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Yahoo Finance Uncut: Michele Schneider, Marketgauge.com Partner

Yahoo Finance's Jared Blikre sits down with Marketgauge.com Partner and Director of Trading Research & Education, Michele Schneider, to discuss inflation, investing in the stock market, and Michele’s experience as a commodities trader in New York City.

Video Transcript

[MUSIC PLAYING]

JARED BLIKRE: Welcome to "Yahoo Finance Uncut." This is our second edition, and I want to introduce a very special guest today, Michele Schneider. She is the MarketGauge partner. And Mich, we've had a chance to do some webinars in the past, we've done several segments on live. This is a tape program here.

But we got some data couple of weeks ago or recently, and I just wanted to get your overall assessment of where we are in the market. Very hot inflation print, we have the consumer sentiment, the lowest reading that we've had in history actually. 40-year inflation high. How are you making sense of this in the markets right now?

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MICHELE SCHNEIDER: Well, none of this is coming as a big surprise to us. We anticipated this would happen over the last couple of years. Because we have the perfect storm really coming to this point starting with almost 40 years of accommodative Fed policy, tax cuts that happened, under production of lots of raw materials because the costs were so cheap they wanted to try to create some level of supply demand balance.

And then put all of that together along with overvaluations, high PEs at historical highs based on really basically a lot of corporate buybacks and not some real growth. The tech sector leading, of course, which made sense at the time. But even that wasn't really representing the inside sectors of the US economy. They were not really participating in the growth that tech was seeing, and it's not enough to carry the weight for the US economy.

Trade deficits widening, while we are getting more dependent on importing goods that are cheaper than we are exporting. I mean, it just goes on and on and on. And then when you get to that point, it was a bubble waiting to happen. And what happened? COVID certainly created that bubble with all of a sudden, everything stopping in production completely, the labor force declining.

And then when people came out of COVID, of course, that incredible demand along with supply chain issues. Then add on top of that the Ukraine-Russian war, and voila, here we are. Years and years of printing money, years and years of bloated valuations, and years and years of under production and here we are, at this crazy consumer confidence at all time lows and inflation at 40 year highs.

JARED BLIKRE: And I know you've been hammering the gold message for a while now and some other trades, and they've picked up. They perked up. I guess the market participants finally realizing that inflation has costs, and the Fed may not be able to fight it. We're already seeing 50-basis-point hikes expected for the next three meetings, possibly 75. We're in the midst of quantitative tightening where the Fed is shrinking its balance sheet. So how does all this fit together with the way you're looking at the markets? And in addition to gold, you can go anywhere you want with this.

MICHELE SCHNEIDER: So there's so many points there. So let me see if I can think of this in a linear fashion. So let's start with the fact that the Fed as we all know are about two years behind the eight ball in terms of raising the rates. They should have been doing it actually during the Trump administration. But we knew that that was not something that he was going to allow to happen.

He was very vocal about that with Powell that let's keep everything great because it was all about the returns of the stock market. But meanwhile, they missed this great opportunity. They started in 2018 if you remember. They hinted at it, and then we had that taper tantrum, and they reversed course. So there's that.

And so that brings us to now, the fact that they're raising now. Is this a 1980 event like what Volcker did? No, it's very different. The inflation is very different than it was back then. The economy is in a different place than it was back then. And so here we have it right now. And we'll get back to gold in a minute because it kind of all ties in.

But essentially right now, the type of inflation we have is a supply-side-driven inflation. There is not enough supply. There's not enough supply of food. And as what we've discovered recently, there's not enough supply side of petrol. Even though one would think that there's plenty of oil around, the reserves have actually gone down about 35%. Back in the '70s, the embargo was a manipulation by OPEC. But actually, there was plenty of oil.

So that was a big difference there. Inflation was sparked after that for similar reasons, also accommodative Fed policy at that point. But right now, what's happened with this type of unique supply side inflation is that if the Fed continues to raise rates, it doesn't necessarily solve the supply side crisis.

All it does is pinch the consumer, pinch the economy even further, and doesn't necessarily do anything about the high inflation that we're going to have with goods that are just scarce, that will take time to come back into play. You just don't grow crops like, oh, OK, tomorrow I want to grow fields and fields of corn and wheat and soybeans and they are. No, it takes time. And the softs.

And the same thing even with the minors. This whole mining has calmed down so much, there aren't that many metals around like there were at a time when demand for metals will continue to rise because they're very much used even in electric cars and alternative energy. So this is different than the '70s. That's why the Fed right now, they have really deep problems because they can raise and raise and raise and drive us into a recession, maybe depression, but they may not resolve inflation for years.

JARED BLIKRE: Well, and that's what it kind of seems to me. It seems like market participants are just kind of waiting for the Fed to blink. And the Fed has given no indication that it is going to blink, and we're expecting 50 basis points, as I said, down probably through at least September. And I'm just wondering when people take stock of their portfolios, now, I think most retail traders have had a very bad not only this year, but also last year.

