Fill The Gap Episode Fifty-Two, Vincent Randazzo, CMT

In this episode of Fill the Gap, we are joined by Vince Randazzo, CMT. Vincent emphasizes the importance of systematic risk management and the use of breadth indicators to improve upon traditional buy-and-hold strategies by spotting market deterioration, even if an index is making new all time highs. He also highlights the need for financial advisors to justify their fees by providing value beyond passive management, particularly through effective risk mitigation during market downturns.

Vincent has guided portfolio managers and investors through multiple market cycles, developing proprietary market breadth indicators that help minimize losses in downturns while maximizing upside. As founder of ViewRight Advisors, he implements systematic, technically-driven investment processes that consistently outperform traditional strategies while maintaining strict risk parameters.

Give us a shout:
@dlundgren3333 or https://www.linkedin.com/in/david-lundgren-cmt-cfa-63b73b/
@_TBone_Pickens or https://www.linkedin.com/in/tyler-wood-cmt-b8b0902/
@CMTAssociation or https://www.linkedin.com/company/cmtassociation

Tyler Wood 0:05
Hello and welcome to episode 52 of fill the gap, the official podcast of CMT Association. My name is Tyler Wood. I am a CMT Charter holder and joined, as always by the illustrious portfolio manager, David Lundgren. A CFA and CMT Charter holder. How you doing, my friend? Good to see you.

David Lundgren 0:23
In the in the middle of the woods on a lake in Maine. So I couldn’t be happier.

Tyler Wood 0:26
Bragging to all of us working stiffs still pounding pavement.

David Lundgren 0:30
Nice and cool.

Tyler Wood 0:33
Dave, we just had a fantastic hour long conversation here on Episode 51 with Vincent Randazzo and I think he dropped maybe the best quote of all time that why don’t why don’t you share with our audience, give a little sneak preview about what this conversation led to.

David Lundgren 0:50
Yeah, I I really do. It’s I think it’s one of the best quotes of all the podcasts we’ve done together. But first, I just want to say that, you know, Vince is if you know, if you know Vince, you’ll know what I’m talking about. He’s easily one of the the nicest guys in the business, incredibly humble, really smart. And just just a wonderful guy. So it was great to have him on the podcast to have a discussion about, you know, his his background and his new firm and and things like that. So he’s he’s he’s up to a lot of really great things. We had a great chance to talk to him about a lot of that.

Tyler Wood 1:04
Yeah. Yes.

David Lundgren 1:19
But.
He he dropped this quote and I&I wrote it down as fast as I could, so I’m not sure that in playback it’ll be exactly what he said, but it was something along the lines of and I think I’m pretty close, he said. What ETFs have taught us is that an advisor who provides buy and hold advice is worth 3 basis points. So how are you going to earn you 1%? And I I mean it’s one of those conclusions that’s that’s that’s been derived by marketplace reality like the marketplace has gotten to 3%, 3 basis points.
For to buy and hold an ETF. So that’s what it’s worth.

Tyler Wood 1:52
Mm hmm.

David Lundgren 1:52
And that’s been so obvious, but Vince just laid it bare in terms of like, what, what that what it actually means. And so at the end of the day, it’s like how are you gonna help me beyond, you know, buy and hold and and what we obviously focus on and center on. And Vince does a great job of it with his new firm is to protect you during these downdrafts. That’s worth that’s worth a fee beyond 3 basis points. But if you’re not doing something beyond that, you’re worth 3 basis points. And I I just thought that was brilliant.

Tyler Wood 2:08
Yeah.
Yeah.
Absolutely. Vince has worked in so many different spots, but where I first met him in 2016 was on the team at LM Lowry, and for those longer standing members of the community, they they will remember Paul Desmond and Tracy Knutson and **** Dixon, all beloved technicians who, as Ralph would say, are in the chart room in the sky somewhere. So Vince is really the living memory of the.

David Lundgren 2:29
Right.

Tyler Wood 2:46
The Lowry work, which is largely based on breath studies.
And I think this conversation about how you.
Just improve upon buy and hold because 75% of the time that’s that’s probably what most investors should be doing and being able to spot that market deterioration even if an index is making you know new all time highs, that’s the maybe the secret sauce that that Paul and the folks at at Lowry ‘s the longest running publication of any research firm in the United States.

David Lundgren 3:17
Yeah.

Tyler Wood 3:19
Were after and. This is just a delightful.
Conversation with, as you mentioned, Dave, A really good guy. So if you’re if you’re coming to a future CMT conference, find Vince, grab a cup of coffee, you’ll have a lifelong friend. And with that, I will let you enjoy fill the gap with Vincent Randazzo.

David Lundgren 3:26
Yeah.

Interview:

David Lundgren 0:46
Welcome to fill the gap, the official podcast of the CMT Association. I’m Dave Lundgren. And along with my Co, host and fellow CMT charter holder Tyler Wood. Vincent Randazzo also a CMT. Vince has a storied career, having worked with several large firms, including Morgan Stanley, NASDAQ and UBS. But most importantly, Vince worked at Lowry ‘s, the oldest technical research firm still in operation in the country. More.
Recently, he’s decided to blaze his own trail starting view right advisors in January.
Not much longer. After launching his firm, his defender system issued its first sell in 3 years, so it definitely looking forward to digging into that and much more. So let’s jump in. Vince, welcome to fill the gap.

Vincent Randazzo 1:31
Thanks, Dave. Yeah, thanks, Tyler. Yeah, no, it’s it’s great to be here. I I really do appreciate it. I just wanted to start by by thanking you guys. You know, for having me on, but also just for doing everything that you do, you know, thank thank you for what you do and what you’ve done for our discipline and for your work furthering, you know, the work of technical and analysts everywhere in the world literally. So it’s it’s just. Yeah, it’s great. I appreciate that.

Tyler Wood 1:59
Absolutely, Vince. Thanks for having us down to Florida in mid January for for the event. I think all of us New Yorkers need to plan that annually to come to Vince ‘s backyard sometime around mid January.

Vincent Randazzo 2:10
Yes.

Tyler Wood 2:14
And I’ve I’ve long followed your work and really appreciate you coming on today looking forward to this conversation.

Vincent Randazzo 2:19
Yeah. No, likewise appreciate that.

David Lundgren 2:20
And I’ll follow up with thanks for the kind words, Vince. It’s our honor. Absolutely. As you know, this community is just full of wonderful people and the the more that we can share and bring everybody, everybody together so we can learn from each other. They’re better off. We’ll all be so really appreciate your your your kind words and absolutely appreciate you joining us today because I know you have a lot to say. I consider you to be one of the foremost.
I guess on the forefront of of of researching Brett, both in terms of what you’ve done recently, but in terms of what you’ve learned why you were at Lowry’s, which is?
Clearly, the the mothership of Brett, so really looking forward to your contributions today. So thanks again for joining us before we jump in, let’s, let’s hear a little bit about your your career and it seems if I recall correctly you you like many of us kind of stumbled on technical analysis when you said hey, wow, this this stuff actually works, I should probably go learn about it because you saw something crazy happening happen in the market and the only thing that made sense of it all was technicals and then.
Here we now have Vince as a CMT Chartolo, so so fill us in on that.

Vincent Randazzo 3:27
Yeah. No, I mean I I think it was, it was an interesting path because in college I was an economics major. So I had this sort of, you know, broad base and you know very data driven fundamentally driven and at my university Drew University and we had this program called the The Wall Street semester. So we would go, it was in New Jersey. So we we were we would go every, every, every time we had a class which is once a week we would go into into Manhattan. So Wall Street, the trade centers at the time and we would hear from.
Different person who worked on Wall Street, who did a different job, and this idea of, you know, fundamental analysis and portfolio management that all kind of really fit with my personality type and it was something I really was kind of obsessive about. So I guess I was more interested on the fundamental side to your point that it’s not something I was expecting at all. But you know get out of school.

Tyler Wood 4:02
Yes.

David Lundgren 4:19
Yeah.

Vincent Randazzo 4:23
2002 start my first job at Morgan Stanley. Every research sales.
And you know, obviously, surrounded by a bunch of smart cable people. But I was lucky enough to be on a desk where they were. They’re all really open minded. And when I say that, I mean about different disciplines. You know, even though we were, we were talking the research call from the institutional side, which is really driven by the strategy, economics and then fundamental all the fundamental analysts and those morning calls that we had every day, you know, at the desk at 7:30 in the morning. Right. So I’ll I’ll never. I’ll never forget those mornings.
You know, commuting in from my parents house all the way into Midtown Manhattan, you know? So. So that was always fun. Waking up to get that, get that early, train to get out there. But.

