We're in (the early stages of) a bubble

0:10Welcome back to Investing Expert, Clem Chambers, the founder of AnuFN. Great to have you back on Investing Experts. Thanks for making the time. Great to be back on, Rena. I think last time I was on, I was telling everybody and telling you how good Intel was at$20 a share. We were also talking about gold and silver, which have seen some things along with the tech sector. So talk to us. How have you been feeling? Last time you were on was September. So how have you been adjusting to these new realities that we are living in? Well, I seem to be in a very small minority of people that seem to be able to grok various twists and turns.

0:50Everybody tells me I'm a fool at the beginning, and then they tell me I'm a fool at the top. And, you know, I'm getting used to that. So unless people think I'm a fool, I think I've got it wrong. And, you know, this particular bump in June, which was, you know, very, very, very rough. I was saying that it was the end of June was the end of a month, end of a quarter, end of a half year, end of a year. And that, you know, the market moved so far, but there was a huge amount of rebalancing required. And that's what was causing all these conniptions in June. And that this Monday, as in today, would be the first day when we would get some sanity back.

1:30Because, you know, when you have to rebalance before the end of the month, you then have to rebalance after the end of the month again. Because a lot of funds, they're not allowed to, put it this way, at the end of the month, they have to show a certain layout of their positions. But it doesn't mean they want them. And if they've had a good set of positioning in, say, memory chips over the last year or six months or three months or even a month, they're showing so much profit that it's bending what they should be doing as a fund that has a diversified portfolio risk. so come along June they are running for the exit trying to you know move their positions around to be sensible because the market's not sensible maybe they've made you know way too much money and then of course come the next month they might well we really want to be back there because that's done so well for us and now that things have changed we need to move back in again so you've got to shuffle before the end of the period and then shuffle at the beginning of the period and And then because it's such a big shuffle, it takes a few days and then you've got a holiday.

2:37And then here we are Monday. And what do you know? Monday, or at least 15 or so minutes ago, was looking like the good old days of all those AI and bubbly shares going up a lot. So I think that that's what you saw. And it's really exacerbated by Samsung in South Korea. The South Korean market has gone so wild. And if you're an international fund that follows the MSCI, for example, I mean, you're going to have a bent portfolio. It's going to be all over the place because you can't really have exposure to South Korea over the last six months and end up with a sensible return. I mean, it's a great return.

3:24but you know when a market does that i mean it's going to make your portfolio diversification look a bit strange well strange it's going to look wrong it's going to look dangerous so you know when you have markets moving in these ways and you get these big technical maneuvers because you know most um funds institutions they're not speculators they are buyers and sellers of risk and you know when things go well they like it but really they're not there to incredibly outperform they're there to kind of you know track everybody else and a bubble presents them with with lots of problems that we wouldn't consider problems but you know they go to work in the morning go home at night they're they're they're not as speculators they're they're journeymen and i think what we saw up until today is all about that.

4:19And now we're on again at the beginning of a new year, a new month, a new quarter, a new half. So we should, if I'm right, because I could be completely wrong about this, but it seems to be panning out. We should get back onto that slope, that rise that we've been getting for a few months. Because I don't think we are in, we have had a dot-com crash moment. I think it's more like 97 or maybe 98. And, you know, with that, I remember I was there. I made huge fortunes in the dot-com and lost them again. I bought the T-shirt, opened a hamburger stall in the dot-com. So, you know, I feel that there's a reflection of the dot-com going on, but we're not in 2000.

5:06We're in a couple of years beforehand. And we are in a bubble, and it will behave like the dot-com, and there will be a lot of money to be made and a lot of money to be lost and a lot of crying and gnashing of teeth when the crash does come. But if you know you're in a bubble, then you can ride it as long as you don't believe that it's going to go on forever like the gold and silver people did a few months ago. You can get out near the top. You don't have to get out at the top. You don't even have to get out halfway up really to do extremely well. so you know i my strategy i long-term plan is is to try to navigate the volatility of this technical bubble that we're in that will probably go on for another 16 months because i said 18 months two months ago so that means it's 16 but you know a year or two and you know if you can ride that bubble successfully, there's very, very good returns to be had.

