Listen above, or subscribe on your favorite podcast service and never miss an update!
Pam’s favorite chart (secular bull/bear markets)
RBC video about Pam’s work
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 veterans, 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 filled 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 refine the design of Technical Marketing.
Tyler Wood 01:11
Fill the Gap is brought to you with support from Optuma, a professional charting and data analytics platform. Whether you are a professional analyst, portfolio manager or trader, Optuma provides advanced technical and quantitative software to help you discover financial opportunities. Candidates in the CMT program gain free access to these powerful tools during the course of their study. Learn more at Optuma.com.
Tyler Wood 01:51
Hello, and good morning, Dave Lundgren. Welcome to Fill the Gap, the official podcast of the CMT Association. How are you doing today?
Dave Lundgren 02:01
I’m doing well, Tyler, doing well. Thanks. Nice to see you.
Tyler Wood 02:04
Nice to see you too. I’m very excited this month for our featured guest, Mrs. Pamela Yoon CMT. She’s the Vice President and Portfolio Manager at RBC Dominion Securities in Vancouver. And this interview is a little different from some of the guests that we’ve had on the show before. We’ve often highlighted the work of technically minded investors that are in the media spotlight. But we also want to feature the work of CMT charterholders, who are less often known on the wide media landscape. So Dave, talk to me a little bit about what really stuck out to you from this interview with Pamela.
Dave Lundgren 02:34
Well, first is as you just said, was, to me, one of the great things about this particular interview is that I think it’s a great example of what we’re trying – striving to accomplish with this podcast, which is to bring notoriety and recognition to those CMTs who are perhaps lesser known because they’re not on CNBC all the time, but they’re striving and thriving using technical analysis on behalf of their clients, either as analysts, or portfolio managers. In the case of Pam, who is a CMT charterholder, she’s, she just does a really good job. And she has a very healthy level of respect for fundamentals, she does deep dive fundamental work on her individual stock selection, but she also has a very high level awareness of the sort of episodic risks that are inherent in equity ownership from time to time, and the benefits that technical analysis can bring to bear when those episodes do arise. And so she just as a, you know, we’re all striving as investors, ideally to be somewhat more holistic in our approach, where we’re trying to incorporate fundamental and technical and what I’m pretty, you know, most excited about in this particular conversation with Pam is to highlight somebody who is actually thriving doing both: using fundamental work, but as well using a technical overlay to really help protect her clients’ assets during those episodes where you really need to bring risk management front and center,
Tyler Wood 03:46
Absolutely, responsible risk management, paying attention to not just the fundamental data, but to the market data itself certainly helps Pam improve performance for clients. You know, it’s funny; when when I first started working with the CMT Association over a decade ago, I heard so many comments about “Oh, sure, technical analysis, you know, that’s for short term speculative trading, or that’s, you know, that’s that systematic high frequency stuff.”
Dave Lundgren 04:09
And the fact is, technical analysis is commonly used throughout the industry. In every aspect, it was great to talk to Pam about how she can create concentrated portfolios on behalf of her clients to take advantage of securities that are trending and outperforming and she uses the fundamental discipline to back that up, but really, it’s the technicals that help her stay with those names in leadership. One of the things that Pam mentions in our conversation on her website; she talks about concentrated high conviction. And that reminds me of the conversation we had with Jeff deGraaf, where he talked about this idea that technical analysis allows you to be almost brash and brave and you’re investing in managing a portfolio because it always has that risk overlay that enables you to pretty readily recognize when you’re wrong. So that enables you to actually have a high conviction, highly concentrated portfolio because you know pretty readily when you’re wrong. These are the – try to change and the tools we bring to bear in technical analysis. So that’s – that was interesting.
Tyler Wood 05:03
Absolutely. Pam is a great example of that Bull Durham quote in action. It’s fear and arrogance, right. The other big takeaway for me, Dave, was just how generous of time and spirit somebody like Pam is: she does a lot of work with Simon Fraser University and scholarships and mentorships for the next generation of investors and it’s great to hear her stories, early beginnings and how she got in finance and some of the influences she had in her life from other CMT charterholders out there in the Pacific Northwest. So for all of you listening, I hope you enjoy this interview on Fill the Gap with Pamela Yoon, CMT, Vice President and Portfolio Manager at RBC Dominion Securities in Vancouver.
Dave Lundgren 05:47
Welcome to the eighth episode of Fill the Gap, the official podcast of the CMT Association. Our goals are to highlight the value of technical analysis, the value of the CMT Association, but most importantly to profile analysts and portfolio managers who are thriving as CMT charterholders. And today’s guest is thriving to say the least. Pamela Yoon is a CMT charterholder, a vice president, and Portfolio Manager with RBC Wealth Management in Vancouver, British Columbia. Pam, welcome to Fill the Gap.
Pam Yoon 06:18
Thank you. Glad to be here.
Dave Lundgren 06:20
Great to have you with us. Well, Tyler and I are very excited to speak with you about your transition over your 25 years in the business both pre-CMT charter and post-CMT charter. We’re sure that’s going to be a riveting conversation. Let’s start first with how you got into the business. What drew you to the business? And how did you get your start?
