RAGE AGAINST THE ALGORITHIMIC MACHINE…

Although algorithms with AI can be self-learning, Wall Street’s algorithms depend largely on human oversight, so it stands to reason that all moves are scripted. Many trading algorithms are rule-based algorithms designed to execute based on specific instructions or predefined strategies. 

For instance, let’s say a stock’s 200-day moving average crosses its 50-day moving average to the upside—this is known as a golden cross. This triggers algorithmic buying. If the stock’s 50-day moving average crosses its 200-day moving average, creating a death cross to the downside—this will trigger downward selling.

Algorithms are centered around a series of technical and situational events in the market.

So, if a company’s price crosses above 70 on the relative strength index (RSI) this means the stock is overbought, meaning…buyers have bid up the stock and it has ran too far too fast, so this would trigger algorithmic selling above 70.

In reverse, if a stock crosses 30 on the relative strength index, this means the company is oversold and triggers algorithmic buying. Algorithms also ride the momentum wave and may trigger buying to the upside as well as selling when there is a momentum reversal to the downside. 

There are many complexities and strategies that algorithms are designed for: 

1. Technical trading 

2. Statistical Arbitrage

3. Momentum trading 

4. Risk management 

5. Market conditions 

6. News based events 

7. Earnings 

8. Order execution 

9. Trading ranges 

10. Time frames 

Although they are programmed by humans, they operate based on the rules of the program. The algorithms are monitored but they operate without emotions. This is why when we see technical breakdowns, a series of events will trigger.

So if it breaks support, algorithms will sell without thought or human intervention. Unlike the retail investor, algorithms carry no emotional attachment. Once the stock hits a technical event there is an action (buy or sell).

It’s a trained human instinct to be emotionally attached to money. This is why most retail traders lose. Sure, most retail investors have trading plans, planned entries and exits but like Mike Tyson said, everyone has a plan until they get hit. 

So Wall Street’s machine advantage makes a phenomenal difference as compared to the emotionally manned human retail trading rig. It is estimated that a staggering 80% of Wall Street uses trading algorithms. 

So one can’t help but wonder who is the small guy doing big things behind the machine pushing the strings. 

When you zoom out 1,000 feet, there are teams of strategists and data scientists implementing trading programming for algorithms based on market conditions, data, and news driven events. 

This leaves the retail investor at a dreadful disadvantage, sort of like bringing a 38 caliber gun to a fight against a team of expert sharp shooters holding 50 caliber rifles. 

It’s important to understand what and how algorithms are being used on Wall Street. This will help to understand what you are seeing through the eyes of Wall Street. 

Since these are situational and technical trading events in the short-term, most of the downside or upside will dissipate over time as nothing goes down or up in a straight line. It is also important to note that the technicals of stocks trade independently of fundamentals.

Traders are more concerned with price actions and technical trading patterns.

As a fundamentalist, it’s truly about the micro and macro environment surrounding the company. 

Being long-term has the advantage of time. When you are in a stock for five years minimum you will be less concerned about the day to day movements or money flows. 

In my opinion, this is the best way to beat the machine. If you are long-term why watch your stocks everyday?

If you watch them less, the less emotional you will be; therefore, curtailing the losses from the emotional decisions, because nine times out of ten when you make an emotional decision, you make a wrong decision. 

TRADING: THE IMAGINARY HUSTLE…

An institutional trader may not be able to see your stop loss, but they have a great idea of the range. 

As a retail investor, facing an institutional trader is like facing David against Goliath. You might win some days, but in most cases, it’s an episode of Big Bank Takes Little Bank, which means the person with the most money wins. 

Imagine the Ukraine and Russia war without the use of the United States or its allies' technology. The war would be over before it started. This example is the equivalent of a retail investor playing in a space where they are severely out-matched, out-monied, and out-experienced.

Institutions are equipped with real-time analytics, trading algorithms, multi-asset trading capabilities, as well as Bloomberg terminals that Thompson Eikon and proprietary systems developed in-house. 

It’s like playing Call of Duty in the dark against a player wearing night vision goggles, pointing an infrared beam directly at your heat signature—about to take out your stop losses while chasing the liquidity all day as a way of life. 

In other words, you can’t win!

The sad part is that trading has become an imaginary hustle where people actually believe they can make a second income. 

So, they buy as many courses as possible from social media furus (fools impersonating gurus), looking for the magic bullet, only to be left with a gaping hole in their bank account and an empty pit in their stomach called stupidity. 

Since a great majority of them get their stock recommendations from social media, they will more than likely buy after the fact, when the money has already been made.

