public

Fill the Gap Episode 1, with Special Guest Robert J. Farrell

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Bob Farrell and Peter Vermilye

Bob Farrell, left, with Peter Vermilye

 

Resources

Address to MTA 25th Anniversary Seminar – “Living Legends Panel”

Bob’s 10 Investment Rules

The Crowd: A Study of the Popular Mind – Crowd Psychology by Gustav Le Bon

Technical Analysis of Stock Trends by Robert D. Edwards, John Magee

The Art of Contrary Thinking: It Pays to Be Contrary by Humphrey Bancroft Neill

One-Way Pockets: The Book of Books on Wall Street Speculation by Don Guyon

New Methods for Profit in the Stock Market: With a Critical Analysis of Established Systems by Garfield A. Drew

Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions) by Benjamin Graham & David Dodd

Transcript

 

Tyler Wood  00:13

Welcome to Fill the Gap, the official podcast series of the CMT Association hosted by David Lundgren and Tyler Wood. This monthly podcast will bring veteran market analysts and money managers into conversations that will explore the interviewees investment philosophy, their process and decision making tools. By learning more about their key mentors, early influences and their long careers in financial services, Fill the Gap will highlight lessons our guests have learned over many decades and multiple market cycles. Join us in conversation with the men and women of Wall Street, who discovered, engineered and refined the design of technical markets. Well, good morning, Dave Lundgren, how are you and welcome to 2021?

 

Dave Lundgren  01:15

Yeah, doing well. Tyler. Good morning. Good to see you.

 

Tyler Wood  01:18

Can you believe we made it through 2020? That is probably a year everyone would like to forget as quickly as possible.

 

Dave Lundgren  01:24

I know. And I suspect that through our conversations in the podcasts in the coming year, we’ll have a lot to say about what happened last year. I mean, there were many records broken in both directions. So it was it was a very interesting year. But it ends up being one of the better performing years for trend following and technical analysis. So it was a unique year for most for sure. But it was also one that really let technicals shine. I think it was it was an important year for technicals.

 

Tyler Wood  01:47

I think you’re absolutely right, that return to volatility, the fact that we had the fastest move to bear market territory ever recorded, as well as the fastest recovery tells you that you know, the industry is in need of tools that help them manage that volatility and take advantage of of market trends when they’re happening. And so my first question as we are addressing our audience for the first time, why another podcast on investing? It’s 2021. There must be 2021 investing podcasts out there. But it felt important to both unite to start the podcast for the CMT Association members and for the industry at large. Tell me a little bit about why you’re passionate about this project.

 

Dave Lundgren  02:27

Well, I mean, for me, if you think about the the primary objectives of what the CMT Association are, you know, there are four of them. But the the ones that really stood out to me as it relates to the podcast, specifically is continuing education and advocacy. And I think there are a number of excellent technical analysis based podcasts that are out there now. But there aren’t, I don’t think there are enough. And I think what we can do with this podcast is to really serve the public in terms of broadening the awareness of the impact the technical analysis can have on your investment decision making process, but also keep our members better informed as to what’s happening in the organization. So this is a podcast for the members. It’s our mindset as we go forward, but it’s also for the public, because there’s just a tremendous body of knowledge that exists in the CMT Association that really can benefit investors of all walks of life, once they get to know and dig into it. And through discussions you and I have, as well as the the guests that we have on the podcast, I hope that we can really dig into the value of technical analysis and really, you know, bring to light how investors can benefit from it.

 

Tyler Wood  03:31

Very well said. As I travel around the world and speak to a lot of different audiences, in academia, at various financial societies around the world, I still get questions from folks who’ve been brought up in a culture where there are a lot of myths about what technical analysis is, there’s still a fairly strong narrative out there, about markets being purely efficient. And so I really have found from this first interview, and from the series that we are delivering here in 2021, just an incredible array of professionals who have used these tools to successfully manage money and and help others manage money through professional institutional market analysis. But I hope from this podcast, the industry at large will understand what technical analysis truly is, and definitely what it is not. So my next question for you, Dave, I know you’ve been in the industry for 30 years, you’ve developed a masterful approach to trend following investing and managing money, but as a CFA charterholder, I’ve heard you say many times that that nobody in this business believes in fundamentals more than you do, and that you’ve got the CMT charter after your name because the market has proven itself to be the best fundamental analyst on the planet. What do you mean by that? Dave?

 

Dave Lundgren  04:45

Yeah, I raised a lot of eyebrows with that actually, you know, I mean, to me, at the end of the day, if a stock is going to trend, it’s going to trend because of the fundamentals. So good fundamentals results in good price trends and bad fundamentals results in bad price trends. It’s just that what we’ve come to learn over time. And any investor that’s been in the business for a long time has come to realize that the markets pretty difficult to be. And the reason it’s difficult to be over time is because it’s a pretty darn good fundamental analyst. And so the idea is that it’s not, you know, you mentioned, I have my CMT, which of course, I do, being very involved in the organization, etc. But I also have my CFA. And if you look at my business card, it’s David Lundgren, CMT CFA, the CMT comes first, because that’s my acknowledgement that I’m just checking my ego at the door, I’m willing to let the market do the fundamental analysis for me. And I’m willing to just listen to the verdict of the market. So in essence, I’ve hired the market to be my fundamental analyst and I meet with the market every morning, and vis a vis, my process in the market presents to me those companies with the best fundamentals that I really need to consider to own in my portfolio and conversely, the ones that I really need to avoid. And if I have a stock that’s in my portfolio that the market’s telling me to sell, I sell it, and if there’s an opportunity through my idea generation process that says, you know, you really need to consider buying the stock, I buy it. That’s not a statement against fundamental analysis. It’s fully embracing it. It’s just it’s not my opinion of the fundamentals. It’s, you know, the market’s opinion, you know, one of the things we talked about was valuation. And, you know, if a stock was trading at 50 times earnings a year ago, or 100 times earnings a year ago, and then since then it’s gone up 100%. Was the stock really expensive a year ago? I would argue, no, that’s what the markets told has told us over the past year. So you know, all those things that are the central focus of fundamentally minded investors, they’re all very important. It’s just that I don’t have an opinion on them. I, you know, I’ve just kind of given up my opinion, as an investor and just listen to the market. And I think that’s, that’s the core philosophy of technical analysis is to just let the market dictate action for you.