Pam Yoon 06:38
Yeah, that’s a great question. I did not grow up with stock/bonds type of financial terminology in my business. In my upbringing, my mom gambled in stocks, like a casino. And she used stock tips and her methodology when she was trading stocks. And so that was a no-no. Dad was a civil engineer in the construction business. So I grew up going with dad to see the highways that he built and the commercial buildings where he builds until, you know, it was a family that we understood construction. But I didn’t know anything about stocks really, other than it was gambling. So I didn’t want to work in a family business as I was a little girl; I was a girly-girl type growing up in the 80s. And you’re looking at Vogue magazines, and at that time was power suits, and I wanted to be in a power suit. And I wanted to dress in pretty clothes. And so finance was the place to be, so that I could work in Wall Street, kind of thoughts. And so then I went and pursued an economics degree. And dad wasn’t very happy about that, because in all it was, I needed to be in a family business. And so growing up, I loved art and I loved beautiful things. And I was also very good in the sciences and Math. And so I went to university and graduated with an economics degree from SFU, Simon Fraser University here in Vancouver. And then when I graduated, I thought I was gonna go on into the traditional routes of going into banking, but one of my buddies in university a few years my senior suggested that I come work with them at one of the brokerage firms in Vancouver, and truthfully, I didn’t really know what I was getting myself into. But he said, You know, you’re a smart girl, you’ll figure it out. So come work for us. And so that was how I got into the business and worked in the bullpen. That was a brokerage business, very traditional back then, you know, the early 90s was very sales culture. I saw who was successful and who wasn’t and I knew it was a meritocracy kind of business. And so that was it. Yeah, I was a broker. I started out as an assistant with that buddy. And then in two years, I became a broker. So I was an immigrant. Well, I came to SFU in Vancouver as an international student. My friends didn’t have money. I didn’t know anyone with money. Yeah, that was my start.
Dave Lundgren 08:57
So first of all, when you when you mentioned the word bullpen, maybe describe what that is. That’s when I think about the movie, Wall Street, which came out in 1987. Is that what you describe as a bullpen?
Pam Yoon 09:08
Yeah, it was dial for dollars. It was trying to get clients, right. And so that was really what it was. And we buy tickets and pink sell tickets, and we run to the trader to put punch in your order. Interesting. Interesting.
Dave Lundgren 09:21
So what year did you officially get into the business?
Pam Yoon 09:25
December of 93.
Dave Lundgren 09:26
That was sort of the beginning of what ended up being one of the great bull markets in history, right, that peaked in 2000. Considered yourself a genius stock picker.
Pam Yoon 09:37
Exactly. I didn’t really have a lot of clients back then. So it was very sales culture. I was primarily trying to get clients by doing seminars and putting together mutual fund portfolios. At the time mutual funds were, you know, the biggest invention kind of thing. The business has just changed tremendously since then. But yeah, it was quite fun.
Dave Lundgren 09:59
We have a lot in common and that probably more than you ever even would suspect, but my first job was a stockbroker in Canada. I started in 1989. And I remember very well picking up the yellow pages, and literally going down number number by number, making 100 dials a day –
Pam Yoon 10:15
Trying to build a book of business. Exactly. I did that too. I couldn’t go home. And so I made 100 dials a day. And so it was one of those things, right. But I think it builds a lot of resilience.
Dave Lundgren 10:26
And it definitely weeds out the ones who don’t really want to be in the business. It weeds them out pretty quickly. So in your early years, as you were sort of transitioning into the business and trying to learn your way around, would you – can you highlight any folks or perhaps books that were early influencers to you, they really kind of gave you direction in the early days?
Pam Yoon 10:43
And this business, Dave, you know, it’s fundamental based. And so it was Graham and Dodd, Warren Buffett to the world. And so that’s where I went and read Barron’s with the Wall Street Journal. But it was really in the mid 90s, around 9596, that I met a very good friend – he’s a very, very good friend today. Yeah, Gatis Roze. And we both served on a board together. And he he was a great guy. And he asked me a lot of questions about what I did, my methodology and stuff. And that really pointed me out to what technical analysis was all about. And if you remember, back in the 90s, technical analysis was still treated as you know, witchcraft, Voodoo kind of stuff, right. And so he pointed me in the right direction, I dug deeper into it. And that was really the start of it. But then back then computing power was still quite limited. And most charting was done by hand. As a retail investment advisor. I didn’t really get a lot of access to these kind of big powers into the fidelity chart room, that kind of stuff. Right? So they’re very different days. Yeah. So that was my early start.
Dave Lundgren 10:44
Tyler Wood 10:44
And you and Gatis served on a board together for which organization?
Pam Yoon 12:00
For Simon Fraser University, he him and I are both alum of assignment for the university. I think we served there 96 to 99, or something like around there.