Tyler Wood 5:01
Yeah.

Vincent Randazzo 5:10
That time, obviously the market was having a lot of trouble. We were still deflating the bubble from, you know, 99, 2000 and.

David Lundgren 5:15
Right.

Vincent Randazzo 5:19
I remember that you know.
Rick Benzinger came on. He came over to our desk. We we were right around the corner from him. If you if you know Rick benzene here, you know out of you know he was he was great and and you know he trained up some of the best you know Katie Stockton and Mark Newton were there you know who came out of his bullpen basically right and we know that the kind of amazing.

David Lundgren 5:28
I do. Yeah. Good man.
Yeah.

Vincent Randazzo 5:41
Careers that they have had so really, really something special was going on there at that time. But but he came over to our our desk and he said, hey, anybody have a have a jacket? I’m gonna do a hit on CNBCI don’t have a I don’t have a coat, you know. So somebody let them a jacket. So of course we’re gonna watch, you know, we’re gonna watch the hit. It’s we’re we’re fully invested at that point, you know. And this was October and it was literally. I’m pretty sure it was the day at the bottom.

David Lundgren 5:42
Great.
Yeah, yeah.

Vincent Randazzo 6:08
But.
He said, you know, there’s, you know, we’ve XYZ signs of exhaustion. I use a big to mark guy and, you know, there was XYZ signs of exhaustion and, you know, we think this is this is the bottom here or very close to it. And that was it. And it was kind of amazing just to see that in person and sort of be part of it in a way. But.

Tyler Wood 6:22
OK.

David Lundgren 6:28
Yeah.

Vincent Randazzo 6:29
But I also, you know, resonated with me, that OK, there’s definitely something here. I shouldn’t investigate it, you know, again, just me being sort of a a data driven person with my background.
I wanted to investigate it and also that that idea of risk management.
Really hit me as far as just having been framed by the environment coming in, coming into the market in 2002 when everything is sort of melting down. I think Morgan Stanley at the time came out with a A, a list of stocks literally called the casket basket where the idea was that, you know, of this list of names, most of them are going to go out of business. But the few that survive are going to be, you know.
The haymakers, right? So like yeah that this is the kind of stuff that was going on. And and this is what framed my.

Tyler Wood 7:13
No.

David Lundgren 7:16
Yeah.

Vincent Randazzo 7:18
Whole thinking process, so that combination of you know, seeing what was going on with technical analysis with Rick Benzinger ‘s call, the whole risk management advantage to it. And then just having been a little bit more broad based, I went to a liberal arts school and we studied all different things and you know one of the things I had interest in was physics on the science side and then also had an interest in psychology and a lot of I think what goes on.
With the market has a lot to do with both of those things.

David Lundgren 7:48
Absolutely, yeah.

Vincent Randazzo 7:49
In addition to the core principle of economics, which is supply and demand, so I’ll just kind of coalesce I guess in that way or really early in my career.

Tyler Wood 7:56
Hmm.

David Lundgren 7:59
When did you get your CNT?

Vincent Randazzo 8:01
So I got my cmti spent all of 2007 studying and and passing all the tests. So by January I had the CMT.

Tyler Wood 8:12
Did what was there.

Vincent Randazzo 8:12
It was perfect timing.

Tyler Wood 8:14
What was there, was there reference material in the CMT program that sort of came to life as you watched the the meltdown?

Vincent Randazzo 8:21
Oh, absolutely. I mean, you know, at that time we we it was you read all the books, you know it wasn’t the study guide, it was all the books. Right. So you’re reading all these sort of really famous books about all these time periods that were really unique in their own right. But then seeing all that history almost repeat itself in real time was kind of amazing. And just to be have my eyes open to it at that time could not.

Tyler Wood 8:27
It.

David Lundgren 8:41
Hmm.

Vincent Randazzo 8:46
Have been better timing, you know, for me, my career. But the people who I was speaking to my clients.

Tyler Wood 8:49
Yeah.

Vincent Randazzo 8:53
You know, found found ourselves on the right side of, you know, one of the biggest bear markets that you know we’ve ever seen. And I remember in like, early 2008 getting into like, literal argue, like literal arguments with colleagues who are more fundamental purists on the.
Desk about some of the banks. Maybe you know, going out of business and and that the market was just looked really poorly set up for a really long, painful decline.
And you know, that was an edge, you know, that was my edge. You know, the people I talked to, I was like, able to understand the economics picture, the strategy picture, distill that down and then, you know, go after the stocks and sectors that were still working but also have this little other piece called technical analysis that can overlay to say, well, hey, listen, this analyst is really good. He’s really smart. I think this is a good call. It’s just not the right time for it.

David Lundgren 9:48
Hmm.

Vincent Randazzo 9:48
Or, you know, whatever, just to have that extra bit of colour it made such a big difference to me.
My clients and you know later on in my career, it sort of helped help me set myself apart because I am in a New York, you know, the New York City market, you know, really hyper competitive. Everyone is trying to trying to get that next spot and certainly help me throughout my career.

David Lundgren 10:11
You know the.

Tyler Wood 10:12
You mentioned the team at Morgan Stanley, Rick Benson Yar and Katie Stockton and Mark Newton. When you were at UBS going into the great financial crisis. Were there other folks who utilized technical analysis or even folks who who held the CMT designation?

Vincent Randazzo 10:28
Yeah. So when I was on my desk, there wasn’t anybody. So I became that guy. Like, that was awesome for me. It was a group of, I think probably we started out with his equity research sales, so it shrank as I was there. But I think it started out with 20 people and not one person was a real technician. And, you know, and that that, to me, was also something that I felt was important is just having the credibility.

Tyler Wood 10:43
Yeah.

Vincent Randazzo 10:54
Associated with the designation like the CMT.
To say that, hey, I’m an authority here, right? I’m not just. I’m not just pretending like I know something because I know something about the 50 day moving average and the 200 day movie average or whatever, right? So. So that was one thing that you know, again, really cemented that idea. I’m gonna get the CMT right. And then the other thing was Peter Lee. He was a technician over there at the time. He worked with Daniel Tromsky. I think, you know, at at some point there. And I knew Dan kind of casually through through UBS.

Tyler Wood 11:08
Yep, yeah.

Vincent Randazzo 11:28
Overlapped a little bit, but it was really Peter Lee who influenced me at that point in my career because he was the head technician. He was on the Squawk box everyday.
And, you know, he was just really gracious with his time and be able to sit down and talk to him. And. And he was another, like, just I would say a big picture guy. And and I that resonates really well with me. Like, I don’t see myself as much of it very much as a trader. Like, I’m not a short term technical guy. I like, I like structures and big picture seeing those battles, you know, of supply and demand, you know, carry over long periods of time. To me that’s interesting because I don’t have to be right.
On every little move, I just have to generally.
Be swimming with the right tide, if that makes sense.

David Lundgren 12:14
Yeah, you know the, the the conversation you you mentioned about the the debates you had during 2008 with the banks going out of business and and why not at A at a very large scale very prominent such debate for that very for that the the the very existence of that debate is one of the reasons we have we can call amongst our CMT Charter holders Bill Miller, the 4th, Tyler Tyler if you remember we we had this discussion I think it was episode if I remember it was 17 and a half we had Bill on and.

Tyler Wood 12:39
Of course.
Yes.

David Lundgren 12:43
It was 17 and a half because we we did this sort of intra month.
Episode when he was one of he was that he spoke with me at the at the symposium in Florida, actually, and it was basically watching the world implode and and just recognizing that they just they’re missing some part of their edge to your to your appointments. There was something missing in their edge and to sharpen their edge that Bill Miller had his son Bill Miller the 4th go out and get a CMT. And so now we have the great privilege of having him in our community as well. So it’s that’s generally how a lot of folks come to their CMT, is that it’s more about.
What on Earth is happening here? I’m missing something about my in my edge and let’s let’s fix that by getting our CMT. So that’s it’s interesting that you you brought that up as well. And when did you get to lowrys?

