipate.

Drawing on over two decades of experience in technical analysis, Randazzo explains that market breadth essentially represents liquidity: how much money is flowing into how many different companies. A healthy market shows broad participation across companies of all sizes, while an unhealthy one features concentration in fewer names. At February's market peak, only 53% of stocks in the Russell 3000 were trading above their 200-day moving averages despite major indices hitting all-time highs—a classic divergence pattern that has preceded major market tops throughout history.

Small cap underperformance has been particularly telling, with the Russell 2000 effectively experiencing a "lost half-decade" already when accounting for inflation. This divergence between small caps and large caps represents one of the most significant warning signs in current market conditions and could be foreshadowing a potential "lost decade" for equities similar to 2000-2010.

For investors accustomed to the "buy and hold" approach that has dominated the last 15 years, this environment demands a tactical, risk-aware strategy. The value of avoiding major drawdowns while still capturing upside becomes paramount for effective long-term compounding. Diversification needs to extend beyond asset classes to include different strategies with varying signals and time horizons.

Whether you're managing your own investments or working with an advisor, understanding these technical signals could make the difference between protecting your capital and suffering significant losses as this bear market potentially unfolds. Visit viewright.ai to learn more about navigating these challenging market conditions with discipline and systematic risk management.

 Sign up to The Lead-Lag Report on Substack and get 30% off the annual subscription today by visiting http://theleadlag.report/leadlaglive.


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Speaker 1:

Yeah, that's what our work tells us that we are in a bear market. It could last longer than a lot of people think. I think a lot of people believe this is about just the news and this is about tariffs, and I would make the counter argument. That, which is what I said earlier, is that every major bear market starts in kind of the same way, which is, you get these divergences, you get a hollowing out of participation in the market. There's fewer stocks to choose from, fewer stocks going up, less liquidity go around. I mean, these are just hallmarks.

Speaker 1:

Classically, you look at the last hundred years or more. This is how tops are formed. So I think you know, regardless of what happens with the tariffs and the news around, that I think that this market has a lot of challenges ahead of it and I think that market has a lot of challenges ahead of it, and I think that you know this. I would call this a bear market and I think that's that's the only the only fair moniker at this point that I would apply to, at least on a cyclical basis, my name is Michael Guy, a publisher of the Lead Lager Pour.

Speaker 2:

Joining me here is Mr Vincent Randazzo, who is a CMT. I'm a CFH order holder. He's a CMT. Both are good designations. Um, Vincent, uh, you and I had gone back before a few times in the past, but it just up to the audience. Who are you? What's your background?

Speaker 1:

What have you done for your career? What are you doing? Yeah, yeah, Thanks, Michael, I appreciate that. No, it's good, but again, thanks for having me. I really do appreciate it. Yeah, a little bit about me. I am a charter market technician. I've been so since 2008.

Speaker 1:

I started my career in summer of 2002. So anybody who knows what that was like it was. Basically, market was down pretty much every day and it was a great time to start, but sort of formed my thought process around the market in terms of, like, wanting to defend the downside right, Wanting to really work around risk. And, of course, I found for me formerly run and owned by Paul Desmond, who was, you know, a legend in the industry and be out there. Talk about 90% downside, upside days. That's him right. So I had the opportunity to be mentored by Paul and work with him and, as of January of this year, I started out on my own with ViewRight Advisors.

Speaker 1:

This is my own endeavor. It is a risk management and market intelligence firm and what we do is we provide signals to keep you in the market when it's time to be in the market and out of the market when you shouldn't be in the market. So very simple, but it's all based on breadth. It's quantitative but it's based on uh, you know my, my full, you know, 25 years of experience, uh, on the topic and uh, so you should get very high probability signals, high probability outcomes, and uh, you know, this is just my, my way of doing it, that you know.

Speaker 2:

I found that that works very very well, I feel like we should. Um, we'll get into the signals, but I feel like we should define breadth. I point for the better part of two years I keep saying on X, small caps hold the key, because there's many more small cap companies and large cap companies. I view that as breadth, but a lot of people don't view it as breadth.