Tyler Wood 12:12
And of course, Gatis Roze is the author of 10-style trading. Fantastic book for any of you who haven’t –
Pam Yoon 12:17
fantastic book. Yeah, I give that to everyone who asked me about investing,
Tyler Wood 12:23
Not to date myself, but I’m much closer to his son Grayson Roze, who’s also in the business, stockcharts.com. Wonderful, great technician. So Pam, as I’m listening, clearly, you have drive, you have the resiliency to make it in this business, particularly in those days, and you seem to be a lifelong learner. Can you tell us a little bit about what is inspiring you now? What do you see on the horizon in terms of great authors or influencers in your life right now that kind of keep that passion alive for continuing to innovate, and just get better at the craft.
Pam Yoon 12:58
Gatis continues to inspire me, the work of Amos Tversky on behavioral work, behavioral finance, that’s big, especially in the work I do with clients and on the investor behavior psychology. I never really enjoyed psychology when I was in university, but today applying psychology to the markets, to human behavior. And so that’s big for me. Seasonality work, I do a lot of work on that cycle theory, I do a lot of work on that stuff that Julius de Kempenaer is doing at RRG, that’s all fast, absolutely.
Tyler Wood 13:31
So much out there that’s directly impactful to your business. I wanted to keep on this thread of education for a while; I looked it up and you earned your CMT designation in 2017. Is that right?
Pam Yoon 13:44
Tyler Wood 13:44
Now, you had already been in the business for 20 years by that point, what prompted your decision to go through a rigorous three-level exam process and study for another financial designation?
I was really driven by my friendship with Gatis. And I’ve always wanted to do that. But during the early part of my career, in the beginning two thirds part of my career, I had been really more on a survival mode, I was a primary breadwinner in my family; I had to raise the two boys, they’re now 16 and 18. And when they were young, it was just, I needed to run the business. And so when the boys got older, I finally had the time. And so I did that designation. And you know, truthfully, that was the best – one of the best decisions I ever made. Because it gave me a view into what other tools that I didn’t know about, it was quite fantastic. And to be able to do the CMT while running money, to be able to apply some of these tools to see, you know, how is that going to impact my setups and how am I going to view this a little bit differently. It was really, really good. And then today I use some of the tools and some I don’t. Point and figure was something I never knew anything about. And so it’s come in to really help me a lot today.
Dave Lundgren 15:07
Wonderful. Were you – were you using technical analysis before you got the designation and then getting the designation so to refine it? How you use it? Am I hearing you correctly?
Pam Yoon 15:16
Absolutely. Absolutely. My technical analysis, when I used it earlier was – I would consider it very elementary today, very, very elementary. Today, it’s so much better.
Dave Lundgren 15:27
Just doing a little bit of research on getting ready for our conversation. It struck me just watching like your video on the web, on the RBC website, there seems to be a bit of a tactical aspect to your your approach. So I’m curious if you can highlight what might be the turnover in your portfolio and how you deal with taxes at the client level and things like that, when you’re trying to be tactical, how tactical are you; what does tactical mean to you, etc.
Pam Yoon 15:49
When I bring in clients – so I work in a private wealth space. So these are families, most families come to me with, you know, anywhere from one to seven different accounts. So husband and wife registered portfolio, which is taxed, because I’m here in Canada, right. So the registered accounts are tax sheltered. So there are no capital gains on gains and losses within the tax sheltered accounts. And then some accounts are tax exposed accounts. So when we bring in these clients, I don’t put each account in the same allocation. So but I would look at the family as a whole and allocate currently about 20% to tactical, I’ll explain a little bit more later 20% I’d say tactical, but I could take that 20% and allocate that tactical into the tax sheltered account. So that then when I’m trading, I’m not triggering capital gains, every time I’m trading. So then going back to that bigger picture mode, currently, I put 20% in tactical, and the rest will be in long term portfolio stocks, their long term portfolio can also be anywhere from 35 to 40 stocks, that’s my concentrated position. In tactical, I use my big picture, macro technical analysis, using cycles and chart patterns to decide if I want to be in or out of the market, do I want to be risk on or risk off at any one point in time. So when the charts are telling me that I need to be careful, then I get out of my tactical position, tactical positions are really just broad based ETFs that allows me to raise cash very easily. So let’s say you know, I have 20% in SPY today, and the market’s looking overextended, I may say I want to take tactical down from 20% to 15%. Or I may take it down all the way to 10% or even zero, and I feel it allows me to be – to raise cash easily. I’m calm, I’m not trying to sell, you know, 20% or 40 different stocks. And then now I’m running around with a chicken with a head cut off, right. And so as I’m sure you guys know that as technicians, we need to be calm at all, at any given time so that we can make good decisions when you’re investing.
Dave Lundgren 17:51
On the I guess that longer term portfolio? Is that a portfolio that’s driven primarily by fundamentals, and it’s not necessarily buy and hold because you are making individual stock decisions. But in that portfolio, you’re – you’re likely to let let it ride through a global financial crisis or something like that, would you actually take tactical action there as well,
Pam Yoon 18:12
Generally, it is a long term goal. However, there will be situations where I would take positions down dramatically. So for example, in February, when the markets were looking iffy, I took tactical cash. And then I also started reducing the weights in the long term portfolio. So by the time March came around, I had 40% cash.