 

Tyler Wood  06:54

Absolutely, paying attention to the verdict of the market makes all of our individual opinions irrelevant. There are a few philosophies in the world, Dave, that people live by that capture some of those same ideas. Seems like you could have a much happier life as an investor, if you simply went with what the market was telling you now that none of it’s easy, right?

 

Dave Lundgren  07:13

I mean, I’ve been a tactician for 30 years. And I would never say it’s easy. But what it does do for you is one better highlight for you the opportunity set that you need to consider for portfolio but secondarily, and perhaps even more importantly, is helping you manage the risk around those times when you’re wrong. And no matter what type of investor you are, you’re going to be wrong. And you can make the case that a very skilled investor over a full cycle will be right half the time whether the fundamental quantitative, macro, technical, doesn’t matter. But the question is, and the core differentiator between between the technical process and the other processes is that we have a very explicit risk management aspect to our process so that we know exactly what to do when we’re wrong. And I can’t really identify another process that can really tell you that with such clarity that you’re wrong, and that’s what’s really critical about about investing over the long term is to not dig big holes when when you’re wrong. And that’s, that’s one of the great strengths of technicals. It’s why I’m a technician. Despite my strong view and feelings for fundamental analysis.

 

Tyler Wood  08:17

Talking to these titans of the industry, our guests on Fill the Gap are some of the best known names in the industry. But what was striking to me just as we got this project started, is how humble, quiet, reserved they are, despite, you know, maybe because they have been involved in markets for so many cycles, they’ve seen the humbling nature of what the markets can do. So Dave, real quick, you’ve developed this belief system, this philosophy and this approach to money management over many years. Tell us just real quickly about where you have ground the axe, where you cut your teeth, how you got to where you are now.

 

Dave Lundgren  08:55

I mean, I’ve been a technician my entire career, which was not at all what I was planning. Like I said, I got my CFA as part of my belief in fundamentals. I studied fundamental investing in college: I majored in finance and investing. But what happened to me in my very first job out of college was I was a broker stockbroker in Canada. And I just happened to have this incredible fortune to sit next to a gentleman named Kuldeep Raheel. And he managed, he used technical analysis to manage his book of business. And just by sheer fortune, I was able to sit next to him and watch him bring to life the primary benefits of technical analysis. And from that moment, I’ve been hooked. I’ve been just a very firm believer in it; not one moment has my belief in fundamentals waned, it’s just that I’ve early on, I just was able to quickly recognize this, the benefits of technicals and in every job that I’ve ever had since then, and there are a number there, they’ve been all – every one of them has been technical, right up to my last post at Wellington.

 

Tyler Wood  09:54

Fantastic. And you and I have been able to work together on multiple projects and functions for the CMT Association as a member of the global Board of Directors, as the head of our advocacy committee, making sure that we have the right tools to deliver to the industry, what they really need. So it’s a pleasure, Dave, to be working on this podcast series with you and digging in deep with our guests finding out what drives their passion for analysis.

 

Dave Lundgren  10:22

I appreciate that. And I especially appreciate your accepting my offer slash challenge to join me as the co host on this podcast, because I really, truly don’t think it would be anywhere near as good as it will be without your participation. So I really truly appreciate your involvement. Maybe you can tell us a little bit about yourself, Tyler, I mean, you’ve entered the organization for 10 years, you’ve played a critical role in its development over the past 10 years. What got you here? What got you here, what piqued your interest in technicals?

 

Tyler Wood  10:47

Absolutely. It’s funny, my circuitous path towards technical analysis and to the CMT association is not unlike a lot of a lot of the guests that we’ve had on the show, I studied in at the Kelley School of Business at Indiana University, got a healthy dose of corporate finance and fundamental analysis, I had a couple of corporate finance professors who said to all of us in class, if you hear the words technical analysis come out of anybody’s mouth, you run the other direction, those fools will lose all your money. So you know, maybe not the most enlightened individuals on the planet. But I also before, before leaving graduate school, took a great quant finance course, and much more respectable individual teaching this class mentioned that there is a whole field of study, we were simply talking about some simple regression analysis, and he encouraged us if we were interested to reach out to the Market Technicians Association, there was a group in New York that, you know, brought together all the professionals who study a lot more about these quantitative factors, which was fascinating to me that the first sort of foray into technical analysis was through the lens of a quant. And I think that over the 10 years that I’ve been with the association, you know, I thought I was coming to New York to be a consumer packaged goods brand manager, and, you know, make sure that all the toothpaste was on the right aisles of the shelf, but found this organization, which really, to me represented an incredible opportunity. It was still very small, had a very dedicated group of volunteers had been around for 40 years at that point, and I could tell that there was something really special there. Of course, my love for technical analysis, my knowledge of the discipline and the tools has really been learned while at the association. It’s been mentors like Ralph Acampora, and Phil Roth, you know, members from around the world that I get to meet with and present these tools within their firms, to other financial societies, that have really helped me understand not just the philosophy, but also individually what is driving the objectives for these folks at various roles throughout the business. I mean, what I’ve come to learn is that a CMT could be somebody writing, algorithmic, highly systematic trading strategies could be somebody that is running a pretty vanilla long only mutual fund could be somebody on the sell side doing market research that’s either sector specific or global macro, the tools really apply their asset class agnostic and timeframe agnostic. And that’s fascinating to me, how diverse. So that’s, you know, I’m still learning Dave doing a little bit of studying now we all are. And the great thing is that the market is constantly producing a new case study. So as you said, that we will have a lot to learn looking back at at 2020. And hopefully, the folks who are listening to this will find that there are some other tools out there to help them manage their own investment decisions.

 

Dave Lundgren  13:45

Let’s talk about our first guest, which is a huge win for us and just a huge honor for us. Tell us a little bit about who our first guest is.

 

Tyler Wood  13:53

So today you are going to hear from Bob Farrow, Robert J. Farrell is known to everyone in the industry, particularly those in the technical analysis community, but he would describe himself really is as a contrarian, not falling into any one bucket but being a broad market analyst. For those of you who are new to the name Robert J. Farrell, he got started in the industry, right after receiving his master’s in investment finance at Columbia Graduate School of Business, studied under Graham and Dodd clearly see that right. Clearly, he had every influence, you could have to be a fundamental investor, but his career took him to Merrill Lynch and after just three years, he joined as the firm’s technical analyst the senior position in 1959. Bob talks quite fondly of his early mentors at Merrill Lynch, including William Dunn. CAC people who had traded through the crash of 2009 and understood where the market was coming into the late 1950s. From a very long historical perspective. Bob has evergreen lessons for all of us, Dave, and I think for me having the first president of the Market Technicians Association, the person who really, really shaped the direction and the core tenets of what this organization stands for, it’s just a very fitting first guest for the show. What was the most surprising part of Bob’s career path for you, Dave?