If that’s not discouraging enough, most will resort to the grandiose visions of easy money revenge trading options, which is the equivalent of juggling razor blades with alcohol on your hands next to a fire. 

The retail investor has effectively turned investing into a day at their favorite casino, bringing with them a huge appetite for speculation—all fueled by FOMO and the “something-for-nothing” or “very little” concept. 

Instead of learning the principles of long-term investing, they would rather invest in something that could potentially grant them an instant profit. 

Welcome to the world of MEME stocks, where profits made are not profits earned. 

MEME stocks are retail investors' way of bucking a system that has excluded them and disenfranchised them for so long.

Not only are prices on goods and services rising rapidly every year, but wages aren’t keeping pace with the increased cost of living. 

The impact is extraordinary as people can’t afford to keep up with the rising housing, food, and healthcare costs. This has led to increased speculation in the stock market as people seek to make up for the difference in lost money due to inflation eroding their buying power. 

They all heard Ray Dallio, the founder of Bridgewater Associates say, “Cash is Trash.” But retail investors have taken this literally, turning their cash into trash. So, rather than earning close to nothing in their savings accounts, they are revenge trading life’s lost treasures. 

This is a classic case of behavioral economics where the cards are heavily stacked against the unknowledgeable player.

And because there is discontent since their financial standings brought them to the point of risk, their reaction to losses may be more compounded than their reaction to gains, causing emotional instability. 

But while inflation is eating away at their paychecks, they are more willing to ignore the risk as their mental accounting tricks them into a thought pattern that at least it’s better than sitting in the bank doing nothing. 

This is very true, but a faulty thought in the wrong hands, meaning…as you do one thing, you do all things. 

So, if you aren’t apt enough to pick up a book, investigate, or do the research, it is not the action of investing that’s harmful, it’s the lack of understanding that’s detrimental to the growth of money. 

When you lack understanding, you choose the imaginary secure path of taking advice from someone you trust without inspecting the source; therefore, placing your money on a clear path of wealth destruction. 

This behavior is extremely pronounced during a period of uncertainty, hence the reason casino and alcohol stocks do well during a recession. 

This also leads to false expectations, over confidence, and insecurities because desires outpaced the willingness to do any research—leaving people watching their investments daily as if it’s a play off game and they are betting on the Michael Jordan of investments, when in reality, they are betting on the worst players in the financial league. 

 Be careful out there folks…

WHY LIVE IN A FINANCIAL CAGE?…

There are two unwritten paths in society. The first is conformity—a scarlet letter, gray-type of existence where people follow the traditional path, take little or no risk, and live with a blind belief. 

The second path is packaged as risky but rewarding—a maverick type of existence only built for people who have their own compass. These are your unemployable entrepreneurial types that will either die trying to succeed or change the world. 

They both read from the imaginary book, “You Work For Me” or “I Work For You”. Your juxtaposition in life will determine which book you read. It all factors down to choice and whether you are a risk taker or not. 

If you desire to be safe, you are more likely to follow the financial advisor's advice who advocates for three to six months of expenses in the bank. Most likely, you will swallow the false doctrine that your first home is your biggest investment and you can save your way to financial freedom. 

You consider investing in your future if you have a retirement account, like a 401 (k), Roth, or IRA, but because you have limited knowledge or true access to applicable, useful, and proven methods of building wealth, more than likely your retirement accounts will go underfunded. 

Vanguard and Fidelity are two of the largest sponsors of 401 (k) plans, and based on a snapshot of 5 million participants, the findings are shocking.

First, there are 100 million Americans with defined contribution plans with approximately 10 trillion in assets. 

According to a Vanguard study, only 14% of all 401 (k) participants maximized their retirement account contributions in 2023.

The good news is that the average participant was up 18.1% in 2023. The bad news is that the average participant underfunded their account and they underperformed the S&P 500's 2023 26.29% percentage gain by a whopping 8.19%.

Here is how you frame it…let’s say you invested $1,000 a month or $12,000 a year for 30 years and received a zero rate of return. Your account would be worth $360,000. But if you received 8.19% on that same investment for 30 years, the difference in appreciation would be $1,173,592,73 for a total appreciation of $1,533,592.08.

Now this is hypothetical, and you would have to receive 8.19% every year for 30 years, but if you look at the S&P 500 performance of 10.6% over the last 100 years, it’s extremely possible. 

The reality is that you need to maximize both your contribution and your knowledge to ensure a retirement that is worth having.

If not, it will be impossible to beat the math. 

The average person at the age of retirement has $273,588.00, and the median account has $88,488.00. 

