AWM Insights Financial and Investment News

Is it tradable? Recorded on Election Day, before a single result was in, Justin Dyer and Mena Hanna put that question to the two stories dominating investors' feeds: the midterms and the selloff in high-flying AI stocks. The quick answer is almost always no, and they show why. Mena breaks down a market where large growth fell while small value rallied, and why a diversified investor barely felt what a concentrated one called "blood on the streets." Justin draws the line between investing and trading with one question: are you the casino or the gambler? They revisit how long the NASDAQ took to recover after the dot-com bubble, explain why healthy corrections belong in the plan, and take a lesson from the Buccaneers' win without a single completed pass. The real question isn't whether an event is tradable. It's whether your plan was built before the storm.

Get in touch: https://www.athletefamilyoffice.com/talk-to-a-pro?utm_source=awm-capital&utm_medium=podcast&utm_campaign=ep-277-is-it-tradable&utm_content=show-notes

Connect with Us
Chapters
[00:00] Preview: A friend asks whether to sell, the casino or the gambler, and a win without a single completed pass.
[00:52] Is It Tradable?: Justin sets up the episode's one question, why the quick answer is usually no, and why the midterms aren't a trade. Vote at the ballot box, not with your portfolio.
[02:12] Two Investors, One Market: How a solid year for broad indices can feel like a bear market, and what corrections and bear markets actually are.
[03:35] "Blood On The Streets": A friend asks Mena whether to sell, and the numbers behind the AI selloff.
[05:47] Concentration Vs. Diversification: Why a diversified investor was down a few percent while the AI trade fell much harder.
[06:23] The Casino Or The Gambler: Investing for the 1Hundred Year Family versus trading the headlines.
[08:29] The Wrong Question: Why we actually want healthy corrections.
[09:05] Black 10: The risks people don't realize they're taking, and how long the NASDAQ took to recover after the dot-com bubble.
[11:07] Win Without A Pass: What the Buccaneers' rainy-day win says about the boring side of a portfolio.
[12:03] Built For All Weather: Why the plan has to come before the storm.

Creators and Guests

Host
Justin Dyer
Chief Investment Officer and Chief Operating Officer at AWM Capital
Host
Mena Hanna
Senior Investment Analyst at AWM Capital

What is AWM Insights Financial and Investment News?

A bite sized discussion on timely financial news and investment topics, to help you maximize your net worth and wealth for the next generation with Justin Dyer and Mena Hanna of AWM Capital.

Mena Hanna: Hey man, there's
blood in the markets.

There's blood on the streets.

The stock market's doing terribly.

What do I do?

Do I sell now?

Large growth was down close to 11%,
and this is over the past year.

And small value up close to 25%.

So that's more than a 35% swing
between those two categories.

Justin Dyer: Is it tradable?

Well, really, at the end of the day,
you're asking the wrong question.

Are you the casino or are you the gambler?

The casinos play a
completely different game.

Mena Hanna: It's not even like
putting your money on black,

it's like putting your money on
black 10 and hoping that it hits.

The Tampa Bay Buccaneers,

they won this past weekend
without completing a pass.

Justin Dyer: They had
a plan in place for it.

Mena Hanna: They did
the boring things well.

Justin Dyer: We want portfolios to do
both things well when the time comes.

Hey everyone, welcome back to
another episode of AWM Insights.

It's your host, Justin Dyer, Chief
Investment Officer here at AWM,

joined as always by Mina Hanna,
Portfolio Manager here at AWM.

And today we're gonna ask the simple
question, uh, and try to answer it.

Uh, and that question is, is it tradable?

What type of event should be tradable?

How to think about that.

Um, there's a lot actually
going on in the market.

We're gonna kinda answer this
question through the, the

lens of, of current events.

Um, hopefully you all know that the
quick and dirty answer is that the answer

to that question is likely to be no.

Uh, and we're gonna give you
some substance to that answer.

Uh, and, and really address it through,
um, a couple of, of the main events

that are taking place right now.

Number one being the midterm.

We are recording this, uh, on Tuesday.

We don't know the results of the election.

We don't know what
markets are going to do.

Um, and you shouldn't
actually trade on that, right?

We just recorded a podcast specifically
on that topic, and punchline there

is vote with your-- vote at the
ballot box, not with your portfolio.

Data just really doesn't
support that activity.

But, you know, the, the-- this
question applies to this event as well.

But then actually extending it, there's
some really, really interesting data

points that are happening in the market.

Um, and depending on how you look
at the market, whether you're a

diversified investor or a little
bit overly concentrated in one part

of the market, could dictate how
you're actually feeling about, um,

what's, what's going on in the market.