 

Dave Lundgren  15:18

Well, for me without question, it was the fact that he, I think he was either a couple years ahead or a couple of years behind Warren Buffett studying under Ben Graham. And I mean, to have that opportunity to learn from arguably the grandfather of fundamental analysis, and then decide to go the other way was quite fascinating to me. But what I what I was really taken aback by was, and I didn’t know this until we had our conversation was the number of marquee technicians in the business today that actually got their start in his group over the last 50 years, including my boss at Wellington, Frank Tex, who’s one of the one of the great technicians of our generation, he got his start with Bob Farrell. So Bob is obviously on to something. He had it, he didn’t have just a skill set in technical analysis, but he had a skill set at identifying talent in nurturing talent, which is not easy to do in this business, for sure. So for many reasons, the industry – the technical industry owes him a debt of gratitude, but not the least of which is for his contribution to the skill set with the skilled practitioners that have come through his department through Merrill Lynch over the years.

 

Tyler Wood  16:20

That is probably one of the defining characteristics of a of a really great leader. It’s bringing young talent in and then helping them to go off and find their next endeavor. Obviously, the accolades that Bob has received individually, are incredible: being top ranked technical analyst 16 of the 17 years, amazing that he competed, they created a new category just for the market analysis that was, which is just really incredible to talk with a man who has so many accolades behind his name, who has received every award in the business and is deeply respected. And yet so humble, so quiet, so reserved. So I hope I hope our listeners enjoy this next hour with Bob Farrell, and tune in next month, we’ll be bringing Louise Yamada on to the show. Very excited.

 

Dave Lundgren  17:10

Very excited. All right, well,

 

Tyler Wood  17:12

let’s dive right in.

 

Bob Farrell  17:13

Thanks, Tyler. Thanks, Dave.

 

Tyler Wood  17:19

Good afternoon, Bob, thank you so much for joining us. How are you today?

 

Bob Farrell  17:24

I’m doing fine. And I’m happy to be with you today.

 

Tyler Wood  17:28

Thank you very much. I hear it’s a little cold down in Florida.

 

Bob Farrell  17:32

Yeah, a little more a little colder than normal, but we can take it in the 40s. Excellent.

 

Tyler Wood  17:40

Well, Dave and I both felt that it was only fitting that the very first president of the CMT Association be our very first guest on Fill the Gap, the official podcast series. So we’re honored to talk with you today. And I think Dave’s gonna start us off with a little look back at your history.

 

Dave Lundgren  17:58

Yes. Hi, Bob. Again, thank you very much for joining us. For our first case, it’s a real – It’s a real honor to have you on here. I thought it might be interesting to start our conversation with maybe a look back at your early years, particularly with a little known fact that you actually studied under Benjamin Graham and David Dodd at Columbia Business School. You know, for our listeners, these are essentially the grandfathers of fundamental analysis. They they literally wrote the Bible on securities analysis; on fundamental analysis, they also taught Warren Buffett how to invest fundamentally and so you also had that same opportunity to learn from what were some legendary fundamental investors at that time? What was that like? Bob, as you started out your your sort of Educational Foundation and investing?

 

Bob Farrell  18:41

Oh, first of all, Warren Buffett did a little better than I did. But it was, it was a challenge. And it was, it was something I wanted: to be a security analyst. At first I thought chemical engineer but my father said, No, you know, you don’t, you want to go to Wall Street. That’s where the money is. So when I was in college, I decided to apply for a scholarship at Columbia. And I got one, and in one year, got a master’s degree. And I had both Graham and Dodd as teachers. And I thought that was important only because getting into a research program in Wall Street really required another degree, but it was just sort of icing on the cake that Columbia had these two guys that were the most prominent people studying fundamental analysis. And from that point, I did get into the Merrill Lynch training program and that went on for two years. That was around a start in 1957. After I got out of the army, and I was in a training program for those two years and I really was anxious to get out of the training program and then be an analyst but they offered me the job as technician, because the guy who was a technician decided he didn’t like that. And they gave him a job as a security analyst assistant. And so they opened it to me. And I didn’t know anything about technical analysis because I had been schooled in the fundamental side of the game. And so I made my first big contrary decision, I took a job that nobody else wanted. Because the technical department at that time was one person and an assistant to keep up charts. So I took the job. And I had an assistant, the young lady from Brooklyn who lauded her lipstick on my files. And they said to me, it will be a time for you to learn about the business history of markets, and nobody will bother me because it’s a quiet little spot and research, you know, not knowing anything, you can see how important they saw a technical analysis was, they give it to a guy who’s a trainee who knows nothing about it and say you can learn on the job. And what I did was to start reading and finding out more about technical analysis and what it meant. And I quickly came to the conclusion, it was a lot more than just looking at charts. Read Charles Dow and Dow Theory, of course, and Colonel errors and breath and Edwards and McGee, Garfield A. Drew on odd lab studies and Humphrey Neil on contrary opinion, Lyman Lowry on the buying power and selling pressure approach,  ESC Coppock on rates of change measures, Edson Gould on speed resistance line, and John Shelton on technical and fundamental analysis and see how you combine the two. And it really turned out to be it is wasn’t education time for me. But you know, everybody has a look in their careers. And my luck was that the head of research for 30 years, a guy named William Duncack, was thought to be not salesy enough. And so they gave him a new job, which was to be the market economists on the staff of the president of Merrill Lynch. And he asked me to go with him, and he became my mentor. And for four years, I was outside of research in his little staff. And he taught me the business, and particularly the parts of the business that related to market psychology and sentiment, and he had access, or he got us access to Merrill Lynch internal figures, margin, account transaction, short sales, stop loss data, online data was also made available. And I had a four year college where I learned a lot more about what market analysis was about. And so I went into this business and then kind of observed what was happening in the technical area who was doing it and what was the competition. And it turned out, many people were mainly being used as stock trading idea people for the short term. And my thought was, maybe we should be really focusing on longer term trends and the institutional market. And I made that decision. And a few a couple of years later, we came back into research and I was made to head of the market analysis department and my boss eventually, or in the year, retired. But when I got to be the head of the market analysis department, that was when I really realized that what was important, and this whole end of the business was you were a historian, you’re a psychologist, you follow the trends in the market. And basically, you knew that interest rates in the Federal Reserve are important as well. And what I had been taught was that maybe the best combination is to figure out fundamental rationale for what we see on the charts and what we see in the markets. And that was something that I was taught by done CAC. And I think we’ve had some other people that have come along, doing that I mentioned course, john scholtes. And William O’Neal, I think, has done a great job in combining the two. And so rather than thinking of it as us versus them, I thought of it as we have similar goals, we just go about it a different way. And so that that was something that really led us into the late 1960s. And I was writing a market analysis comment at that time, I call it that because technical analysis was not regarded highly in Wall Street in the 1960s. We were basically thought to be in all kinds of labels were put on us. We were held and we were saucers and all kinds of things. We’ll just charge us and It was a time when we were really at a point where we had to get ourselves to be more professional. In fact, just as one background factor, not Charles Mero had vowed never to get into a market letter or never publish one. And as we’re run by Merrill Lynch saying, Okay, Charlie, put those charts away in 1961. And so this was a, this is a big change for Merrill Lynch. And ultimately, they let me publish my market comments in 1971. But in that late 60s is when the market technicians Association as we first call it was born.