The S&P was up something close to 30% on the total return basis, but most of the new traders were trading on the retail fad that was GameStop, and we know how that ended. So I think the average Robinhood account is now about $240. At its peak, it was $1,000. So basically, 75% of retail traders at Robinhood, 75% of the account has been lost. And that's an average.

And it just really makes me think that the retail trader, whether they're new or an experienced investor, is facing a new paradigm. So what can they do to really understand and buckle down in this new, what you think and what I think, I happen to agree with you, is going to be a high inflation period for some period of time, possibly the end of the decade.

MICHELE SCHNEIDER: Exactly. Well, again, you know, what's so interesting about history when they say that cliche that it repeats itself, sometimes it just looks a little bit different, that's so true in this case. So let's go back to that period of time when inflation was hot 40 years ago. And at that point by the way, everybody was in the market at the commodities market at that point. People were buying gold and silver. People were buying copper.

They were buying softs, sugar, coffee, everything grains. Everything was going up during that inflationary period, and it was get to the point where the retail investors were piling in to buy commodities. And I know this because when you would just go around New York at the time, you kind of had the slogan is that when the orange juice vendor tells you it's time to buy gold, you know maybe we're near the top. But the bigger point--

JARED BLIKRE: So Kennedy, I think, the shoeshine boy.

MICHELE SCHNEIDER: The shoeshine boy. That also was the orange juice vendor, because back then, you could go on the street and buy it. Not so much anymore. But anyway. So the point being though, is that when you start to get-- if we take that, that was commodities. Now if we take it to present time and it was equities. All you had to do was buy, buy, buy, buy, buy, buy, buy, buy every dip and you weren't going to make money.

And so what happens is the retail investor gets seduced by this falsehood that it's easy. And we know Jared because we've been around, it's not so easy. So what happened was after 1980, we went into this big double dip recession, lots of people lost lots of money. And then, of course, things started to come back.

And things came back, and people that survived that were the people who actually got an education. And so that's why I cannot stress enough how important it is to take this opportunity to learn. And there's so much more available now to learn than there was back then because we have social media, we have YouTube, we have all these different ways.

JARED BLIKRE: Yahoo Finance.

MICHELE SCHNEIDER: Yeah, we have you and me. So if you really want to stay in the game then-- I mean, you know, I just want to say one other thing. And I still haven't mentioned gold. But we'll get back to that.

JARED BLIKRE: We'll get back to gold.

MICHELE SCHNEIDER: You know, I go on media a lot as you know. And I have to say and I'm going to try to say this in the most tactful way possible, but these financial planners and these people that work for these large investment firms are not your friend. Because I hear them go on-- and when I say you, I mean you the retail investor-- I hear them go on.

Sometimes they're sitting right next to me, and I literally have to sit there and stop myself from making some kind of bizarre facial expression or actually blurt out or do something like this because what they're telling you is that, A, 60-40, which we know doesn't work in terms of the passive investor is the formula. And number two is through this whole thing they've all been saying, just buy the good companies with the good balance sheets and you can't go wrong.

And as you can see, Apple is going very wrong right now as is Amazon and Microsoft and Google and all the big players. So what I'm saying is that if that's what you believe as a retail investor is the words of these people that only get paid by the way, if you stay in the fund and if you buy more, then you really are being misled. And I think it's incredibly irresponsible. So the best people to learn from are the people who actually trade for a living.

JARED BLIKRE: Couldn't agree with you more.

MICHELE SCHNEIDER: Right. Right. Right. Not invest long term, but trade.

JARED BLIKRE: Yeah, because when you trade-- and this doesn't necessarily-- I think only trading really gives you a feel for the market. You can have a feel for the market if you're an economist. But when you're forced to look at your P&L minute by minute or at least day by a day, defend your thesis every single day after the closing bell, do your homework, and these are the things that professionals do.

And by the way, for retail investors, if you're trading, that's your competition because on a short term basis, it is kind of a zero sum game. Not necessarily long term but short term. So I want to get to gold, and I want to get to commodities. And this is in the theme that we've been talking about, 60-40 doesn't work.

If you're in a target fund-- my personal target fund I was shocked to learn in April that over five months, it had lost 8%. So I just yanked it. I'm going to be honest, I don't talk my positions. I'm going to manage it myself, and I am managing it myself. I'm not going to say what I'm doing, but I'm taking matters into my own hands here. It was one of my smaller accounts.

So what does an investor do getting into the market knowing that 60-40 doesn't work, seeing some of these commodity plays as well? Because alternative investments do very well at this stage in the business cycle when you have exposure to commodities, because commodities trend during high inflation periods. So if you're an investor and you're listening to us, and we think that inflation is going to be high for years, how do we play these markets, including gold?

MICHELE SCHNEIDER: Well, let's start with the first thing you said about taking matters into your own hands, because I cannot tell you how that is music to my ears and should be music to everybody's ears who call themselves retail investors.