6:07So what would you say to your average retail investor? What would you share with them about your process? Like what are you looking at along the way to make sure you're staying, I guess, in good stead with your portfolio? What are you looking at? What are you watching? You should never have anything that you're not comfortable with ever. So if you ever get uncomfortable with something, you should, you know, lower that risk, lower that exposure until you're not uncomfortable with it anymore. And, you know, somebody... Is there an example, sorry to interrupt you, but is there an example of that for you recently?

6:44Well, you see, my, you said the average retail investor, not me. Fair enough. Touche. Touche. and you know i'm a little bit um hardened as we just seasoned as they would say um and so but in a blunt manner you know when i was writing about gold taking off around 2000 just before it took off and when i was saying it's going to go to three and a half and then five and a half and i was tempted by eight it got to a a state where i went i've had enough of this i'm out now for some people that might be i'm getting uneasy with this i'll just lower my exposure to it and you know if if you are not comfortable with your positions you should always lower your exposure to you're comfortable with them and if you don't have a diversified portfolio of risk you're in trouble so the first thing a a normal investor should do is ask themselves do i have a diversified portfolio of risk.

7:51And if they don't know, they should do research to find out what that is and make sure that they, it's not a hurry really to do it, but make sure they're on the pathway towards having a diversified portfolio of risk. I mean, back in the day, people would ask me, how do I get into the markets? I would say, well, you know, and buy a share and then buy another one and then buy another one. And if you make a profit on one and you sell it, you know, buy another one. Don't buy more. Just keep buying shares until you have enough of them that you have a diversified portfolio of shares, which is probably minimum 15, 20 is getting comfortable.

8:30And I would say 30 to 40. Yeah. So if you're on the road to diversification, in a sense, you are diversified in the same way as card counting in blackjack. as long as you do it properly, the profit is in the ether until it suddenly turns into chips. But because you're playing properly, you will get that. And because you're investing properly, you will get there and you will get that return. And those returns will be bumpy on the way there until you are diversified. And then it will be much smoother and much easier. I mean, it's really hard to start investing. There's so much entropy and there's so much inertia that it takes to get to have a nice portfolio, the decent amount of money in it, to have learned enough lessons to be comfortable with throwing large sums around.

9:22Because for most people, a couple of thousand dollars is a large sum. And really, you're working towards a situation where someday you've got 20 or 30 stocks at$10 ,000 or$20 ,000. Well, for most people, that's unimaginably large amounts of money. and an unimaginably large amount of exposure to a crazy, unpredictable thing that they don't know much about, which is one of the reasons why it's a long-term gain and why you should always build slowly towards it and why you should always be comfortable with where you are. Because, you know, that is the way that you make money is by having a good, comfortable portfolio and having built up over, say, 10 years, which will sound ridiculous to young people, 10 years, built up a toolkit of skill, which then will serve you well all the way to old crumbliness like me.

10:15Would you say that the average retail investor gets trapped in the thinking of, I want a huge payoff with one or two stocks? Do you feel like that's one of the biggest kind of challenges for them? It is a trap that many fall into. And many people enter the whole game like a gambler. So they've already got a gambler's mindset. They already think of it in terms of gambling. They already think of it in terms of winning. They already think of it in terms of, they already have a bag of magical thinking. And, you know, that is, it's very difficult to get out of that mindset and very costly because a large part of the market makes its money out of those sort of people.

10:57You don't have to go very far until you bump into people that are trying to basically scam gamblers out of their money. And, you know, scamming gamblers out of their money is a game that you can see all over the place. I mean, you know, casinos are packed with people throwing their money away. I mean, I don't understand that. Why would you throw all that hard-earned money away? But people do that. And if you go into it like a gambler, or treat you like a gambler, and you lose money, and if you go into it like a farmer, and you're trying to build up a crop, It will give you a crop. So, but it's, people would say, why would it do that?

11:35That's so boring. And yeah, yeah, it is. I mean, good investing tends to be boring. And the less boring it is, probably the further away you're getting from the ability to get good returns. So what would you say to somebody that's more plain in your area of interest and of skillset and of experience? What would you say to like a more experienced, savvy investor? I probably wouldn't have to say much because they've probably got their system already worked out and they're comfortable with it. And they'll be getting their 10, 12 percent. And maybe they would like more, but maybe it just doesn't suit the way that they go about things.