Vincent Randazzo 13:22
Mm hmm.
So Lowry ‘s is a bit of a, you know, surreptitious path, I guess I.
Was after, you know, after I was at UBSI went, I tried to make a bid for the institutional side. I just felt like, you know, I wanted if I wanted eventually get into portfolio management, you know, this was the path I would sort of have to take and you know, me not having the ability to sort of sit, sit and get through the the CFA, I tried. I I did try to study for it actually.
Before this, the CMT, like when I was at Morgan Stanley, still I still had to like.
Scratch that itch if you will, of saying, well, I wanna. I wanna tackle this thing that this, this beast, the CFA beast and and it go that sort of traditional route because it was just something that would have opened a lot more doors I felt at that time.

David Lundgren 14:05
Yeah.

Tyler Wood 14:12
Hmm.

Vincent Randazzo 14:21
And it turns out guys that I I could.
Not get very enthusiastic about pension fund accounting. So, so.
It did not. It did not resonate with me. Yeah. Yeah, it did not resonate with me. And I was not able to really dedicate myself.

Tyler Wood 14:31
Surprise.

Vincent Randazzo 14:38
To that I didn’t even finish studying for the first level. I was just like guys. This isn’t gonna work, but.

David Lundgren 14:42
Yeah.

Tyler Wood 14:43
Yeah.

David Lundgren 14:44
Yeah.

Tyler Wood 14:44
Yeah.

Vincent Randazzo 14:45
But anyway, that brings me back to, you know, the the next step which was.
You know what? What brought me to Lowry? So I was at. I was at NASDAQ and still in Midtown Manhattan and sort of doing that commute. But, you know, life happens honestly, you know, my wife had her first child and we had to consider the possibility of, you know, moving away from the city further into the suburbs.
And and that was just something I had to really wrestle with and think about. How do I, how do I do this right? So I wanted to open my my net of places. I was looking and and it was had nothing to do with NASDAQ. I really loved it there. Great people on that desk as well. And market intelligence desk. But I I needed to make a change so I could plan for my life and and the big picture of my life which is I want to spend time you know time is my currency right.
The older you get, the more you think that way, but.
Long story short, I I short saw I saw this listing on LinkedIn for Lowry Research and I was like, oh, isn’t that the place that Paul Desmond owns? And you know, I, of course, you know, knew Paul and, you know, his work at least. And **** Dixon. And. And I thought, hey, this is this is my chance to work with living legends doing.

David Lundgren 15:51
Yeah, yeah, yeah.

Tyler Wood 15:58
Yeah.

David Lundgren 15:59
Yeah.

Vincent Randazzo 16:08
What I genuinely loved expressly so like, I wasn’t spread thin. Having him spend a little bit of my time focusing on the technical side.
It was. That was my job.
And also fulfilling that lifestyle goal right of relocating to a you know different venue where I would have a much shorter commute and and you know the weather is a perk here in South Florida at least for 7 months out of the year I would say yeah the other.

Tyler Wood 16:33
Yeah.

David Lundgren 16:33
You’re still down there now.

Vincent Randazzo 16:35
Still down area and I’m still in Jupiter. And you know that that just you know that took me to another level being there.

David Lundgren 16:36
Yeah, yeah.
Yeah, that’s fantastic. I mean, it must have been something to to work with. Paul. Desmond. I mean, I I, Tyler. I’m assuming that most people know what Lowry ‘s is, but maybe Vince just give us a quick 32nd, you know, overview of what the company is, how long it’s been around and.

Tyler Wood 16:43
Yeah, for sure.

Vincent Randazzo 17:00
Yeah. So they are the law. I think longest continuously published newsletter in in, in.
The country, if not the world they started in 1938, LM Lowry started the company, and Paul Desmond found.
You know, found him basically and.
Ended up buying the company and he worked there for you know, 60 years owning a company for 50 and you know, some of the work that they did was.
Really focused on breath, but also they had this proprietary models of buying power and selling pressure and the idea is that if you can visualize these forces of supply and demand right then you would understand when you compare that to the price trend, you can understand what kind of strength there is really kind to give and move. And I love that I love that concept again. You know coming from economics background, I love that.

David Lundgren 17:36
Right.

Vincent Randazzo 17:55
Concept of the the supply and demand and and being able to see it and say.
You know, it’s a lot less about what people you know should be doing or what the market should be doing or what people even say that they’re doing. Its about. What is the money doing, you know, and and being able to see that, you know, just took it to, you know, took it to a really practical place for me.

David Lundgren 18:20
And I should I should know this, Tyler. But I’m I’m assuming that but the the Lowry’s work is still it’s all proprietary. Like we we haven’t seen any of that. Any of their work released to the CMT or anything, right?

Tyler Wood 18:20
That.
No, no, no, not at all. But in the show notes, we can put in Bill Kelleher, and I invited Paul Desmond and Tracy Knudson to the 2014 Symposium in New York. They gave a great session on buying power and selling pressure, talked about topping and bottoming formations, and and what what to look for. We missed them both dearly, but.

David Lundgren 18:33
Yeah.
Yeah.

Tyler Wood 18:55
Then again, in 2016, Paul Desmond was our honorary.
For the annual award of the CMT Association, and I think that was the the last time I got to see Paul was was at the conference in New York and at that point he was recognizing that the organization had started really just to represent the the professionalism amongst research analysts, but that the Community had shifted so so greatly. I mean, there was a paradigm shift amongst the members of the Community and and certainly at our conferences, Alt.

David Lundgren 19:08
M.

Tyler Wood 19:28
Ered the buy side roles that he felt was much more.
Much more proof that technical analysis adds tremendous value to the investment management process, so he was thrilled to see that and I believe had some had some plans to open his own funds shortly before he passed.

David Lundgren 19:39
Time.

Vincent Randazzo 19:46
Yeah. No, he did. And you brought up, you brought up also Tracy and. And she was actually the person who I reached out to through LinkedIn. You know, we we had been connected. And, you know, she was also from New Jersey, as was I. So we had that in common. And of course, you know, she was a very talented CMT and we had a great conversation. And she’s like, no, I think you’d be really great fit for this, you know, for this team, you know, and and she kind of got the ball rolling at least. So, yeah.

David Lundgren 20:04
Yeah.

Tyler Wood 20:14
Is an excellent board member. She served for 2 and a half years on the CMT Board of Directors as well.

Vincent Randazzo 20:22
Yeah, yeah, I think I heard it. Heard story that she was like in labor with her son or something. And she was, like, reading CMT books.

Tyler Wood 20:31
That sounds like Tracy, very dedicated.

Vincent Randazzo 20:32
I mean, he was very dedicated. Yes, absolutely, absolutely.

David Lundgren 20:37
Yeah.

Tyler Wood 20:37
So you got down there in 2016 and **** Dickson and and Paul were still actively writing what was.
What was the interview process like, Vince, I mean?

Vincent Randazzo 20:48
Oh wow. I mean the interview process. Yeah, it was kind of intimidating. Kind of amazing, though. I mean, Paul, I just remember, Paul, I sat down in Paul ‘s office and he was like.

Tyler Wood 20:49
About intimidating.

Vincent Randazzo 21:00
I guess he just started talking about.
It was sort of preamble into breath and white matters, but he was saying, you know, in nature, if you notice, there’s not really any straight lines in nature. You know those things are, you know, even even if you’re talking about, you know, mountain mountains really high. And it goes really high up or whatever. But it’s a gradual slope to get there when, especially when you’re on the mountain, right. It’s not. Nothing ‘s ever straight up straight down, you know, waterfall even. It’s not. It’s rarely, you know, straight line so.

Tyler Wood 21:23
Hmm.

Vincent Randazzo 21:30
I guess his point, the point why he brought that up and then he started talking about.
How when he first started working at Lowry with Mr Lowry, they brought in a potential client and apparently he was an old, like stockbroker or floor broker from the New York Stock Exchange, and he was been there in the crash of 29, and the guy was telling the story. This gentleman was telling the story of it. And he had said it was just out of nowhere, you know, stocks just kept falling and there was no bid, and there was nothing. It just.

Tyler Wood 21:45
Mm.
29.

David Lundgren 21:50
Yeah.

Vincent Randazzo 22:04
Breakdown and Paul was like and he said it just, it didn’t make sense to me. It didn’t make sense how there could be no warning, how there could be nothing to tell us that there is. Yeah. This erosion under the surface of price and that you should really be prepared for what’s next. And that’s how we got to start talking about, you know, breath. And this was kind of all in the interview process. I mean this this is like I sent his office for I think almost 3 hours.

Tyler Wood 22:31
Yeah.