Because it's like, how dare you call yourself a retail investor and not understand things like risk parameters and cutting your losses before they get ridiculous and not buying falling knives or buying dips based on the fact that some analyst says, hey, this company has a good balance sheet? So yeah, I really think that that cannot be emphasized enough, is if you want to really learn how to do this-- and let's face it, that's what we saw from Robinhood.

Like you said before, we saw all these people come on board saying, wow, I want to trade. And this is the great thing about trading by the way, is that it's the purest bastion of capitalism because it doesn't care who you are, where are you from, how smart or dumb you are or anything. It just it's pure money that everybody has access to if they get an education, they'll get better at it. OK. So I just wanted to reemphasize that again and again and again.

JARED BLIKRE: Thank you.

MICHELE SCHNEIDER: Because this is what you and I are all about, teaching. This is what I go on the media for all the time, is not to hear the sound of my own voice, but to keep driving home to people, I started at modest means and I figured it out. So can you. I mean, that's essentially-- Now, let's get to the commodities thing.

So I was a former commodity trader on the floor in the New York Commodities Exchanges as the World Trade Center during the heyday of commodities, although I was very young and very green. So I didn't necessarily get to experience it the way that people that have been down on the floor for years have, like for my husband as a matter of fact, because he had started much younger than I did. He started as a teenager, actually.

But what it did was it taught me so much because first of all, it taught me that the whole world seen through raw materials, whether they're in high demand and low supply or in low demand, high supply or just supply demand is kind of evened itself out. I've seen every single economic cycle over the last 40 years, and I always think of it in terms of what are the raw materials doing in relation to the overall economy, to the overall geopolitics, et cetera.

And one thing that I learned very well was gold, because as a young, young, young girl, I watched gold go up from about $150 an ounce to $850 an ounce in its peak. Adjusted for inflation of course, that's much bigger. But that's the key. Adjusted for inflation over the last several months, gold was stupidly cheap. Really. I mean, if you look at a graph--

JARED BLIKRE: Warren Buffet cheap maybe. It was a value play.

MICHELE SCHNEIDER: Exactly. Exactly. And yet, I got a lot of flak because like, hey, when is it going to wake up? And you know, it's dead and doo doo doo doo. For a while it was Bitcoin, Bitcoin, Bitcoin. No, no, no.

JARED BLIKRE: The other gold, right?

MICHELE SCHNEIDER: Right, the other gold not. So not that I don't love Bitcoin by the way.

JARED BLIKRE: I do too, separately. But it's not gold.

MICHELE SCHNEIDER: Exactly. It's not gold. So I have been posting these charts after chart after chart after chart writing articles all over the place about gold. Why? Three things. Number one is that if you look at the last time we had stagflation, oil rose in the '70s, sugar rose in the '70s, other grains and softs rose in the '70s. Copper, wood, they all rose in the '70s. Then they plateaued and gold was the last to go. The relationship between gold and the S&P lately has still been at historic lows. It's still at historic lows right here. That's number one.

Number two is, if you look at historically money supply and where gold prices adjusted for inflation from 1970 to now, gold was just as cheap back then with the money supply being at record highs. Something was off with that equation for sure. And then finally, when there's no more real credibility from central banks, even with the manipulation that they're doing with the dollar and everybody who's holding on to that thing.

Oh, the dollar's strong, gold can't go up. That's nonsense, because if you look back, the relationship between the dollar and gold and inflation and economy, only about 50% of the time actually computes. It can be all over the place because the dollar can be so easily manipulated. And in the Bretton Woods case, that was a classic where the British pound was manipulated against gold and then the whole thing blew up in their face.

JARED BLIKRE: Well, George Soros eventually fix some of that too.

MICHELE SCHNEIDER: Exactly. And that's where George Soros went on the map. He called that.

JARED BLIKRE: He broke the Bank of England. He shorted the pound because of interest rate differentials. And guess what we're seeing now, big if interest rate differentials.

MICHELE SCHNEIDER: Right, exactly. So if you put that all together, gold not only adjusted for inflation was stupid cheap, as is silver by the way and the minors, but the dollar as much as it looks like, oh, it's so strong, it's is strong. Actually Peter Brandt tweeted this and I thought, this is so brilliant. And he also admitted how old he was, which I thought was kind of fun.

But he said in 1947, a dollar was worth a dollar. Compared to now, 7.4 cents, which means our purchasing power has been destroyed. So this strong dollar is meaningless. So brings me back to gold. What is the one thing that people run to when they don't know what else to do? What can you trade for things-- it's certainly not going to be Bitcoin. Not at this point, it may get there. And it's certainly not going to be Fiat currency.

It's gold and silver things, that you can trade. And people get into that sort of primitive mindset when the proverbial you know what hits the fan and when people are starving or they can't put gas in their cars. And especially in poorer countries and global economies, people get very, very, very socially disruptive. And that's all good for gold.

