Steady Wealth Podcast

The current state of the market remains uncertain, with potential challenges ahead in the coming quarters. Serge is joined by Brian Terry, a colleague from The Steady Trader and Blue Marlin Advisors, to discuss the US markets slow-down. The overall sentiment is negative, as inflation is still not under control, making this year a tough one.

The looming debt ceiling debate adds further volatility, with politicians seemingly waiting for market turmoil before taking action. This situation resembles the uncertainty surrounding Brexit, where a last-minute deal is expected. However, past experiences, like the 2011 default that led to a 6% drop in the S&P, indicate that increased anxiety may occur as the deadline approaches. Failure to reach a resolution could bring short-term pain to the market.

As it is an election year, the divide in opinions is hardened, and there is mounting political pressure on the Federal Reserve (FED) to take action. The current administration seeks to instill hope in the market by urging the FED to act. Amidst these conditions, there is a significant shift towards active management funds, with a focus on longer-term investment strategies and seeking opportunities such as dividend captures or selling covered calls. It is crucial to adopt a more cautious and strategic approach after the prolonged period of essentially free money and irrational market behavior.

What You’ll Learn:

Favorite Quote:

“Our big focus is, and should be on, our longer term investments.” -Brian Terry

The attitude towards money and investing among the majority of people is concerning, according to Serge. Despite the economy being at a point where it needs a healthy slowdown, people continue to show a lack of seriousness toward their finances. Most people have forgotten that the markets go up and down, and there are economic cycles. People tend to have shameless greed and want to make as much money as quickly and as cheaply as possible. This attitude has resulted in people not taking long-term asset allocation seriously, and instead, they trade with 80% of their money while investing only 10-20%.

Serge advocates for the opposite approach, advising people to trade with only 20% of their money and invest the remaining 80%. He suggests spending more time on the long-term investment strategy instead of the short-term trading approach, which is the major fault of financial media and brokers. Serge believes that after two years of a bear market, people should not have a gambling mentality, but instead focus on the power of compound interest. He concludes that there comes a point when it's too late to fix one's portfolio for retirement, and it's essential to start taking investing seriously.

What You’ll Learn:

Favorite Quote:

“I’m truly, honestly, sincerely, shocked at people’s attitude towards the markets and more specifically, their money.” -Serge Berger

Trading and investing are two distinct approaches to building wealth in the stock market. While trading involves attempting to profit from short-term market fluctuations, investing aims to generate long-term wealth through a diversified portfolio of assets.

The average annual return for the stock market has been around 10.3% per year, while day traders have experienced only a 3.5% return. Despite this, many individuals are still allocating too much of their capital to trading, hoping for big wins rather than steady gains.

Investors understand that there's a time, place, and amount of money to trade with. They typically invest in a diversified portfolio and aim to make the most of their money through this strategy. Swing trading, or the "fun bucket," can make up around 10-15% of their portfolio, while day trading, or the "drunk bucket," should only make up around 5-10%.

Trading requires active management and can lead to higher fees and a lot more time invested. In contrast, investing is more passive, allowing individuals to buy and hold their investments over a longer period. Investors can compound their interest over time, leading to significant long-term gains.

While trading can be an exciting and potentially lucrative strategy, it's important to do it with far less capital than investing. Ultimately, investing has historically outperformed trading, and individuals should aim to allocate more of their capital toward this strategy for long-term wealth building.

What You’ll Learn:

Favorite Quote:

“Quick profits, from a psychological perspective, is rooted in greed.” -Serge Berger

The performance of different asset classes has been highly varied this year, with gold emerging as one of the best performers year-to-date. The bull case for gold is clear and there are several reasons why you should consider owning it, although it can be tricky to look at it in a neutral way as people tend to either love it or hate it.

One of the main criticisms of gold is that it doesn't pay a dividend, which may be unacceptable for some people. However, for those who don't trade actively and hold onto it as an investment, gold can be a valuable addition to their portfolio. Gold is often seen as a hedge against inflation and can help with asset diversification. Allocating a portion of your portfolio to gold can offset the underperformance of stocks as it tends to hold its value well.

Furthermore, with a potential economic downturn looming, gold could perform well over the next 12-36 months as it works best when real interest rates are lower. It is worth noting that while silver is more volatile than gold, it has more industrial uses, so it can be a good investment as well. In conclusion, there are compelling reasons to own gold, and investors should consider adding it to their portfolio.

What You’ll Learn:

Favorite Quote:

“Some people look at gold as a hedge against inflation.” -Serge Berger

The power of compound interest is an incredible phenomenon that can have a huge impact on our financial lives. As Einstein famously said, it is the 8th wonder of the world. But what exactly is compound interest, and why is it so powerful?

Put simply, compound interest is interest that we receive on interest. This means that if we invest our money and earn interest, we can reinvest that interest and earn even more interest on the original investment and the interest earned. Over time, this snowballs and can lead to significant growth in our investments.

In the current economic climate, interest rates are higher than they have been for some time, but there are still multiple ways to take advantage of compound interest, including through bonds, ETFs, and dividend-paying portfolios. Reinvesting dividends is a key way to ensure that compound interest is working for you.

Compound interest is not only important for retirement age, everyone should be doing it, and the earlier the better. Many people have gotten into a short-term investment mentality because of low interest rates in recent years, but taking a long-term approach can lead to significant financial gains.

If you're not sure where to start, consider seeking the advice of an investment advisor who can help you create a balanced portfolio that includes both investing and trading. Head over to Blue Marlin Advisors to learn what they can do for you. By harnessing the power of compound interest, you can make your money work harder for you and achieve your financial goals more quickly.