 

Tyler Wood  25:41

I want to take you back for for one moment, just before we dig into the start of the market technicians Association. While you were at Columbia, was there was there recognition of technical analysis as its own discipline? Did they? Did they steer the students away from thinking about those aspects of the market? And I guess the the follow on question there was, did you read any of these other great authors like Garfield Drew, or Humphrey Neal, while you were still in business school? Or was this all your own self education after leaving?

 

Bob Farrell  26:14

Well, an answer the latter question, I started reading that only after I got this job to be a technician at Merrill Lynch that nobody else wanted. And when I was in Columbia, there was no reference to it, at least not consciously, because in 1982, there was a 50th anniversary celebration of the publishing of Graham and Dodds classic book security analysis. And I was invited to be a speaker, along with Buffett and a bunch of other people, mostly who were fundamentalists. And I was on the last one on the program. And I chose as my topic why Ben Graham was a closet technician. And it was a real fun thing to do. Because he really did think of times when the market looked over. There was more too much speculation in the market, and you had to cut back on your holdings because the market cycle might turn down and and other things that I referred to, but it was kind of ironic, because there was no no real reference to technical analysis that I can remember in 1955.

 

Tyler Wood  27:26

How did the audience react to you inferring that Benjamin Graham was a closet technician at Columbia Business School at the 50th anniversary of securities analysis,

 

Bob Farrell  27:37

I got my own applause. It really it really was, I didn’t know if it was successful or not, I think I kept it I have a copy somewhere of the speech I gave, but it was received, at least respectfully, because by that time, I had no taking the Merrill Lynch market analysis department from a few people to 17, which was even bigger than what they had up at fidelity. And we had gotten such an influence on the institutional market that our impact based on what the salesman told us on the customers, the institutional customers, by 1980 was greater than the whole fundamental size of the research department. And we had a big research department.

 

Tyler Wood  28:22

And when you began leading the market analysis department, Who were some of the other respected technicians on Wall Street in the 1960s, did you have fierce competitors or others that you looked up to that that you shared work with?

 

Bob Farrell  28:37

Well, Lauren a number and john salt shelf was one of my, I thought he was the intellectual technician. He used charts and he ran an article on Forbes every week or every month, whatever their publishing schedule was, and I thought he was terrific. And you know, he combined both technical and fundamental and brought he was very big on point and figure charts. But there were a number of people Edmund Bell and his point and figure work and it was Edson Gould with a speed resistance lines. And because Edson was still operating at that time, I think he died in 1987. And there were well there were a couple of books that were my favorite two. One was the crowd by Gustavo Bon, and everybody should read that book. It’s really a good lesson in crowd psychology. And the other was a little tiny pamphlet called one way pockets by a broker named Don galleon who wrote about a typical market cycle in the 1916 War brides market and it gives you another good look into the psychology of markets. And of course, that was something that I emphasized a great deal with. The sentiment side of how markets go to extremes. And we had among the people that I hired and trained or was a mentor to Bob Proctor and Walter deemer, arch Crawford, Phil Roth, and Steve showman, Frank grits, Bob noroc, Walter Murphy, tech, McCabe, Frank to share. Liz McKay, Charlie GaNS, Joe generalis, a whole bunch of people and I was, you know, they would come and some of them must have come to the conclusion. They couldn’t have supplanted me. So they go out on their own, and they become the first head technicians at other places, and I was proud of that.

 

Dave Lundgren  30:42

I think that’s something Bob would be great if we could spend a little bit of time on that, because what you just did was you just listed off some of the Great’s of technical analysis. I’ve been in the business for 30 years, and I followed every every person you just mentioned. In fact, my latest boss at Wellington was Frank Teixeira, who I consider to be one of the best technicians of our generation, and he came from your group as well. So, you know, as you were building out this group, and these folks are coming through your group under your tutelage were you were you even aware of the level of talent that you were sort of unleashing on on the investment industry as we I mean, these these folks, in many ways defined what what technical analysis is today, and it all happen under your tutelage where you were even mindful of that impact you were having on the industry at the time.

 

Bob Farrell  31:29

No, I wasn’t. But you know, my approach was basically I didn’t go to personnel to find people. I didn’t want to find people from Ivy League colleges, because I felt they expected too much. And I wanted people who were, they were just hungry and want and really love the business. So most of the people I hired came to see me and I hired, some are like Lou Smith is another one that I hired. And I know when I met Lou smithdown, I was making a presentation at the bank in Philadelphia and Lou wanted to come and work with us because he was not getting paid very much at the bank. But he asked the best questions. He was the smartest guy in the room. And he joined me on a train trip up to New York from Philadelphia. And as a result of that, I hired him. So a lot of these things happened just by chance that they came to see me. And Bob Proctor came to see me he was his four years out of college in in a band. And he decided he might want to try technical analysis. And I thought that he showed a lot of smarts and gave him a shot. And it paid off for him. And for me too.

 

Dave Lundgren  32:41

Yeah, kudos to you for recognizing all that talent as it came your way. That’s, that’s a talent in and of itself.