JARED BLIKRE: Well, and let me ask you then. Are you talking about owning this long-term, are we talking about physical, just being in the futures? Because I see gold as not only an inflation hedge but also an Armageddon hedge. But if the exchanges go down and the lights go dark, your futures contracts aren't going to be worth much on the open market.

So that's the first part. And then how long are you holding here? Because gold tends to do well in these high inflation environments, and we saw it 2005, '6, '7, '8. And it continued into I think 2010 or '11 before peaking. But then it pretty much did nothing for a decade or so, or a little bit less than that.

MICHELE SCHNEIDER: Well, that's a really good question because as a trader, you don't necessarily say, oh, I'm going to hold gold for three years. As a trader, you hold gold for as long as gold continues to have its momentum to the upside. And this is really where trading strategies become incredibly helpful, understanding that it's certain parameters, you take some profit, you leave a tail. Maybe and when you're first initiating a position as it's clearing certain technical barriers, you might add to that position.

But at the same time, you take your risk out while you're adding in terms of where you put on your original position. And then when you get to a point where you feel pretty flushed and maybe almost too overexposed in gold as it continues to go up, you start taking property and you leave a tail. And the tail has to be wide enough where it adjusts for some volatility, but not so wide where you give up a tremendous amount of your profit. That's the way I'm going to answer that question.

I don't even think gold has gotten started yet, right? So we've already been in gold. We bought-- I know this is going to be heard over time. So if you aren't already in gold and it's still trading below say 1,900, I don't think you've missed the boat. If it gets through 1,900, can it see 2,000? Yeah. Have I heard people like-- oh god, what the heck is his name, you know, the big gold bug?

JARED BLIKRE: There are a lot of gold bugs.

MICHELE SCHNEIDER: Peter Schiff. Peter Schiff. That's who I'm thinking. Peter Schiff. I mean, if you listen to somebody like Peter Schiff, he thinks it's going to 3,000. I don't make those crazy type of predictions. Remember, I was on the floor. I watched it go to 850 and people thought it was going to continue to go up.

In 2007, people thought gold was going to continue to go up. I had friends calling me saying, hey, my broker just told me it's time to buy gold. And I'm like, a little late to the party. So could it go there? Yeah. Would I continue to buy as it continues to go up to a certain point? But at some point, like I said, you've got to really play this like you would play any volatile trade.

Just like oil, we watched it go up. We heard people say it peaked, it dipped, it became a new buy opportunity. And now it's still even consolidating at high levels. And that's how it's going to have to be with gold. We'll all know when gold peaks and start to turn down because it'll be violent just like it was in 1980.

JARED BLIKRE: Yeah. Or like silver a couple of years ago when it broke out to above 30, I think, per ounce. I want to get down, I guess to brass tacks. I want to talk about risk management. We kind of talked about it a little bit before about just how to think about trading. And I guess from a perspective of a trader who's not necessarily having success right now or who's taking the reins decided that they don't want their target account anymore, maybe they're just going to be a passive investor, maybe they're going to be slightly active. Where does one begin?

And I'll just tell my journey here, and then maybe you can chime in. I became really interested in technical analysis close to 20 years ago. And I have a computer science degree, so I put that to work. And it just kind of made sense. And I got really into the markets, and it became kind of an obsession. And when the financial crisis, the global financial crisis started to rear its ugly head in 2007, there were a lot of warning signs. There was a meltdown in August.

And then 2008, I realized I really didn't know that much about the markets except for the E-mini S&P 500 and some of the grains that I traded. So I gave myself an education, and I tried to learn everything I could. QE, in 2009 nobody knew what that was, quantitative easing. And there was really nobody writing about this. So I just kind of started writing my own little newsletter, and that's how I learned. But it's full of fits and starts. There's a lot of snake oil sales people out there that are just selling a bunch of stuff that simply doesn't work.

And what I found and talking to a lot of traders, a lot of retail traders over the last few years is that they get started with something. They become excited about it, but then whatever they had isn't working. And so they lose interest, they lose money, and then they've gone away. Well, here we are. We have all these investors who are down in their accounts. They want to make a difference. Where do they start?

MICHELE SCHNEIDER: Well, I always like to say that it's probably good to become a specialist in one thing first. And you can decide for yourself what that one thing is. And by the way, I wish I had known you in 2009 because--

JARED BLIKRE: Could have told you all about quantitative easing.

MICHELE SCHNEIDER: Well, yes. And actually in March or April of 2009, I wrote my first blog for a publication that has been defunct since, not because of my blog.

JARED BLIKRE: What you're phrasing there.

MICHELE SCHNEIDER: Yeah, exactly. But I wrote that biotech bottomed, and it was the first one to be bought. The IBB actually, ETF. And because I could start to see the turn-- and by the way, that schema, the whole economic model family, we could talk about later. But I wish I had known you because we probably would have done very well together. And you know that you are one of my favorite technical analysts.

JARED BLIKRE: I appreciate that.

MICHELE SCHNEIDER: The journey that you've had has been very successful and not gone unnoticed by many people, including myself. So I just wanted to say that.