It is absolutely impossible to live on these savings and stay in the United States. This is why in the movie, The Bronx Tale—Calogero, the son of Lorenzo (played by Robert Di Niro), said that the working man is a sucker. 

Because if not careful, they will fall in line with a belief and dogma that doesn’t benefit them or their family. 

Now granted, he was speaking of the illegal way of life, but I used this point to illustrate that it is a crime to be financially ignorant, and the longer you stay in the blind, the more you rob yourself of an early retirement and a superb way of life. 

We hear it all the time…”Boy, if I knew back then what I know right now.” But the sad fact is, most people now know—and do nothing to change their trajectory. 

The system doesn’t take care of its own, it eats its young. 

It’s up to each individual to define their plan of financial attack and not be force fed a line of BS designed to keep you working until you die in your work clothes. 

Although the path of an entrepreneur is extremely risky and not for everyone, who says that you have to be extreme?

How about you take bits and pieces of the entrepreneurial culture, and infuse it with your comfort level of risk and build a family business on the side. 

In today’s environment, the internet is the new cottage industry. There are no limitations on your success, only the bars you place on your thinking. 

It’s all about multiple streams of income. But here is a reality if you don’t understand the role of your money and your role as a creator of money. No matter what side of the ledger you are on, business owner, operator or employee—as soon as you stop, the clock starts on your money. 

This is why the plan is to throw hours at financial education and study all proven methods, not just one, so that at least you have the opportunity to escape the American caged way of existence and thinking. 

I have opened the cage—how far and how high you fly is now up to you…

Now, let’s be clear, there is nothing wrong with following society’s imaginary line if you max out every opportunity and sidestep its wasteful parts. 

A CONSUMER SQEEZE PLAY…

Have you noticed how people have been reduced to free range economic sheep, being prepped for financial slaughter?

It’s like the object of the corporate and government game is to make your life so economically dependent on the system for your basic needs—to the point where one day you will need permission to breathe on a subscription basis.

We have gone from a subsistence living or foraging, which simply means—from living off the land.

Have you ever felt like the weight of the world was on your back and keeping your head above water was more than just a theme song from an episode of the sitcom, “Good Times”?

This angst is the exact feeling the consumer is faced with current state. I would argue that you have never had a more realer choice to make than choosing between your child eating or paying rent, especially if you are a single parent. 

If you’re single with no children, it’s easier to tough it out in the dark trapped between two week paycheck cycles when you can’t pay your electric bill. But try explaining to your five year old the reason why they can’t watch their favorite episode of SpongeBob on their iPad when the internet is no longer an option. 

According to the Bureau of Labor Statistics the average person in the United States makes $65,470. So that means depending on deductions, the take home pay will be somewhere around $4,400 a month. 

As a single parent tackling your daily responsibilities with two young children, how can you not be under extreme loads of stress when daycare or after school care costs are between $1,800 and $2,400 per month?

Depending on where you live, the average two bedroom monthly rent can be between $1,500 and $2,000—let’s just say $3,300 dollars on the low end.

How does one pay for food, credit cards, car note, and insurances—or the one-time annoyances that are almost guaranteed to pop up when you least expect it?

The answer is they can’t! 

To compound this—a second job robs the children of their parents and their parent’s of peace of mind. 

Now imagine the culture of a society that has been pushed to the breaking point where civility is no longer an option and the only thing they can afford is their feelings. 

It’s hard not to be emotional when corporations only see the consumer as the profit between the margins—with no relief in sight. 

On top of this frustration, just the threat of tariffs are causing companies to up their already inflated pricing. 

My question is…what happens when there is no more milk in the cow? 

What happens when you have squeezed the consumer to the point where they are rolled-up-toothpaste-tube dry? 

…You have a recession.

The consumer is 70% of GDP. If the consumer slows down there could be a domino effect that translates to slowing economic activity, workforce reduction, and higher unemployment. 

This could potentially sink the U.S into a recession…but to what extent? 

We have never had a recession when unemployment has been lower than 5.2% and unless we see a deep supply shock from tariff policies—I believe it will be a V-recession, which throughout history doesn’t last long. 

And while this may be the case, you have to define how long when it comes to the already torn and tattered consumer that has been getting whipsawed from all sides.

I heard the CNBC commentator say when asked, “What effect does the low end consumer have on the slowing of the economy?” To which her reply was, “Not much.”

Although there was no malicious intent in her response, this highlights the pain point of those below the poverty line that are trapped between an imaginary line of low, middle, and upper class living standards.