Dave Lundgren 18:39
Okay, so that’s, that’s interesting. On the ETF portfolio, do you utilize any of the levered inverse ETFs? Just to hedge the longest with the long portfolio?
Pam Yoon 18:48
Dave Lundgren 18:49
Okay, and how about?
Pam Yoon 18:51
Yes, yeah. So yeah, that’s when RRG comes in quite a bit where I would look at EA and that’s where I would look and, RRG comes in a lot to do with my longer term portfolio. So yeah, in a somatic ETFs will be when if energy is looking like it’s coming back into play, or biotech coming back into play, and I can do a quick trade there, then I would put in maybe 10% of tactical into the XLE or the SEI or something like that. And they would be shorter term kind of trade, systematic ETFs gives me an opportunity to do to buy and have access to opportunities when I don’t have time to research properly, right. So if I wanted to buy energy and I didn’t really know if I should buy Sunco or Conocophillips then I would just buy the XLE.
Dave Lundgren 19:41
That’s exactly what I do. I do the same exact thing. I think that’s – that’s one of the best ways to utilize ETFs particularly in the early part of a cycle when you’re – you’re more at that point making a almost a macro call if not a sector call and you’re just not sure which stocks to buy. That’s a great use use of ETFs yeah.
Pam Yoon 19:59
Even geographic allocations, like so for example, Europe looking good, emerging markets looking good. So it is just fantastic for that.
Tyler Wood 20:07
Right? Right. For all of our listeners, RRG stands for relative rotation graphs. And in fact, just last week, Julius de Kempenaer, presented at the European CMT Summit explaining the concepts of relative strength over time, and how you can see not just between sectors, but even baskets of currencies or, or different asset classes together against a single benchmark. So Pam, when you are doing your tactical asset allocation, how important is the relative performance of the portfolio versus absolute return?
Pam Yoon 20:37
I run money for absolute return, I don’t benchmark. I aim to get a rate of return in the private clients space. Clients don’t care really, I think whether we’re, you know, 2% or 3%, above index. So what index do we really use? You know, here in Canada, do we benchmark against the Canadian index? Do we benchmark against the SP, s&p 500? Do we take currency into consideration? It is the MSCI so it is more difficult, but I think at the end of the day, in a private client base, they want to know that they’re going to be okay, they’re going to reach their financial goals. So really, for me, I feel that for in my client space, I am trying to benchmark against that financial plan, and we made for them, right, so we said, Dave, we’re gonna run a financial plan for you, and you only need 4% to reach your financial goals. And Dave only needs a 4% benchmark, really, but do I want to only target 4%? No, I mean, if we can deliver 30% or 25%, or 8%, that’s significantly above your benchmark. And so so to me, that’s how I run money.
Tyler Wood 21:45
Yeah, I respect that answer a lot. Given that benchmark is more defined by their risk appetite than by, you know, trying to index to any other larger benchmark, well said.
Pam Yoon 21:56
Hey, and so and then going back to, you know, periods of crisis, like, you know, COVID or 2008 financial crisis, I go back to the financial plan we do for them. And you know, every year there’s a number to that. And then we look at the portfolio, and we say, you know, Mr. Client, even though we had a 40% drawdown or a 30% drawdown, you’re still way above the number that we had in a financial plan for you and they feel. So it is that psychology of the client, they feel better, they’re not going to panic, they’re not going to do stupid things. And then that also empowers them to think about, you know, how do I take advantage of this opportunity and buy on sale right, instead of panicking and doing stupid things?
Dave Lundgren 22:39
That’s actually a great sort of segue into the into the question I was just about to ask you. So in your career, having started in the 90s, you have ridden through some pretty tumultuous times to which I can pick up you use technicals. But you didn’t – did not have your CMT, and then one most recently, which sounds like you’ve navigated it pretty well, of course, was COVID. And you did have your CMT? So I’m thinking 2000, the unwind of the bubble in 2000. And then the global financial crisis in 2008. How did you navigate those relative to how you navigated? COVID, which sounds like you obviously, you raised quite a bit of cash heading into that. So you know, job well done for you on that. Were there any differences in what was your experience in 2000 to 2008? Were those perhaps a catalyst to encourage you to get your CMT should such a crisis unfold again?
Pam Yoon 23:22
In 2000 and 2008. In 2000, particularly, I was running money as an advisory relationship versus discretionary advisory, meaning I had to call clients for the okay to trade, discretionary meaning that I could raise cash whenever I wanted, based on the investment policy statements. Moving to discretionary was key. 2008 was … 2001. Going back to 2001 taught me how to communicate with clients and setting expectations. 2008 was a defining moment for me, my reading of charts at that time told me trouble was brewing, but I could not execute, because I could not possibly call 200 clients to get them to get out. And even if I got them out, I couldn’t call them back in to get them back in right. It was not humanly possible, right. So 2008 made me think hard about how I would manage money differently. When I made that decision meant that I was going to change how I run money, and that I needed full control. Instead of the advisor role. I only took one client that entrusted that to me. So then going back to the CMT in 2008 I didn’t have as good tools as I do today. Today, having the tools I could go to cash easily I could pivot I could move so quickly, and then communicate with clients after. And so it’s just been there. Very good. Interesting.