Vincent Randazzo 22:32
Just in his office. I mean, it was, it was incredible. And I I felt like I learned so much more than I had probably learned in my past 2 jobs just by sitting in the room with him for for 3 hours.

David Lundgren 22:33
Yeah.

Tyler Wood 22:35
Yeah.

David Lundgren 22:42
It’s awesome. Yeah, and.

Tyler Wood 22:43
Yeah.

David Lundgren 22:44
And so with your maybe tell us a little bit about your transition now to view right advisors. I’m assuming that it’s still based on this connection between the popular averages in the in the breadth beneath and the disconnects between the 2 and the signalling that may provide them. So maybe give us some background on that.

Vincent Randazzo 23:06
Yeah. So with you, right, I wanted to focus expressly on indicators that are not created by me just.
Raw, almost like raw data, and if I look at the raw data hard enough or well enough, what can I glean from it? Because we know that there.
Were a lot of data that you can sort of manipulate in a way that is unnatural and because of that, you know there’s subject.
You know, subjectivity that gets introduced. So my whole point is that I don’t want. I want to limit the subjectivity. I want it to be totally systematic and totally objective.
And my basis was the.
Was breath really the advanced decline lines and just being able to watch them closely enough compare them closely enough with the indices and the idea of divergences or something that really fascinated me and and Paul and.
You know, he and I would sort of have these long conversations in his office and and **** too. You know, we would. We would all talk about, you know, how do we make this better? It’s such a it is such a great, you know, tool in its own right. But how do we make it better because it’s sort of like, you know, we got into the these conversations because look at these periods where you have these really long divergences. For example there was a long one that you know Richard Russell identified that nobody else really knew about before the crash in 1929.
Where it was like over a year and a half long that you had this divergence.

David Lundgren 24:38
Yeah.

Vincent Randazzo 24:41
So then the question became, how do we make this a useful timing tool? So it’s sort of like when the fundamental guys come and they and they talk about yield curve inversion and that being kind of a really valuable tool, but.
It’s not a good timing tool, right? So I task myself with finding a way to make it a better timing tool and that has to do with, you know rate of change.
Figures and momentum, and then the different bringing in different indicators so that you understand when is the fragility that’s been introduced by that divergence.
To the point where it becomes dangerous and to the point where you know, any little nudge will will push that Jenga pile over, right? So that was that was sort of the premise. That was my goal. And then just because I am the way I am in terms of an investor, I don’t like to make a lot of changes.

David Lundgren 25:24
Hmm.

Vincent Randazzo 25:34
I don’t like to make a lot of decisions and.
I tend to be more focused on just capturing the bigger the bigger trends and not trying to trade. Like I said, I’m not a trader. I don’t really like that very much so.
It was sort of like how can we improve buy and hold right buy?

David Lundgren 25:52
Yeah, yeah, yeah.

Vincent Randazzo 25:53
And hold is great until it’s not, and it is great. Probably 75% of the time that’s you know, percentage of the time that the market is up, but what about the other 25%? If we can see?

Tyler Wood 25:55
Hmm.

Vincent Randazzo 26:03
Through the divergence is that that train is coming down the tracks. Well, why don’t we just step aside, let it pass us, and then get back on the rail? So that’s that’s where I really wanted to do. So you have this sort of dual mandate of being invested as long as you possibly can be buying the dips along the way in a systematic way, but also systematically decreasing exposure as.

Tyler Wood 26:10
It.

Vincent Randazzo 26:29
Stock participation in the market progressively dwindles and we know this because we see it in.
A lot of the indicators that we watch and the idea was that you can still sort of benefit from the market even when you have a, you know, a starting of a hollowing out because there are still a group of stocks that are going up. So why not sort of recycle that money into those stocks that are still going up or start to raise cash, whatever you want to do. But the point is that there are fewer stocks when you have that divergence, you know.
Mathematically, it’s just saying you’ve got more stocks going down every day than are going up. And as a portfolio manager, you sort of need to know that.
Because presumably you’re not gonna be weighted the same way. The major indices are weighted and those.
Big stocks that carry those indices, particularly at the end of bull markets, are going to be so over represented at the time that you know you no, no normal person would hold them in those concentrations. And I think this is especially true today when you’ve seen the concentrations reach, you know, record highs.

David Lundgren 27:33
Yeah.
Yeah, you know the the notion of of breadth and the the popular average, the way that I, I, everything you just said really, really resonates with me. And then one of the ways I’ve tried to explain what breadth means is that you, you have a, you have a car, that’s the index, the breadth is the amount of gas in the tank and you can a car can still move forward if it’s on a an 8th of a tank of gas, it doesn’t stop moving forward until it runs out of gas entirely. And So what you’re trying to do, the the nuance you’re trying to bring to the discussion is.

Vincent Randazzo 27:55
HM HM.

David Lundgren 28:06
How do you know when the the tank is actually empty in the index? Now is going to start going down because again an an index. What we’ve learned in the recent history is an index can go up for prolonged periods even if it’s running on fumes.

Vincent Randazzo 28:19
Yeah. Yeah, I think that’s that’s such a great analogy. And and, you know, I also like thinking about it in terms of just liquidity. Like when I explain this to, I would say like your normal RIA or advisor who tends to be a little bit more fundamentally minded.

David Lundgren 28:19
Yeah.

Vincent Randazzo 28:34
I I borrow this from Tom McClellan. I heard him. You know, I’ve heard him say this before. Comparing breath to liquidity. And I just thought that was such a great way to communicate to people, especially fundamentally minded people that, you know, this is about liquidity. How how much money is being divided over how many stocks.
You know, and you know how confident the way I interpreted too is is in in terms of confidence, right?

David Lundgren 28:52
Hmm.

Vincent Randazzo 29:02
The more confident investors are, the more money they’re gonna put to work, and the more broadly they’re gonna put it to work. And you know, if you think about breath as also being sort of like like a freight train, you know, bigger freight train, better breath, harder to stop, harder to reverse, right, you wanna you wanna freight train that has a lot of cars in it.
Because as a portfolio manager, that means my probability of success in picking the right stocks is going to be a lot higher and I will always just want the highest probabilities and the best probability outcomes. And that’s that’s one of the ways you do it.

Tyler Wood 29:35
We’ve got cars can keep moving even on a very low bit of gas. I love that we’ve got the freight train right that it’s harder to stop and reverse when I talk to college kids, I I explain it, the chubby Midwestern boy that I am would love the Chicago Bulls. I was like everybody thinks about Michael Jordan, but breath is a measure of your bench strength and the 90s Bulls won all those championships because they had scouting Pippin and Dennis Rodman, like everybody on the team. So to your point about liquidity, there’s always somebody else to pass the ball to.

Vincent Randazzo 30:06
Bye.
Bye.

Tyler Wood 30:15
I mean, there’s 1,000,000 ways to measure market breadth. What do you like to use expanding daily, new lows, new highs? What talk to us a little bit about what you favor in terms of breadth measurement?

Vincent Randazzo 30:28
Yeah, I like to keep it really simple. So it’s New York Stock Exchange, all issues, advanced client line. I also like to use the common stocks version because there are moments when the the common stocks will tell you something that the all issues doesn’t and vice versa. So I think they’re both tremendously valuable and I like to use them both. But I also do like to use.
New highs, new lows and then in certain time frames too, you know, 6 months, 12 months, etcetera.
And then this idea of also upside participation and you know that to me is you know is partially breath is partially momentum. But what I mean by that is like the the percentage of stocks above their long term moving averages, right and then shorter time frame, shorter term moving averages and sort of that that there are commensurate counteractions as a result of those divergences. So you get shorter divergences and shorter indicators.
They tend to be less meaningful than longer divergences and longer Ed cares right, for example.

David Lundgren 31:35
Do you use the advanced decline line on on just the S&P 500 and just the mid cap and the Justice 600 so you get rid of all the other stuff that’s not in the index that you’re actually measuring?

Vincent Randazzo 31:46
It’s the all issues in New York Stock Exchange. So yeah, everything in New York Stock exchange.

David Lundgren 31:49
Is that is that an explicit like decision or or is there like a reason you don’t look at the advanced decline line on the S&P 500?

Vincent Randazzo 31:56
Yeah. For the SMB 500, I just feel like I’m, you know, I’m trying to get away from.
The idea that there are these select group of names that we’ve someone has decided is in this list, right? So again, just like removing human, the human element, even when it comes to that level, but also that you know, those are those are probably the stocks that are gonna peak last. So if anything I you could sometimes see.