 

Tyler Wood  32:48

It strikes me that there was quite a community on Wall Street, taking shape, even as you were really in the early stage of your career. But as I understand it, there were a couple of youngsters that came knocking on your door sometime in late 1968, asking to make it official and bring a community together. Could you tell us in your own words a little bit about the start of the Market Technicians Association?

 

Bob Farrell  33:13

I’d be glad to because in the 60s, technicians were a loosely knit group and you know, technicians, it’s like herding cats, we all don’t agree with each other on conclusions, we might agree on the different approaches. And we had very little professional standing, as I mentioned before, and they will we will call these different funny names, even saucers and trail readers. And we’re not held in much esteem. So we rode in the back of the bus and the analytical sense and except for a few people who had really gotten recognition already, a group of technicians would meet at lunch to discuss stocks in the late 1960s. We refer to it as the tip and clip club, because they don’t come with their favorite ideas that they’d already recommended. And we needed professional standing like the New York Society of security analysts, which they had for the fundamental word and I thought at the time that that was a reason to call our apartment, the market analysis department rather than the technical analysis department. But the real beginning of the MTA was when john Brooks and john Greeley and Ralph helican Pura called about 18 of us that were practicing technicians at different firms, mostly from New York and Boston to meet to discuss one afternoon, forming a professional association. So they put the idea together. And we all liked it as a concept. And I don’t think anybody was voting down the idea at all. And a few of us started working on the project. And we came up with a name, bylaws, a code of ethics, ethics, and a plan to schedule monthly monthly meetings. We’d have a speaker at each meeting both And technical analysis because we thought it would be good for us to have somebody that was critical, like the people you mentioned when you were studying, and they were doing technical analysis. And by the way, the main reason people poopoo technical analysis, they don’t understand what it is. They just think of it as watching a bunch of charts. I was asked to become the first president, and I don’t know quite the origination of that. But I accepted the honor because I thought professionalism of technical analysis or a technical analysis, society would benefit us all. And we relator created the MTA annual award and started an annual offsite market technicians conference. And from this modest beginning, things really expanded. And I think Ralph and others really carry this on, much beyond where I was participating. But I found that it was a really seminal point for us to get this professional standing. And I’m amazed at how far it has gone both internationally and the scope of having credentials, that you have to pass a test to show that you are that professional. And it’s, it doesn’t make you great to have those credentials. But there is, you know, it’s like going in to a job you get hired, first thing is getting in. The second thing is showing that you can do a job. So everybody has to show their potential. But this was a good way for us to get in the door, in the professional ranks in Wall Street, the analytical side.

 

Tyler Wood  36:48

To me, Bob, after a decade of working with the association and seeing global expansion, new offices overseas record enrollments into the CMT program, because that charter has value, the CMT has value on the street. And for people looking for career opportunities, I guess I have to come back to these core principles that you and your fellow founders had, which was to elevate the professionalism to make sure that the the code of ethics and Standards of Practice were paramount. And it sounds like from the very beginning, education and getting together to discuss process and tools was really critical to you and your fellow members. Is that a fair statement in terms of the three pillars?

 

Bob Farrell  37:32

I don’t think I could have said that better. Now, that was it’s true. And education is true. And everything we expanded the scope of I think what market analysis and technical analysis comprise and a lot of improvements have happened as things have changed over the years, meaning more tools have been found, and yet really gets down to the idea that you need professional standing, and then it’s up to you to make yourself a special person within that profession.

 

Tyler Wood  38:06

Very well said, very well said, Our next series of questions, Bob, what we’d love to talk with you about, obviously, we could spend all weekend talking about your 10 rules of investing and philosophical approach to to markets. Let’s dive in for just a minute about when you crafted these rules that you know, 16 years as the number one II ranked analyst, you have distilled your career into some very simple and clear takeaways for how you approach markets.

 

Bob Farrell  38:39

Well, I really do think simple is best when people discuss all kinds of chart patterns and little flags and head and shoulders and reversals and one that I just welded down to I am very worried about umbrellas and I love sauces. You know, it beings simple about it is where you have an understanding of what what it’s about. In other words, I think the moment you get into the minutiae, the more you lose the big picture. And so I I tried to keep things fairly simple. And I was entirely a contrarian. I mean, all of us are if we’re in this end of the business, but whenever everybody wanted to go one way, if they it looked like they were going to four I I knew that wasn’t the way to go. And I would use that in talking with the institutional money managers who were more fundamentally oriented, but I’d give them fundamental reasons why my technical conclusions were as they were, and I think that’s something that is a communication skill. I went through a whole bunch of decision processes, but first wanting to get to the institutional market and then how to communicate to him and how to how to write something That will get people to listen or to read. I never wrote anything more than two pages, I always started off with some kind of a quote, or some quotes that I turned around like, every silver lining has its cloud or something like that, but just grabbers and but you want to get the intention of the people that you’re talking to, or at least that’s my way of looking at it. And I also looked at it from the standpoint that I never made big claims. Like, there were some guys that were really right on some of the big claims that, you know, the markets gonna crash on the markets gonna go to the moon, I was always giving the best odds of something happening. And I would take the view of repeating my point approach, time and time again, because a new idea people don’t accept, right off the bat, they have to hear it, and then they have to see it happening before they will adapt. So anyway, there’s a lot to how you communicate. And I’ll have to say, when I first started out, I was back in the early 1960s, I went to speak to the training school, and the guy that spoke before me, he was an office manager, he said, If I see a man with a chart in front of him on his desk, I say, fire that man. And then I get up to talk about technical analysis and chart. So anyhow, we all go through things like that. But I think today, there is a respect for the profession. And market technicians Association, or the CMT is very much responsible for that.

 

Dave Lundgren  41:41

And you are, of course, very much responsible for that success, to say the least, I love your your 10 rules of investing, I think when I read them, there’s no question that that those 10 concepts will definitely stand the test of time. I love number 10. It’s bull markets are more fun than bear markets, we can say that for sure. For our listeners, we will make sure that we will include this list in the in the podcast notes. Number five on the list, Bob is I think, is a really important one, you’ve made considerable contributions to this over the years in terms of not just acknowledging the number five states that the public buys the most at the top and the least at the bottom. So they essentially have a pattern of doing the wrong thing at the wrong time. And again, as you mentioned, some great books that highlight those concepts that go back 200 years. Probably the oldest one is popular delusions, was a book about that entire concept. So what you did, however, to to really transition that concept is you were able to actually back that concept with data because you were at Merrill Lynch, and you were able to track what individual investors are actually doing. So the question would be what as you as you look at how that’s changed over time, How valuable is for instance, the odd like concept? Is that is that something that’s still investors can use today? Or do you think that there are better ways to measure sentiment today, as opposed to how you did it in the 50s and 60s and 70s?