The middle class is fading away as the natural attrition on buying power decreases buying power as inflation creeps higher and higher over time. 

It all comes down to understanding the investable dollar. This is the only way to get from underneath the thumb of inflation. This is the main reason I started Investment Dojo, so people have a fighting chance to right this wrong. 

Having a financial education helps consumers make an educated decision by defining what exactly is a need, a want, and a waste. 

My thought process says, if I have to pay a bill I have to be able to invest an equal amount in a vehicle that will return my net spend back to my accounts over time. 

This also means living at the lower part of your means and not chasing after what society says will make you look, feel and appear good. 

This may take a bit of willpower but trust me, your children’s children will thank you for your prudence. Besides, there has to be one generation that’s willing to sacrifice for the next, why not yours? Someone has to break the cycle…

JUST OVER BROKE…

The “witch is riding your back” is a southern Americana folklore term for sleep paralysis, characterized by the victim being paralyzed, unable to move or speak. 

When I was in my twenties I used to have these dreams where I would be wide awake and an intruder would be attempting to break through my door and no matter how hard I tried to shake myself awake, I was totally paralyzed.

This is how I describe the state of employment as we know it today. You can see the job mentality blocking your ability to be successful, but you act as if you are paralyzed by fear and incapable of moving out of your own way. 

The questions that may evoke action that must be answered is, what has your job done for you lately? Are you any richer today than when you first started? Or, are you just over broke?

I have been in insurance for 11 years. As an insurance rep I’m in about three to four houses a day, four days a week if you do the math. Excluding Thanksgiving and Christmas holidays, it’s roughly 576 to 768 homes a year or 6,624 to 8,832 households during my tenure as a rep. 

What I have found startling is that not all, but the overwhelming majority and consensus is that people are discontent in their chosen fields and if given a choice they would start businesses, but they are trapped by their inabilities and the lack of startup capital. 

Secondly, and most frightening, excluding those with a financial planner—which were the 1%, was that absolutely no one I sat down with understood their money flows or had a concrete plan for retirement. 

It’s as if they were trapped in between two walls of worry. One was “Maybe I will retire with enough money “and the other was the mystical “One of these days I will start investing.”

Some were so sick and tired that they couldn’t work due to health but others were just sick and tired of themselves. 

For many years, they have been breaking promises to themselves that one day they would eat right, start working out, and plan for their futures financially, but the conveyor belt of life tricked them into thinking that they would have more time and for some—time ran out. 

It’s amazing what I’ve seen over the years and it saddens me even ‘til this day that people are trapped in a cycle of un-improvement with no way out—pushing between paycheck to paycheck, trapped in despair. 

It’s as if they are all farmed fish swimming in their own feces hoping one day they would get out, only to find out that getting out, or in this case…retirement, meant literally going from the frying pan to the fire.

This made me curious and sad at the same time. I was curious as to why all was brainwashed by the same concepts of a job and saddened because for the life of me, I couldn’t figure out why people married their jobs—when in reality, financially it would end like a bad divorce that left every single one of them just over broke. 

Well, allow me to dispel a few myths. First, there is no such thing as going to college, graduating with a degree, finding one job, and staying with that job for your entire life anymore. 

Well, at least not according to the Bureau of Labor Statistics because the average person has 12.5 jobs between the age of 18 to 56 and as of January 2023, the average person jumps ship every 3.9 years. 

So the days of depending on a job to enrich your life is about as moronic as staying in the same job for 30 plus years and expecting to retire a millionaire. 

Unless of course you are a Wharton business school or Ivy League graduate that becomes the CEO of a successful publicly traded company on the NYSE or NASDAQ with a golden parachute that includes stock options—and even at this level they market their talents to the highest bidder. 

Jay-Z once said at the 2009 American Music Awards that, “Men lie woman lie but numbers don’t,” and he was exactly right. 

And since this is the case, we have to rethink the old archaic way we see education and reverse engineer the roles of employment, or better characterized as the rules of engagement—instead of being used and abused and taken for granted by jobs, we will do it in reverse.

Meaning…if we choose to work for anyone other than ourselves, we will only accept healthy work environments that allows us to accomplish what is deemed our purpose. Which is to take care of our family and future generations and have enough monies after expenses to invest in growth vehicles such as stocks, bonds, and real estate. 

For this to happen, we must view our time as the most precious commodity we have, more precious than gold. For example, I googled a life expectancy calculator and plugged in my personal data and based on the information provided, I am expected to live to the age of 91. 

