Why This Week Is Critical for the Market
Editor's note: We were thrilled to welcome Greg Diamond to the Stansberry Research family last year.
This weekend, we'd like you to get to know him a little better.
In today's Masters Series – the conclusion of an exclusive two-part interview – Greg explains why we're approaching a key inflection point for the stock market... why we have to launch his product as soon as possible... and the type of person who's right for his brand-new trading service...
Why This Week Is Critical for the Market
An interview with Greg Diamond, editor, Ten Stock Trader
Sam Latter: Many of our readers have mixed feelings when it comes to hedge funds. They think of The Wolf of Wall Street, greed, backstabbing, and lies. Why is your background in hedge-fund trading a positive?
Greg Diamond: Hedge funds are paid based on their pure performance above a certain benchmark. The reason many hedge-fund managers are so rich is because they charge incredibly high fees – generally "2 and 20," or 2% of assets under management and 20% of performance.
That means if you had a million-dollar portfolio earning 10% a year, you'd have to fork over $40,000 to us in fees every year.
These hedge funds can justify those fees because they have decades of experience and access to incredible amounts of information. They also have access to leverage and liquidity, which allows them to take $1 million and turn it into $100 million when they're right.
But with my brand-new publication Ten Stock Trader, you're going to be able to use my trading expertise to get access to my trades without getting charged 2 and 20. In other words, you get all of the hedge-fund-caliber research while only paying a minuscule fraction of the fees.
Sam: I know these things move quickly, but can you share a chart setup you're keeping a close eye on in the market today?
Greg: The main setup I'm looking at right now goes back to our conversation earlier about time cycles.
Back in January, I told Stansberry NewsWire readers about an important cycle that comes around every nine years and was coming up in March.
We saw a short-term bottom in stocks in March 1982 that led to a double-digit rally and eventually a meteoric rise in stocks that ended in March 1991. The market traded sideways before another huge rise that culminated with the peak of the tech-stock bubble in March 2000. Nine years later, the market bottomed out during the Great Recession in March 2009. And we've seen an historic bull market over the past nine years.
Based on history, I knew that this past March was going to be a seriously volatile period for the market. And over the period of 10 trading days last month, the S&P 500 fell more than 7%, a huge move for a major market index. As I told readers in mid-March, at the very least, volatility would continue from then until May.
Sam: Why was it important to launch Ten Stock Trader now, rather than later this year or even next year?
Greg: For one, we're fast approaching the end of that time cycle and some key inflection points in the market.
There's no way for me to tell what the catalyst will be. If I had to take a guess, it would be an end to the trade-war negotiations. But I'm not concerned with the why, I'm concerned with the what and when... meaning what prices are going to do and when.
Based upon history, I think by next week, the markets will reach a critical point. I'm not so concerned with whether the market will go up or down. I'm focused on how to trade what the market gives us. We'll take advantage of and profit from market volatility.
That's the key to risk management. You can find a high-quality company with a great balance sheet, and shares could still pull back sharply in a market-wide correction. A lot of people don't realize this and lose a fortune in the market.
When we reach these moments in the market, we tend to see the market make extreme moves in one direction or the other. That gives us a chance to hit some home runs.
But also, we wanted to launch Ten Stock Trader now because we really want to spend the next few months gathering reader feedback on the product. We want to make sure people who sign up as beta testers are understanding what they're reading and are learning a lot. We want it to be a fairly interactive experience, with a lot of conversation between the readers and me.
Sam: What are some of your goals with Ten Stock Trader?
Greg: Well, the No. 1 goal is to provide alpha. Alpha is essentially performance compared against a benchmark index. And while we may not compare our returns directly to a specific benchmark, it's important for us to know how we're performing against the overall market.
I also want people to look at the market in a different way by using technical trading. I really want readers to recognize the importance of price and time with regards to the markets. It doesn't matter why you buy an asset. All that matters is when you buy it, what you pay for it, and when you sell it. Because ultimately, the only thing that matters is whether you make money.
Sam: For folks who are on the fence, wondering if this product is right for them, what kind of commitment does it take to follow your trades?