I, I…

You know, and we'll use that to jump
right in, Mina, where, you know,

from my perspective, I'm thinking
that this year's been a great year

for all intents and purposes, right?

I think we're tracking a slightly
above average- Yeah … for

broad market indices.

Um, which, I mean, if you're above
average, you're outperforming, right?

This is a positive year.

Um, but if you take a step back, as
before we jumped on and hit record,

I mean, we're going through some of
these statistics, like there are some

significant pullbacks and potentially even
outright corrections, if not bear markets.

And, and just to define those for, for
listeners, corrections are typically,

uh, um, declines of 10% or more from
the peak in a, in a specific part of

the market, um, or a bear market is 20%.

And we're actually seeing that where,
again, you know, from my perspective,

we're doing just fine, right?

And so let's, let's unpack that,
like give folks the, the detail.

Mena Hanna: Yeah.

And, and the details in it was very
telling with a conversation I had

with a buddy over this past weekend.

He sorta came up to me, uh,
during, during a little bit of a

gathering, and he was just shocked.

He was like, "Hey, man, there's
blood in, in the markets.

There's blood on the streets.

Like, the stock market's doing terribly.

What do I do?

Do I sell now?"

And I took a step back
and kind of quantified.

Like, I know he invests like a degenerate.

So that degenerate trade, call it,
over the past month or three months has

actually performed exceptionally poorly.

The big name AI high-flying stocks
that have done phenomenally well

have definitely taken a step back
for a bunch of different reasons.

But if you were over-concentrated there,
you are feeling a lot more pain than, call

it, the professional diversified investor.

And this isn't just a couple of percent.

I'll throw the Morningstar style
box up here, which kinda shows

you and gives everyone, uh, a lay
of the land in terms of markets.

Large growth was down close to 11%,
and this is over the past year.

And small value, which we
obviously tilt towards in value

in general, up close to 25%.

So that's more than a 35% swing
between those two categories.

And when you look at kind of the
names in this large growth field,

which includes most- most of the
tech names, you have CoreWeave,

which is down 60% from its peak.

Intel also down 58.

Oracle's down 56.

I'll just go down the list.

Google's down 32 from…

It's recovered a little bit,
but it was down 32 at one point.

Facebook was down 20.

Nvidia, who pretty much everyone
was betting all of their dollars

on because the AI trade can't fail,
Nvidia was down at a point 17%.

So you're seeing that portion of
the market really, really sell off.

And semiconductors and the chip space
in general is down close to 30%.

That is like a bad recession and
what we see in a bad recession.

While the general market, if you were
actually properly diversified, you're

only down roughly two and a half to 3%.

So that's not nothing.

That's still volatility, and it's
really volatility that we can expect.

But concentration and investing
in names that are, you know,

trading at stretched valuations,
this is exactly what can happen.

And this is why a lot of the news
that we hear and the events that we

think are tradable definitely aren't.

And if you do trade them, this
is exactly what can happen.

So it's, it's always important
to keep that in the back

Justin Dyer: head.

Totally.

And I, I think that's a great comment
to pull on a little bit, right?

You-- I obviously asked the
question, is it tradable?

You just said, "Is it tradable?"

And there's an important distinction I
wanna highlight here between investing

for the 100-year family versus trading.

The analogy that we always can
tie that to is, are you the

casino or are you the gambler?

The casinos play a
completely different game.

They know with pretty solid confidence
that there-- If enough people come

to their casino, they're gonna win X
number of times, uh, and they have that

predictable, predictability, let's call
it, in what their expected return is.

That is basically how we want to construct
portfolios for the 100 Year Family.

We certainly want to outperform, and
we do so in a way that, that we are,

are pretty confident will outperform
the market over long periods of time.

Again, very much similar to
like the casino mentality.

But everything we do, especially in
the public markets, is in a way that is

confidence driven or supported by data,
so we know that client comes to us and

say, "Hey, I want the 100 Year Family."

We can say, "Okay, we'll build the
portfolio that will give you the

highest confidence to support that."

Versus going and putting it all on
black, right, at, at the casino,

and this idea of trading, um,
i- is essentially that analogy.

Some people could say that's an
extreme, but I think it's completely,

uh, um, fair to put those two
things in, in different categories.

And then to your point, like

polling Action from current headlines
that are often myopically presented

and missing the forest for the trees
because they know these headlines are

gonna get clicks and people are paying
attention to what's going on, all things

AI, um, is just really not a way to
invest to support that 100-year family.

And I, I think, you know, that's
the heart of, of the answer.

Is it tradable?

Well, really, at the end of the day,
you're asking the wrong question.