Dave Lundgren 24:47
It sounds again, like you might have because you use different vehicles in the two different approaches. One being it sounds like stocks and that longer term allocation and then ETFs and the more tactical allocation, maybe we can focus first on the that longer term allocation and of course, no specific names are needed. But just generally speaking, can you describe what would represent an ideal setup for you from a fundamental perspective? Is it will grow through or is it value, and then what technical tools you use to then help you navigate the entry and exit?
Pam Yoon 25:18
Sometimes the ideas come from a bigger picture of macro strategy. So I may be thinking that I want to have access to the medical technology area. For whatever reason, I’m looking for a high margin type businesses that have a technical setup where it’s corrected to a certain point, but I use Wyckoff type work quite a bit. Where looking – Yeah, yeah, I manage, it’ll manage a lot of money, right? I’m 250 million, that’s small. And in the bigger scheme of things, I like to play that David Goliath thing. So I want to see institutional fund flows, I want to see your accumulation distribution, I want to see that if I think that, you know, someone like a Fidelity or Wellington is going in and accumulating this position, I don’t want to be that people in front of them. And then if I see that they’re de-cumulating it a lot. And I want to be that speedboat in front of them as well. Right, I am fast, right, I could exit a position in 10 minutes, whereas Fidelity takes them about six months to exit. So I look for high margin businesses, I look for growth, but I want to look for an opportunity to get in. And then sometimes I also want to see find stocks that have been building a long face and have done nothing for years. But then suddenly, something changes on the fundamental side and I see volume coming in, and then I want it; then I also see earnings increasing. So those are just the best setups, but harder to find some stocks in my portfolio that look like that, where it is a longer term base, and then I want to ride it up for longer term. And then sometimes it is more of a shorter term growth type of business where I can get it at a cheaper entry point. And then I bought it higher, just like a pullback in an uptrend or something like that. Yeah.
Dave Lundgren 27:12
And then in valuation, is that something that you consider on the individual stock side? Or is that more because you’re not on growth? Yeah, exactly.
Pam Yoon 27:19
Now, but I would go back and I say there’s a chart, cycles work chart that I use a lot, and I use it with all my clients is that secular bull secular bear that two decades chart, you know what I’m talking about? Yeah, Rob Sluymer, uses it quite a bit. And so depending on whether we’re in a secular bull or secular bear, so today, I believe we’re in a secular bull that started in 2013 14, we probably have another seven or 10 years left in it. And so in a secular bull market, I want to be mostly in growth oriented types of stocks, I want to go for all offensive types of behavior. Whereas if we’re in a secular bear market, then I want to be more defensive. And then so I would rotate the stocks into probably a little bit more value oriented plays with dividends, and cetera, et cetera.
Dave Lundgren 28:12
So I run money that way, I really look at the bigger macro picture. And I can pivot easily is this using tools in relation to the tools when you think about what you do use from a technical perspective, it sounds you mentioned earlier, when you were getting your, perhaps after you got your CMT designation that you there’s some things that you do use, some things that you don’t use, which is I think it’s common for all of us. There’s a lot of things in the curriculum that I – that I value, but I don’t use just because it doesn’t dovetail with how well you know what I’m trying to capture. So that’s completely understandable. But what you do use is a pretty eclectic group of things, whether it’s, you know, Wyckoff in cycles, and RRG, which is a fantastic tool, when you sit down with a client to explain to them technical analysis, where I would assume that you don’t run them through a dissertation on Wyckoff. So in like your 30 second elevator pitch, how would you describe technical analysis and how you would plan to use it for them on their behalf to help them grow and protect their wealth?
Pam Yoon 29:06
So technical analysis is just price and volume. In my opinion, fundamental analysis is great when I’m trying to buy a business from let’s say, Tyler, and I want to know the valuation of a company, how profitable is it, et cetera. But then in the – in the market and the publicly traded market, I don’t care how cheap your company is, if nobody wants to buy your stock, you can be undervalued for 10 years. Nobody wants to buy a stock and I would be fired so fast on my clients. If I underperform for 10 years, even two years, I’ll be fired. Right? So it’s right to our clients hire us to make them money. I can’t just sit there and say, Well, you know, it’s undervalued. Stocks are undervalued. I’m not Warren Buffett, I don’t really have that kind of time running my own money to do things like that. So we need to – We’re here to make money. So that’s really what it is. And so I feel that you know, I’m as a portfolio manager, I’m a generalist, I look for stocks that are growing, I’m here to protect wealth when we’re in a secular bear. When we’re in a secular bull, then I’m here to grow. And so I want to outperform over the long term.
Tyler Wood 30:18
Very well said, and Pam, just saying on this thread about how you interface with clients, big bull and bear regime shifts, it often takes a lot longer for the psychology to catch up. How do you coach clients to take advantage of points where maybe there’s a sentiment extreme, but there’s a point of lower risk versus, you know, market tops where you’re at a place of maximum risk? And yet the the sentiment is very frothy? How do you coach them away from some of those heuristics and bad mistakes that we all make with respect to markets?