Speaker 1:

Yeah, no, you're absolutely right. I mean, that's how I view it. If you think about and the way I like to describe it to to macro guys or fundamental guys is that breath is liquidity, right, if you think about it? Right, all this philosophy is telling you is how much money you have in the market and how much of that is flowing into how many different companies. Right, the more money flowing into the more companies, that is the healthier market condition, right? So it just goes back to the old generals and soldiers. If you're running an army, you don't want just the generals going out on the field, you want the whole force. Right, you want the leaders. They're out in front, okay, those are your big dogs, but behind you, you want your full class, you want your full support of your big dogs, but behind you, you want your full class, you want your full support. And when you don't have that and this is what we've seen over the course, certainly in our work we indicated it as early as January of this year that breadth was becoming a major, major issue because those generals were just running out on the field by themselves. They didn't have any support and have any cover. So that makes the market really vulnerable and if you think about it from a liquidity perspective, it means that liquidity is drying up.

Speaker 1:

I like to use the advanced decline line and a few other indicators, but the advanced decline line is just a simple addition equation, right? It is basically just taking every single day in the market and saying how many stocks were up versus how many stocks are going down, and you just net that number up, right, and then you just add it to the day before. So if you think about what a divergence means we talk about divergences as technicians a lot. We like to use these words Divergence is basically telling you breadth is going down, so that advanced decline line is going down and the price of the major index is going up. Well, how does that happen? Well, it happens because small caps are not participating, right? And what that means is that, mathematically, on average every single day, there are more stocks going down during that period than are going up during that period. And you tell me, as a portfolio manager, is that kind of the environment that you're going to be really, really, you know, knocking it out of the park? No, it's not.

Speaker 1:

And I'll add real quick on that it's a good point, because it's very hard to beat the S&P 500 when it's the only game in town, when breadth is as weak as it has been, because anything you try to position into will almost automatically underperform Right right, oh yeah, and then there's all the you, you know the math and the waiting, and that's more your, you know your belly wick, but uh, but you mean, it really just becomes a question of you know, at that point, okay, you've got a withdrawal in liquidity, right, and what happens after that? Well, it's going to lead to volatility because you have you have a fragile environment. Right at that point you'd only have a few stocks going up. I mean not literally a few, but a few compared to the thousands that are out there, right.

Speaker 1:

So in that scenario, bad news, when it hits, is exaggerated. Right, if you have a good breath environment, you can get hit by all sorts of bad news. It really doesn't matter, it doesn't stick as bad news, uh. But if you get hit with it in a fragile environment where breath is weak, then you have problems. And that's kind of where we, you know, that's where we were, that's how we started the year and a lot of people really were kind of oblivious to it.

Speaker 2:

So part of my um thesis for the last two years which also has been very wrong and really wrong, particularly in 2023. I backed off from a lot of that and I'm now bringing it back to the forefront is small caps have been weak, which is why I was so anti-NVIDIA for a long time, because, to your point, the generals fault the soldiers. My original thesis back then was small caps clearly were diverging with large caps and I thought that the Mach 7 would converge to. Small caps clearly were diverging with large caps and I thought that the Mach 7 would converge to small caps and obviously they haven't right. It was just totally in its own orbits as the AI narrative took over. Do you think we could have a moment where some of these AI names very suddenly collapse to the message of small caps? Or is that AI narrative so strong that and the earnings are so strong that that's not really a possibility?

Speaker 1:

Yeah, I mean, I think, listen, history is a guide for this right, and we can talk about this later. We talk about, you know, potential for a lost decade and how those start. You know they start with extreme valuation and then, of course, you have structural issues that are introduced that just take a long time to work through and that's why you get these lost decades. But yeah, no, I think you started to actually see with the bigger drawdown. If you look comparatively, the drawdown the S&P versus the drawdown in the NASDAQ comp has actually been a bigger drawdown from the NASDAQ comp, which tells you that maybe there's a little bit of a catch down effect, which may be what you're sort of referring to Now.

Speaker 1:

All in all, small caps are still underperforming year to date and that's sort of been the case, like you said rightly. But I do see there is some early evidence of kind of a catch down effect in those in those mega cap and those mega cap names. And I think you look at NVIDIA and NVIDIA hasn't made new high like a, like a, a really strong new high, I would say, since, you know, almost a year it's been I think July, you know July, maybe of, of of last year. So I think it's, it's a possibility. It's not exactly what I do, but but certainly, you know, I could, I could see, I could see that happening.

Speaker 2:

You talk about divergence. I tend to look at a lot of divergences from both a bullish and bearish perspective, because divergence just tell you where there's a disconnect between different asset classes and different parts of the marketplace. What are some of the biggest divergences that you're seeing right now?

