Building Wealth Amanda Cuocci: All right, welcome to the Health and Wealth Bulletin interview series. My name is Amanda Cuocci. Sitting with me today is Ben Morris. He is the analyst and lead editor for DailyWealth Trader. Ben, thank you so much for sitting down with me today.
Ben Morris: Absolutely.
Amanda Cuocci: We’re just going to go ahead and get started with some simple background questions. Ben, I know you’ve been here for a number of years at Stansberry. How long exactly has it been?
Ben Morris: It’s been a little over six years now.
Amanda Cuocci: Okay. What was your background before coming here?
Ben Morris: So right out of college I decided to move down to Costa Rica and I sold real estate down there for five years.
Amanda Cuocci: Oh, wow.
Ben Morris: So mostly to foreigners from North America and Europe. Yeah. Great experience. Love Costa Rica. And yeah, that was my first professional experience out of college.
Amanda Cuocci: Wow. That’s quite a trip right after college. What made you come back?
Ben Morris: Well, I moved down there in 2006 just before the real estate market collapsed, so selling real estate after that just wasn’t happening. So funds were running low. I decided it was time to move back.
Amanda Cuocci: Sounds like you made a good call then.
Ben Morris: Yeah, yeah. And actually I was working in customer service at Stansberry within three weeks of me moving back to the U.S.
Amanda Cuocci: Oh, that’s fantastic.
Ben Morris: So yeah, I got an interview pretty much right off the bat and got the job and started, and that was my start at Stansberry.
Amanda Cuocci: That’s a great plug for our wonderful customer service team, too.
Ben Morris: Yeah.
Amanda Cuocci: So going back even before then, you had mentioned something to me earlier about college. What was your very first investing experience?
Ben Morris: In college I managed to save up some money, so when I graduated I wanted to do something with my savings, and as I was on my way down to Costa Rica, I just took my dad’s advice and put the money with his financial advisor.
Amanda Cuocci: And what happened?
Ben Morris: Yeah, so again that was in 2006, I graduated college. And shortly thereafter the market fell apart, and so I basically saw my life savings fall by 50%.
Amanda Cuocci: Whew.
Ben Morris: Yeah, I talked with my advisor the whole way down and she recommended just staying in, and you know, no stop losses anything like that, and I wasn’t too happy with that experience. So that’s actually when I signed up for True Wealth and then became a Private Wealth Alliance member shortly after, which is a lifetime to all of our front-end newsletters. So that was in late 2008 I’d say, and so I was a subscriber for about three or four years before joining.
Amanda Cuocci: That’s fantastic. I mean, that you were a subscriber, not that you had to learn that lesson.
Ben Morris: Yeah.
Amanda Cuocci: Would you say out of that maybe what was the most important finance lesson you’ve learned?
Ben Morris: Yeah. I mean it’s really directly related to that, and it is take care of your downside. You know, it’s easy to say use stop losses, but it’s by far the best advice I can give, you know. Really just taking care of the downside altogether. Use stop losses. Use asset allocation. In good times you’ll make money. In bad times you’ll lose money, but you know, you optimize as much as you can. So limit your downside.
Amanda Cuocci: Yeah. Always great advice. Unfortunate way to learn it, too.
Ben Morris: Yeah. It stuck.
Amanda Cuocci: So and just following up on that, I think you probably just answered this question, but what is one piece of advice you’d give to say twenty-year-old Ben?
Ben Morris: Yeah. So when I first started paying attention to the stock market, or I should maybe go to when I started investing myself. I was fortunate enough to start by following Dan Farris when he was talking about world dominating dividend growers, and you know, that was after my account fell in half. And I think at the time I was too short-sighted as a young me just getting started in my professional career with little savings. I was too worried about losing money, and everybody at Stansberry recommended position sizes of no more than like 3-5% of your portfolio. And so I took that advice, and was only – well, I was investing so little that commissions were eating away a significant portion of my investments. So you know, with around $20,000 or so I was putting no more than really $500 to $1,000 in that range. So I wish at that point I’d been a little more aggressive and took bigger positions in fewer stocks. But I don’t think that’s necessarily the right advice today. Today I think a lot of people might take too large positions. So I guess it would be pay attention to position sizing. Think about where you are in your life and what your goals are, and what sorts of position sizes make sense for that time.
Early on it might make sense when you have a lot of earnings potential ahead of you to take bigger position sizes. Later on when you’re coming towards retirement you probably want to scale back a little bit and again, limit your risk.