12:17Maybe they don't have time. I mean, it's a pretty time intensive thing if you really want to go for the inverted commas big returns. And in my research, I think there's a natural limit to long-term returns. And that's about 25 % on average. If you go much or try to get much more than that, you will come unstuck. There's like a cliff. And that cliff edge is in the top 20s. So if you were pushing for 35%, you would probably lose your money quite fast. if you're pushing for 30 % and you're highly skilled, you'd probably still lose. If you're pushing for 25%, you're incredibly skilled, you can pull it off.

13:01Yeah. And, and you can see that if you look around, you can see the greats pull in 25 % a year. And what you have to realize, you compound 25%, you know, over 10 years, that takes a thousand bucks to 10 ,000 bucks. So you'll get 10 X at 25 % compound. And when you look around the world, there ain't many people that get 10x every 10 years from their portfolio. There's some out there. And, you know, Buffett, for example. So if you take 25 % as an absolute maximum and wind it back to something that's tremendous, like 10 or 12%, then you see that the game is a long-term game and not a short-term game.

13:43Yes, occasionally you can get an Intel at 20 bucks and it goes to 120. And you can call it exactly right. but you know that's once every five or six years you can't have your money there applied at that sort of rate um for very long it's very difficult i mean obviously if you've got crystal ball and and you knew about nvidia in 1990x which i did i actually worked with nvidia in the 90s and they were great companies even then they're a great company did i buy the stock no did i ever buy a stock no so you can even work with great companies and completely miss the opportunity and yeah i mean i've i've got a garage full of n video equipment because i was early in crypto and i was using their gpus to mine things like ethereum and and other things did i did i see ai coming yes did i did i buy their stock no did i think it was going to be as big as it is today no yeah i thought hey why don't you sell me some more gpus so i can mine crypto what are you doing because they basically cut off the crypto boys they said no we don't want you as customers no no no we want computer gamers and ai is a thing you know so there i was staring it in the face completely missed it so you know that that's just the way that this this market works is that you You can't expect to get those things in any other way than by accident.

15:09And then, you know, you triple your money, you sell, and the blooming thing goes up another 30 times. So sensible, if you chase those sort of things, you'll have a very hard time. But if you chase reasonable returns, 10 % is pretty good. 15%, you're really good. 25%, you are a master. Yeah. So that's why I think sensible investors should think about. And therefore, for somebody starting out, the best thing to do is just buy the index, just pour money every month, a little bit in every month, and then buy the index. And then think about breaking off part of that money in the index and maybe putting it in sector ETFs.

15:56and then as you get to understand them better and you learn more you go oh i like that sector that's done well for me oh let me see what's in that etf oh that stock i know that stock i bought them on amazon and they were really good their gadget oh i'll have some of those and then you break it down into single stocks and that's a way that you can ease yourself in because you know most people that there's there's something that they call the cat and the stove dynamic which is If a cat jumps on a hot stove, it never jumps back up on it ever again. So you start to invest, you do it all wrong, you take a loss, a couple of thousand dollars, and that's it, you never go back.

16:34And you miss the opportunity to build up real wealth because you did it, you kicked off on the wrong foot. Are you somebody that looks a lot at technicals in general and at this point? I do, but over the years of using technicals, it's sort of like burnt into my brain. I look at a chart and go, oh, look at that. Oh, that's great, that one. I love that. And if you use other people's methods in charts, you probably won't get very far because all the quants in all of America and all the rest of the world in those black towers of geniuses are pouring through all that data. So you really have to build up your own neural network.

17:16I mean, I make this joke, but it's a very good joke, and it's a very valuable one, which is charts are very good at predicting the past. Yeah. And that sounds like a joke, and it's meant to be. But actually, if you take the idea and say, what happened? You look at a chart and say, what happened? What happened here? What happened there? What happened here? What happened there? It will unroll the story. Well, that's very good information. and occasionally particularly with very large issues like commodities you can see things building up so it was very very obvious in my in my technical analysis brain which has been you know built actually i used to look at stock charts when i was like 10 they were commodity charts back then and that is a long time ago so you know i have had a long time to build up my neural network.