Speaker 1:

So you know right now versus you know where we were. So you know right now versus you know where we were. So, like kind of how we got here is through the divergence, and that's sort of a very key part of you know what I do. And I started studying divergences in a really big way in 2006, 2007, 2008. And of course it was really timely and it helped me at that time. But a technician by the name of Peter Lee, who was at UBS at the time and so was I, we had kind of worked together to some extent while I was on the equity research sales desk and I got really really deep into the weeds on breadth and these divergences and I studied them through history and I said, wow, these divergences are present pretty much at every major market top into every major market top. And that kind of leads me to the structure I created my, my own system on, which is is based primarily on this observation that just divergences are kind of hold the key and, like you said, small caps hold the key. I mean that's totally true in my work and to the point where you know we, we, we did get a major sell signal. You know that I give out to you, know out to my subscribers as of February 21st. So that was just two days, two days after an all-time high in the Russell 3000, the Russell 1000, s&p 500, s&p 1500, all these new highs in these major indexes. And then, just two days later, breath went weak, into the point for us where we said listen, this is time to take risk off or start to take risk off. Of course, we got another, more definitive sell signal in our service in the middle of March which basically said that okay, now this is getting to the point where we'd say this we would call this bear market type behavior, right. And that's just based on some of the divergence that we saw, not only between the AD line, but also if you look at, for example, the percent of stocks above their longer-term moving averages, if you look at the percent of stocks in the Russell 3000 at the time of the all-time high so I'm talking about February 19th you only have 53% of stocks in that huge index. That's so vitally important as far as determining, again, liquidity how much money is out there, how much it is going into, you know, going into stocks. Yeah, only 53% of stocks. At that time, when the index was making new highs, were actually even above their 200-day moving average, and that's even. You know. We're not even talking about new highs, we're just talking about holding a basic, you know uptrend. So I'm not really looking at any positive divergences right now. That, like you said, is the other end of it.

Speaker 1:

There were some people out there who were sort of calling out oh, there's a positive divergence in the percent of S&P 500 stocks above their 50-day moving average. A few weeks ago and I didn't reply to that person but as an announcement people should be aware of I put a note out on Twitter and basically said be careful, because the slope of the moving averages really matter. Right, people don't understand this. So if the slope, in other words, if the slope of moving average, is negative, then you're going to have at some point on that curve. You're going to have a time where you can see positive divergences that aren't really positive divergences and the point that I made there, not only with the slope, because a lot of the slope.

Speaker 1:

At that point I think there was less than half of stocks in the S&P 500 above their 50-day moving average, which demonstrates that you probably have a negative slope, but also half of them. When I did check, half of them did have negative slopes indeed, so that would tell you that that's kind of a false positive, in addition to the fact that you basically have to get a reaction to the upside to really call it a positive divergence. Also, none of the other indicators were confirming a positive divergence. So if you just have one, you know one of these indicators saying positive divergence, you're not getting confirmation anywhere else. You don't trust it, right, and I think that sort of held true. So for right now, I'm not seeing anything on the positive divergence side. I think that's something that I would watch for and something in my work that I do look for.

Speaker 1:

But we looked for longer term, more confirmatory positive divergences when we're looking for them and more along the lines of stability. First right, you need to have a foundation from which to jump from and I think it's really premature for people to say, yep, that was the bottom, that was it, and I'm talking about last week or the other week. It's just too soon for the amount of damage that we've seen to this point. Uh, the internals are kind of a wreck and historically you don't just go vertically up from that. That kind of damage it takes time to even find a bottom. In this situation and in our experience and historically again, my work is only based on probability and history. Um, it takes a long time from this point to rebuild. Typically, you know, there are of course always counter examples, but those are the rarities.

Speaker 2:

Yeah, and I would tend to agree as much as that Wednesday call I had where I said you know you're going to see one of the most epic intraday reversals for the stock market history, which then happened when Trump did the pause on the terrorist. I myself then said I suspect they're going to rally for two weeks and then it doesn't mean attack lower lows, right, because path behavior is very consistent with what you see in bear markets, right, which I guess is sort of a good question. I mean, do you believe that we are actually in a bear market?

Speaker 1:

Yeah, that's what our work tells us that we are in a bear market. It could last longer than a lot of people think. I think a lot of people believe this is about just the news and this is about tariffs, and I would make the counter argument. That, which is what I said earlier, is that every major bear market starts in kind of the same way, which is, you get these divergences, you get a hollowing out of participation in the market. There's fewer stocks to choose from, fewer stocks going up, less liquidity go around. I mean, these are just hallmarks. Classically, you look at the last hundred years or more. This is how tops are formed. So I think, regardless of what happens with the, with the tariffs and the and the news around that um, I think that this market has a lot of challenges ahead of it and I think that you know this. I would call this a bear market and I think that's that's the only um, the only fair moniker at this point that I would apply to, at least on a cyclical basis.