Amanda Cuocci: Yeah. Absolutely. Now speaking of position sizing and all of that, I know that we have you working on DailyWealth Trader, and there’s a lot of great educational resources with that newsletter. How did you start working on that letter, and can you just explain it for anyone who might be listening who’s never heard of DailyWealth Trader?
Ben Morris: Sure. Like I said, I started in customer service, and after I left customer service I joined DailyWealth Trader. The DailyWealth Trader team at the time it was Amber Lee Mason and Brian Hunt, and I was their research assistant. And just started practicing writing, and again following the markets as I have for a long time. And yeah, I became coeditor and then editor as Brian and Amber moved on to different things.
Daily Wealth Trader is a daily service, and a lot of people make the mistake of thinking that we’re day traders.
Amanda Cuocci: Um-hmm.
Ben Morris: That’s really not what we do. Our average position lasts about three months, even though we publish daily. And we normally publish one to two trade recommendations a week. We look at all sectors of the market. Really all different strategies including option selling, like Doc does in Retirement Trader. We buy stocks both speculations and conservative stocks. One of our biggest winners right now is Apple. We recommended it probably two years ago, and we’re up 120% on that. So that’s been great, but we also – our biggest winner right now is actually Newmont Mining, which is a gold stock. We bought that obviously at the right time, and we’re up about 130% even though gold has struggled lately.
Amanda Cuocci: Right.
Ben Morris: So anyway, we really cover all areas of the market. We’re very focused on risk and when the market turns lower, if we believe that stocks could continue lower, we’ll recommend short trades and positions that’ll profit as stocks fall.
Amanda Cuocci: Right.
Ben Morris: Yeah. We do a couple of recommendations a week, and then just insights into different sectors of the market. We do back testing in different assets. And I think that the common thread aside from being very focused on limiting the downside is that we marry fundamental and technical analysis. So we look at big trends and earnings and growth, which is the fundamental analysis, but we also look at price action and trading volume, which is technical analysis, so reading charts.
And because we publish daily we can really time our trades precisely. So you know, we won’t just buy a stock if we think that the fundamentals are good. We want to make sure that the technicals line up to maybe it’s a breakout to a new high. Or maybe it’s a big selloff and bouncing off of a low that just seems like it’s oversold.
So when the fundamentals and technicals line up, we recommend a trade and it’s served readers well.
Amanda Cuocci: Great. Yeah, I know it’s a very popular service, and I really love how much you cover, because like you said, you cover every sector, and there’s something really for anyone. It’s a really great way to also have diversification I’m sure because you’re covering so many different things. What can you tell us is really – you kind of hinted at this in your last answer, but what’s really going on in the markets right now? Like what sort of things – what big topics should we be paying attention to?
Ben Morris: So the big topics – I mean, definitely the performance of big tech. Tech has led this rally for years, and I think that it’s really going to give us a clue as to what will continue to happen. Certainly Facebook dropping 20% in a day was a little bit of a warning sign, but you know, the market held up extremely well. And actually I think that was really a surprising positive. I was concerned that that was going to be a really bad day for the markets, but the markets held up. So I see that as a positive. I continue to see higher prices coming, but I also expect volatility.
Amanda Cuocci: Right.
Ben Morris: So again it’s a tough time to be an investor. You have to make sure that you have a plan. If you don’t have a plan in the markets right now, you’re going to be selling and buying at exactly the wrong times. You know, a lot of people are nervous, and if you let emotions get control of you in a volatile market, you’re going to do very poorly.
Amanda Cuocci: Right.
Ben Morris: So follow big tech. Make sure you have a plan on every trade you make, and investment for that matter.
Amanda Cuocci: Right. Do you see any of those – you mentioned volatility. Do you see any more big swings of volatility later this year? I mean, it seems like every time there’s a big news story out, you know, we see the big spike or drop or whatever, and it’s kind of crazy to be watching this, but do you see any more volatility? Do you think we’re going to start seeing maybe a bear market?
Ben Morris: I’m sure we’ll see a bear market at some point. You know, my main indicator is the 200-day moving average. You know, there’s so many things to look at out there, but one thing that I’ve seen is that the 200-day moving average of S&P 500, this is just a rolling average of the last 200 days of price action. When the 200-day moving average is rising, we’re in a bull market, and when it’s falling we’re in a bear market. It’s the long term trend. And right now the 200-day moving average is rising and rising and rising. So I want to stay long. If it rolls over and starts to fall, that’s when we’ll start being more aggressive on the short side, or looking for short opportunities. That said, the end of any bull market tends to be very volatile. I’ve looked back at the last two bull markets very closely. The dot com boom and bust, and before and after the financial crisis. The tech boom especially. We had a lot of seven, eight, nine, 10% drops on the way up. We’ve really only had one 10% drop lately, and before that was I think 2015. But I definitely expect more ten, even maybe a 15% drop or so before we peak. So I don’t know when it’s coming, but I do expect volatility in the end term.