18:10But you look at gold and you go, oh, that's one of them that is. Oh, that's going to break out. Oh, wow. Okay. So if it goes there, I'm going to jump in on that one. It's not easy to learn that. You just have to look at millions of charts. And quite often I say to people, oh, here's a chart. Isn't that brilliant? And they go, what are you looking at? I go, that. Can't you see that? I go, no, I can't see that. Can't see it at all. So you have to just look at lots of charts, read them, read the past, and look for the obvious. I have this joke that I say on my substack that I do my charts in Crayola.

18:45And it's the same with all my stuff on Forbes. And I've been ridiculously right the last couple of years. It's like, you know, you couldn't really make up how right I've been. It's all there on Forbes. You can see it's all dated. And you look at my charts, they look like a five-year-old's done them. I go, it's going that way. And it is It's going that way. It's a straight line. I mean, look at the S &P right now and go back 10 years. It's just going straight up in a straight line. It's like, what do you need to know? It's just going up in a straight line. Well, something's going on to make it do that.

19:16And, you know, there it is. So I think anybody that can look at charts and see the blooming obvious, they're in good shape. The moment they start drawing 17 lines and pitchforks and Fibonaccis and all that good malarkey, you know, oh, it's the fifth wave of the fourth cycle. You're getting trouble doing that. But if you look at it and you go, well, that's obvious what that's doing, then that's a good starting place to start your other research. And I look at financials quite a lot, and that keeps me out of trouble. So, you know, you look at these companies with 30 times sales, and you go, what is 30 times sales?

19:55How did that happen? SpaceX, 100 times sales. oh yeah wow okay so they've got the universe um as their market uh it could happen so you know if you look at the numbers and so few people do that will give you a great advantage because so few people are looking at the numbers and i'm always suspicious of the words i'm i'm not a fan of words i like numbers i look at the numbers i look at the history of how it's behaved and how it's gone. You know, hey, I'm going to look at the chart over 20 years. It goes like that. Oh, you know, keep it simple. If you keep this stuff simple, you'll be in good shape.

20:37The more complicated it gets, the more words they throw at you, the more you want to run away screaming. So for charts, you're basically just like looking at the basics, the trend lines and relative strength indicator, and you're not... No, even more basic than that. Even more basic than that relative relative strength what's that then you know is it going up or is it going down i mean i always ask that question i look at that child and say which direction is it going well i can't tell it keeps going you know all over the place i can't see which way that's going so it's not going anywhere is it oh that one's going that way or it's going that way yeah and after time you pick up oh it's doing that it's doing that and then oh it's done that oh that I've seen that before.

21:19Oh, look at that. It's going that way now. So you pick up these little signals because you see it over and over and over and over and over again. If you back it up, and most people will suddenly, the color will drain from their face. If you study a bit of mass, proper mass, and there are places where you can learn proper mass, you'll get a lot of insight into stocks. And hardly anybody's looking at that. Hardly anybody's looking at that. So, you know, you're in good shape. if you get you know it's study it's a skill game study the skill game build up your own toolbox of ideas and away you go i mean i wrote a best-selling financial book oh it's nearly 10 nearly 20 years ago now um it's it's selling well at the moment actually which is rather nice after all those years i'm called 101 ways to pick stock market winners and the idea was you have a little idea and you write it down and there's your little tick and then you have another idea and there's another tick so when you look at a stock you look at see if it fits any of those tick boxes and if so you can mark it out of 10 if you want to i mean chat gpt would do that for you these days and and you just score everything so you have right these are five things i'm going to look at do i like the chart do i like the directors do i like the the dividend do i like the um pe do i like the whatever do i like this and you just mark it out of 10 add it all up do 20 shares a month and buy the one that has the best score for example dead simple dead dead dead simple but of course it's work some people don't like work and you know people want to be told they they want me to tell them to buy a share and or this is a really good one and it's like no it's how you think about that share i did a video on my uk uh youtube channel on friday about um easy jet saying that this one was going to be it was cheap stock 9pe i mean 9pe had a dividend a dividend yeah and was a fantastic company i fly with them all the time and that this was going to get a takeover you know highly likely at that sort of valuation i'd buy them if i if someone lent me 10 billion i'd buy them at 9pe who wouldn't so anyway monday morning bob's your uncle a six pound 90 takeover it was five pound 90 when i did my article um you know a few days ago so you know but if you look at the numbers and you and and you've got a head for the numbers less than 10 p you know that's a classic value filter right there dividend well you can sit around and get a two and a half percent dividend the head falls off that's nice and it's a great business so that's like i don't know what number that is if you really really like a company you think they're really, really well run, look at the business and see if you want to own some shares.