Speaker 2:

It's a question from somebody watching on YouTube noting that the mag seven went up 600% this decade. I don't know if that's right or not, but could be right. But what do you expect on mag seven? So we're going to touch on the theme of a lost decade, but are we talking about lost decade in every stock or in the mag seven, which is what's driven the in quotes bull market? Right, yeah, hey, no stock? Or in the mag?

Speaker 1:

seven, which is what's driven the in quotes bull market, right, yeah, hey, no, it's a great question. I wish I, I wish I knew. Um, as far as you know the mag seven, uh, I would say that there are probably structural forces in play that are going to deflate those valuations. Um, you know, I talked to walt deemer about this kind of topic, about major tops and the kind of weird things that you can see in the many, many years that follow when you have these mega, huge, dominant, dominant companies, where you had a company that would trade up, trade up to a certain level, multi-year highs, and everything looked great and the fundamentals are great and the multiple, you know, reflected that right. And then you know, whatever, 35, 40 times earnings or whatever. And you know, in the examples that he gave, he said you know the fundamentals actually carried out exactly how the company had said they would. Right, I mean, they kept, they kept crushing it on the numbers.

Speaker 1:

But guess what happened? The stock cratered in the years that followed, simply because you had these structural forces in play, ie interest rates. Ie, interest rates had gone up dramatically such that that valuation premium shrunk, shrunk, shrunk, shrunk, shrunk, to the point where the stock was trading in a fraction of what it was in its heyday, but the fundamentals were as good as everybody ever thought they were going to be. And that's what makes the market really, really difficult. But I can see something like that happening and I think Walter, in our conversations he said that you could see something like that happening where there's still great companies, they're still doing great work, they're still executing. It's just that the multiple is compressed to the point where these are not good stocks to own. They might be amazing companies. The point where these are not good stocks to own. They might be amazing companies, but they are just not good stocks to own.

Speaker 2:

You mentioned the work with Lowry Research and your own signals. You touched on breadth a little bit. What signals do you typically like to look at that you find have the least prevalence of false positives?

Speaker 1:

Yeah, I look for extraordinarily high probability outcomes like to look at that you find have the least prevalence of false positives. Yeah, I look for extraordinarily high probability outcomes. So what I'm looking for when I'm building a system and this is taking me 20 plus years to do this right but what I look for is extraordinarily high probabilities. So something that happens more than 90% of the time, with an outcome that is predictable more than 90% of the time. As a result, I get very few signals and when you get them, you need to really pay attention. So I tend to look at indicators that are relatively immutable. There's really no opinion about them. I don't want to put any real transformations on them. Opinion about them. I don't want to put any real transformations on them. I don't want to make them my own.

Speaker 1:

I want to look at the raw data and then, throughout history, understand okay, what is the data that's being presented now? Okay, what does that data feel like and what does it look like and how does that compare historically to market regimes in the past? So what I do is I just basically say, okay, given these conditions, what is my regime? And, based on that regime, what did my return and risk profile look like? And then, what's my optimum level of equity exposure based on? Based on those factors, right? So, in a way, it's it's simple, because my assumption is always and it will always be hasn't always been, but it will always be that the market is just infinitely smarter than me, right? So the only thing I can do is look really, really careful at the cues that it is giving me, not somebody else, not some transformation on some indicator that could sort of bastardize it in a way. Right the pure, you know the pure data, right the pure numbers, and then historically compare those things. So that's really what I'm after and what I'm doing.

Speaker 2:

Another question which might be nuanced, although it's interesting maybe from a technical perspective Any consequential differences in this cycle due to the change in the character of the S&P 500's ownership. About 20-25% of the S&P 500 was foreign-owned in 2007, versus 40% today. This is, by the way, an interesting thing only because I think it also has driven a lot of the over-evaluation. A lot of money from foreign institutions, foreign high net worth, has gone into NVIDIA, has gone into a lot of the AI names because they don't have anything in their local countries that are equivalent, and we've never been in a cycle where it's been so easy to move money around so quickly.

Speaker 1:

Yeah, that's a really good point. I think that's exactly right. And also think about it from a relative strength perspective. It's been like 15 years at least that you've had just massive relative strength in in the U S market. So it's sort of like it's a self-fulfilling prophecy. I mean, money's going to go to where it's treated best, right, I mean a lot of the relative strength guys that you know you speak to, um in in technical analysis, will tell you that. So to me it's not anything special to hear.