What You’ll Learn:

Favorite Quote:

“Compound interest is not only important for retirement age; everyone should be doing it, and the earlier the better.” -Serge Berger

Investors and traders are starting to see sell signals in the market once again. While the first quarter for equities was very bullish, many are now watching the Nasdaq 100, which did about 18% in the first quarter, to see if this momentum is sustainable. However, the seasonality of the stock market should be taken with a grain of salt, as historical trends don't always hold true in the current economic climate. Economic data, such as the Purchasing Manufacturers Index, indicates contraction, and this could spell trouble for the equity market.

The fact that the equity market is living on borrowed time is becoming clearer, with the S&P 500 up only about 7-8% for the year and an equally weighted S&P graphing at basically a flat line. The market is propped up by just a few stocks that people have flocked to, such as Apple, Microsoft, and Google, and if these stocks drop, many investors could be hurt, even if just psychologically.

Investors are also watching gold, which tends to do well when real interest rates go lower. However, if and when panic sets in and stocks are being thrown out, gold may react poorly, potentially dropping to as low as 1900. It could be a great time to buy more if you have a long-term view. For more daily nuggets of knowledge, check out Serge’s shorts on YouTube.

What You’ll Learn:

Favorite Quote:

“When interest rates start to go lower, stocks and equities tend to like that.” -Serge Berger

Serge has found that the number one thing on institutional investors’ radar is when the Federal Reserve will start to cut rates. This is almost unprecedented as usually the top concern is about stocks. Serge believes that the Federal Reserve will cut rates soon, as we will see a real recession soon. Equities, particularly tech stocks, have recently rallied strongly and tend to perform well in the long game. When interest rates are lowered from a higher rate and a recession is looming, legit tech stocks tend to get a bounce. However, when rates go from ultra-low to almost 5%, the shock is real and comes in waves. 

As the economy worsens, interest rates will lower. The market is going to front run the Fed, which does not control the Treasury market. The first rate cut is expected to happen sometime between this summer and the end of the year. The Fed often reacts more quickly to save the economy in terms of it getting worse than they would in a tightening cycle. Interest rates peaked in early March of this year, and it is expected that the first cut will happen 3-6 months from now. Until then, Serge believes Bonds are still the way to go when investing.

What You’ll Learn:

Favorite Quote:

“Every recession ends in some sort of a credit crisis.” -Serge Berger

Daniel Sinnig studied to be a software engineer, but always had his eye on trading and investing. He believes that finding trends is one of the most crucial aspects of being a successful trader and investor. Daniel realized that he needed better tools to help him make better investment decisions, so he used his software engineering background to create tools to help him with his trades. Eventually, he was introduced to Serge and together they developed Market Rover, a web-based tool that helps traders and investors identify trends in the global macro picture, and economic and business cycles.

According to Daniel, the biggest challenge for traders is figuring out what to trade. With so many options available, traders can become overwhelmed and make impulsive decisions. Over the past decade, Daniel has seen short-termism kick in, causing traders to lose sight of major trends. He advises traders not to fight the market but rather go with the trends.

Market Rover is a web-based tool that allows traders to access trend signals without downloading or installing anything. The tool was originally built for in-house use but was eventually developed to share with the rest of the world. Daniel believes that web-based tools are the future of trading and investing, as they remove obstacles and make it easier for traders to access information. He also emphasizes the difference between trend signals and trade signals, advising traders to focus on the bigger picture when making investment decisions.

What You’ll Learn:

Favorite Quote:

“We made this dashboard as intuitive and as simple as possible.” -Daniel Sinnig

Understanding charts is essential for traders and investors as it helps them analyze data, identify trends, and make informed decisions. Research analysis, which is based on technical analysis, can be a powerful tool for those looking to trade in financial markets. John Burnell, an account manager and team member at Steady Trader, is a strong advocate of technical analysis and its usefulness in trading.

Burnell initially struggled to understand why markets were volatile and constantly changing. However, he found candlestick charts to be a valuable resource for technical analysis, as they provide a visual representation of market trends. He believes that technical analysis can be extremely helpful if used correctly and that oversimplification is what draws many traders to it.

Burnell has experimented with different indicators, such as moving averages and market memory, and has found that the odds are more in his favor when multiple indicators confirm a trend. He also advises traders to check the whole sector and look for correlations when they see something going on in their favorite stock.

What You’ll Learn:

Favorite Quote:

“The business cycle, and more importantly, the credit cycle, will always supersede and trump the charts.” -Serge Berger

Covered call strategies are an investment technique that can generate income on a portfolio of stocks, or even without a portfolio of stocks. This strategy has been previously overlooked, but it works in both bull and bear markets. It is essentially a neutral to bullish strategy where an investor sells an out-of-the-money call against every 100 shares of stock they own, while simultaneously collecting a premium. If the option expires, the trader can keep the stock and sell against it again. If the worst-case scenario happens and the stock is called away, the trader still keeps the premium earned.

One benefit of the covered call strategy is that it can snowball into a true compound effect and generate side income. The strategy is a low-risk way of using options and can also be used to hedge risk by giving compensation. Additionally, it is a monthly income strategy that can be used with a steady stock.

However, it is important to note that if the stock is volatile, the risk of options being underpriced is higher. Furthermore, it is not advisable to use the covered call strategy if the stock price is expected to make a big move in the near future. Overall, the covered call strategy provides an opportunity to generate income and mitigate risk.

Serge is currently putting together a 3-hour course on covered calls to take place in the near future, so stay tuned for details on that. If, in the meantime, you have further questions about covered calls, feel free to email [email protected]. If interested in having a covered call strategy done for you, head over to Blue Marlin Advisors.

What You’ll Learn:

Favorite Quote:

“A covered call is one of those forgotten strategies.” -Serge Berger