The Birth of N.I.T.R.I.C

Friday, 29 May 2020
Melbourne, Australia
By James Woodburn

 

Today’s Insider begins 167 years ago, on a mud-soaked settlement on the foremost tip of Victoria’s Yarrowee River.

A place those passing through dubbed ‘Poverty Point’.

The winters in Poverty Point were harsh.

There was no shelter, bitter winds, and morning frost.

Workers travelled through the highlands from farm to farm, offering their hands for a meal and a place to rest.

It was desolate and desperate. Teeming with convicts.

But that all changed on 8 August 1851…

On that day local blacksmith Thomas Hiscock found gold, sparking the biggest gold rush in Australia’s history.

A few years later, the ‘Welcome Nugget’ — 69 kilos of pure unadulterated gold — was dug from the ground.

Here’s a picture of it: 

The Insider

Source: MAAS Collection

By mid-October, 2,000 men were sifting through mud and muck at what they now called ‘Golden Point’.

And over the next six months, tens of thousands of migrants flooded the colony of Ballarat, northwest of Melbourne, to seek their fortune.

But where there are riches to be made, opportunists lie in wait.

The gold bonanza attracted the seediest charlatans, who claimed to have ‘struck it big’.

There was only one way to tell ‘fool’s gold’ from the real thing, however.

Which is why every man who cared about his pocket carried a bottle of a miracle chemical.

That ‘miracle chemical’ was a compound called HN03.

Or more commonly known as nitric acid.

In short, nitric acid allowed prospectors to tell what was gold…and what wasn’t gold.

It’s a quick and simple method.

Essentially, every metal rapidly dissolves under nitric acid.

Except gold.

Pour a little bit of nitric acid on gold, it doesn’t bubble and it doesn’t disappear. It stays totally still, thus separating the worthless material…from the valuable metal.

Why am I telling you this story?

Well, what if I told you there was an ‘acid test’ you could use for tiny gold equities that, when put under examination, would identify truly great prospects?

That would help you separate the dog stocks…from the golden gems?

This is what our resident gold and gold stock expert Shae Russell has developed.

Her system — she calls the N.I.T.R.I.C test — is a neat metaphor for how she de-risks highly speculative gold stocks.

You can find out what it stands for in her latest Hard Money Trader research report, which has just been released today. But perhaps more pressing is the latest recommendation her system has uncovered.

As I said in a company-wide announcement earlier this morning, in a market swirling with volatility and uncertainty, one absolute stormer of a trade has just presented itself.

It is for uber-speculators only, though. Acquiring shares in this $82 million company is a risky move.

But, according to Shae, there are compelling indications that — amid the roiling virus headlines and economic disaster — the little mavericks behind this gold explorer are about to pull off a masterstroke.

If you read the full research and take the plunge — good luck and let me know how you go. This offer to test out Shae’s research closes on Sunday.

Read Shae’s full lowdown on how ‘this thing prints cash’, right here.

Now, I have something a little different for you today…

Yesterday I caught up with our Texas-based friend and former Morgan Stanley quant, Tom Meyer.

Tom is the brains behind the trade signal system we use in Algo Trend Trader.

On 2 March, Tom’s algo unequivocally signalled a bearish trend in the Australian and US stock markets.

You know happened next. The ASX lost a quarter of its value in a matter of weeks. The fastest bear market in history.

It’s great to know that we have a system in place that has the ability to alert us to falls of this magnitude.

As Alliance member Felix told me a couple of weeks back…

I would like to give credit to Tom Meyer’s Algo Trend Trader service for calling the beginning of the bear market in early March. When most people thought the worst of the correction was over, Tom Meyer’s Algo kept us on the short side, and continued to lock in profits all the way down week after week. I personally made a lot of money, and I successfully hedged the rest of my portfolio of shares that are underwater, without having to sell them. While any person will feel emotions when seeing your portfolio [go] up or down, Algo Trend Trader successfully takes the emotions out of the decision making side of the trading process. This is a very valuable lesson in itself, and is necessary to be profitable in stressful market conditions. 

So, I thought it would be useful to get Tom on the line, properly introduce him and his way of thinking…and see what his algorithm is indicating now.