Pam Yoon 30:52
Clients don’t know stock markets generally. So I show them the history of the stock market. So I go back to that favorite chart of mine. Now, I could link it to use like, you can link it in the show notes later. But it is that long term cycles at the secular bear secular bull, I tell them the story, I show them, the SPX, the s&p 500, for the last 100 years, and I show them, you know, periods in the 40s 50s. And then I also show them, you know, the 50s, to the 70s, when we had a secular bull market, and I show them that within the secular bull and bear markets, there will be bull and bear markets within them. And that when our clients first experience in investing, when in which period matters in their psyche, so I coach them to say that, you know, if you’ve gone to the business in the 90s, just like I did, or started investing in it, you’ve only seen positiveness, and so you know what to do, and then you know, during the secular bear of the 2000, to 2013, then it’s a different environment, if you got in there, so so if you started investing in that, say, 2006, or seven, you’re fearful the entire time the market went up, but it’s going to crash again. And so, you know, when the markets broke out in 2013 14, I would be talking to a lot of prospective clients, and they, they’re still scared that we’re going to see a crash down to 2900 levels, right, and they keep going, they keep thinking that it’s going to crash, it’s going to crash is the market too high market too high, and they won’t, they’re just too scared, right? And then it’s normal human behavior, that by the time you’re, you know, 1015 years in then fear of missing out comes in, and you jump in with both feet, but then maybe it’s too late. So I teach them that this is the history, this is human behavior, the market are beautiful, because as long as humans are participants in the market, we will always have opportunity to make money because humans are driven by fear and greed. Well said, right? It’s a very human behavior is that when we’re fearful, we’re fearful, fearful, and then suddenly they flip to greed. And then when everyone jumps in with this greed, that’s when the Smart Money takes money from the dumb money. I’m not putting saying anybody’s dumb, but I’m just saying, in general life, smart money takes away – takes money away from the dumb money, I put them into the smart monies pocket. Teaching clients about history, and, and, and the cycles and to, to let them know that this is what is going to be happening. And this is – clients need to be aware of these things happening. And then I view my job as a coach to the elite athlete, right, my clients are smart people, they just don’t know the business. So I’m here to coach them to not do stupid things and to be smart when the opportunity exists with them to be smart. Yeah, but I always go back to that chart, because that chart is just human behavior.
Tyler Wood 33:57
Very well said that coaching process, beginning with history, explaining to them, you know, sort of what they can expect. You’ve removed all the jargon from technical analysis, and yet the price and volume of the picture is still important. How long does that process with your clients? Does it happen in the very first meeting? Is it – is it a succession of sort of coaching before they come on board?
Pam Yoon 34:20
Yeah, it happens at every first meeting. So I don’t pitch anything. I always jump to that chart. I say I want to teach you first. This is what drives my thought process. And so I spend time talking about my favorite chart, I call it my favorite chart. And then at every review meeting, I go back to that favorite chart. Sometimes clients just don’t care and then they just glaze over and that’s okay too. But you know, at any one time when they’re fearful, they want to talk about the market like always go back to that favorite charts. I referenced that a lot in my client communication. I communicate very often to my clients, minimum once a month. They hear from me so that puts them at ease to know that Pam is taking care of things, that she’s not out playing golf and that they don’t need to be fearful.
Tyler Wood 35:04
Pam Yoon 35:04
I hear that a lot from prospective clients that they would say, oh I never hear from my money manager, I don’t know what they’re doing. And so I think that, you know, the more you communicate in non jargony language that they can understand, put them at ease. During COVID. In March – I, you know, with 180 clients, I probably had five clients that called and that was it, my phone didn’t ring.
Dave Lundgren 35:31
That’s a job well done. The last episode that we recorded has not been published it at the time of this recording. So you won’t, you will not have known this yet. But our last guest was Andreas Clenow, and one of the things we talked about was in his books, I don’t know if you’re familiar with him, but he’s written a couple of real important books on momentum and trend following and in both books, he dedicated the perhaps not quite the latter half, but maybe the latter third of each of those books, actually walking through the month by month, p&l of the strategy, which really brings to light what it actually takes to what to actually experience and live through what you refer to as your favorite chart. So I’m curious when you show them, that favorite chart, you just show the chart to them with the expectation that just the visual of seeing that markets go up over time, even no matter how bad things get, they always come back, etc? Or do you actually give them the statistics to show that, you know, in order to get this seven or 8% compound return over the last 30 or 50 years, you had to sit through this drawdown, this was the volatility, these were the things that happened, how detailed you get in your explanation of the your favorite chart.
