John Nyaradi talks with Gabriel Wisdom, host of The Gabe Wisdom Show on Business Talk Radio Network::
Gabriel Wisdom: Right now, we go across the Pacific with the trade winds down to the beautiful island of Oahu, Honolulu where our friend John Nyaradi is. John, I guess you’re holed up in a tropical resort somewhere on the white sands?
John Nyaradi: Yeah, I am Gabe. Good talking to you like always. I’m at a beautiful place here on Waikiki just looking out at the water on the harbor and, you know, it’s never a bad day in Honolulu.
Gabriel Wisdom: Now, John Nyaradi by the way is the man behind the Wall Street Sector Selector, WallStreetSectorSelector.com, and he’s the author of a recent new book, an outstanding book from Wiley called “Super Sectors: How to Outsmart the Market Using Sector Rotation and Exchange Traded Funds.” John Nyaradi, if the name is familiar to you, writes for Seeking Alpha, Market Watch, and many others. John, you wrote recently for Market Watch, I saw it on the front page of the Yahoo homepage, about a death cross. What’s a death cross?
John Nyaradi: Well, it’s an interesting technical indicator that’s pretty widely known and some people think controversial. It’s where the 50 Day Moving Average moves below the 200 Day Moving Average in whatever index or security you’re looking at. The opposite is the golden cross, Gabe, which is the 50 Day moving above the 200. The golden indicates a bull market and the death cross indicates a bear market. So that recently shifted to what would be described as a bear market or a sell mode in just the last week or so.
Gabriel Wisdom: Now, we had a pretty decent little rally I guess, sort of, kind of, but still the financials have been just — I mean they’ve just been decimated. When you wrote this article for Market Watch, “Death Cross Springing Up Everywhere,” the financials as measured by XLF, the exchange traded fund, was down over 25%, the industrials were down 18%, energy down 16+%, consumer discretionary down 13.7%, so on and so forth. Does it appear to be improving now or is this just kind of a head fake rally?
John Nyaradi: I think it’s a bear market rally, Gabe, coming off really oversold conditions. If you look at the long term history of the golden cross, I described it in my book as a simple trading system anybody can follow. In fact, the Dow Jones indexes, the big Dow Jones, has an index based on this very thing and they’ve done, you know, tremendous statistical research going all the way back showing it does in fact outperform the market. So, today, the activity I would say would be a reaction to being oversold and I’m looking ahead to Jackson Hole on Friday with Dr. Bernanke and what might happen there.
Gabriel Wisdom: We’re talking with John Nyaradi. His book is called “Super Sectors” from Wiley “How to Outsmart the Market Using Sector Rotation and ETFs.” His website and newsletter service is WallStreetSectorSelector.com. John Nyaradi here on the Gabriel Wisdom Program on the Business Talk Radio Network.
I always like to go to your site because there are a number of very interesting services and articles. Most recently, you wrote one, I’m not sure where this appeared or at least you posted one here. It’s “Is Gold a Bubble or Just an Impressive Bull Market?” John, that’s what everybody wants to know. What’s your take?
John Nyaradi: Yeah, that’s one of the ones we wrote. Gold is one of the super sectors that we described going forward over the next many years. Right now, it does appear to be getting pretty frothy, you know, as people run this thing up. Today, it took its biggest loss I think in a year so it’s a tricky market to be in. But I think I would be in the bullish camp long term over the future months and years even.
Gabriel Wisdom: Okay. Let’s go back to this article from Market Watch that you wrote about the “Death Cross Springing up Everywhere.” In the article, you say that “from here on Mr. Market will tell us if this is the beginning of a new bear market or if a bottom is now in place and current levels become great buy-the-dip opportunities.” “It’s important” you write “to know what to look for because anybody calling either for a bottom here or for a return to cyclical lows is merely guessing.” Well if everybody is guessing, how do you identify a super sector?
John Nyaradi: There are two questions there regarding the golden cross, death cross. You know, it’s not infallible, there’s no perfect indicator, Gabe, –
Gabriel Wisdom: Sure.
John Nyaradi: – or no holy grail. If this thing turns back up, then I think you could say it was a false indicator and higher prices could be ahead, certainly. So I think that’s one part of that question. And then regarding the super sectors, those are more like long term things for people who want to be just in front of big kinds of generational waves, and I think we can see that in the gold, precious metal commodities markets. I think we can see that also looking really long term in areas like technology and emerging markets, China and so on.
Gabriel Wisdom: Also, in the article, John, you write that “a new bear market is a more likely a probability if prices continue moving lower and the death cross becomes more well established with that 50 Day Moving Average moving more steeply below the 200 Day.” With the action today and somewhat yesterday, I guess we’re sort of on a bear market watch here?