Press play on the video below:


 

Woody: Hi, Woody here from The Insider and today I have what I think will be a really fascinating discussion with, I’d say probably one of our lesser-known experts. I say that with all due respect, Tom Mayer is his name and he is the brains behind our VIP algorithmic trading service, the Algo Trend Trader. I’ve just thought it’d be a really fascinating discussion to get Tom on camera. To introduce himself to all of our readers across Port Phillip Publishing and Fat Tail Media. Because Tom, you’ve actually got what I think is distinct advantages in the way that we view the market. Because, you don’t really view the market through your own lens, you view it by a system now. So, I thought you could perhaps introduce our readers to your experience in trading, to start with. How you got into using algorithms to trade the market? The advantages of that and the in inherent…I guess it exposes inherent flaws that normal traders have, and they fail a lot because of those flaws. Then, perhaps we can relay that information to the markets today. What do you think?
Tom Meyer: Perfect. Thank you for having me today, Woody.
Woody: No worries. I was going to say, do you want to start introducing yourself and your experience, and how you came to be working with me?
Tom Meyer: OK, good. I’ve been in this business as a financial professional for 27 years now. I can’t believe it’s almost three decades. I started off with Dean Witter, which merged with Morgan Stanley in the 1990s. That’s where I cut my teeth as a broker, working with individuals and with smaller institutions, helping them out. I got to see firsthand the inner workings of the large wall street brokerage firms. That are really quick to develop products, develop mutual funds, develop all sorts of products that they like to sell. But, they were really bad at telling my clients when to get out and this really came to light. My first experience with a bear market professionally was the dotcom crash. Of course, for those of you who are my age and remember the internet bubble, and all of the IPOs, and the secondary offerings for these companies. That most of which aren’t even around anymore and the new language that was used. No one cared about earnings, no one cared about revenue, profits? Who cares? Eyeballs, that was the big thing, how many eyeballs are they going to get?
Woody: Yep.
Tom Meyer: Of course it all blew up. The big brokerage firms kept developing new products to sell to people and they didn’t tell our clients to get out. I found out after that, that they didn’t tell our clients to get out. Because, they would have working relationships with the companies that they follow. They wanted to make more money selling their bonds and doing all sorts of work for the companies. So, they wouldn’t put out a sell recommendation. But the institutional clients, the ultra wealthy, the hedge funds, they got the best of the research. I thought to myself, well, ‘That’s ridiculous.’ I learned at that point in time that picking stocks is not the most important thing. Now, most of us spend 90%, 95, 98% of our time trying to find the right stock to pick. It turns out that’s really not what you need to be spending your time on. Yes, you want to pick out good stocks. There are a lot of ways to be successful in the market. Woody, I have one way that’s very successful, but there are other ways that are successful as well.
Tom Meyer: I don’t want to tell people that, ‘Oh, it’s just my way.’ And that’s it. I have a way that works really well for me. We’ll get into that in just a moment. But, what I found out was the key to making money in the stock market, is knowing how to exit your trade properly. What I mean by that is, sometimes you’re going to have to take a small loss. You never want to take a small loss and turn it into a large loss and Woody I’ve done that. I’ve also done the opposite where I’ve gotten into a position and I’ve gotten out of it really early. I make 15 or 20% in a couple of weeks and six months later, the thing’s up another 100%. So as individuals, we tend to make mistakes. We sell our winners too early, and we hold on to our losers for a lot longer than we should. Because, we theoretically don’t want to take a loss. If you’re going to invest in the stock market, you are going to take losses.
Tom Meyer: Now, it’s up to you as to whether you’re going to take small losses or large losses. What I’ve learned over a long period of time is, it’s much better to take small losses and get ready for another day. Because, the markets are always going to be open. So, the dotcom crash led me into the next direction that I’m in now. Then, I’ve been doing this now 16, 17, 18 years. That was algorithmic trading, computer programs that were developed to help us overcome the emotions that we have. Woody, I’ve got a slide here that I’d like to show you, give me just a moment to get this up and going. I’d like to show everyone and speak to everyone about how you go about looking at the market from maybe a more intelligent way. So, let me get my PowerPoint up.