Speaker 1:

But I think again this sort of begs the question of structural forces and what is that going to mean for valuation and innovation and the way capital is deployed? And again, I think this is more like in line with you, michael, in terms of your background on the CFA and just being the macro person that you are. But, um, but that that would be my answer is that you know I could, you can see that go the other way for a lot of different reasons. Um, might, you know, maybe to the point of what they're trying to bring up here. It might exacerbate that the fact that you do have so much more foreign money, you know, in this market. But you have to have a valid place to put it elsewhere. So if there's a proven, demonstrable relative strength trend that forms elsewhere in the world over a long period of time that people can really trust and get behind, well then that money is going to flow to where that benefit is right.

Speaker 2:

I'm curious to hear your technical take on international markets broadly. You mentioned valuation in the US, which we'll get into as it relates to possibly the last decade. But yeah, there's been some really good relative outperformance right in the international stock market side of things. How are you viewing international market here?

Speaker 1:

The way that I would view it, I guess from my lens, would be more along the lines of people probably see relative value there from a fundamental perspective, and if that is true, then you also usually get a relative strength benefit and then you get momentum benefit. The issue I have when it comes to relative strength style analysis is like what's the period of your look back? I mean, you can say that yeah, there's been a great trend in relative strength on the international side of the equation for the last whatever three months, six months, whatever you want to say, but like is that adorable trend? And the question is like I have no idea, right, like you just don't know if that's going to persist and how long it's going to persist for. And oftentimes, when it comes to relative strength, what I found is that you know by the time it gets to be the point of like popularity or being really well known or widely regarded or widely respected as a trend, you kind of get there and then it goes a different way. You know this often have on, happens more like on a single stock basis, but it can happen this way too.

Speaker 1:

Um, again, I think it comes down to what is the sustainability of those trends I don't foresee, you know, if this is a true bear market. I don't. I don't. It's hard for me to imagine that. You know there are going to be big. There might be really small, small markets that this could happen in, but it's unlikely that you would see a very, you know, major, major, major international markets really massively outperform. If the us is, you know, if the us capital market isn't a doubt, isn'ta major down friend or bear market. It's just it's difficult for me to kind of square those things. Um, it could happen, sure, um, again, with some of the smaller markets. I could see that. But uh, by and large it'd be difficult thing to imagine, just because of that liquidity. You know that whole, that whole question around liquidity and you know within the capital structure where is money being treated best.

Speaker 2:

You know it's just a difficult one to for me to get my head around, but open-minded, you know any any particular international markets that I don't know if you're tracking them, look better than others meaning yeah, is it contrarian trade China? Is the contrarian trade Germany? I mean what looks more interesting to you?

Speaker 1:

Yeah, I mean, it's not work that we do, you know we don't do anything on, you know, beyond the US market. But you know, I would say that there's a high degree of correlation historically between the U? S market and most markets in the world. I think China is probably one that is there's like literally no correlation, uh, most of the time. So, uh, that doesn't mean it's good, it just means that there's no correlation. So maybe that's something you would look at. You know, you would look at, um, you would look at markets around the world that historically have very little correlation to the US market, and then that would be to me, that would be the place I would start, if that's an angle I wanted to take. But it's just not in the work that we do. We focus on, you know, breadth in the US market, because that's just where I have the edge.

Speaker 2:

Edge is an interesting word, um, because it's as you know it's like the problem is very hard to, in quotes, beat the market Right and a lot of technical indicators will work for certain periods and then not work. They'll get whipsawed. Because it's ultimately about the cycle. You know, if you have a tailwind, you have a tailwind, you're less likely to be whipsawed. If you don't have tailwind, you're more likely to be whipsawed. So is it the cycle or is it the indicator? All right, there's all these kind of interesting, yeah, base people we can have, but, um, what tends to give traders an edge? I mean it. I don't think the answer is as simple as technical analysis broadly right, you're right, it's not.

Speaker 1:

The answer is discipline, right, you know, and I think you you portray that in your work, um, and also in the way you live, like with, with the fasting and the exercise, like I'm the same way. I don't fast like you, uh, I can't. I just I love food too much, um, but but you know I do. I do have a regimen that I follow and I and I translate that into my process. That's just how I am. I'm systematic, I'm very disciplined in that way. So I think, in order to be a successful trader, you need that, you need to be disciplined. It's not about willpower or anything like that. It's about discipline, and that's something that anybody could form.