John Nyaradi: I think that’s correct. It’s still in the death cross mode. Significant resistance above and also below. Of course, everybody knows about the 200 Day Moving Average, we’re below that, Gabe. And I really think what we’re seeing today, it has nothing to do with the fundamental change of the market. It’s strictly to do with the hopes and the guessing about what might happen with QE3 and Dr. Bernanke and the Fed on Friday. Of course, he can’t do anything on Friday other than hint to what’s going to happen at their next meeting in September.
Gabriel Wisdom: On the Wall Street Sector Selector site, you interview many of the world’s greatest investors. I see here that you did an interview recently with Paul Merriman who’s an investing legend and he’s been at this for more than 40 years now. What did he say, you know, that stuck with you?
John Nyaradi: Well, Paul is a wonderful guy. You know, he like you said is a legend. He’s been around for a long time and been through everything and he’s one of the — I call him a rare animal. He has buy and hold portfolios for people who believe in that kind of philosophy and he’s also a market timer. So I think, you know, his main thing, which I think was interesting was that the next 40 years are going to look a lot like the last the 40 years, and I think that’s probably true. You know, it’s never different this time. So if we’re heading into a recession, depressionary environment, we’ve seen that before. And if the Fed can save the day and they’re hoping that this stimulus, QE3, can prompt growth, then, you know, we can enter a new uptrend.
Gabriel Wisdom: John, what do you make of these folks who think we ought to return to the gold standard? I mean that just seems so unworkable to me. You try to pay for your hotel room using little chips of gold, let us know how that goes.
John Nyaradi: [Laughs] Yeah, I think that’s behind us now. You know, that worked in the old days. I think in today’s electronic age and where we’ve come and with the deficits, I don’t know if it’s a practical reality to go back to that. I mean it sounds good –
Gabriel Wisdom: Yeah, it sounds good.
John Nyaradi: The same with the balanced budget idea. I think that sounds good on paper, but if we had one today, this recession would have been far worse than The Great Depression as most of these monetary policies couldn’t have been implemented.
Gabriel Wisdom: Uh-hum.
John Nyaradi: So there’s no perfect solution, Gabe
Gabriel Wisdom: We’re talking with John Nyaradi. He’s the publisher of Wall Street Sector Selector, the site specializing in ETFs, WallStreetSectorSelector.com. He’s also the author of a book from Wiley called “Super Sectors: How to Outsmart the Market Using Sector Rotation and Exchange Traded Funds.” John Nyaradi here on the Gabriel Wisdom show on the Business Talk Radio Network. John, using the concepts in your book, “Super Sectors,” how do you or how did the greatest investors of all time, many of whom are interviewed in your book, “Super Sectors,” how did they identify super sectors? You said gold has been one, but how do you find them?
John Nyaradi: I think Gabe, it’s looking at the big picture and what’s going to happen. I think if you look out ahead, you can see problems with the Dollar, you can see problems with the developed economies so that would lead us towards the emerging economies. China, of course, is the 800-pound gorilla long term. You look at the retirement of the baby boom, that’s a major, major wave that’s going to have all kinds of impact. So if you look at those big, big macro trends, you can find the sectors that are likely going to profit from those.
Gabriel Wisdom: On Wall Street Sector Selector, you’ve got a number of exclusives. You’ve got the Sector Selector free newsletter, which I assume people can sign up for just by going to WallStreetSectorSelector.com. And then there’s the Sector Selector free trading system. What’s that?
John Nyaradi: Well, you know, that’s what we’ve been discussing, the golden crossover and it really gets into detail how somebody, anybody can use it. I mean a fifth grader can do that. And it also includes the material, the research from the Dow Jones index people, which is terrific research. It actually does validate these things. I mean so many people involved in programs, they’ll buy and hold and hang on for the long term, you can’t beat the market. It turns out you can and the Dow Jones has demonstrated that. As I mentioned, it’s something that anybody can do very simply. So that’s a report that you can just download and look at and see what it’s all about.
Gabriel Wisdom: Well that’s great. So just go to WallStreetSectorSelector.com. Get the book, “Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFs.” Hey, Stock Traders Almanac says it’s the year’s top — one of the year’s top investment books. Hey, my book didn’t make that list.
John Nyaradi: [Laughs] Well, you have a new book, Gabe, and value investing is your thing, your specialty and I think that always makes sense.
Gabriel Wisdom: Yeah. But the year’s top investment books. John, you’re the best, man. “Super Sectors,” that’s the book. I have a copy and I know our listeners would benefit from having their own. John Nyaradi. John, thanks for being here.
John Nyaradi: Thanks, Gabe, always a pleasure.
Gabriel Wisdom: Thanks everybody.
(recorded interview edited for clarity and length)