Woody: Yep.
Tom Meyer: As you and I have talked on numerous occasions. The markets don’t flat-line, the markets stay in trends until they don’t. It doesn’t matter whether the trends are moving higher or whether the trends are moving lower. See, that’s another thing, people get all caught up in having to go long, only, ‘Oh, I only want to buy a stock, that’s going to go up.’ Well, stocks don’t go up forever-
Woody: Well, they do, until they don’t.
Tom Meyer: Until they don’t, that’s exactly right, they’ll stay in a trend, until they don’t. So, the problem that we as humans have, is we have cognitive biases. That were built into our systems hundreds of thousands, if not millions of years ago. We are stuck with some of these biases, we have to come up with a way to overcome the things that cause us to be unsuccessful in the stock market. One of the big biases is an anchoring bias. In other words, we’re really anchored to the price we paid for a stock. Doesn’t necessarily mean anything, if a stock is not doing what it’s supposed to. What’s a stock supposed to do? It’s supposed to make money for us and that’s what we want it to do. But really, if you want to break it down into something else. Maybe no one’s ever said this, on Insider or even you and I speaking. Why do people buy stocks? They buy stocks…go ahead and answer.
Woody: Well, to make money.
Tom Meyer: Nope. No, because you don’t always make money. You buy a stock to sell it. Hopefully you’ll make money with the trade, but sometimes you got to get out of it. Then, here’s where the anchoring bias hurts us, ‘Oh, I can’t get out at a loss. So, I’m going to hold on to the stock or I’m going to do something really smart. I’m going to double down and have increased losses.’ Confirmation bias. We only want to process the information that we like. So, if we’re looking at say Qantas and we’re long Qantas, we want to ignore the fact that 99% of the seats were empty in the month of April. Probably, 85 to 90% will be empty in May in June. Before a long, we don’t want to read that information. We only want to hear that, ‘Ah, there’s a buyout. The state is going to help them stay in business.’ Three years down the road, they think that they’ll be at 80% of what their numbers are today. We only want to read the news that we believe in.
Tom Meyer: That’s something that they can hurt us a lot as investors. We see this in politics all the time, nobody wants to hear what the other side has to say. We only want to read what our side has to say, because our sides right. The other side, we know is wrong. There’s an outcome bias. Let’s say that you take a dart, you throw it at a listing of the stocks and the ASX 200, and you buy a stock, and you make money with that. Well, just because you made money with it does not mean that the process was an intelligent process. What you really want to do is, you want to judge the traits by your process. Now, if your process isn’t working, then maybe you need to change the process. But don’t just look at one winning trade and say, ‘Oh, this process works.’ [Inaudible 00:10:25] Losing trade and say, ‘Oh, the process doesn’t work.’ Then there’s a commitment bias. We tend to believe in a stock.
Tom Meyer: We tend to believe in an investment a lot more after we’ve put our money on it. I was talking with Daniel right before we started. We were talking about people who are just getting into trading and just learning about it. They might set up a paper account, or they might set up an Excel account. Well, let me tell you, that’s great. But, until you have real money on the line, it’s a whole different animal. Once your emotions become involved, your emotions can mess you up. So once we invest our money, we tend to have a stronger commitment to that investment. Even though, there’s really no reason we should. So, what do successful investors do Woody? They develop rules, they develop rules to overcome the biases, to overcome the potential poor decision making that we’re all subject to. Today in the US, the NASDAQ dropped about 2.5% in the course of just an hour. I have some friends that got out and then it turned around, there was really no reason for them to get out. They used their emotions instead of an intelligent rule-based system.
Tom Meyer: No matter what investment strategy you use, and whether it be algorithmic trading, whether it be trading with fundamental analysis, whatever it might be, always have your exit planned. Because, that’s the biggest key to making money and protecting your money in the stock market. The beautiful thing about algorithmic investing from my perspective, is that not only does it allow you to set up intelligent rules. But, it’s also a discipline that you have to stick to. What we do is, as an algorithmic investor, we can still have emotions about the market. We can still have our own opinion about what’s going to happen, but we don’t act based on our opinion. We act on rules that are set in place, the algorithmic investing and what we have done with Algo Trend Trader. It forces us to act in our own best interest. Woody, we’re going to get to a couple of charts here in a moment.