Regardless of whether this is true or not, for me to ignore that my life will one day come to an end is an act of avoidance. This is as silly as a coach going into the locker room and waiting for the game to be over, then coming out and asking the team something stupid like, “did we win? “

Living your life without the reality that you will die sooner or later is like playing a basketball game without a score board or a game clock. If this is the case, it can be stated that if you are living unhealthy and financially stressed, you are not only playing Russian roulette with your health and your time, but you are mismanaging your money. 

We must readjust how we view our time on earth; it’s critical that we understand that our time is limited. 

There are 86,400 seconds in a 24-hour day. Now upon hearing that you have thousands of seconds in a day. It might compel you to discount your time and waste some foolishly thinking you have time to spare, but to waste even a second brings you closer to your life’s end. 

Let’s look at it in a broader stroke. God willing let’s say I was going to live ‘til the age of 91. I would have to break my time down based on understanding that from birth ‘til 91—I only have 33,215 days to live, not including leap years. 

Based on this knowledge, I would have to apply my time wisely. So, in this spirit the first portion of my life up to the two years of college finished—I would have to subtract 6,935 days from 33,215…meaning I would be starting my work career with only 26,280 days to live. 

When you look at your life from a numerical perspective, it allows you to focus on what is purposeful, instead of the wasteful thoughts that leads one to procrastinate in the face of their own demise. 

Whether you enter the workforce straight out of high school or college, if done correctly, you can retire by 55 (20,075 days) or earlier leaving the last one third of your life to enjoy with your loved ones or in my case for the sake of the example, my last 13,140 days. 

The thought process and life’s business plan has to be based upon your approximate life expectancy with exception to early death, you must execute and define each and every step with precision.

Your thought process has to be that you are a business that trades dollars for hours, so the ideal scenario is that you work for the highest and most effective wage required to hit your business and life goals, and nothing less. 

Included in your goals has to be a plan that makes the dollars earned, based on your hourly trade, multiplied and compounded in interest, generating investment vehicles. 

Compounded interest creates the effect of you physically multiplying money and yourself over time, without you having to work hard for the rest of your life.

For example, let’s say I entered the workforce at the age of 21, intending to retire by 55, and I calculated that I would need 10k a month for the rest of my life to accomplish this goal. 

Let’s say I spent some time on a life expectancy calculator and it forecasted I would die at 81. This means I would have to earn enough money to invest so by the time I retired at 55, I had 3.1 million dollars between savings and investments.

There are two numbers I would have to plug into my calculations—First, how much money would I have to invest monthly, and second, what would be the highest rate of return I could expect to achieve consistently?

For this, you will need a compounded interest calculator, which you can find conveniently on www.moneychimp.com

To achieve this goal, you would have to have a monthly investment spend of $3,000 or 36K yearly for 26 years and achieve a compounded interest rate return based on 8%. This method can also be used when calculating how much money you would like to leave behind for your children’s inheritance. 

The next step would be to read and educate yourself on what it takes to achieve such a phenomenal return. Next, find a mentor and/or financial planner who’s smarter than you, and carefully lay out a business plan that you both can commit to and then, whistle while you work it. 

If done correctly, you will retire with grace, but if not, you will be trading dollars for hours. Eventually, due to health, you will run out of time at which point you will be forced into the reality of subtracting your life expectancy by the amount of dollars you have saved when you can no longer work. 

For example, let’s say you didn’t plan for retirement and had to work until the age of 70 to collect the maximum social security benefit allowed. According to the Social Security Administration, almost two-thirds of 70-year-old men and almost three-fourths of 70-year-old women will live at least an additional ten years. 

Now I need you to stare at the number 3,650 because there is a chance that 3,650 days will be the only time you have left after giving your life to a job that left you just over broke. 

Where is the quality of life in this?

I have seen so many bask in the joy of one day retiring and die two weeks after retiring due to a heart attack or stroke. Why give away your best years to a job that will never love you enough to give anything back?

Use that job by leasing out your time to the highest wage that makes retiring at an early age effective and never get comfortable. 

If a competitor is willing to pay you 20% or 30% more, the only loyalty crisis you will suffer is the one dollar that secures your family's future. 

Always keep pushing the envelope that holds the biggest amount of cash for your future. You owe no one your time, but your legacy, and it is your responsibility to leave an inheritance, not theirs. If you left it up to your job, they wouldn’t care if you died with nothing; they would just step over the body and hire another person.

To a job, you are just a number required to satisfy their shareholders or owners. 

Jobs will never take care of you, so it’s imperative that you come to this realization earlier versus later, before it’s too late. 

Because if it’s you not taking care of you and yours, nobody else will.