Pam Yoon 36:33
No, I don’t I don’t have those stats, it’s just a visual, the visual shows the secular bull, the secular bear, and then I have a regression line over the last 100 years. So that to show that over the entire period, you’re looking at an 8% long term growth rate in good and bad times. I also explain that in a secular bull market, you’re looking at, you know, historically 10 to 35% types of returns, turns average annual, and then in a secular bear, you’re looking at at best fortified the types of returns. I explained to them that when we are in a secular bear kind of period, we want to be defensive. So it’s a different strategy in a secular bull, I want to be offensive, I want to look for growth. And we are currently I believe in a secular bull. And I don’t think we’re going to be ending anytime soon. I show them the periods of the 90s, the 80s, and 90s, where we had the crash of 87, we came back down to that longer term regression line during the secular bear type of regression. If I draw these trend lines to show them in a very visual format, they see it. And then when we live into it, they go, you know, this is I’m going back to that chart I showed you,
Dave Lundgren 37:47
Right, we’re still good. I like the way it was either you or Tyler mentioned that it’s almost coaching. And you in particular said coaching elite athletes, I think that’s a brilliant way to phrase it. And I think that’s the value that whether you’re a portfolio manager on the institutional side, or in your role with a client facing role, you know, it’s one thing to pitch the strategy and to show the returns and things like that, but to not really invest the time in making sure that the client is as versed in sort of sold on the strategy over time and what the the month by month return stream might look like. To not spend that time as a service not just to you as somebody who’s trying to build a business, but it’s a disservice to the client. Because when the strategy does go awry, which it will, it always does, that’s when you really need to really hunker down and not only panic out of the strategy, but add money to it and correct it. That gets to the behavioral aspect of it. If you can invest the time with your clients to head that off, and educate them about it ahead of time. This is just incredible value. So good for you.
Pam Yoon 38:45
And I tell them that you will have drawdowns, you’ll have 20, 30 or 40% drawdown and you know, that’s my job to worry about it, your job is to look at the cash in your bank account. And if you have opportunity to send over cash, listen to my tone and my communication. I am not able to reach out to 180, 200 clients by phone, but I will communicate very quickly to you, by my emails and so you need to listen to my tone. If I’m pounding the table, then you need to pick up the phone and say, Hey, Pam, I got a ton of money sitting in my bank account. You know, what do I do with it? Right? And so that’s what happened during COVID is that clients phone and they said, You know, I have money? What do I do? The only challenge that we had during COVID with new money was and we worked around it quite well is that the US dollar spiked up to about 45 Canadian so and I execute about between 90 to 100% on my portfolio is in US dollars. And so for me it was a little bit more challenging. So at that time we would buy we would then need to execute in the currency hedged ETF and kind of market and meaning ETF for at that time, right because I didn’t really want to buy USD at 145 with Canadian dollars, but I want To have market participation. So lots and lots of things that sometimes I can use ETFs for may not be part of the models, but you make do right because the opportunity is there, it was a great opportunity in March, April, May.
Tyler Wood 40:15
Your ability to pivot and adapt, particularly in the face of currency risk must help build trust with your clients that they can see you making clever moves for them. And on behalf that may not have been part of the original plan or strategy. Can you tell us just a little bit about other ways in which you build that trust with clients so that they’re fully invested not just in the portfolio, but in you and, and your ability to execute on their behalf?
Pam Yoon 40:41
Okay, so communication is key, and the other thing is that all my wealth, apart from the home I live in, is invested in exactly the same strategies as my clients, I don’t have any other investments, no private equity, no other kind of investment portfolios, I don’t even have any other real estate investment portfolios, I have full confidence in everything I do. I can make it to clients, but I’m running my own money, my own wealth, and I’m here to make a lot of money while I’m alive. And I’d love to have similar minded clients to come along with me for the ride. I’m not interested in being all things to all clients, to all people, some clients are obviously not going to be a fit, and some clients will really enjoy their time with me. So I promise open and honest communication. My clients have full access to the portfolio online, they see all my trades if they wish. So that communication, I do what I say I communicate often, I think that is key. It’s really not the performance of their portfolios or anything. I mean, you know, it’s nice that they get great performance, but it’s this the communication, I think, making sure that they understand why we do what life is not a bed of roses investing, it’s not a bed of roses, and sometimes I would tell clients that I’m struggling with this is this. And so the US dollar CAD is always an issue above 45, coming down to a buck 20 at one point three weeks ago, a few days ago, you know, that’s challenging, right, because that negates some of the gains. But I still feel that in US dollars, I have access to the whole world instead of being only in Canadian stocks. So I’m fine to lose some in my foreign exchange if I can get a better return. Because the world’s my oyster.
Tyler Wood 42:28
Honesty, transparency, authenticity and great communication. That’s a fantastic takeaway, I think, for all advisors out there. And certainly you shed some light on the ways that technical analysis, particularly when you remove the jargon can really just help your clients understand long term perspective and also the human nature that’s at play in all these markets. As we’re coming to the end of the interview, I wanted to switch gears a little bit. I’ve learned so much from Dave Lundgren and over the years and yet have never taken his class. We’ve taught for five years at Brandeis University, and I can hear in your voice. And even as we touched on Simon Fraser University at the outset of the conversation that you’re very committed to mentorship, to teaching and leaving a legacy for the next generation. So can you talk to us a little bit about some of the programs that you developed and and some of the work that you do on the mentorship?