Speaker 2:

It just takes, it takes time, but, yeah, discipline and process, that's what I would tell you every single time, which is really hard um, it is right because, like, I've always had an issue with the idea that, uh, people who say that you know, if my strategy is not working, I switch strategies, well, then you're not disciplined, right? I mean, you know, just because it's not working in the environment that you're already in doesn't mean you shouldn't keep doing it. Now some will counter and say well, the definition of insanity is doing the same thing over and over again, expecting a different result. Well, but then explain to me how people get healthy, explain to me how people get stronger. Right, I mean, you do need to have a degree of repetition, even though it may seem like it's not working in the now.

Speaker 1:

Right, that's absolutely right. It's persistence and like and you know this and I know this as system followers is that even when you think, and maybe even especially if you think it's wrong, you have to follow your system. You have to, otherwise you have nothing. Then you're just like everybody else and you're a you're. You're, you know, a victim or of your own emotions, and that's what we want to cut out.

Speaker 1:

I mean, emotions are not good for investing. I mean, this has been proven so many times, so many studies, in so many different ways, I don't need to say it again. But but yeah, I mean that's what I think it. Just you know, following that system, even when you think it's wrong. Some people will call that persistence, some people call it insanity. I would call it persistence, I would call it strategy, I would call it, you know, being systemized. And and again. If it's something that you believe in and you've tested thoroughly right, then there's a reason that you're doing, why you're doing it, and you have to remember that All right, let's get into this the topic of the lost decade.

Speaker 2:

It's not a very comfortable topic, although I've been tagged as like a perma-bearer because I keep saying small caps, small caps, small caps. You look at Ross 2000,. They're basically halfway through a lost decade already, sure, at least on a nominal basis. I mean, when you look at it after inflation, oh yeah, it's way worse, right, it's nobody's thinking, they just don't get a chart. But the chart is is not adjusting for inflation, right? So we've had this really weird environment where typically a rising tide lifts a boat and it has it. And let's first outline what are the characteristics of a lost decade, what are the things that you tend to see in the early stages of one, and how do we know if we're in one, except with hindsight?

Speaker 1:

in one, uh, except for the hindsight. Yeah, I know, I mean this is an awesome question and I love just the the idea of talking about it, because I think there's just this religion that's been formed around uh, buy and hold, uh and buy the dip and uh, honestly, I just think that there's a time for everything. That was the right thing for the last 15, 16 years now. Right, that was the right thing. But as far as the way, historically, you see lost decades start, you see them start with extreme valuations, so you can check that box. You see them start usually with very long negative divergences between some of the breath indicators and the major indices. I wouldn't call this one that we've seen most recently uh, fit into that category, but only. But remember, you talk about lost decades. There's not a huge sample here, so these are really just tendencies. What I think is more important and I think you should speak more to this because you have the background too is that those lost decades, they're driven by massive structural forces. So whether that be deleveraging, whether that be demographics, whether that be inflation, and then I think most importantly probably is the direction of long-term rates. So I think there's a lot of reasons why you should at least consider the possibility that we could be entering a lost decade for equities, much like what we saw between 2000 and 2010.

Speaker 1:

And again, that's how I started my career and I remember in 2010 or even 2013, when the market was just getting back to all-time highs. In 2013, when the market was just getting back to all-time highs, um, people saying that you know, buy and hold, you know buy and hold is dead and you know this doesn't work anymore. And I think you've got the opposite now, where it is this, it is this religion that it's buy and hold and you have to buy and hold and you can't miss, you know you can't miss the best days, even though they're they're clustered around the worst days, by the way. Um, I just think that people's thinking has been so, you know now, one-sided, in addition to those extreme valuations that we could, all you know, we've all observed, right, um, that I think this is a real possibility and what you would expect to see is is you know more of a big range. You know where you get. You still get bull, right, you still get cyclical bulls, then you get cyclical bears.

Speaker 1:

The problem is, you don't make much progress over a very long span of time and, as you brought up rightly earlier, in real terms, when you account for inflation, this is a massive misallocation of capital, of capital right, because you're losing money effectively, in some of these cases for a decade or many, many years. So, uh, it just makes the asset class as a whole something that is something that it's typically not and that's difficult for people to get their heads around and adjust to. But, um, again, that's why you look at the data and you're just open-minded to the possibility that, hey, this could be it, we could be an environment where you need to be more tactical. You cannot just buy and hold. You need to know when to sell and you know when to buy. And that's why you know one of the reasons why I think is a great time for you know my service and services like yours, because I think people need to sort of wake up to that possibility.