 

Bob Farrell  43:02

Well, in this in this in the 60s, the the put call information wasn’t available. So it was in the last few decades, we had more access to put call information, which really gave you a feel for the short term response to price change and market change. I felt that sentiment was a big factor and you go from one extreme to the other, you got returned to the mean, these things were, it’s all the biggest trick is to measure how extreme a market can get either down or up, you can know that people have gotten too bullish, they’re all buying the same thing they’re all buying and not selling anymore. Or as the guy said in one way pockets during a uptrend after a bear market, the average investor we’ll buy a little bit and then gets a little prop and sells buys a little bit more gets a bigger profit and sells. And he goes in and out all the way up. And near the top, the decision is made. And you’ll hear it everywhere. Long term investing is the only way to go I’m going to buy and hold. And when you hear a lot of that kind of talk, you know you’re getting vulnerable. And it was it was things like that, that really grabbed me because it was and measuring. What you can’t tell is how far the extreme is going to go and today there’s are there are some changes in markets that are affecting that. But we can discuss that in a minute. But I think overall, the the things that I found didn’t change were things like when a market goes parabolic, you know the adjustment is not going to be sideways is you’re going to you’re going to undo some of those excesses and sometimes very big.

 

Dave Lundgren  44:53

But you mentioned the put call ratio and being you know, a newer way of measuring sentiment in That particular indicator today has a lot of people perplexed because it’s been so low for so long. And so again, for our listeners, the put call ratio is just dividing the number of puts transacted divided by the number of calls. And the lower it is, the more bearish it is, because nobody’s buying puts. And so when we look at that indicator today, it’s, as I’m sure you’ve seen it, it’s consistently depressed. It’s I don’t think it’s ever been this depressed for so long. So it gives this pretty clear warning, at least as it has historically, that the markets in trouble, at least from this perspective, from this one sentiment gauge, do you have any insights on that as to maybe what is it you think the signal is valid today? Or is there something else going on in the markets that might make it a little bit less relevant today than in past or

 

Bob Farrell  45:43

I can’t explain how it’s stayed as extreme as it has this long. What I do realize is that we are in different markets. Now I can talk about the whole present situation, if you would like but, and we will go into that. But the put call ratio, when it’s flashing a signal like this is to be listened to what it says to me is, you know, stop buying, and it hasn’t really, we don’t really have a clear sell signal that this is the day or this is the week because it has gone on longer. And there’s an interesting thing about markets that I’ve learned that you are most influenced by what’s happened to you recently. And a market that’s creeping up, you just get more and more comfortable with it just creeping up and you put a little bit more money in and you get less interested in being bearish or in the bearish trade. And I think we’re going to something here that is an extreme. And basically, it’s the opposite extreme to what we had in the six weeks of decline in the spring, this is one extreme to the other. And I would not go to come to the conclusion that put called Data don’t work anymore, I would just say it’s gotten to a greater extreme, maybe because of other influences, like the number of people that are in trading or became traders, short term traders, as a result of being locked up with the virus restrictions. And they needed something to do and they took on gambling in the stock market. And in some ways, that may not be a great reason why put call ratios are low now. But they it means that there’s a new public group in here. And as I see all the things that are happening, they do suggest that we we have a market that is susceptible to disappointment. And we haven’t had the trigger yet. Mark has been remarkable. And it’s taking a lot of bad news. But I can talk more about that if I were to carry that further about what’s happening today. And in terms of market performance, it seems to me that this year has been a terrible year on a lot of fronts and a lot of people have suffered, the economy is at a tough time in some spots, and some places have done well. But basically, it’s been a tough economic time. But all the things done to keep the economy going and help the stock market with the low interest rates. It seems to me that we’re setting up for a big contrary here. And I think that 2020 being a year of a lot of bad news, I think john 2021 is likely to be a year of much better nose On the economic front. And in 2020, the market is wound up doing exceptionally well, despite the bad news. And in 2021, I suspect we will have a positive economic backdrop is the virus vaccines take hold, and we get over our fear of COVID. But the market will more likely confounded by having wide swings and little net progress. And my feeling is that we’re coming to a point in this first half of 2021, where there’s going to be some adjustment of the excesses that are developing here in terms of bullish sentiment. And it could be as early as January depending on how the results are from the Georgia election. Or it could be maybe a little bit beyond that. But I’m concerned about the put call ratio being this low. I’m concerned about a lot of other things that relate to sentiment and one of my feelings is that market is not your grandfather’s market. It has changed. And I wrote that in the that was the title of the last piece I wrote and went into business as federal advisory associates. I was writing for a small group of institutions privately and he published something and my last one was it three years ago. Yeah, it was three years ago that I did that. And when I when I refer to is that I think the markets are gone through a transition. And that transition has changed things. We started off with ETFs coming in, that’s taken up a huge part of the market. And we don’t know to what extent they’ve changed the markets. But it has certainly pointed or given a emphasis on indexing. And then we had the change to decimalisation in 2001, the computerization when, in 2003, when they started the end of the specialists 2007, they removed the short sale uptick rule out of nowhere, in effect since 1938. And then all of a sudden, they say, well, we don’t need that. And of course, that enable the growth of algorithmic trading, which grew after the 2008 2009 bear market. And machine trading is now estimated 60 to 70% of volume. And that, to me, the algorithmic trading does have a big effect, in the sense that it’s a lot of low volume. And I think the people that run these things, and I’m not an expert on algorithmic trading, but I see more false breakouts more times when new highs mean new, bigger risk, rather than we’re free and clear and On we go. And they’re greater extremes. We think of the extreme on a sell off being when the public gives up, you’ve also got the algorithmic trader in there and that volume, and they can trade on down ticks and accentuate a move so that I think that many things are changing from breath to me is currently in the decimal system. We more often have very short lead times to tops rather than these long divergences. And maybe the long divergences will come back. But what I’ve noticed up to now is that change where we’ve seen just a matter of few days of divergences, and we get a breakdown, and in volume, I think is inconsistent as an indicator to have you looked at long term charts of the market during during the last couple of decades. The big uptrend phase in the last decade has been mainly with lower total volumes. And I think it’s a market of traps and things you think, you know, traditional signals. Certainly some of working and trend following is working and at this time, but I think that there is a reason to be careful about using precedent as your guide to the future. And I always did it. That’s what I did it all this looks like this just looks like just like 87 or 72, or some other period where there was a similar trend. And I think, you know, in some cases, it’s may be valid. But to me, I’m very leery of using precedent, because I think the markets have some significant changes.