David Lundgren 32:17
Right.

Vincent Randazzo 32:28
A lead effect or even a head fake effect where you can get a new high in the S&P 500 AD line for example.
But they they can, you know, they can reverse, you know, we saw that and I think the summer of 2022 where you actually did have a new high in the SB 580 line. But of course we had a lower low that followed that. So whereas you know whereas the all issues doesn’t you know doesn’t really the all issues in the common stocks version, they don’t tend to give you those potential false you know false signals of of of confidence.

David Lundgren 32:59
And I think if I’m correct, is is the. I’m just looking at it now, but is is the Nyad? Is that not very close to hitting a new high already, if it hasn’t already?

Vincent Randazzo 33:09
Yeah, I mean, so the all issues version is is at a new high. It’s I think it started in mid May, but the the common stocks version has not yet it’s close, but it has not yet, yeah.

David Lundgren 33:13
Yeah.
Yeah.
Right. Yeah. So this is this is so I I used to follow the advanced decline line and obviously the fact that I know that it’s breaking out to new highs indicates that I still follow it. But the reason I don’t really act on it is because I just think that there there’s something wrong with it. To be honest. I I just think that like if you look at the decline we just had throughout February to April, I mean that was a pretty vicious nasty decline and virtually every stock on the planet went down. But the advanced decline line.
Basically went sideways and you could argue had a slightly upward tilt to it throughout that entire decline, so it just it just seems like. I don’t know if there’s. If there’s some something with regards to the structure of the market or something ‘s just different so that that was sort of the catalyst to what, you know made me create the different breadth measures that I use today. And I just, I’m I’m curious now that you’ve you’ve spent all this these years the number of years.
Thinking about breadth, I mean, do you agree with what I’m saying? And if you do, how have you dealt with it? If you disagree with me, I’d love to hear that as well.

Vincent Randazzo 34:16
Yeah. Yeah, I do agree. And that’s why I do use the common stocks version as well because the all issues is going to include preferred, you know, preferred stocks. It’s going to include close then you know, closed end funds. Even so, things that act like bonds.
At times are are included in that and obviously that’s not what we’re after. We we want to pure pure stock gauge. So yeah, that’s why I use the common stocks only version. But I do I do watch other flavors, right.

David Lundgren 34:40
Yeah.

Vincent Randazzo 34:46
But what you don’t wanna do is watch anything that has any kind of bias to, you know, particularly to the downside, you know. So I think like NASDAQ, some people who wanna sort of bait you on Twitter will will kind of bring up the the NASDAQ ad line at any given point in time and say, like, it’s bearish. And it’s like, yeah, well, it just always looks that way. So you have to understand that, you know, you’ve there’s context here, you know.

David Lundgren 35:06
Yeah, yeah, yeah.

Tyler Wood 35:09
Yeah.

David Lundgren 35:12
K.

Tyler Wood 35:13
Beyond breadth measures, I’m assuming you use a a suite of tools for a mosaic view on on what you’re looking at. Talk to us about things outside of breath that that are part of your process.

Vincent Randazzo 35:26
Yeah, I mean, I keep it, I keep it focused. I really do keep it focused on breath. So I mentioned earlier, you know, new highs, new lows and then on multiple time frames and then the percentage of stocks of their longer 2 moving averages. So they’re all sort of in the realm of breath.
And I&I, try to keep it really honest and straightforward and easy, because I’m just a simple guy. You know, I gotta gotta keep it easy for myself and you know, don’t don’t wanna. Yeah, I don’t. I don’t wanna be lied to by any of my indicators, basically. So I’m really careful about the ones that I use and the ones I think I can trust and have been proven to be trustworthy. And the ones that maybe aren’t.

Tyler Wood 35:52
Like that.
Makes sense?

David Lundgren 36:07
Yeah. OK. So let’s, let’s maybe talk a little bit more about what you’ve been doing since you’ve you’ve moved over to your own firm. I think you started it in January and as as luck would have it, the market kind of started to melt just shortly thereafter. But you made us to be on the right side of it. Visa v, this breadth work and I believe you referred to it as the the defender. So give us some give us some info about that as well.

Vincent Randazzo 36:34
Yeah. So what I’m trying to do is is to identify VIS.
A v breath different market.
Regimes or I guess expected market regimes?
Of risk reward outcomes. So I put it into 4 different buckets and I say OK, these are the qualities that are common in this regime and these are the outcomes you can expect in terms of volatility and expected return. And you know this is how you should be invested based on those things, right.
So it’s just it’s really simplistic on the way out. We we scale out because we know that tops are a process. I mean you know that.

David Lundgren 37:10
Yeah.

Vincent Randazzo 37:11
You know, a stock puts that super, super speculative might top a year before there, you know the the Dow components would right. So because of that in in recognition of that and that idea that you could recycle capital it’s it’s a 3rd, a 3rd a 3rd out right and and that’s how we that’s how we do it. It’s not this binary.
You know, switch that we just flip and say, OK, we’re out and then we’re back in. It’s a 3rd to 3rd, a 3rd out. And again it they’re all very systematic in terms of what triggers those and they don’t, it doesn’t always go to full cash by the way. And then that’s an important component too is that we’re really adaptive based on what the market is showing us at any given time. But then on the reverse side.
We’re basically saying, OK, well, at a bottom, there’s this real asymmetry between return and and risk. So in recognition of that, there is no gradiation, we just push all the way back in, right. So it’s really different.

David Lundgren 38:11
Yeah, I’m curious. So. So you, your your process did a great job in was it January, February, February or both?

Vincent Randazzo 38:19
Yeah. So it was February. So in January in our note in January, we’re basically saying that we were bringing up a couple different factors. We were saying in this regime that we’re currently in, which is a fully invested regime that has run this length, which is a pretty extended regime.
The the the 3rd year tends to be really rough tends to have, you know, not great returns even negative returns in some cases. So that was sort of the preamble. Then of course by February those those divert those negative divergences in. Brad had gotten to the point where they had become serious enough and then we got our triggers and some of the other the indicators that we watch. So you basically say, OK, a 3rd out and that was February 21st. So 2 days after the.

David Lundgren 38:39
Hmm.

Vincent Randazzo 39:02
All time high in.
A lot of the indices, SV 500 S&B 1500 S&P.
100 The Russell Russell 3000 Russell 1000 they all made new all time highs, but you know breath had been declining for over almost 3 months at that point. So so that was a red flag to us to say OK a 3rd off and then we had another cell signal came a few weeks later on March 14th for a 3rd out and and that again was just sort of like.
Continuation of the pattern that you had this look and feel of a major market top where these longer divergences took place along with.
A lot of the the weakening and the momentum that we had seen that would typically pretend of a longer lasting decline and and that’s why we we we acted because you know this, this is historically what major market tops look like. If it looks like this and it’s acting like this and we have to sort of adapt to that idea that you know that’s what this could be. And of course you know me being a person with emotions, I I don’t want to necessarily.
Make these changes or or do these things, but I’ve got to stick to the process even if I think it might be wrong.

David Lundgren 40:30
Yeah.

Vincent Randazzo 40:31
Is that hey, here’s a signal and say, OK, yes. Here’s a signal. Historically, this this is the outcome. Either it goes this way or goes that way. X percent of the time. Here’s the risk return profile of these regimes. Historically, this is what it looks like. So we have a a really good sense historically of, you know, not what to expect in a predictive way. But what we may be getting ourselves into. So you can adapt to it. And of course, be open minded the possibility of reversing that.

David Lundgren 40:59
How far back? When you? When you’re talking about probabilities based on the signals that my next question obviously would then therefore be how far back did you run this study? How many signals has it given, etc. Maybe you can frame that out for us a little bit.

Vincent Randazzo 41:11
Yeah, yeah, no, great question. So I went back to 1988 only because that’s when I had data for all my data sources for all the indicators that I look at.
That was the time I can go back to. Of course you can get divergences back to, you know, the 20s. If you wanted to, but that’s that’s only one part of it. Then. Then you have other things that you know, I I needed the right data for so.

David Lundgren 41:28
Yeah.

Vincent Randazzo 41:36
In that amount of time, so from 1988.
To present there was 30.
36 scaled cell signals so those 3rd thirds one of those thirds right, but only but only 10 buy signals, right? So so really kind of again I I want I’m identifying regimes I’m it’s not really like a a trading system or anything like that. It’s not going to give you any signals really in bear markets or at least it’s designed not to.
So.