Speaker 2:

I see a question here from somebody which I think is worth mentioning, given that you're a CMT charter holder. I'm a CPA charter holder. For someone trying to understand the macro side of things, would you recommend going to college, and if so, would you recommend economics or finance? Let's talk about self-education, because one thing is to see that we're talking about markets you and I understand what we're saying to each other. A lot of people may not have a clue right, and a lot of the stuff is hard to understand for people that are engrossed in this daily right. So let's talk about some of the education that you went through. So I mean, I have an economics degree.

Speaker 1:

I was, you know, very interested in Wall Street from a, you know, college age, you know, and that's kind of the route that I want to take. So it helped, you know it helped. And of course, I think, the way that I think about technical analysis and maybe this is a result of that, but also my career to this point it really is about supply and demand. If you think about it, what's the force of the buyers versus what's the force of the sellers or what's the liquidity behind each of those forces.

Speaker 1:

Getting insight into psychological tendencies and improving your emotional intelligence I think would be really great advice for somebody, especially who is young and very interested. Because again, it kind of goes back to that idea of discipline and being able to have a process and know yourself and know what works for you. Are you a swing trader, are you a long-term investor, are you a day trader? What makes sense in your brain, and then having emotional intelligence around that. So that would be sort of my advice and of course I mean there are so many books that you could read that will help you kind of get up that curve in achieving those and finding those things out about yourself. Um, but that's. That's what I would suggest yeah and listen.

Speaker 2:

I mean, like I made this point many times before, no amount of intelligence can increase the clarity of one's crystal ball. So even if you're highly intelligent and highly well versed in in the topic of markets and investing doesn't mean that you're necessarily outperforming right, because this is one of those domains in life where it's hard to know if it's skill versus luck, good or bad right when it comes to the outcome. But it's still good to obviously at least have the basics down right and having structure around that, as opposed to just looking at random posts. On X yeah, I think you see it really quite a bit.

Speaker 2:

You mentioned we're probably in a cycle for tactical and active, which is music to my ears because the reality is, ever since QE3, that's where I myself pin it it's been in an environment of just passive buy and hold Yep. Any hedge funds that have been out there have massively underperformed. Any active tactical strategies have underperformed. And again I go back to is it the signal? Is it the cycle? Is it the cycle? Is it a combination? The challenge with active and tactical, I think, is that there aren't that many vehicles left that are active and tactical Right. I mean, I have certain strategies that are, that have survived throughout a very nasty environment, almost a decade-long environment, where there's plenty of historical reason for why. Strategies that are, um, that have survived throughout a very nasty environment, almost a decade-long environment, where there's plenty of historical reason for why those strategies do what they do. But, um, for those that are trying to do it themselves, how do they even go and go about being active and tactile?

Speaker 1:

yeah, I mean that's tough, I mean it really is difficult in this environment. Um, the one thing I would and the one thing that's really disappointing, to mean it really is difficult in this environment. And the one thing that's really disappointing to me and this is just my own experience and I've worked with a lot of financial advisors or wealth managers through the years and there are very few that actually do take a tactical approach to markets and that, to me, is very disappointing. And it's actually really surprising to me too, because if you think about what the ETF industry has done to investing over the course of the last 10, 20 years, they've told you explicitly and implicitly that buy and hold investing is worth you paying about three basis points for, because if you look at the index ETFs, that's kind of what they're selling for. So what's shocking to me and kind of disappointing is that there are a lot of financial advisors out there and wealth managers out there that are charging fees well in excess of 100 basis points. So it's sort of like I mean I know my generation and younger is probably asking like if you're not going to be tactical and you're not going to be risk aware, then what you know, what am I really paying you for, right? So I think that if we do go into an environment again with this current demographics that we have, where you do have the younger population that is now sort of inheriting those older portfolios from the prior generations, I think you will have a shift back into active and I think services like yours and services like mine are going to benefit from that. What I believe is going to be a multi-year trend, if not longer, because it just makes too much sense. I mean, if you can avoid the uh, the major drawdowns, and you can still participate in most of the upside or all of the upside, you know what that does.

