Mish Schneider on stocks, bonds, and Bitcoin market strategy

0:01i'm ashton addison from event chain for investmentpitch media and fintech news network and today on blockchain interviews we have miss schneider the managing director of marketgage.com mish welcome to the show and thanks for taking the time to be here thank you ashton such a pleasure to be here today thank you for having me likewise i'd love to kick off our time

0:20by just first getting a little bit of background on yourself in the finance industry what are your recent focuses and your philosophies on investing right now okay well we'll start quickly with the background uh because it is definitely unique i started out as a special education teacher and consultant and wound up going down to the commodities exchange uh

0:40right around the turn of the decade in 1980 so i've been doing this for quite some time and i went kind of on a fluke with a friend of mine who worked down there for merrill lynch and it was one of those proverbial light bulbs that went off in my head this is really where i want to be and what i want to do and so it wasn't so easy but i did eventually get a job

0:59and i spent 13 years on the commerce exchange pretty much a member of almost every exchange by the time i left and then of course everything changed we went upstairs electronic training became the thing and i married keith schneider who's the ceo of market gauge and he was already working on technology to make it easier to trade from upstairs so market gauge was formed about 20

1:22years ago 23 years ago and i didn't really join until about 10 11 years ago and so in the last 10 11 years we've really been sort of soup to nuts able to teach people if they've never traded before tools to help them trade we have quant models i run a discretionary service we have courses pretty much if you want to be a day trader to a full-time swing trader

1:45and everything in between that's kind of what we're doing very exciting and yeah i've followed your work and it seems like you're covering the stock markets often with you know misha's market minute and there's just so much to talk about especially in 2020 here with everything that's going on in the upcoming presidential election and the markets so i'd love to you know get your take on

2:06on the equities markets right now which is a lot of americans have become interested in and have jumped into it and looking for higher yields the market continues to grow heading towards the election uh despite a little bump on monday and it seems like the trend is your friend and we're continuing to go up but there's no word of caution from others at the same time

2:26you know how are you approaching the market moving into the election and post-election well what's so interesting about right now as you say the market has definitely gone up since it fell and bottomed out in early april and a lot of that has to do of course with the fed which started the ball rolling by being extremely accommodative and then stimulus started passing so here we

2:49are now week before election and the stimulus package still hasn't passed and on top of that we have this wave now happening in the united states again with the pandemic so there's going to be a question on whether the death rate will go up whether the hospitalizations will max out and whether or not we'll have further restrictions as far as closing

3:09businesses again so the uh complacency that we were seeing in volatility up until really this week was bizarre considering all the bubbles around so what we've done right now is we have kind of a cautious more commodities based focus in our portfolios right now in terms of the discretionary account we have models that are still along some of the nasdaq stocks

3:34um but that are the high flying nasdaq stocks we also have a small cap growth model we also have an alpha rotation that's in the s p 500 and the nasdaq but these are all small positions in terms of the discretionary trading what's really interesting is that almost full circle i'm almost back in all the commodities i was in when i first started oh i'm sorry when i first started

3:57trading commodities in the early 80s um and so that's that's where i feel right now i feel like with all the stimulus all the debt all the money supply that will still be hitting the market the uncertainty the social unrest and potentially a contested election we could actually be looking at something we haven't seen since the early 80s late 70s and that's

4:19inflation which was really more of a stagnation so that's how we're positioning ourselves right now yeah that's really interesting and yeah the congress has you know taken out taken a rest at least until after the election in terms of getting more stimulus for the american people but they did provide a lot of stimulus to wall street and it seems like a lot

4:38of capital has been flowing into the stock market and it doesn't seem like there's a limit to that i do expect more injection you know hopefully to the american people as well but definitely into wall street and just continue going until the divergence between the market and the economy becomes really really great well the federal reserve has already said they're

5:02out of tools basically they can go to negative rates but they really don't want to sort of actually buying stocks themselves which legally they're not supposed to but blackrock has sort of been doing it for them and they've been buying junk bonds and they've been buying high yield investment grade uh bonds of corporate bonds short of that they don't have much left to do so

5:22they are urging the government to inject more stimulus and then it'll happen there's no doubt it'll happen how it looks really is going to depend on who wins the election because the democrats have a very different idea than the republicans and then to add to that if we do not have the type of situation where we have gridlock because we have a democrat