Tom Meyer: But, I’m going to give something away to you. We are all experts to the left hand side of the chart. But, we don’t invest to the left hand side, we invest to the right hand side. So, algorithmic investing forces us to act in our own best interests. It forces us to take small losses, and we’re going to have some losing trades. But, I’ll show you in a moment, some of the differences between losing trades and winning trades. It also forces us to stay in a position and let our gains run a lot higher than they might normally would otherwise. Again, the algorithms don’t remove our emotions, as humans we are emotional. But, the algorithms force us to act in a disciplined manner that is in our best interest in the long term. So as you know, we’ve been doing this for a little over a year now, for your members. The system that we use, I’m going to show you a few of the details here, in just a moment.
Tom Meyer: We have a system that identifies up trends; it identifies down trends, and it helps show you when momentum has taken place to the upside or to the downside. Every trade has a predetermined exit strategy and that doesn’t mean that we decide what it’s going to be, and then we stick to it and never change it. What we do is we have an exit strategy, that’s based on the underlying volatility of each of the tickers that we measure each stock, each index. So for instance, we’re going to look at the ASX 200 and Qantas, today, we look at gold every week. All of these are going to have different levels of volatility. So, our exit strategy is based on the volatility of whatever ticker we’re measuring. So, it allows us to stay in trends and stay in trades longer than we would otherwise and it forces us to get out with small losses sometimes. But, many times with some really nice gains, that’s what we’re looking for. So for the ASX 200, we’ve had five closed trades, and you can see they’re not large.
Tom Meyer: Mostly to the winning side, up 2.44%, up 1.22, up a little bit more than 0.25% and then a couple [inaudible 00:15:26] less than 1% each. But we went short. Our system told us to go short the ASX 200 on March 2nd of this year, which we did. We got out of the long trade earlier than that. We got into our short trade on March 2nd, on March 23rd our system was telling us that the ASX 200 was oversold. You and I have talked about the bear market that occurred, the fastest bear market in history. We saw in just a few weeks period of time, tremendous destruction in the markets. Our oversold rule was identified and it caused us to get out of the short trade on March 25th. A gain of almost 25 and a half percent. Currently there is a short trade, the gain is little bit more than 10, 10.3%. Here’s the chart on the ASX 200. This is the chart that just came out on Monday the 26th, 25th of May.
Woody: I should just say for readers, that aren’t familiar with this system, is that what Tom does is…his algorithm has been programmed to calculate the weekly volatility. So, you get a signal that the algorithm tells you what to do once a week. Do you just want to explain that? Before, you explain the chart.
Tom Meyer: I’m going to show this on the chart how it works. You see two or three things immediately that come to life. The first thing that you see, is the yellow channel in the middle of the page. That yellow channel has a couple of things with it. You’ll notice in the middle of the yellow channel is a light grey line. Woody, that is the 200-day moving average of whatever we’re measuring, in this case the ASX 200. The yellow above, and the yellow below represent one unit of normal volatility. One of weekly volatility as measured over the last 52 weeks. Now take a look here, we go back three years and look how narrow that channel is. We’re looking at a normal weekly volatility in 2.5-range and there wasn’t a lot of volatility. As the ASX started to move up a little bit at the end of 2017, a little bit more into 2018, we had the sell-off. But, then some nice move higher in 2019. You’ll notice this yellow channel started increasing and it became almost-
Woody: That’s the volatility of the index increasing.
Tom Meyer: That’s exactly what it is. So, you can look at it now and it is incredibly wide. The weekly volatility for the ASX 200 right now is almost 6%, that’s huge. Compare the width of this channel, to the width of this channel here. So, this is an important key to what we do. Remember earlier on we said that we always have an exit strategy in place. Well, the exit strategy is based on volatility, and this is a great visual to see what volatility actually looks like on a chart. The next couple of things you’re going to see, you see a green line and you see a black line. The black line is the week ending close of the index itself, or the stock. In this case, the ASX 200, the week ending close. The green line represents going long or going short, according to the system. So, let me tell you how the system works, Woody. We’re going to do this really briefly.