JARED BLIKRE: Thank you.

MICHELE SCHNEIDER: For people right now, getting back to the specialist and one thing idea, so I guess my personal journey was that in the commodities market my specialty became understanding one commodity at a time. We have a situation in the stock market where there's hundreds and hundreds and hundreds of stocks, right? I was on the floor.

First I traded coffee, sugar, cocoa because that was the whole exchange. Focused mainly on sugar at that particular time. Then I went to gold and silver, focused on those two things. Then I went to the Mercantile Exchange where I traded crude oil mainly. There was heating oil and natural gas, but I really focused on crude oil.

And so what that did was teach me to become a specialist in how that one area performed technically, fundamentally, momentum, speculatively. Who were the big players? How did the locals add liquidity? And by the way, that's why I kind of crack up when they talk about high frequency trading and this whole SEC thing that Gensler is going after. Because this has been going on since the beginning of the time. Jumping in front of orders, it just didn't look electronically at that point because it was all paper being carried in by people on the phones. But anyway, I digress.

So getting back what I learned to do was to chart that one particular instrument. And then from there, my point and figure charts, I started doing weekly charts. And then I started to learn and understand basic chart patterns like flags, like consolidation, like cup and handles, trend lines, when they break out. This was all before I even put in things like moving averages and all the stuff I'd become more sophisticated with over time.

The point is that you have to really be able to understand how price movement works, its history to its predictive power. And then once you understand that, you understand that if that doesn't work out the way you think, that's called risk. And once you understand risk, which you learn very quickly in the Commodities Exchange-- I always had an inherent sense of risk because I came from no money, and I could not afford to really lose a lot of money.

But I also had the opportunity to watch guys who were reckless. Way, way over trade, make fortunes of money, and then lose those fortunes of money plus, plus, plus because they never got a clue about risk. So if we put those two together is one is really try to understand maybe just follow one volatile stock.

Or maybe right now since commodities will be hot for a while, learn how to trade gold, gold futures, or even the ETF gold or some of the gold stocks. But really get to know how one thing works technically, fundamentally, how the sentiment changes, the personality of that particular instrument. Learn everything about it, and then branch out from there. Does that makes sense?

JARED BLIKRE: I love that. And well, that kind of tracks my personal journey here because I spend thousands-- I have thousands of hours of screen time with the E-mini S&P 500 and the other E-minis there. And it's really been in education, you get to know the market. And I've tried a million different things, I know it works for me. And I think it's important for people to understand, you have to find what works for you.

Try not to get indicator fascination. I think that's what they call it where you're just trying out a new indicator every day. Stick with some simple things. Follow people on Twitter. And if you like their calls and it kind of suits your personality, see what they're using. I would highly suggest people follow you, Mish, and look at your style. Because you have a great feel for the markets, and especially those which you know very well, which are the commodities.

So I think when we're talking about what do people do, what's the first step, it's important to figure out what works for you. There are some great tools. I know people who use DeMark with great success. Doesn't work for me. Elliott Wave, doesn't work for me. I know other people who swear by it. That's fine. So people don't like trend lines. I love trend lines. I love price action, candlesticks. I think price action and candlesticks are probably a necessity for everybody. I see you nodding your head. So I'm going to ask you about that.

MICHELE SCHNEIDER: Well, it's so funny you should say that, Jared, because-- well, first of all, another way to say what you were talking about technical overload is analysis paralysis. You really want to avoid that. I find-- what's one of the reasons why I'm very, very selective of A, what I look at on my charts, number one. And number two is who I listen to.

And I'm kind of in your camp. I'm not a DeMark person. Although I think in certain market conditions, the mean reversion is great. When you're in a trading range, mean reversion is great. We've been in that trading range until obviously today when now we're testing the lower ends of the trading range. Same thing, I'm not an Elliott Waver. I have never ever, ever in my experience seen anybody with Elliott Waves being right.

You know, I'm not a Fibonacci person, MACD person. Do I use Bollinger Bands? Yes. Do I use relative strength? Yes. Do I use volume? Yes. Do I use basic simple moving averages with a couple of exponential? Yes. Do I use multiple time frames? Yes. Yes. But that brings me to candlesticks.

JARED BLIKRE: Yes.

MICHELE SCHNEIDER: I love candlesticks. I've been using candlesticks. And I have to say, I've used them and that's my daily chart, candlesticks. And I've seen bodies and wicks. But really, and this is kind of funny because after 40 years of trading, I'm finally really, really not just using them more from an intuitive sort of casual observer as I'm looking at the chart every day, but now I'm actually starting to study in terms of profit parameters and even risk parameters, entry points as well.

How those bodies of those candles line up on certain opens and closes if you go back in time sort of ignoring the wicks to some degree, because that's kind of the noise and really focusing on the body and specifically the opens and closes. So if you get a whole bunch that line up if you just sort of draw a line that goes across maybe several months, sometimes you can actually see how the opening, closes so line up perfectly. It may be the closing and one the opening another that you get a really good idea of what's happening.