5:45president in a republic senate or vice versa we have a republican president and a democratic senate so so much right now is really up in the air stimulus i think we can all agree has to happen the government is not going to allow the economy to collapse from here the other factor of course is what happens with the pandemic because both parties have very different ideas

6:08about what to do about it the republicans are more in the camp of let things open because the recovery rate is nothing compared to the devastation of the economy staying close or closing down again and the democrats are more into the well let's step back let's get this under control so the fact that the market's holding right here is basically because they know or it knows

6:33that whatever happens there'll be some money but we really won't know how everything rotates i think until a few days after the election yeah it's definitely seems like an unprecedented time in terms of managing money and dealing with the different types of risk including political risk this time but there's also just because of the stimulus and the pandemic

6:56prior to the election there's all these other risk factors involved in terms of people that you know have been following the stock market and equities market um since april and a lot of retail investors and you know regular uh workforce has sort of gotten involved what should they look at for leading indicators you know besides who wins the election

7:18what kind of leading indicators in the equities market whether it's the bond market or other markets should they look at in terms of seeing the direction of where the equities will move after that great question well there's a couple of ways to look one is because we were floor traders in fact our whole company all the principals were floor traders that's where we all met was down on the

7:38floor there's something called an opening range which means on a daily basis the market opens and within the 30 first 30 minutes there is this sort of a significant edge in that most trading ranges are made in the 30 minutes so if they go up above it or down below it there tends to be follow through we're going to take that a little bit broader out and maybe look at the range of the

8:00actual opening day post election and then i think not only as the overall market goes but looking at individual sectors you'll have a better idea of how to play the market in terms of is retail for example going to continue up or are we going to look at some major disappointment as we go into the seasonal holiday shopping and consumers aren't buying same thing

8:23with transportation and with the growth stocks and the nasdaq et cetera so we will wait pretty much that 24 hour and look at that as almost a reset now from the outlier standpoint i'm a big big watcher of the dollar right now uh we actually vis-a-vis this show have been long bitcoin for some time and actually took a second profit target today being tuesday

8:49um so that was nice i think bitcoin's telling you that the currency instability is something to watch could hurt the market in general obviously interest rates are something to watch and i would also be watching the bonds the junk bonds and the high grade bonds as i was mentioning before because if the fed stops playing there or what they've done there cannot

9:13sustain then i think we really are going to go into a much riskier environment if they hold up and we can see the market hold up in the and the actual range let's say day two or day three breaks out of what we see the first day just follow it and don't overthink that's what i try to tell people try not to overthink too much so much doom and gloom out

9:34there and if you've been listening to it for the last several months you wouldn't have made any money yeah well said and i do like that perspective on following the the opening range after the election so i'll definitely keep that in mind and what you mentioned about bitcoin as well um it it's been so hot you know not only the equities market but bitcoin

9:53uh hit a low of around 3000 when the crash happened in march and in the recent weeks here it's gone from 10 000 to now 13 000 almost 14 000 in a day and when when bitcoin likes to go up it likes to go up quickly um what's your take on the legitimacy of the bitcoin rise this year versus last time bitcoin's all-time high you know went up quickly and sort of

10:20crashed back down and it seems like there's a lot more institutional interest in place already with chartered banks and all of these other companies coming in as well as public companies coming in putting bitcoin on their balance sheet now like or paypal which now allows you to uh pay in bitcoin well there's been a lot of changes to the whole space as one who is a baby

10:41boomer i can tell you that in the original launch of bitcoin when it went parabolic pretty much people over 40 were not involved they didn't understand it they didn't think it was legitimate uh didn't think it would sustain kind of thought of it as just sort of a new shiny fandangle generational thing and not something real now that's totally changed so you're

11:04seeing more baby boomers getting into it paul tudor jones by the way just came out and said that bitcoin was probably the safest place to be so i really believe in the future of it now how it evolves in terms of standardization who gets their hands on it government regulation etc etc remains to be seen but i think it's very much a metaphor for the younger generation which is

11:27they're tired of the manipulation and they're tired of being victim to what the banks are doing or the lobby groups are doing and even the currency wars that we've seen around the world and i think that's where bitcoin turns out to be the winner in all of this and will continue to be the winner yeah well said and it's definitely uh it's a larger movement than just owning