David Lundgren 42:09
Does that? Does that imply that you had? If I? If I’m doing the math on this, you had a lot more scale outs, but you’ve only had 10 buys. Does that, does that imply that at 1:00 point you scaled out but you and you never bought it back? Or am I misunderstanding you?

Vincent Randazzo 42:22
Yeah, there was. There’s 2. So there was.
So the scaling out is just that. Just because you have so many more instances that you could scale out and versus only one buy, right? So for every, so every 3 theoretically for every 3.

Tyler Wood 42:33
Hmm.

David Lundgren 42:37
Right. Because you, you push it, you push in 100% back in when you get in, I see, yeah.

Vincent Randazzo 42:40
Yeah, exactly. Exactly. So theoretically, you can have 3 cell signals and you’re only going to have one bicycle ever, right? So that’s sort of the ratio, but there’s also there’s also 22 instances where you had cell signals that did not progress to to a full on, you know, secondary cell signal to get to get lighter and and not a bear market.

David Lundgren 42:49
Yeah.
Which one of those do you call? What?

Vincent Randazzo 43:05
So yeah, so one was in in the early 90s, 92, right and.

David Lundgren 43:05
What?

Vincent Randazzo 43:12
And that just was again, breath was weak for a period of time. We got the trigger.
There was really not much of a sell off. I I think maybe more of a sideways kind of market and then it got back in, you know, after that. And the other one was in the summer of 2020.
1.
Where breath, if you remember, was kind of moving sideways a little bit of diverging and there was some rotation that was going on at the time. If you remember, it was like that, that value growth, rotation, kind of like some weird stuff going on there. And I think that might have influenced it, but but yeah, that was a false signal ultimately. But that was the only, you know, the second, the second one that happened and that way. And then you gotta buy back, you know, again relatively quickly. But then of course, you had AI had a sell signal in January of.

David Lundgren 43:36
Yeah, yeah, yeah.
Yeah.
Yeah.

Vincent Randazzo 44:01
2022 and also in December. So it was kind of like not a whipsaw, but you know, it was.

David Lundgren 44:02
22 year.

Vincent Randazzo 44:07
I think it was on the right path, but again the rules are the rules. They follow the rules and and that’s kind of how how it.

David Lundgren 44:12
Yeah, that was a that was an exceptional period of time as well. So I I I completely share your frustration with that period of time, but it was also a spectacular time to be long equities as well. So it’s just sometimes risk management can get in the way.

Vincent Randazzo 44:26
Yeah, yeah, exactly. It can. It can.

David Lundgren 44:28
Yeah.

Tyler Wood 44:28
We’re too good at it.

David Lundgren 44:29
Yeah. No, exactly. That’s what Frank Tichera always says is that where that’s one of our greatest strengths. But it’s also one of our greatest weaknesses is that we’re just too damn good at risk managing risk. So I’m I’m curious. We’ve obviously had an explosive rally since then. We talked about the NAD line.
With all issues being back to highs, the common stock only very close to back to highs. Did you get a buy signal off the lows?

Vincent Randazzo 44:51
Yeah, so off the lows, it was kind of interesting, you know, one of the components and piece of evidence that we find around major market bottoms is this.
This element of price discovery where that you typically get through not only time but testing and retesting potentially. And you know that was been present at every bottom in our in our work you know back to 1988 it wasn’t in this in this case we didn’t have that. So there was no there was no buy signal. So that either means that being you know the immediacy of that rebound is is is.

David Lundgren 45:11
Yeah.

Vincent Randazzo 45:29
An anomaly, right? Or that there’s another bottom out there, there’s another lower bottom out there?
Either way, this is this is what the program you know did, and you know year to date we’re in line with the S&P, but we took an 8% drawdown in 719% drawdown. So you know our risk, you know our our risk adjusted metrics are much better and and you didn’t have to sort of go through that pain. But yeah, I know it’s it’s.

David Lundgren 45:49
Yeah.
Right.
What about maybe how? How would you compare what just happened to the?
COVID decline, I mean, how did how did your process navigate through the actual decline in COVID? And then in more more pertinently after the low because that also was a we spent no time, we just kind of blasted off because the world was just a washing liquidity at that point.

Vincent Randazzo 46:20
Yeah. So that one was, it looked like a V on the surface, but in the in the indicators that we we watch, it was a you. So you did have this period where you had this compressed compressed. I will just say like oversold conditions to keep it simple.
You had this period of really compressed oversold conditions that was almost like a coiled spring effect and it was held down long enough that you can expect to see you know.
A full on recovery.
You know a new bull market, if you will, where this time you had compression, but it was like momentary compression and and.

David Lundgren 46:55
Right.

Vincent Randazzo 47:01
And it just, you know, sprang up and in the, you know, in the past, what I’ve noticed is that when you, when you don’t have a great foundation and I think it goes back to like some of John Roque’s work, right, where, like, the bigger the base, the higher in space, you know, that kind of thing.

David Lundgren 47:11
Hmm.
Yeah, yeah.

Vincent Randazzo 47:19
Yeah, yeah, yeah. I don’t know how to pronounce that, by the way, I’ll never know. I’ll never know.

David Lundgren 47:24
Yeah, I think he’s the only one that does. So he assume he’s doing it right.

Vincent Randazzo 47:27
Right.

Tyler Wood 47:27
Its its from the famous novel where he goes to meet the little Puchhans they they.
Refer to him as a brubagnagian giant John Roek literary genius.

David Lundgren 47:37
Whatever, yeah.
Yeah, yeah.

Vincent Randazzo 47:40
Yes, yes, but.
You know, the idea is that you have this time of price discovery. Where can buyers and sellers can sort of agree that this is this is kind of going wherever it’s going to go and we’ve it can’t really go too much further. And now we’re starting to see it increase. So it met all the criteria except for the sort of time, price discovery timepiece of that. So it makes us really suspicious.

David Lundgren 48:05
Interesting it it. Yeah. Yeah, so.
So this I I wonder, therefore, given your your your height and focus on breadth, I’m curious how you processed and you thought about the fact that we got that Zweig bread thrust that that has this incredible, I think it might be 100% hit rate of some crazy forward forward numbers in terms of performance for the market, how how are you processing that?

Vincent Randazzo 48:30
I in a very confused way. I mean I I I acknowledge that that is a really powerful tool and.
Great track record. It’s just it’s not part of my process.
So it’s almost like there’s got to be.
The way that I that I’ve done this is that there’s like an order of operation that you would typically see. You know, typically tops look this way. Here’s how they play out subsequently. So in other words, you have a precondition and then you have a reaction to that precondition or or triggers from that precondition.
And sometimes I guess you just don’t get everything you want, so that’s why I do have an upside. I have an upside, you know safety basically that would that would sort of take in effect pretty soon here, but but it hasn’t hasn’t gone off yet but but yeah, no, I I I saw that and I was like man that’s that’s really interesting and I love the I love the Whaley thrust and I love the breakaway momentum thrust, but neither one of those were triggered.
You know, to me.
And I I’ve talked to Walter Deemer about this, and he’s of course, like I see he he’s like the authority to me on on breath thrust just because of the work he did with the the breakaway momentum thrust. And I I think that one ‘s really, really trustworthy and and and and great. And you know, he he just said no it’s it’s interesting and sometimes they just some of them trigger sometimes some of them don’t some of them sometimes they all triggers you know and some of them don’t you know.

David Lundgren 50:01
Yeah, you know, I wonder.

Vincent Randazzo 50:01
It’s it’s, it’s.

David Lundgren 50:04
The If you, if you look at the the average return.
Of the constituents in the market, so call it 3000 stocks.
Since the the end of 2021, early 2022, the average stock even after this rally that we just had.
Is still down 20% from that peak in 2021, which is extremely abnormal. And so that’s how I think about breadth that that’s like that’s that’s different like you look back to the 1970s, that’s only happened really 4 of the times in history and they all have preceded like the one that really jumps off the charts that really.
In in many, when you look at look into the background of what’s going on in the market today versus this other example would be 1998 to 2000 and that’s that. That’s the bear mark, you know it’s it looked like a bull market off the 98 bottom to we have the old economy versus new economy et cetera.

Vincent Randazzo 50:59
And.
Yeah.