 

Dave Lundgren  53:09

Yeah, they’re not at all like the the old environments. I mean, there’s some, there’s some similarities. But you know, just what we saw in the past year, we saw a record crash and a record recovery. And that’s, of course, never happened in history. So precedence can sometimes be a helpful guide. But it’s certainly not something you want to stick to dogmatically in in your in your positioning and your portfolio’s and so, you know, you’ve done a great job of articulating and highlighting the things that have changed, I guess, maybe you can help us think about you as a because I know you’re still very much involved in the markets, you You’re still recording your data at the end of every day and in monitoring the markets just as you always have. But at the same time, you’re also acknowledging and recognizing these changes that are taking place. And so I wonder, what are you doing differently to accommodate these changes? And what do you How have you adjusted your strategies and how you implement your technical strategies to accommodate for these changes that you’re seeing?

 

Bob Farrell  54:01

Well, you get down to I guess, I’ve been caught by some of these things. I would say, you’re not alone. times when I think we’re over done, but not overdone. Both going down and going up. But basically, I’m more careful more looking at individual stocks to confirm what I think about overall picture I I have in the background on the back of my mind that, you know, the still cycles. I think there’s cycles in the markets. And I think if you look at like alternation of rates of return by decade, a good decade is followed by a less good decade. You know, the 19 or 2019 90s work with a great decade of rates of return 18% annually, and the next decade was A decade of lower rates of return, or almost even, it was well below average, this most recent decade of the 2010 has been another exceptional decade, well above average, maybe 14 to 15%. And I think this the coming decade is going to be a below average return decade. And what that fits with, is the idea that passive investing will always beat individual stock picking or active investing. And I think we’ve been through a period where passive investing has worked. I mean, you haven’t had to work, if you just bought the indexes, and bought those ETFs that invest in the s&p, you outperformed most money managers who are active, actively managing that portfolios. And so I think we’re due for decades and decades, a long time, but where the returns are going to be probably below average. And I think stock picking is going to come back, I think that may be beginning to see that starting with this parent change taking place between large and small, or small caps in large caps, or we’re seeing some kind of thing where the active manager can do better, and, and is doing better. But I think that that’s something that influences my judgment on what’s happening, you know, day to day and week to week, I do plot the market every day, I’m not so much plot, I keep the spreadsheets that I’ve been keeping since 1960 and 88 now, and I’ve been retired, and I still do what it’s a great discipline to put them down by hand, even though we have all this computer support that’s available today. And I know there’s a lot of change, that’s I don’t even appreciate it at this point in how markets are measured. But in any event, having a discipline will will work in the end. So it’s like it’s like the money manager who has an approach to investing. He’s like, he’s a value investor. And he only buys things that are out of favor and whatnot. And he finds that the markets passing him by because everybody’s buying growth stocks and the market index is going up and he’s left holding the bag and losing his clients and money under management and all of that. But usually, to change your style to change your discipline, because it’s not in favor. Now. It’s a big mistake. If you have a discipline that has worked, the market will come back to you. And it’s so often that we’ve seen this happen, where the guy who won style seems to be going out of favor, switches at least part of his portfolio off into another style. And that’s the style is in favor. And that’s the one that’s about to go out of favor. So that’s the best I can answer the question.

 

Dave Lundgren  57:59

Well, arguably, that could be one of the great sentiment gauges, as we’ve seen it many times in history where I won’t mention names, but just you know, at the peak in 2000, all the hedge funds in particular that fight that rally all the way up, basically close their books, because they couldn’t deal with it anymore within weeks of the market peaking. And so that’s, that’s just a pattern that we see repeat throughout time as well.

 

Tyler Wood  58:20

Bob, I’ve certainly noticed within the market analysis community and technicians, that there is a poll right now to go back to the tip and clip clubs that we’ve seen Robinhood traders participating in this market at record levels. You’ve seen individual examples like hertz have bankrupt securities rallying incredibly, and there is a drive for believers of technical analysis to apply this to a very, very short term mentality. What do you see as the role of market analysts in this return to a stock pickers environment? Where can the technical community be most helpful to institutional portfolio managers?

 

Bob Farrell  59:01

Well, it’s a good observation that there is a tendency to go towards doing more short term forecasting. And everything is good at the median and gets in trouble at the extremes. The trick is here during the best part of a market move, almost anything works. And it looks easy. And that’s what’s happening. Now. There’s a there’s been a desire to capture these great percentage moves that occur in low priced stocks or in different groups. In a short time, some news base and some very difficult to predict, but I think that that’s something that is what will be the warning is when you see more of those not working. It’s like the new issue market. When the new issue market is really jumping like it still is now where these stocks go up. 100% in a day. That’s not generally the top, it’s when they start failing that you got because it was in early 2000. It just started seeing some of the big new issues coming out that slumped then didn’t didn’t work. And so it’s sort of you got you got to be careful about jumping on the new bandwagon, or you have to be very careful about observing when it’s not working anymore.

 

Tyler Wood  1:00:25

I think that was one of the best lessons I learned from your mentee, Ralph, I can pora he said, an overbought RSI is not a bad thing. It’s still overbought, it’s when it stops being overbought that you need to worry so good. Right, let’s take away.

 

Dave Lundgren  1:00:39

Okay, jumping with a question on the on the regime. The last time Bob made comments like this, about the potential impending regime change was in a, you know, we all should have listened and hopefully many of us did. But it was towards the end of the last secular bull market. And one of the one of the challenges I find, and I, I’ve wrestled with this myself. And so maybe Baba can ask you for some advice on this. But when you go through a regime, you learn how to exist in that regime, and you learn what’s the right thing to do in that regime? And what’s the wrong thing to do with that regime? So when you’re when the markets trending strongly, you learn not to sell short. But when the markets transitions to another regime, you have to forget everything that you did that was correct in the last regime and make adjustments to this new regime. And so how do you handle that? How do you first of all, how do you know to the extent that it’s possible, how can you tell that the regime has changed? And when it has changed? What What do you do differently as a technician to help navigate that transition from one regime to the other?