Tom Meyer: So, any time that the price of the index is above the yellow channel 200 day moving average, plus one unit of normal volatility. Then, that triggers an entry signal, that means we should go long in the trade. Then, the top of the channel is our stop-loss and you can see that we moved higher here for a few months. Finally, we stopped out, the gain here was a few percentage points. We went below the channel, just a quick move below and then back into the…we call this yellow channel, the transition zone, back in the transition zone. Now in 2019, you can see the same thing happened, but we came back down. But, we had a nice long run, this stayed in a [inaudible 00:20:17] for months. Now, look at this, this is what we were talking about in early March.
Woody: So, that was around March the second, because I remember very well.
Tom Meyer: Right down here, is the weekly close from February 28th. I think right here and that’s when our bearish signal kicked in, and we dropped for a few weeks. I don’t want to get in the overbought and oversold, because that’s just too much information for right now. But, people get the idea. So in our world, we go short. You have to understand we don’t care for going long, we don’t care for going short. We just want to make money and follow the trend. We’re like a surfer and the surfer is looking for a wave, and they don’t know when they get on that wave. If the wave is going to last for 10 seconds or 15 seconds, then peter out. Or if it’s going to be something that they can ride for 30, or 40, or 60 seconds or more and that’s what our system does. So we get in, we got this huge move down. We moved thousands of points to the downside and we triggered our signal.
Tom Meyer: That tells us that we were way oversold again, this is all measured with algorithms. It’s based on the volatility of, in this case, the ASX 200 and we went down, we went short. Now, we’ve had over the last about eight weeks, we’re moving higher. But, we’re still a long ways away from hitting the yellow channel, which would normally be a stop out, under normal conditions. That is how we measure by the way. So, the 25% is what our members could have gotten on the trade. But, I’m very conservative with my reporting. I’ll wait till we actually stop out and determine the gain or the loss. Right now, if the market were to move higher by 700, 800 points in one day, we’d still get out with about a 7% gain.
Woody: It’s just an interesting chart, because aside from whether you’re actually trading the algorithm, it shows you where the mood of the market is at right now. So right now for example. There’s talk of markets opening up and shops opening, and people going back. I was talking to Greg about this early in the week. It almost feels like the acute sense of fear…even the name COVID-19. People get a bit bored of it now, everyone’s coming out again. But, according to this non-biased metric, it still shows a bearish signal. That’s a useful thing for the investors to understand. Would you say?
Tom Meyer: It does show us a bearish signal, a bearish signal which began on March 2nd.
Woody: Yep.
Tom Meyer: So, almost three months ago and let’s look at this intelligently. We’re not going to go in and throw all of our money into a new short trade this week, with this market moving higher. Now, if someone is not in this, on the short side. You invest small, invest a little bit, maybe on the short side and see what happens. Again, we talk about this every week in our newsletter. Small losses don’t turn winning traits into losing traits and take small losses, don’t take big losses. So, this is Qantas, since we began on May 20th, 2019, we’ve had four traits, identified. Three are closed, -4.75, -1.5 + 9.375%. So these are great, again, March 2nd. Now, you’ll see the chart Woody it’s…you’ve seen it, but for those who haven’t, it’s incredible. Our oversold rule got us out with a gain on March 25th of 43%. Which is huge.
Woody: I’ve got a question on the oversold rule, which I’ll come back to. I’ll make a note there while you carry on.
Tom Meyer: So, here’s our chart, this is our chart on Qantas. Then, we go back three years, you can see right here, the black line and the green line tracked each other beautifully. We had this nice gain, that 9.38% gain in Qantas from the end of the third quarter, beginning of the fourth quarter. You can see, we went up a little bit below six all the way up above seven. We got this transition zone, just waiting. We call it a transition zone, because we don’t know if the stock’s going to move bullishly in the next move or move bearishly. So we’re waiting for the transition and obviously it dropped down to maybe IPO prices from 25 years ago, something crazy like that. But the volatility here, was the equivalent of two years’ worth of volatility. That’s where our weekly volatility hit. We were so far below the stop-loss, we were two years of volatility and it made that move in two to three weeks. So again, now that Qantas has been moving higher. This short trade, this was the maximum profit in the short trade, as we are right now, we’re still up 21%.