24:08I think that's a Warren Buffettism. Yeah. So you've got all these little tick boxes, blah, blah, blah, blah, blah. And away you go. And you'll get, you'll have 20 shares, 10 will sit around doing nothing, five will go bust and five will go through the roof and, and, you know, more makeup for the other ones. And you'll make 10, 15 on your portfolio every year and you get dividends. I mean, you know, the simpler it is, the better for investors, particularly, you know, starters or people that haven't got the time or haven't got, haven't had the experience. And I'm always, I'm always a big fan of saying narrative, don't believe the narrative, only believe the numbers.

24:52Are you yourself in ETFs as well as stocks? I never used to be, but these days I've got a soft spot for them. There's two reasons. One is, I mean, the one that I like to say whoop-dee-doo about at the moment, because I'm doing some work in rare earth, and there's a lot of rare earth people out there. But, you know, and I have picked one that I really like, but I'm in the Sprott X China Rare Earth ETF, because they've done all the research for me, and they've given me a diversified portfolio of rare earth risk in a nice little wrapper. It's cheap as chips. It's a new thing. It's exactly what I want.

25:29And if I really want to get, you know, sexy about it, I can just go to their website and look at all the ones that they've picked and go and research each one of them. Not that I have to because I know them all, maybe, but I can research them all and then pick within the ETF. And there's certain things that are quite difficult to get hold of. I mean, it's quite nice. a silver etf was was very nice because there wasn't that many silver companies out there it was quite hard to get hold of it and uh you know gold physical etf that's that's a nice thing it saves you having a sock full of bullion or um i mean i with gold um which was very good good to me um end of last year in the beginning of this you know you have physical involved of all you have an ETF, you have some gold miners, you know, you have a diversified portfolio of your gold as well.

26:21So diversification, you cannot beat diversification. And anybody that tells you that diversification is a bad thing, you should be very suspicious. And in fact, that's the only bone I've got to pick with Buffett. He says, oh, diversification, no, concentration is the way to go. And there's a guy with 40 shares in his portfolio. You look at the, yeah, you look at Buffett's company, it's got a wide, wide portfolio of risk. I mean, Berkshire Hathaway is not a focus company. It's not only is it a conglomerate, one of the few left, it's actual investments. It's a lot of companies in that investment.

26:59And again, what a good idea. Just go and get the list of shares that he owns and pick the ones out you like. I mean, why does your world have to be any more difficult than that? In terms of the gold ETFs, are you saying that like GLD and GDS and maybe GDXJ are a nice diversification within that ETF world, or you're saying GLD is a nice way to just be exposed? I held GLD, if memory serves me right, just because it was convenient. And you go like, oh, you know, I want to buy 100 kilos of gold. Clickety-click, you got it. I mean, you know, buy 100 kilos of gold, physical, actual physicals. Well, actually, you can buy that through vaults.

27:40if you've you know if you've got your life organized so you can do it you can do it but if you wanted to buy gold in the next 10 minutes it's a great way of doing it convenience is is huge and the cost is is little and when you've when you're starting to sweat because it went up 200 that day you can go click and it's gone and that execution is incredibly important i mean i was trying to tell silver people and they thought i was mad and they hated me get your silver channel to sell organized now and i think it was about you know 60 an ounce at the time get your exit organized it doesn't mean you have to exit but make sure you've got an exit and of course when it went over 100 they couldn't sell because nobody wanted to buy it because they were frightened that they'd buy all this physical silver and then the price would collapse and they'd be stuck with it so they said no no don't want it no i'll give you a 30 discount there wasn't the liquidity in the physical silver market i go to a store and buy it hey we've got plenty yay here's the price oh you want to sell it now oh all of a sudden nobody wants it anymore you know you have to have your exit worked out it's the same it's the same with with dealing platforms i mean make sure your dealing platform is going to work when the market goes wild i mean how many times have we seen the market go wild and all of a sudden random broker doesn't work anymore yeah and they say oh it's conspiracy it's complete no it's not it's because there's too many people trying to do it at the same time it's that's a that's as bug as bug that's as old as the hills i remember when i was selling because of covid before anybody knew about covid oh man it was so hard to get out because a few people had worked out that covid was the day after tomorrow and they were all bailing out and and everybody was melting that day Now, it got way worse, but because I had the platforms necessary, I actually managed to exit before the roof came in.