Speaker 1:

To compounding. I mean you, you, you tell us as a CFA, but I mean that supercharges compounding, because you're basically just cutting the negative part of the equation out and uh, and you're basically just cutting the, the negative part of the equation out and uh, and you're not, you know, going off the textbooks in the textbooks on compounding say like, oh, it's, you know, it's nine percent a year, every year. That's just, that's how it is and it's great and it goes like this, it's like all right, but in real life, in real life, guys, uh, it doesn't go like that right, because you'll have a 20 year year and another 20% year and then you're going to have a negative, negative 40% year. It's like okay, well, how does that change? Well, it really depends also on your own path, how old you are, and your own path to retirement and that experience that you're going to go through.

Speaker 1:

So I just think at this point, you know, listen, we are, you know, 16 years into this kind of environment where sort of like buy and hold is king. At some point it's going to change, probably sooner than later, and we're all getting closer to retirement every single day. So, at a minimum, you know, sequence of return risk is a very big deal. That, again, I don't think anybody really talks about or thinks is relevant to them until it's too late, and I think that's something we need to be more careful about in the way we think about risk.

Speaker 2:

Yeah, which goes back to a line I've said as part of my own brand, which is path matters more than prediction, which is the sequence of assurance and the end point. Because, sure, we can zoom out and say stocks will in the long run and don't worry about it, that's all fine. But it's like, if something happens tomorrow, that where you need that capital hopefully obviously you have an emergency fund that's in cash, it's not in equities. But what if you need capital and you have to sell equities at the wrong time? There's other dynamics which have to be considered.

Speaker 2:

Right, then just sort of zoom me out and look at 100 year chart, so to speak. Sure, um, right, so okay, now I am curious to hear your thoughts on diversification within being active and tactile, right? So I am of the mindset that diversification comes from more than just asset class. It comes from strategies, which means maybe you have a portion of your portfolio that's trading a very specific set of signals. Maybe you have another portion of your portfolio that's got a totally different operating set on the same signals. Maybe it's another portfolio, totally different signals, right? Talk to me about how do you diversify when you're active and tactical, when the risk could be the signal itself?

Speaker 1:

Yeah, I love that. I love that. I think that makes a lot of sense. Having diversity in your strategies itself yeah, I love that. I love that. I think that makes a lot of sense. Having different, having diversity in your strategies, it absolutely makes sense because, like you said earlier, you can go years without a tendency that historically was very valid working out, but then all of a sudden it starts working again. So you don't want to be too tethered to one strategy or another. So to me that makes a lot of sense. I mean, I would totally agree with that.

Speaker 1:

Um, and a lot of people will do that, even in time, in in time relevance. So they'll say, okay, well, this is my long-term money, this is my long-term strategy, this is my shorter term money is my shorter term strategy. I think that's, I think that's, I think that's smart. Um, you know, I think it's a. You know, for me as an equity guy, um, I think that's a better approach than, oh, 60, 40. And you know, this is just how it is and it's like uh, that's another thing that I think people have to rethink is 60, 40, because, um, you know, if there's a structural inflationary force, then 60-40 is not going to be what you want to pursue.

Speaker 2:

Yeah, I think that's right, Vincent. As we start to wrap up here, a lot of people have been listening playing comments. Nice viewership overall For those who want to learn more about your work, your analysis. Where would you point them to? And then maybe any sort of piece of advice as far as how to think about what, what to do in the very short term at least yeah, yeah.

Speaker 1:

So my, uh, my site is view right, dot ai, right. So the idea is we get the market view right. That's what matters, right? So view right, dot ai. And uh, I'm, I'm on x at cmt randaz.

Speaker 1:

And as far as what, in the short term, you should be doing, I think you really need to examine, um, the mindset that you're in and if it is a, if it is a buy the dip mentality, I think you need to probably rethink that, um and think about the possibility at least or be open to the possibility of it that maybe you should be selling strength and certainly be a little more careful about where things are. And I think for me, I would say moving a portion into T-bills is kind of what makes sense. Keeps them powder dry, wait for the right pitch. There are plenty of people out there that will tell you really really successful investors that will tell you and you know, warren Buffett maybe is a great example, or the perfect example of this is like just wait, wait for the wait for the conditions to be right, you know, um, and then make your move. You don't have to do something all the time right, especially not as a non-professional. You don't have to. So you have that luxury of time, use it.

Speaker 2:

I think that's very well said. Everybody learn more about what Vincent does on that website. Stay tuned, I've got another two back-to-back. You'll see that streaming in about seven minutes. And, vincent, I appreciate the patience with the technical difficulties.

Speaker 1:

No, thanks for having me. It was a lot of fun. I hope we can do it again. Thank you, buddy Cheers, take care.

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Michael A. Gayed, CFA

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