Tom Meyer: Those who got our signal and we’re able to book a 40% or maybe even a little higher percentage profit are pretty happy.
Woody: Hey Tom, since I think this is a valuable takeaway as well, can you come back to your oversold rule? So, I guess it’s a game of odds really, isn’t it? So, when there’s a bearish or bullish signal. You don’t know if that trend is going to continue and nor do you pretend to know. So you put these what you say, little stakes, little hooks in the water, and if one takes off. You harness the algorithm to have you stay in the trend for as long as you can on the long side and both ways. So, can you just explain the overrule and the oversoul rule, and the metrics that make that up?
Tom Meyer: Sure, this is all done based on back testing. Remember, what’s the number one goal? Don’t take a winning trade and turn it into a losing trade. Now, we know that stocks get overbought and oversold and people use that term a lot. In my world Woody, I have to measure it and I have to have an algorithm that tells me when it’s overbought or oversold. So, given that the underlying of everything that we use, is based on the singular volatility. The unique volatility of everything that we measure, that they don’t all measure. They all measure a little bit differently. It’s like they have their own volatility genetics. So, when a stock is above this yellow channel, by more than 3.5 or 3.6 units of normal volatility, it tends to be overbought. There’s a good likelihood that it can sell-off in the near future. That doesn’t mean that it’s going to stop out, but we want to have this in place, we want to know this. Same thing on the bottom side. So, if we get 3.5, 3.6, 3.8 units of normal volatility below our stop-loss.
Tom Meyer: There’s a good chance that we’re going to see a rebound, just because that’s the way the market goes. It doesn’t go straight up all the time, it doesn’t go straight down all the time. At this point in our graphing, at this point, which was the close of March 20th. We were 10 units of volatility below the stop-loss. Again that’s, that two years’ worth of normal volatility. It just made sense that it was going to bounce back.
Woody: Reveres, yeah.
Tom Meyer: We’ve talked about during this period of time and in our newsletters. We talked about other bear markets, 2008 bear market, 2000 to 2002 bear market. We talked about the fact that there are bullish moves during bear markets. Wildly bullish moves during bear markets, because volatility has increased so dramatically. It’s one thing to say it, but we have to measure it. So everything we do is measured, everything that we do is based on rules that we’ve developed. Rules that our computer tells us what to do. You know one of the key things we haven’t talked about, Woody? I’m going to leave the chart after this.
Woody: Yep.
Tom Meyer: We are not predicting where a stock is going to go. We are not predicting where the market is going to go. We measure the stocks and we measure the markets every week to give us a clue. We talked about earlier, markets are in trends. They’re normally either in up trends or they’re in downtrends, or they’re waiting to establish a new trend. So, we are measuring the trends and stocks stay in trends until they don’t and that’s exactly what we’re doing. We’re not guessing, we’re measuring and that is a big key to, in our world, being a successful investor. So, we invest in bullish and bearish trends, it doesn’t matter to us, we can make money in both. We always know our exit strategy in advance and again, this is not get rich quick. If someone says, ‘Oh, is there a computer program that’s going to guarantee me a 100% a year?’ This is not it, because there is nothing like that. Our goal as trend followers is, we’ll never get in at the bottom, we’ll never get out at the top.
Tom Meyer: You saw that on the two charts, no one got out at that bottom, the market’s reverse so dramatically. We’re not going to get out the bottom; we’re not going to get out at the top. We want to capture 40% of the move, 60% of a move, maybe 80% of a move and then we’re successful. So, we never guess what’s going to happen next. We measure the market each week, we determine what the trends are. We update the normal level of volatility and adjust our stop-losses accordingly.
Woody: Yeah, that’s good Tom. I would just wrote down a little question here, because I thought what would be a very handy takeaway for viewers of this conversation is. So take the ASX 200 right now. How many units of volatility is it away from the transition zone right now?
Tom Meyer: Let me see if I remember correctly. I think we were at about two units of volatility and the volatility was a little under 6%. It was maybe 5.5 Or 5.75.
Woody: Right.
Tom Meyer: I can look up that number, but I don’t know that we need to for this.