Pam Yoon 42:51
I take in mentees once in a while and it just gives me so much joy when I could pay it forward. I’ve had good mentors in the past. And so yeah, and teaching them that, you know, these are the things I like you to look at. For me teaching is not about me telling them what to do. It’s about pointing them in the right direction to ask them questions so that they can go dig go down their own rabbit hole, not how I started really right. My friend Gatis never really taught me, you know, this is what you need to look at, or this is the to do, but it was really just asking me questions and I am doing the same thing. And Gatis is a great friend, great teacher. And so same thing. So I would point them to say well, you know, you want to ask this question that question. And so what makes you do that and then the other thing I have done is that I like to see more people find out more about the CMT program that you know, the CFA is world famous and every kid who comes interview with me wants to do the CFA or is doing a CFA and they’ve never heard of the CMT. And so I started an award at my alma mater, Simon Fraser University in 2019, to award the year to anyone enrolled in the CMT CFA program. So I’d like to see more of that. I also taught a class this four years ago on behavioral finance at SFU, and it’s really a lot to do with technical analysis, right how investor behavior, market behavior, price and volume, the markets and really applications of theory, so quite exciting stuff.
Tyler Wood 44:50
Congratulations to you, Pam for taking the initiative. It’s not always easy to carve out even more time when you live such a busy life but those mentorships are going to pay dividends in the lives of lots of youngsters, so thank you for all of that service.
Dave Lundgren 45:04
Just – Just curious on the, on the behavioral side, particularly where you’re client facing, what would you say were like the top three biases that you see investors confront the most? And then what what are some of the strategies or discussions, you have to kind of help them navigate them?
Pam Yoon 45:21
That’s that favorite chart again, right? So if I was an investor that started investing in, you know, 2006, the markets go up 2007, I feel good. And then 2008 happens to them, nine happens, and I go, Oh, this is terrible. The market is terrible. I only lose money. Or if I invest it in 1999, let’s say, and I’ve been investing for 10 years, and the markets gone nowhere. So your bias is that the markets go nowhere, and you’re not going to buy you’re not going to invest in the markets because they they don’t go anywhere, right. And then but if you invested in 1981, 82, all you seen or 1974, at the bottom of the market there, right? You are 25 years before it topped out, and then you believe the markets will never go down? Those are very common biases.
Dave Lundgren 46:09
So would you be in the private client? Is that recency bias? Is that how you would refer to that when you have every class having taught? Is that the terminology we use?
Pam Yoon 46:17
Exactly, recency bias.
Dave Lundgren 46:18
Yeah, I got one of the bigger ones what any others, like a couple others, that you think that clients struggle with the fear of missing out kind of thing?
Pam Yoon 46:26
I don’t know what the word is, right? Call it always come. Not so much of an academic but yeah, in real life, and that’s what it is, right? My brother in law did 30% I’m only done 15, you know, different kind of thing, right. Or everyone’s chasing cryptocurrencies today not really understanding what it is. Is it right for everyone? Not quite, maybe? I don’t know. Right. So yeah, clients are, that’s quite common. Yeah. Fantastic.
Dave Lundgren 46:57
This has been a really informative conversation. Pam, we really, really appreciate your time. Is there? Is there anything that you know, given the opportunity here? Is there anything that you’d like to leave for the CMT Association members to ponder or prospective investor or any, anything like that, that you’d like to have them take away from this conversation that you want to really emphasize, always remember that price and volume matters?
Pam Yoon 47:19
The markets can be expensive, overextended, etc, etc. But the markets are always correct. I think that we define us as smart people, we wouldn’t be here if we weren’t smart. And I think it’s that ego, because we’re so smart. Right? Right. That ego is something that will kill us. If we don’t know how to check that ego until I’ve learned over my career that I always need to check my ego when it comes to the markets because the markets will always humble you, if you don’t follow what the market says, You know, I may, I may have done all my work. And I think I’m very smart. I’m very right. But the market’s always telling me something. And so if they, if the market is gonna go down, or if it’s gonna go up, then I better just continue following it. But be careful, have my stops in place mental stops in place. And so yeah, that the market will always humble us. One of my battle scars.
Dave Lundgren 48:12
Great advice. Great reminders. Thank you very much for that.
Tyler Wood 48:15
As Ned Davis wrote, it’s about making money, not about being right or wrong. Correct, Pamela, this has been such an honor and a privilege for Dave and I to get to know you get to meet you. And I know our audience has a lot to take away, particularly for those who are client facing. And we will definitely get your favorite chart in the show notes. Looking forward to a lot more work together. Certainly with the Academic Partner Program, the CMT launched, we need to connect with Simon Fraser University and make sure that we keep things going for the next generation. So with that, Dave and I want to thank you so much for your time today and joining us on episode eight of fill the gap.
Pam Yoon 48:56
Tyler Wood 48:57
Tyler Wood 49:02
Fill the Gap is brought to you with support from Optuma. In addition to candidate study of the official CMT curriculum, Optuma provides a full video course on all of the material that candidates need to know for each level of the CMT exams. Each course is broken up into modules, ranging from 15 to 45 minutes, depending on the complexity and length of the topics being covered. Learn more at Optuma.com.