And by the way I mean, that's one of the reasons why we got into GDX recently again is because if you went back and you looked at the bodies of the candles, even though they it broke under certain moving averages, those bodies of those candles were holding perfectly. So I knew exactly what the risk was going to be. And in this case, it was instant gratification because of the CPI numbers, et cetera, et cetera. But yeah. Just keep it simple. Keep it simple

JARED BLIKRE: Yeah. And have fun with it, play around with it. One of the things that really taught me the most way back in the day was just looking at candlestick charts over various pieces of time or various time frames and drawing rectangles and seeing where the various points line up. You know, you have the body of a candle and then you have maybe a wick up here or a wick down there also called the shadow.

That informs you. When you see a long wick like that, just to stick like that, that means that there has been a reaction off of what would possibly be support here. So just thinking in terms of behavior, I like indicators that kind of show me behavior. And that's one of the reasons why I like volume-weighted average price. we have actually anchored volume-weighted average price.

That's an indicator that's been developed independently by a couple of different people. Most notably, Bryan Shannon of Alpha Trends recently. But that shows you where the average position is from a high or a low from the start of the year, from a quarter. And it really gives you in a sense kind like a moving average where the average investor is and are they in the red or are they in the green on a net-net basis.

And so I do like I do like indicators and candlesticks themselves that show consumer behavior, that show-- not consumer behaviors, but trader behaviors-- because there's a psychology embedded in prices. I think one of the biggest mistakes that people do as traders, the most common mistake that I see, especially among males is the need to be right. All right. I'm underwater in a trade. I'm going to wait till it gives me one penny of profit, and then I'm going to get out.

I've seen that go wrong a million times, and I've seen traders do that consistently for years and years. It's a very difficult trait to let go of. But there is some basic mistakes in the market, and they're repeated. I'm just wondering how you tell some of your clients or friends or whoever asked you to help them trade. What you say to them?

MICHELE SCHNEIDER: Well, let's start with Brian Shannon because interesting story about Brian. I met Brian in 2009 at a conference in Pasadena, California. And we all went out to dinner, a whole bunch of us and he was there. And so I'm giving him sort of a nod, because he said to me at the time, because he knew I was just getting involved with Market Gauge at that time, he said, you know, you really need to go on Twitter. And you really need to create a presence on Twitter. And don't tweet more than five, six times a day, which I don't necessarily adhere to. He does, by the way. And then I went out and I bought his book when it came out about multiple time frames. And I do use--

JARED BLIKRE: I think I have it back here. Keep talking. Let's get it out here. There we go.

MICHELE SCHNEIDER: Ah, there you go. Yes.

JARED BLIKRE: Very happy. Very happy. Oh, look at this. It's inscribed.

MICHELE SCHNEIDER: Oh, nice. I think mine is too. It's in our library in the back here as well.

JARED BLIKRE: Great guy, by the way.

MICHELE SCHNEIDER: And I mentioned Brian for two things. Number one, is yes, VWAP, and I do use VWAP differently than you because I have an inherent sense of where supply and demand is in terms of the price action. I think that's just from my 13 years on the floor. I can look at ticks and I can still hear the noise. I can still feel it.

And it's interesting about the wicks because I also wanted to mention that Holden, who works with us, who's 24, who's really learning technical analysis now and he's very self-motivated. We were sort of playing around with some crypto yesterday, and he said to me, Mich, you put the wick? I'm like, oh my god, I don't even think of that. I'm like, not only that, hey, cool, he's talking to me about wicks.

But anyway, getting back. So the other thing, the reason why-- you mentioned the male ego-- very much trading. And here's a big difference. And when Brian told me to go on Twitter, I took it to a level is that we had community down on the floor. We were all together on the floor. The competition and the cut throat competition that you see on Twitter always I'm amazed at. Because I did not grow up like that.

I grew up in a place where there were thousands of traders and everybody was there to help each other. When somebody really fell badly in terms of their equity people were there to support them and try to help them get back on their feet. If people were doing really well, everybody was there to congratulate the successes. And they always said on the floor, there's plenty to go around for everyone.

So that's why you often don't hear one trader praising another trader in this environment because it's like, oh my god, what does that say about me? Now people are going to run to him and not come to me. And that's all part of the male ego, but I got to tell you, I see women do that too. Sometimes women can be worse in that environment. I try to rise above all of that, because really, at this point in my life, I've had major success. I love to teach, and all I want to see is everybody succeed. All right. Now--

JARED BLIKRE: Yeah, I think that's a great point because the true trader community is extremely giving. Brian Shannon gives a lot back. Not only to his subscribers, because they're paying, but to the general community. It takes a lot of work to write one of these books, and I'll just throw it up there again. If you're just beginning, this is a great one to buy. It's going to teach you how to look at candlesticks and see the potential support and resistance, see where there's supply coming in, where there's potential demand. And Mich, we got about 10 minutes left. And--

MICHELE SCHNEIDER: Do you have my book, Jared?