29:40But if you hadn't got the wherewithal, if you hadn't got the platforms to do so, you're stuck. I'm sorry, this platform is not operating. So, you know, there are a lot of hidden pitfalls out there. but etfs i mean i'm sure that everything has hidden risk but etfs by good etf providers are very convenient very oh i'm i'm getting out of that now bang gone i love that i love to be i mean i i won't these days going into any stock that i can't sell with one click i mean maybe maybe i mean i bought some crazy stock um year before last that was a a silicon one of the last uk silicon companies and it was like 7p in fact i i told my my subscribers about it went straight to 50 but i was desperately trying to get out 20 it was difficult i go why did i bought well i made a lot of money but i don't want to bother with that i don't want to have this position that takes me all morning to get out that's no that's no fun when i bailed out of my um intel pushed off the cliff by Mr.

30:52Trump and his craziness, you know, a lot of intel, gone, just like that. That's what, I like that. I love that. That's what I need. I don't want to be three hours later trying to get out of it, which is one of the really good things about the American market is the liquidity is tremendous. I love that. And you can have spicy positions in size and get out in minutes. And that is so important. And investors should never forget about that getting out can be an issue in instances. As the silver people found out with their silver coins, they had got all their doubloons. And when they came to cash them in for some fear that they hated, they couldn't get the fear and they got stuck with it.

31:34So they didn't get 120, they got 80 or whatever it was. And they ended up not being able to sell them at all and then giving up on it. So liquidity is incredibly important and most people underestimate that. Any interest in sharing that rare earth name that you're interested in? Yeah, Neo Performance Minerals. Or was it Metals? I always get the last name wrong. And they used to be part of Mountain Pass. Back in the day when Mountain Pass was trying to be Mountain Pass, they had a processing company and then the Chinese went, no, no, we don't want you doing any rare earth. We're going to undercut you until you go broke and nobody's going to care because we can just put you out of business.

32:10And the Chinese put mountain pass out of business. Now, when it went to chapter 11 and came out, it was split into two pieces, neo-magna quench, as it was called then, and mountain pass. And now mountain pass obviously had been kind of not bought by the government, but certainly government owns a chunk of it. And the processing part, which is now neo-performance, I've got metals, neo-performance metals, I'm pretty sure. Materials, I think, materials. There you go. I knew it was an M.

32:41And Canadian. Oh, it's N-O-P-M-F and the pink sheets. Oh, okay. Yeah, pink sheets. But yeah, Toronto. And they've been very good to me. And they're a classic because what people haven't yet worked out, and this applies actually quite a lot to AI in a different way, is the pinch point is not the mineral, although it has been. But when they've got all the minerals it'll be the processing and that's where i live in the processing i'm building a factory in india right now with my team to do just that and that is the pinch point because china uses an acid process i mean neo is a magnet maker and and that's another pinch point so you've got the mineral you've got the making it into metal and then you've got the metal into magnets that's the full stack and and neo is is positioned there and and that was the one that i I mean, I got the ETF because it's got everybody in there.

33:36And then I picked that one out. And, you know, I bumped into the mega people and know what they're doing. Been doing it for a long time. So, you know, that's what I like. I don't like people that are a bit fresh. So anyway, I've shared it with you now. I appreciate that. I appreciate that. So you would say the Canadian version, not the U.S. listed version. Well, let me go look up what exactly I've got so I don't get anything wrong. Yeah, NIO on the TSX. Do you want to say a word about what you don't like about pink sheets, why you wouldn't get into that? Pixie's all right, but, you know, I used to run Investors Hub in the US and they specialized in all that wild, wild, wild game.