David Lundgren 51:03
You know, I was at fidelity at the time and we had some very, very, very successful, very storied.
Value managers who just kept buying stocks because they’ve never seen them this cheap in their lives and they just kept buying them and because because they just and but yet they kept going down and it was that incredibly bifurcated fragile market beneath the system. That’s what I think about when I think Brett ‘s not necessarily the advanced decline line and I just that that’s the condition we have today and I’m curious like given your.

Vincent Randazzo 51:16
Uh huh.
1.

David Lundgren 51:34
Like even with semiconductors like, we would think that I mean if the if there’s a group of stocks that are like at the that the forefront of this quote unquote bull market, it would be semiconductors. But the average semiconductors down like 30% from 2021.

Vincent Randazzo 51:48
Yeah, no, isn’t.

David Lundgren 51:49
That spreads to me. What do you think?

Vincent Randazzo 51:51
It’s amazing and I think that’s yeah, that’s another way of looking at breath. And I see those very same things and I&I kind of scratch my head. I’m like this is just a really unusual period of time because you have this concentration factor of the likes. We’ve only seen a couple times in history. So therefore, you have such a small sample to judge like what is the outcome going to be? Well, I don’t really have a great sample to tell me what’s a reliable outcome here.

David Lundgren 52:09
Yeah.

Vincent Randazzo 52:19
So it could just stay this way for a while.
And maybe it’s justified this time because these companies are earning so much more money than everyone else, and they’re just so dominant. So.

David Lundgren 52:30
You actually saying that this time is different? Did I hear you just say that?

Vincent Randazzo 52:34
I am. I am. I am definitely not because I would rather not bet on those probabilities. Those are bad probabilities, you know. And that’s why, like when we talked about the low in April like to me into our system that would be the anomaly. And I cannot bet on an anomaly with any kind of confidence. I have no probabilities to make that bet. So it it’s a really hard thing to do when you’re in a systematic.

David Lundgren 52:42
Yeah.

Vincent Randazzo 53:00
Approach, which is what we do.

David Lundgren 53:02
Yeah.

Vincent Randazzo 53:03
So it’s it’s interesting.

Tyler Wood 53:03
Such such a valid point, right? If you don’t have the math to back it up, you can’t take that kind of risk. I’ve got a.

Vincent Randazzo 53:11
And not confidently, you know.

Tyler Wood 53:13
Got a question for both of you and maybe it’s part math and part philosophy, but is?
Is there a distinct difference, or can neither of you define the difference between looking at an indices on an equal weighted basis and measuring the trend of an equal weighted index versus looking at the CAP weighted and using tools like the advanced decline line? Is there is there? How would you define the difference between looking at breadth in those 2 different ways and is there an advantage to the advanced decline line that makes that?
A part of your process.
Isn’t.

Vincent Randazzo 53:47
I love the fact that the advanced decline line gives every stop of vote right, no matter.

Tyler Wood 53:53
MMM.

Vincent Randazzo 53:55
How big it is, what the market cap is? If it’s, if it’s still a plus side, it’s to the plus side by a tick.
Or by $10, right? It doesn’t matter. So to me, there’s a lot of level setting that goes on when it comes to like looking at the advanced decline line. And I do think that there are definitive advantages to using an equal weighted version.
Of an index.
When you’re trying to understand what breadth is then, then that’s something else. Now, if you’re really just trying to match a benchmark, then you you’ve got to look at the the regular weight. You know the regular cap weighted way, because that’s what you’re being judged against. But.
It doesn’t mean that you can’t get information from looking at the equal cap weighted version that you’re not going to get from the cap weighted version right. And and the difference between the 2 is where you get the most information.
In combination with the ad line and some of the other.

Tyler Wood 54:53
That’s the divergence that’s so powerful to spot.

David Lundgren 54:57
Yeah.

Vincent Randazzo 54:57
Right. Yeah, exactly.

Tyler Wood 54:57
Does does an equal weighted version of the index still give one vote to every single stock? I mean, wouldn’t that be true for an equal weight S&P 500?

David Lundgren 55:07
If you, if you look at like a an equal weighted ETF, I mean they they they rebalance periodically. So there are periods where large stocks just become large for a period and so it’s not quite as pure as that. It’s why the the average that that I probably speak too much about to the make yeah people make people nauseous hearing me talk about it but to me it’s the it’s the absolute it’s the best measure of breadth.

Tyler Wood 55:23
Value line geometric.
Dave, you nerd.

David Lundgren 55:32
That we have available today and it’s the IT is the value line geometric average but.
There was a time Tyler and this this is where that disconnect happened for me, and it’s why I just stopped really paying attention to it is. But there was a time when the advanced decline line would track really closely with the equally weighted indices or the value line geometric average because the.

Vincent Randazzo 55:50
Yeah.

David Lundgren 55:53
The the I just think there was a point in in time when the structure of the market changed and so now you went from decimalization. You went from trading on fractions to decimal. So it’s a lot easier to be up or down and you know we have all the ETFs that that basically trade all stocks at once as opposed to just I’m gonna I like IT industry.

Vincent Randazzo 56:03
Yeah.

David Lundgren 56:09
I’m going to buy this industrial company now. We now we like industrial, so we buy the XLI and that causes more uniform breadth movements on a given day. And I just and and that’s all just intuition to me. I don’t have any science to back that up, but there’s clearly something different about how the advanced decline represents breadth today compared to how it used to. But what does not what has not changed is the that value line, geometric average and and you look at it today and it peaked in 2021 it looked.
Eerily, scarily similar to the 1998.
1987 to 1990200820002007 to 2008. Even during COVID you know that there are periods where it’s diverged like this and it’s generally it hasn’t ended well.
Done.

Vincent Randazzo 56:54
Yeah, I think those are really great points, Dave. Yeah.

David Lundgren 56:58
Yeah, so okay so.
So I I love the fact that you have some mechanism again systematic that will stop you back into the market. If whatever reason the the system as you would normally get back in doesn’t get you in if that happens this time will that be the first time in your system that you’ve ever been just automatically stopped back in?

Vincent Randazzo 57:18
From this from this position again anomaly anomaly after anomaly. After anomaly I mean that’s it’s kind of like it’s hard to it’s hard to get your head around it but you know they can happen. I just don’t wanna change you know you don’t wanna change a system based on anomalies, anomalies to fit them because then you’re then you’re then you’re overfitting right and.

David Lundgren 57:18
Yeah.
Yeah.
Yeah, yeah.
That’s that’s my that my very next question is is do, do you think there there will be either in this case or perhaps maybe there’s others you can speak to in the past where you did change your system because of it, but will there be a lesson learned from this or or not like is there anything identifiable you’re like I can see why I probably missed this and if not this time have there been instances in the past we like? Yeah, you know I need to change my system because this is still a a base principle of trend following and it just wasn’t in my system before.

Vincent Randazzo 58:11
I’m always open to being rather than like trying to call tops or bottom. I’m more focused on staying aligned with where the weight of evidence is heading. So I think there is a certain level of sort of adaptiveness that you you have to have. But again, you know, there’s it’s a dangerous point to be, you know, over fitting and and changing based on something that happened once. It may not ever happen again so.
I I think sticking to the principles that I have.
But I’ve been, you know, borne out through history and study are more important than necessarily one instance when it didn’t work out that quite that way.
You know, so that’s the way I would think about it right now.

David Lundgren 58:56
So so like the way you look at it today, no, no lessons learned. And at the end of the day, you have a mechanism to stop you back in anyway.

Vincent Randazzo 59:03
Exactly. And. And you know, and I still achieve what I which what I wanted to do, which is to reduce the risk and and reduce the drawdown. You know that that’s the primary, you know, goal here because one of the things that I think people overlook and this kind of goes back to like the buy and hold argument is that the math of compounding totally changes.

David Lundgren 59:04
Yeah.
Yeah.

Vincent Randazzo 59:29
When you take these huge drawdowns right and then add on top of that.
You know the timing of hitting those drawdowns relative to where you are in your retirement cycle and where the market is in its secular cycle, right? Has a lot to do with what your outcome is going to be and they could be hugely disparate. So if we can control that part of it.

David Lundgren 59:49
Right.

Vincent Randazzo 59:55
And I think there’s, you know, the math just works much better for you because the market, you know, the textbooks assume like, yeah, 9% a year every year. But like the market doesn’t work that way. It’s up 20 up, 20 up, down 30, you know, and it’s like, OK, well, where’s my math? You know, if that happens so over, of course. So then what then what about a lost decade, you know? And you get things like that, that that totally screws you up, how you have to, Jane. Then change and adapt to being more tactical than you were or.