JARED BLIKRE: I don't have a copy here. I actually use it, so it's not in my thing behind me.

MICHELE SCHNEIDER: I don't know if you're being very diplomatic or honest right now, but yes.

JARED BLIKRE: So here's a perfect segue. Because you were recently in town, I should have brought it so you could inscribe it, you know, sign it for me. But you were in town. We got to hang out in Tribeca for a little bit in a restaurant, bar that was directly across the street. And Julio our producer here, if you could just throw that web page up on the screen. There we go. The 'Merc' of Tribeca.

And if you scroll down, you're going to see this building. And it's still there. And almost there. Yeah, that building is still there. And I'm just reading from some of the text here. I guess it was originally for butter and milk and also later potatoes. And there's quite a history there. So just tell me some of your experiences maybe back in the day at the exchange.

MICHELE SCHNEIDER: Well, when I started in 1884--

[LAUGHTER]

JARED BLIKRE: Rockefellers-- the original oil trader, John D Rockefeller.

MICHELE SCHNEIDER: Exactly.

[LAUGHS]

Well, you know, it's funny because you age is something that--

JARED BLIKRE: Just a number.

MICHELE SCHNEIDER: It's just a number. And actually, to be kind of cheeky but not really is, I often say I'm a vampire.

JARED BLIKRE: I'm glad I didn't--

MICHELE SCHNEIDER: Because vampires are one of them-- hey, they're one of the few species that get away with being thousands of years old and they're still cool. So that's why I say, yeah, when I was there in 1884 for in that iteration. But yeah, no, you know, when you look at those pictures and you look at how things have evolved, it's interesting you see those guys there on the phone with pads. At that point, people were actually with chalk writing the price movement on a chalkboard so that the traders could see the bids and the offers.

And then eventually, that evolved into the open outcry system, which is what the Commodities Exchange was about. And I always say if you don't really know what that looked like, watch the movie "Trading Places" with Eddie Murphy and Dan Aykroyd, one of the greatest movies ever made. And certainly, it was filmed right where I worked at the time when I was working there by the way. I didn't go down that day.

JARED BLIKRE: Was that the New York Board of Trade?

MICHELE SCHNEIDER: No, no, that was the New York Commodities Exchange. I was for World Trade Center, and so what they show is the orange juice pit. Because if you remember at the end of the movie, they were trying to corner the orange juice market. And that's where Eddie Murphy and Dan Aykroyd kind of really get the twins, the brothers. I can't remember their names right now, the actors.

But anyway, the point is that if you look at that picture and you understand that it even started before that, the futures market started because of corn, because as a hedge for farmers. And now there's something people don't even think about right now in terms of hedging. But it's really important. Remember I said in the very beginning, I think of the world in terms of raw materials, because that's what I was grown up to believe that if corn crops are really good, then you're going to hedge in the futures market by selling the futures price.

And if the corn crop is really bad, you're going to hedge in the futures market by buying futures. And so when you start to think about the simple economic relationship between supply and demand, raw material, and what's out there that's really how futures markets were born. And it's really hasn't changed all that much. If you stick to the very simplicity that you're seeing in that photo, of course, technology has changed. All you have to do now is go on your smartphone, press a button, throw up any kind of indicator you want on a chart.

But it really goes back down to the basics, which is-- and that's why I can't believe the economists were so behind the curve on seeing what was coming-- is that, I mean, all you had to do is simple logic. Think like a farmer and you could see that between drought and war and the fact that big corporations have taken over a lot of the farms and these small farmers were seeing the damage being done that eventually we were going to be caught with not enough food and grain.

JARED BLIKRE: Randolph and Mortimer Duke.

MICHELE SCHNEIDER: Thank you.

JARED BLIKRE: I looked it up while you were talking. I had a little bit of time there. I'll tell you funny thing, I got a story about that exchange too, because they got bought by the Intercontinental Exchange eventually, which bought-- I think they and the CME pretty much have a lock on most of the futures. Cboe has some. Anyway those guys ended up sitting by me.

Yahoo Finance's a little station at the New York Stock Exchange. Intercontinental Exchange also owns the New York Stock Exchange, and they placed these guys who were kind of legacy traders from the softs, I think the New York Board of Trade. Traders were in there too. Anyway, they're a great group of people a great group of guys who's all males, not surprisingly. And the loudest guys, the loudest people on the floor of the New York Stock Exchange by far were 5 feet behind me.

And the things that would just go off and be said during the day we're quite interesting. Eventually, they moved out because they started getting charged rents. And I think that's kind of a trend. You know, you don't have to be on the floor anymore. It's not critical that you be there, everything going electronic. And it just kind of raises another question. We're about 25 years or so, maybe 30 years into electronic trading. Really started taking off 20 years ago.

We've seen what has happened to the pits. Well, they're really not there anymore. I think the CME still has the eurodollar pit, eurodollar futures pit open. But what do you think are the long term effects of this? Because we're seeing terrible liquidity. We don't have that community in the pits. You don't necessarily have a pilot, a human pilot flying anymore. We just have algos. We just have algos kind of running the jobs of the market makers or what used to be the specialist.