Woody: Yep. What does that tell you?
Tom Meyer: It’s about two units of that volatility. Well, it had been about six units of volatility away from the stop-loss every week. Again, another thing that you can take away from the chart, every week the stop-loss is moving lower. So, every week we’re locking in more profit and there’s volatility, it’s going to adjust, not normally a lot. You saw how that channel widened, it wasn’t just one move and then it stayed parallel. That the channel has been widening and as the market moves higher, it will probably begin to narrow again. It’ll be a long time before we get as narrow as it was three years ago. But, right now we’re probably about two units of normal volatility from hitting the stop. I know this week the market has been higher, so maybe that’s about 1.5 units now.
Woody: OK. So Tom, maybe a final question. So, you trust the algorithm to make your decisions and that’s the way you trade. You take all the emotion out of it, but you must have a little inkling of what your thoughts on the markets. So, I’m asking for your personal view of where you think we’re headed? Are you pretty worried about things right now? What’s concerning you about the current state of the markets and stocks, etc.
Tom Meyer: I think the markets don’t reflect the damage that’s been done to everyday people and to small businesses. In my town in Austin, Texas, there are some old line restaurants that aren’t ever going to open up again. How many hundreds of people are going to be out of work? Sure, there are programs to try to cover that, but that’s not how you grow money, those are big band-aids. What’s going to happen? The hospitality industry is crushed. I don’t know about you, you know my situation, you know I take care of my parents, they’re elderly.
Woody: Yep.
Tom Meyer: I’ve got to protect them, so I’m not going to hotels anytime soon. I’m not going on airplanes anytime soon, I can’t be the only one. I think there are a lot of people that want to see what’s going to happen with vaccines, or treatments, or whatever it might be.
Tom Meyer: So, I’m concerned about what could happen to a lot of people. By the same token, we have seen in a three-month period of time, a change that’s generational in nature. How people work, how people communicate, how people get their groceries, how companies do business. How many companies around the world, are saying, ‘Maybe we don’t need offices, or maybe we can get rid of half the office space. Because, we can have so many people work from home and it’s working well, and we’re still productive, and we’re still making money. So, obviously there are going to be a lot of winners in this new environment. We’ve seen that happen, we’ve seen stocks that have moved dramatically higher over the last couple of months because of that. There’s a lot that we don’t know. I have opinions about everything. But, I’m going to invest based on the algorithms, because I’ve learned in my 27 years of being in the business. That it’s better to let the computers tell me what to do and if I need to make an adjustment on managing a trade. That I can do, that I’m pretty good at.
Woody: Well, I think that’s a good place to end, Tom.
Tom Meyer: All right. Woody, thank you.
Woody: Thanks Tom. Yeah, take care and we’ll get you back in soon, perhaps for a freeway discussion with Greg. Because, I know he looks at the charts and he’s also very interested. His method is almost a bit of a fusion of fundamental and technical. So, it’s not full on system approach. Yours is a 100% algorithm approach.
Tom Meyer: Correct. Mine is a hundred percent pricing. What is the price tell us? Because in my world, I believe that everything boils down to price. I’m never going to find the next microcap mining company that’s going to quadruple in price. I’ll find it after it’s maybe doubled in price, but I won’t look at the fundamentals, that’s just not one…one last thing that I’d like to do. You can cut this out if you want?
Woody: Nah, you go.
Tom Meyer: I’m going to give a piece of free advice, it’s probably worth every with that, that people are paying for. If you don’t know what to do about a stock, think of the sunk cost rule. Now, the engineers that are in the audience, they know what sunk cost is. A number of the business people know what sunk cost is. But for those who don’t, you have paid X number of dollars for a stock. Doesn’t matter what you paid for it. I’m going to give you an option. You can hold on to your stock or you can get cash for what the stock is worth. What do you want to do today? If you decide that you’d rather have the cash than own that stock, you made your decision. That’s sunk cost and trades are almost nothing today. So, get out of it. They’re only 5,000 or 10,000 other opportunities and you can probably find something better.
Woody: There you go, sunk costs.
Tom Meyer: That’s it.
Woody: All right. Cheers, Tom.
Tom Meyer: All right.
Woody: Talk to you soon.
Tom Meyer: Thank you so much.
Woody: Thanks mate, cheers.

Cheers,
Woody