Tyler Wood 1:00:05
Yeah.

David Lundgren 1:00:09
Yeah, yeah, yeah.
OK.

Tyler Wood 1:00:11
Yeah.

Vincent Randazzo 1:00:22
You just, you know, ride it out and that’s just.
Is such a loss in purchasing power and and opportunity cost there, but that actually brings me to a point that I wanted to mention is that this idea of, you know, missing the missing the best days or whatever that kind of study that goes along to support the buy and hold case.

Tyler Wood 1:00:50
Yeah.

David Lundgren 1:00:51
Cool, yeah.

Vincent Randazzo 1:00:51
Like Super, Super Smart guy, super good guys, and we’ve just sort of having these conversations back and forth and you’re like, hey, why don’t we just, you know, write like, a a white paper on this, you know, and and just talk about talk about dispelling this kind of myth and, you know, adding your own, our own twist to it in terms of, you know, the CMT twist, I guess you want to call it that, but it was just a great experience. But I just underscores, I think, more importantly, the.

Tyler Wood 1:01:08
Yeah.

Vincent Randazzo 1:01:19
The shared passion, camaraderie.
And intellectual curiosity, frankly, that that you get, you know, with, with CMTS and the and the CMT association. So it’s something I’m really excited about.

David Lundgren 1:01:31
Yeah, that’s that’s awesome. I I think I I did a little, hopefully I probably did a a very small amount of the groundwork that you guys are, I’m sure, gonna exceed way beyond what I did. But if you if you actually go to my, if you guys wanna go to my site under the it’s under the about tab and then the drop down is philosophy. I did, I did write quite a bit about that and it’s it is it’s it’s it’s you know the the the folks that don’t want us to think about timing the market will tell you about what happens if you miss all the best days and it’s obviously disastrous.
The folks that want you to time the market will tell you this is what this is. What happens to your returns. If you miss the 50 worst days and it obviously it’s awesome. But neither one of those are true. But when you put them back together, what you find out is that that.

Vincent Randazzo 1:02:11
Hey.

David Lundgren 1:02:15
Something like 45 of the 50 biggest days and 45 of the 50 worst days all happened in bear markets.

Vincent Randazzo 1:02:22
Yep, Yep, this is exactly what we talk about. This too, yeah.

David Lundgren 1:02:23
So when you when you.
Yeah. Yeah. So, so at the end of the day, you end up with a an outperformance over time with much less volatility. And and that’s just the truth. When you when you actually consider the full weight of the evidence.

Tyler Wood 1:02:26
Nope.
Hmm.

Vincent Randazzo 1:02:35
Right. Yeah. No.

Tyler Wood 1:02:36
I’ve been enjoying. I’ve been enjoying as a spectator a lot of the debates between independent RIAS and this.

Vincent Randazzo 1:02:38
Dismiss.

Tyler Wood 1:02:44
Urgency that, as millennials are building wealth when they’re talking to a financial manager or financial planner, first conversation should be this is our plan or our preparedness for the fact that you will definitely endure a massive bear market while you are my client. And here’s what we’re going to do like these once in a lifetime. Events are happening every decade. So the the idea that.
That you could just, you know, ostrich. Put your head in the sand and you know, hope that the recovery happens fast enough so that you can still retire when you plan to. That’s just not hope is not a strategy. And I think there’s a lot of wise folks out there debating this ultra passive buy and hold philosophy that worked really well in a high liquidity environment, right, synthetically driven bull markets.

David Lundgren 1:03:31
M.

Vincent Randazzo 1:03:34
Yeah. No. And I think that’s a really great point and and and a point that as all this money moves from the baby boom generation to the younger generations.
They’re gonna sort of expect more from from their, from their, from their RAA or from their financial advisor because the the ETF.
Market sort of told us that passive management without any kind of tactics is worth basically 3 basis points, right?

David Lundgren 1:04:05
That’s a really, really excellent way to put it. I love that. That’s a that’s a really good way to put it.

Vincent Randazzo 1:04:05
So.
Yeah.
So like how you how you earning my 100 is the question like like I think people are gonna start asking right and it’s an important question because you know that’s a big part of the part of the equation too over the long term over 3040 years is fees, right. So how are you gonna earn those fees for me? And if you can earn those fees for me through risk management rather than stock picking I think.

Tyler Wood 1:04:12
Yeah.
Yes, 100%.

Vincent Randazzo 1:04:33
To me, the probabilities are much, much better rather than stock picking stock making, you’ve got to pick the right stocks, buy them at the right time, sell them at the right time, hold them, hold them forever. If they’re good ones.
If you identify them for smarter lucky enough to identify them out of the many, many thousands of stocks that are out there, and you also got to hold them in the right proportion to to to reap the benefit that they’re gonna, that they’re gonna, you know, give you. But do it in a risk, you know, a risk favorable way. I mean, there’s just so much stacked against you there. To me, if you can, if you can do this by managing.

Tyler Wood 1:04:55
Yeah.

Vincent Randazzo 1:05:10
Risk and reward. Then you know you’re so far ahead of the game it’s not even funny. And not only that, but your probabilities of doing that are just so much higher.

Tyler Wood 1:05:20
Yeah, so well said, Dave. I think from this episode we need to come back to legendary portfolio managers like Frank Dashera and remind him that technical analysis is risk management in both directions, right? We’re managing the risk of those who might miss out on a great up move as well as managing the risk to the downside.

Vincent Randazzo 1:05:33
Yeah.

David Lundgren 1:05:40
Exactly.

Tyler Wood 1:05:42
Hence it is so good to see you right now. I think New York City is starting to feel more like a Floridian swamp. But we should.
We should plan to get together again really soon. I’m thrilled to hear that there’s a nice connection across the country and and into Canada. Looking forward to reading that White paper, I’m assuming you you guys are going to submit that to the Charles H Dow Award competition.

David Lundgren 1:06:01
Yeah, for sure.

Vincent Randazzo 1:06:01
Yeah.
That’s a great idea. We we were, we were. We were thinking about that. We also wanna, you know, have it out sooner than that. It should be pretty much ready soon. So maybe we could have it in the show notes or something, but.

Tyler Wood 1:06:15
4.

David Lundgren 1:06:15
That’d be great. Fantastic.

Tyler Wood 1:06:17
Yeah.

Vincent Randazzo 1:06:17
You know, but yeah, those it was a pleasure, guys. Again thanks for having me. Thanks for everything. You you guys do both of you. I mean I I see you at the events. I see how hard you work and I think it makes a huge difference and it has made a huge difference in the you know, decade or so that you know I’ve seen this real you know strong effort. So I love it.

Tyler Wood 1:06:26
Thanks.

David Lundgren 1:06:35
Thanks so much, Vince.

Tyler Wood 1:06:37
This is the best part of the gig, my friend, so thank you for spending an hour with us and for all of our listeners, fill the gap. What’s what’s the best way for them to find you? Point them towards your LinkedIn or Viewright advisors. Where should we go?

Vincent Randazzo 1:06:37
OK.

David Lundgren 1:06:39
Yeah.

Vincent Randazzo 1:06:43
My pleasure.
Yeah. So it’s view, right, dot AI is the website and Yep.

David Lundgren 1:06:57
Go off.

Tyler Wood 1:06:59
Vince is part of the Cool Kids Club.

David Lundgren 1:06:59
Show dot AI what do you what are you? One of the cool guys?

Vincent Randazzo 1:07:04
I mean to be true.com was taken so you know, I&I didn’t I didn’t want to do.net, you know didn’t want to do.net so it’s got to be dot AI and and yeah I know and and on on on X they call it now XI am a CMT Randazzo so you know get in touch any way you want.

David Lundgren 1:07:08
Ah, OK.

Tyler Wood 1:07:10
Smart move, yeah.

David Lundgren 1:07:12
Yeah, yeah.

Tyler Wood 1:07:23
Effect.

David Lundgren 1:07:24
Song.

Tyler Wood 1:07:25
Awesome. Thanks so much, Vince. Enjoy the afternoon and we’ll see you really soon. Thanks.

Vincent Randazzo 1:07:30
My pleasure. Thanks again guys.

David Lundgren 1:07:32
Expense.

Tyler Wood 1:07:32
Bye.