Greg: Let me be clear: This isn't for people who log into their brokerage accounts once a month.
We'll be trading options and buying leveraged exchange-traded funds and high-beta stocks – companies like Netflix (NFLX), the Internet-streaming company. That's where we'll get our alpha. We'll do a lot of short-term and momentum trading. People who sign up for the service should be interested in actively trading rather than buying and holding stocks for the long term.
I'm limiting our model portfolio to a maximum of 10 positions. We expect to make one to two trades a week. We'll keep a close eye on what's going on in stocks, precious metals, bonds, interest rates, commodities, and currencies. Remember, these assets are correlated depending on what macroeconomic environment we're in.
Ultimately, I'm going to run this portfolio like a global macro hedge-fund trader would. I'll always have a core view about stocks, bonds, precious metals, and the whole global macroeconomic environment.
But Ten Stock Trader is designed for everyday investors. You don't have to have a million-dollar portfolio. You can get by with $25,000 to $50,000 dedicated to this strategy. You simply have to have the time and patience to follow the trades, and an interest in learning more about what moves the market.
Sam: You mentioned earlier that you'll be incorporating options into your trading strategy. Longtime readers know that options can be a way to "juice" your returns in the market. Are you going to be swinging for the fences on every trade you recommend?
Greg: Actually, it's the exact opposite. A lot of investors have a negative connotation associated with options. They think they're dangerous and that they can blow up your brokerage account. And it's true that used in the wrong way, options can be dangerous.
The opposite is also true. We'll certainly look for potential home runs when we trade – setups where we can return 100%, 200%, even 500%. But we're also going to use options to hit "singles" in the market over and over again. It's a way to protect ourselves, but it also gives us the chance to pocket outsized gains.
As we were preparing to launch Ten Stock Trader, I wrote up a sample recommendation for an internal audience – basically "paper trading." I recommended making a trade on the Volatility Index (or "VIX"). It was a 2.5% position, and we ended up making 70% in 17 days. I saw the time cycle setting up and told the audience to make the trade. On a $2,500 position, readers would have made a $1,700 profit on that hypothetical trade.
Sam: I would imagine Ten Stock Trader is going to be a pretty high-end product. What will it cost?
Greg: I convinced Stansberry Research to let me beta test this service before we fully launch it. I wanted to show people the power of trading like a hedge-fund manager.
Because of that, we're making an incredible deal for folks who take us up on this offer. Ultimately, we're expecting to charge $1,000 a month for this product.
At the hedge fund I worked at, our clients paid hundreds of thousands of dollars in fees alone with our trades. But folks who sign up for our beta testing will get a full year of research for just $1,500. Porter wants to charge $1,000 a month when this product is fully launched down the road. That would mean folks who sign up now would get 85% off what we may eventually charge subscribers. It's an incredible deal.
Sam: Is there anything else you wanted to add?
Greg: As I mentioned earlier, I've worked at one of the top hedge funds in the world and one of the biggest pension funds in the country. I have years of experience trading across all kinds of different asset classes.
Before I worked at Stansberry Research, I was working at an investment bank. My desk happened to be right next to Scott Garliss. When he joined Stansberry Research and launched the Stansberry NewsWire, he recruited me here, and the rest is history.
Every day I come to work, I'm impressed by the people in this office. I've worked with some brilliant people over the years. But I'm continually amazed by Porter, Doc Eifrig, and Steve Sjuggerud. They are some of the most brilliant people and best stock-pickers I've ever met.
It all circles back to using that experience to help people... With Ten Stock Trader, I'm looking forward to sharing my expertise in a different way than most of our subscribers are used to reading about, and educating them along the way.
Sam: That's great. Thanks for chatting with us today, Greg.
Greg: Absolutely.
Editor's note: We aren't the only ones who were blown away by Greg's impressive professional background. Our colleague Steve Sjuggerud tells us that Greg's hedge fund was "as good as it gets" when it comes to technical trading. "Right away, he started sharing his insights and methods with my young team," Steve writes. "You are in good hands with Greg." To learn more about this brand-new product – and how to become a beta tester for an 85% discount to what we expect to charge others in the future – click here.