Amanda Cuocci: Right. And I’m sure your readers will know exactly what to do.
Ben Morris: Yeah. Yeah. I mean, you know, we look at short-term indicators, too. I look for general guidance at the 200-day moving average, but we also look at the sectors themselves. Once a month we do a sector update and look at the eleven major sectors in the stock market, or in the S&P 500. And we look at what’s performed the best and worst over the last one month and six months.
So sometimes you’ll have certain sectors in the bull market while others are performing poorly, and we try and keep readers in the stocks that are rising.
Amanda Cuocci: Great. So just one final question for you. What are you most excited about right now? You know, what are you looking at? What kind of recommendations you might be leaning towards? You don’t have to give away anything that’s specific certainly, but what can our readers take away from this?
Ben Morris: Yeah. So because I expect volatility to continue or to pick up really, we’re taking advantage of that in a few ways in DailyWealth Trader. The first is we tend to use relatively tight stops when we open new positions just buying stocks. That way if we do see a big drop we get out quickly. Again, we’re not looking for long-term multi-year investments all the time. We’re okay if we get knocked out of a trade within a month of when we place it. We just limit our downside and keep our upside unlimited. So that’s one thing we’re doing.
Another thing is sell inputs on pullbacks. That’s a great strategy as volatility increases. Put premiums increase so you can earn more income when you’re trading.
And the final thing is a strategy that I’m really excited about that I think will out-perform in the coming years, even a buy-and-hold or an aggressive short-selling portfolio which is called pairs trading. And what pairs trading is, is a combination of two trades. One where you’re buying a stock or a fund, and another where you’re short selling a stock or a fund. And typically you want to do this in correlated or related assets. So what that does, the effect of that is your trade, your pairs trade, is market neutral. If you for example buy a stock in the retail industry and short another stock in the retail industry, if retail stocks plummet, it doesn’t really affect you because that sector performance is in both of your stocks. One which you’re long and one which you’re short. But if the one that you buy does better than the one that you sell short, you make money whether stocks soar or whether they plummet. So it really eliminates a huge amount of volatility, which is exactly what I think a lot of people need right now.
Amanda Cuocci: Yeah. Absolutely. And I think that we are covering some more on pairs trades coming forward because we have a promotion coming up for DailyWealth Trader. Is that right?
Ben Morris: Yeah, that is right. From here on out we’re going to start recommending at least one pairs trade in DailyWealth Trader every month. I just think this is such an important strategy for people to take advantage of right now. It’s not the gigantic gains that you’re going to get by investing early in tech stocks in a bull market, but again that reduction in volatility is huge right now. And again, I don’t know when the bear market will start. I know that it’s coming. I would expect probably at some point in the next couple of years. And when you place pairs trades, again you can make money for the remainder of the bull market. When it turns you can continue making money as stocks fall as long as the stock you buy does better than the stock you sell short.
So you know, we analyze each side of the trade, and depending on the market we may recommend different types of trades if stocks are rising, you know, for the remainder of the bull market and in a bear market, but the overall theme is that you can make money whether stocks are rising or falling, or when they’re doing both. So that’s what I’m real excited about right now. It’s going to become a bigger part of DailyWealth Trader, and you know, I know readers and now listeners are hesitant to sell stocks short, but I think it’s a skill.
I mean first of all, it’s really quite easy. It’s exactly the same as buying a stock except in reverse. You just sell the stock first and then you buy it, and in your brokerage account it’s just as simple to do. And you know, if you want to have a shot at making money in a bear market, you need to learn how to sell stocks short. So that’s what people’s biggest hesitation is with pairs trading, but it’s important. That’s your financial wellbeing. You need to learn some new skills sometimes.
Amanda Cuocci: Absolutely. And DailyWealth Trader is the way to do it.
Ben Morris: Yeah. Thank you.
Amanda Cuocci: So thank you so much for sitting down with me, Ben. For anyone listening, we are going to have a link attached to this video so you can get started with DailyWealth Trader. Get a subscription going today. I know that promotion is going to be running at the end of August, so keep an eye out for that. And again, Ben, thank you so much.
Ben Morris: Thanks a lot, Amanda.
Amanda Cuocci: All right. Have a good one.