 

Bob Farrell  1:01:33

Well, it’s, it’s a tricky question. It’s, it certainly is keeping track of what’s working, what’s not working, and you begin to see the changes. But you know, in my Like, right now, it’s kind of become pretty well accepted that value is coming back in favor. And that growth is losing its command and maybe is overdone, and mostly waiting to the tech area. And my experience is that more often than I can say all the time, but most of the time, when there is a big shift taking place, like from one sector to the other sector, like going from growth to value, it occurs in a decline more than just is passed the baton. And now let’s do these because the other one’s gotten over done a bit. And right now, I think that’s one of the questions because I think we are moving to an extreme on the upside opposite to the extreme on the downside and March. And I think before the long term shift is cemented on to value or small caps, I think there will be a market decline that will impact what was in favor, and which is faltering now. And usually, it’s the warmer leadership that has the bigger decline in a reaction that enables this change in leadership. And it’s the new leadership that doesn’t get down anymore. You know, back back in 2000, that you pointed to in March, that was when we cracked all the tech stocks, but at the same time only out of favor stuff and industrial and other types of value type stocks. They didn’t get down, but some of them went up into the spring of 2000, or into the summer of 2000. So that’s what I’m I’m looking for and in a temporary is how I trade in the market.

 

Dave Lundgren  1:03:36

Thank you, man. You were to actually build a team of technicians today. What do you think that team would look like? What would you be looking for today, given how you’ve seen technicals change over time? And what you see, in terms of other markets change and the skill sets that are required? What What would you look for today in a team?

 

Bob Farrell  1:03:53

Common sense? Just don’t join the crowd. Look for what’s out of favor. That could come back into favor, whereas, you know, where’s the overcrowded trade? As far as you know, what tool would you use? I think you keep using the same tools that have worked over time observing when there are biases or observing when something’s not working the same but mostly, I think you want to be the guy that’s looking for smart smells contrary and I think that I wouldn’t get into naming people it would be more like you know, what approaches to use what all approaches get their get their turn. And some some approaches whether you just like to be a momentum trader or you want to be mainly emphasizing short term versus long term or international stocks versus US stocks. I think those are the things that it’s why common sense comes in and that sense, the sense of markets. I don’t think I can give you something That would be the ideal analyst in today’s market. It’s too broad to many different internal trends in the market. And, and we got this huge individual stock volatility.

 

Tyler Wood  1:05:13

Very good, Bob. I think for all of our listeners on this podcast, there’s a saying within the CMT association that certainly resonates for me that we we are here only because we are standing on the shoulders of giants. And certainly, it’s an honor to have you as our very first guest on this podcast series. And as Dave and I have have reached out to many more that are going to be guests throughout our first season. You’ve named many of the names, but I have to ask you, if you were looking for insights on the market right now, and, you know, curious about someone else’s philosophy and process, who would you suggest that we, that we bring on to the podcast?

 

Bob Farrell  1:05:52

I don’t want to offend anybody. I mean, I, and I have a limited scope of all i don’t know who’s still alive. But you know, I think, Alan Sure. Or Ralph has something to say it’s referring to Ralph outcome for. But I think if you could get somebody like Joe O’Neill, William O’Neal, I think he’s, he’s done something terrific with what he’s done with the Investor’s Business Daily. And I think the people who have been technicians and become money managers, like Frank Teixeira, I think, be an interesting younger guy to have to one of these things. And and there’s some younger people that I’m not, as I don’t have in the back of my mind, and I think I’ve done extremely well. That’s about as much as I have on my mind right now.

 

Tyler Wood  1:06:45

Those are all names on our list. great suggestions. And I think, as we’re, as we’re coming up on the hour, I want to respect your time, Bob, and, and I know there are some indicators you need to populate with, with new market closing data. But knowing what you know now about how the organization has evolved over the last 50 years and the CMT Association now, being a global credentialing organization, in partnership with the CFA Institute, working to promote the complimentary nature of technical analysis and fundamental analysis. How does that make you feel about having started the organization all those years ago? And do you have any thoughts on where this might be headed over the next 50 years?

 

Bob Farrell  1:07:28

Well, all organizations go through cycles. And big doesn’t mean great. But having a far reach is an important thing. And I’m most impressed about how this has grown into a worldwide organization. I’m not a big fan of big companies, big bureaucracy, so that there’ll be times to trim back and reevaluate and do those kinds of things. But there are a lot of people that made this happen that succeeded me, and I’m quite impressed and proud to be part of the whole process.

 

Tyler Wood  1:08:10

Well, thank you so much, Bob, for Dave and I, and all of the board of directors and the volunteers around the world for the CMT Association. We just really appreciate you sharing your your wisdom, your experiences and comments on what we might be headed for next. Thanks for including me in this series.

 

Dave Lundgren  1:08:28

Thanks for your time on it. Take care.

 

Bob Farrell  1:08:31

All right. Bye.

 

Dave Lundgren  1:08:37

Tell us a little bit about what’s going on in the CMT program and the association.

 

Tyler Wood  1:08:41

I’m glad you asked Dave. Registration for the CMT exams is now open. We’re sitting here at January 8 2021. And there’s plenty of time to prepare for the exams, which will be delivered June 3 through the 13th 2021. It’s a three level exam. All three are available now through remote proctoring as well as live exam centers provided by prometric. You can find out a lot more information about the CMT program, the value of the charter to those who manage investment decisions and the career opportunities that are open to you through the CMT Association. Find out more at CMT Association dot o RG.

 

Dave Lundgren  1:09:20

And of course, if you have your CFA you can skip level one of the CMT program.

 

Tyler Wood  1:09:24

Absolutely. The CFA charterholders are exempt not on the knowledge but on the examination process your level one so we welcome all of our CFA charter holding friends to come and join us starting at level two. Dave The other thing I wanted to mention, just with regards to the CMT charter itself, the designation that we have enjoyed recognition from FINRA now for 15 years in 2005, the SEC and the NASD which then became FINRA recognize the CMT program for an exemption on the series 86 research analysts exam that work in the advocacy role of the Association has continued. We’ve got ongoing projects with Iraq and Canada Sebby in India, as well as many in the private wealth management space. So for those of you who are considering the designation, just know that it is regarded as highly as any other by the highest regulatory authority in the United States.