11:50a currency and being diversified it also had you know it's a political movement it's a political statement and especially with the dollar devaluation as you're talking about um it seems like more public companies are starting to hold bitcoin on their balance sheet and have said that they think that it will preserve wealth better than the dollar so that's super interesting um do you

12:13see bitcoin as more than just a diversification or a hedge to the market in terms of actually providing value or something you know similar to gold and like what's your take on having hedged assets like precious metals in bitcoin just as a diversification tool from the capital markets as well right now i think it's definitely something to look into and since we're already in bitcoin

12:37obviously you know we're not just uh talking the talk right here we really believe in it um and then in terms of gold well one of the things that we started to mention before in terms of the outlier which really relates to the dollar but also relates to the result of the whole pandemic is what happens here with commodities in general as we're going through

12:57shortages whether it be in steel copper or in food commodities like soybeans corn wheat we're in a situation right now where as the dollar continues to go down and the supply chain chain disruption continues and the labor force is low we get into a psychological change a shift of hoarding and that could all relate also to bitcoin as as sort of a grouped into that as

13:22this hedge as you mentioned not only also the actual food commodities themselves but getting back to gold gold as well which has been sort of sideways now for the last two months interestingly enough and i think it's because of that complacency factor number one but now i think that's about to change we actually bought we were long gold from april until right after labor day uh in

13:45the united states we got out and that was it we've been flat and we bought a small starter position today as a matter of fact because we can sort of see that the bitcoin could sort of be the waterfall that leads now into this these outliers to hedge against the uncertainty which if the election is contested which people have hinted at and social unrest in this country which

14:12has already been percolating increases where are you going to go you're going to go to bitcoin because the dollar will collapse you're going to go to gold and maybe you'll go to treasury bonds as well maybe and that's if that's if the commodities don't go too crazy because then the fed will not be able to be so accommodated yeah well it's definitely uh uncertainty

14:34in terms of what's going to happen and i think that it is a great opt out and opt into something different by you know at least researching bitcoin and holding a little bit and peop you know you don't have to follow the crazy people that put all of their eggs into one basket you know a lot of these like paul tudor jones they really just put i think he put in four or five percent

14:56but people are even just saying point one percent or one percent and it's more the the asymmetrical risk of these assets the potential for them to to go up and of course there's that potential to go down as well but is that a factor that you considered as you know the asymmetrical risk in these types of investments absolutely we're pretty well diversified right now

15:18although as i said in terms of the actual discretionary account where long most of the soft and food commodities just got back into gold and emerging markets particularly china is also something that we're looking at as well um but you know everything we do doesn't matter what we do we're always looking at the risk factor we're traders we're floor traders

15:40even though many years have gone by we've learned lessons that we've never forgotten one is not buying a falling knife two is always having a stop loss in fact entering every position with the idea of how much i'm willing to lose in relative to how much overall equity you're trading and how many positions you have on you never want to wake up one day and

16:00the world goes to hell in the handbasket and you're wiped out you don't really want to ever lose more than seven to ten percent of your overall portfolio if that happens and then of course the same thing on the flip side so even though we're lowering bitcoin we've taken two profit targets we take money off the table at multiples and then we leave a tail so that leaves

16:19us the opportunity to ride the trend if it keeps going and also put in a pretty wide trailing stop so that we get out but leave enough room for the volatility that happens in between wow all great tips mish and we're out of time but i know that you have a lot more work and literature on preserving wealth and helping people in the markets what's the best way for them to follow

16:42your work well i'm on twitter a lot at market minute that's a really a good place if you actually want to ask me a specific question i'm very engaging and i answer everybody no matter how busy i am two is i do a lot of media appearances so if you want to hear what i have to say on our website market gauge there is a tab called media and we update it constantly with my

17:06different media appearances which i'm very vocal about my views on the market or what positions we're in and then i'm on instagram mish schneider uh linkedin i mean it's really almost impossible not to find me if you're looking so uh and you can email me missionmarketgage i'm always happy to talk to people wonderful i will leave those links in the description box below for the

17:28viewers thank you so much mish for taking the time to come on all the best moving forward with market cage and let's follow up in the near future would love that thank you ashton it's been a real pleasure to meet you you