MICHELE SCHNEIDER: Well, certainly yes. I mean, that's getting back to what we were saying about the SEC trying all of a sudden to fight these algos. They're not going to be able to be successful about it without overregulating to the point where it winds up hurting the very people they think they're trying to protect. In terms of the whole electronic trading and the loneliness of it, you know, everything is cyclical.

So right now obviously out of COVID, it really made a comfortable with the people be sitting at their laptops or their smartphones and trading and not necessarily even thinking about having community. And that's why social media has become even more and more pertinent and essential to create that community. And I often talk about this. What I love about Fintwit is exactly that. It has given me the closest sense of community that I've had since the floor.

And there are people that talk to me like consistently every day. So you know, sometimes I get kind of caught up as like, why don't I have 1/2 a million at least followers because I'm usually ahead of the curve on most of these trends. But I realize that, OK, stop obsessing on that because some of it is some kind of a popularity game that I haven't been able to figure out.

But in terms of the engagement and the consistency of the engagement, it's kind of like being on the floor like showing up on the floor every day standing next to the same group of guys every day and that becomes your community. And I think that that's going to become more and more and more and more important, which is why you're seeing Twitter Spaces happening, more podcasts happening.

Companies like Real Vision that I do a lot of work for you giving content to traders by more experienced traders to the younger traders. And that's what's really going to happen is, I don't think we'll see an exchange of open outcry again. But I think that as technology gets more advanced and automation gets more advanced, I mean, they've even talked about that traders will be replaced with robots.

I can't really conceive of that right now. But if they're talking about algorithmic trading and the end of liquidity by the independent trader, I mean, maybe that'll happen eventually. But I certainly hope that doesn't happen in my lifetime.

JARED BLIKRE: No. No, it's too fun. Your comments about community are very relevant and well taken. I think the pandemic really exacerbated the sense of loneliness for people, and it brought the need and brought to light the need for this community. And as I said, the real trading community, very giving, very open with their ideas and sharing. It's unlike anything I've ever seen. So you just have to find the right people.

We have three or four minutes left here I want to ask you about a funny story or an interesting story from way back in the pits there, something that really sticks out in your memory and maybe make people laugh.

MICHELE SCHNEIDER: Well, let me think about this for a second because there are so many stories, my god, I think I think one of my favorite times is when the market would get quiet, and the guys would sit around and be very anecdotal about-- I mean, one thing that was really interesting about the floor is, you know, we didn't really talk about the fact that obviously I'm a woman. And I was very much dominated by all the men around me. Sometimes very often--

JARED BLIKRE: Let's address the elephant in the room now that we're almost done.

MICHELE SCHNEIDER: Well, yeah, OK, most of the time, I was the only woman in the pit-- in the oil pit. And so I got to hear and see-- and I guess this may not be so funny. But it is an interesting observation. Men-- one of the reasons why a lot of women didn't last down there is because they thought it was sexual harassment. But what I discovered was that men are so physical with one another. It was like an eye opener to me.

Men hug. And they smack each other. And they touch each other. And they constantly are talking about each other's bodies. You know, you lost weight. You gained weight. Look at you. Da da da da da. You're a slob. You're so handsome. I mean, I couldn't believe how much attention men paid to each other physically. And I realized that if they grabbed me around-- maybe sometimes a little bit too rough. You know, sometimes men would just come from behind me, and they'd start giving me a neck massage or a shoulder massage. And it would be like, really?

JARED BLIKRE: You were sitting down, but you're not six feet tall either. I mean--

MICHELE SCHNEIDER: No, no-- I'm not a big person. So I realized very quickly that men-- and I guess it's because-- that's why contact sports are so popular amongst men. They have this need to touch. And once I realized that-- so, if I was getting touched, I felt like I was being considered one of the guys. I never thought of it as, they're touching me because I'm a woman. I always thought of it-- they're touching me. I mean, obviously, there are things that could be inappropriate. But 99% of the time, it was just, like, you're in the locker room with us, babe. Let's go.

JARED BLIKRE: We're going to have to leave it there in a minute. But I just want to say that things have definitely changed since then. I don't think any of that is going on today. And, by the way, there is a difference-- we've got about 30 seconds left here. There's a difference between the traders that I've seen at the New York Stock Exchange and the futures traders. The futures traders are really into risk. And they're a lot of fun. And things can go off the rails there pretty easily.

Like I said, we're going to have to leave it there. This has been a terrific conversation-- lots of good information. Everybody should follow you on Twitter and also buy your book. "Plant Your Money Tree"-- great book there. We're going to have to leave it there. There you go-- shameless plug. You can leave it up there. All right. Ms. Schneider, always a pleasure to talk to you. And Thanks, everybody, for joining here. That's it.

MICHELE SCHNEIDER: Thank you, Jared.

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