Um, you invest for the long
term, for the 100-year family.

You put a plan in place.

Yes, markets will correct.

Doesn't guarantee that you're only
gonna have positive years, uh,

when you invest, invest this way.

But we actually want those corrections,
and we want those corrections to happen

in a healthy way, um, because that gives
us renewed confidence, we've talked about

this before, that, um, that markets are
working and healthy and, and volatility

is an unfortunate, uh, aspect of that.

Mena Hanna: Yeah, and you
used the roulette example,

and I actually love that.

It's not even like putting
your money on black.

It's like putting your money on
black 10 and hoping that it hits.

I don't think anyone would…

You definitely wouldn't go
with your kids' college tuition

money in the future and- Right.

Yeah … put it on 10 black and feel
good about it, kind of walking in.

And that's unfortunately what we see.

We see a little bit of a disconnect there,
where people take risk that I don't think

they understand how big it actually is.

And we actually also see other
professionals doing this.

And if you're doing this from a
professional standpoint, I would argue

you're professionally losing money or
you're professionally putting a client

in the position to, to really lose money.

And if history's taught us anything,
you look at what happened with the

NASDAQ after the dot-com bubble, that
took 14 and a half years to recover.

So most people, and when you think about
the 100-year family, most people can't

really stomach not being able to have
access to their money and, and wait…

They're, they're essentially waiting for
it to recover for that period of time.

If you were a diversified
investor in the early 2000s,

obviously the market sold off.

No one really escaped that unscathed.

But instead of 14 and a half years,
you recovered in five and a half.

It was 5.8

years.

We just ran the numbers.

But those are odds that we're,
we're willing to accept.

And when you actually look at the return
over the long run, that portfolio has

actually statistically outperformed.

So you're making a little bit more money.

You're actually taking on
substantially less risk.

It's a win-win, which is rare
in these, in these environments.

And you're not putting the 100-year
family in a position where it could

get wiped out, which unfortunately
we've seen, we've seen can happen

and probably will happen during, you
know, this potential market cycle.

So it's about being, investing like a
professional and being a professional.

And the, the last analogy I'll
use is the Tampa Bay Buccaneers.

They won this past weekend
without completing a pass.

It was a stormy day, terrible
weather conditions, but they won

Justin Dyer: They had a
plan in place for it, right?

Yeah.

Mena Hanna: Exactly.

Yeah.

They did, they did the boring things well.

They ran the ball.

They played good defense.

They didn't turn the ball over,
and they won the game because that

boring portion of their game plan
actually kicked in and did well.

We position ourselves
in a very similar way.

There is an exciting portion
of the portfolio for sure.

There has to be, you want there to be,
but that can't be plan A, B, C or, and D.

Yeah.

There has to be a boring spot.

And, you know, that boring
portion of the portfolio recently

has done phenomenally well.

So we'll take that, and that's kind
of the balance that we want to see.

We want to make sure the portfolio can do
both things, and it's not just a one-trick

Justin Dyer: Yeah.

Yeah, yeah.

I think it's a great place to end.

We want portfolios to do both things.

We want portfolios to do both
things well when the time comes.

You can't have that knee-jerk reaction
and, and react to either hype headlines

that are potentially not even true
narrative, narratives of what's going on.

Or if there is a real
correction, guess what?

It's probably too little too late,
and you need that plan ahead of

time to make sure you are prepared.

You can deal with all, all weather
conditions, uh, and play the

game-- continue to play the game
on the field, to c-continue make

progress to your 100-year family.

So, um, you know, the
question, is it tradable?

I'll go back to what I said,
uh, about halfway through.

I think it's a wrong question
to ask, quite honestly.

Um, it is not being a pro when it comes to
investing to support the journey and the

100-year family, which takes discipline,
takes the plan in place ahead of time,

and takes the, the ability to let markets
do what they will do in your favor.

And sometimes actually it is in your
favor for markets to have a little bit of

volatility, have, uh, a decline because
that gives us the expectation that we'll,

we'll, we'll be rewarded because we took
on that risk, and we took on that risk

in a disciplined, really defined way.

Um, little bit, uh, of a, a,
um, a, a rant there at the end.

Hopefully, everyone was tracking that.

Hopefully, everyone found this
conversation super helpful.

This actually did come by way of
some, uh, client conversations.

So definitely either bring
questions up to your advisors.

Those questions do make, uh,
make its way to us, or send

Mena Hanna: us a text.

Yeah, my number is six two
six-eight six two-zero three

Justin Dyer: five.

And until next time, own your wealth,
make an impact, and always be a pro.

Thanks for listening.