Last updated on November 9, 2022
Jason Shapiro joins the podcast to discuss his trading strategy, based on the simple premise that most investors are wrong most of the time. This approach requires trades to be crowded, which is decidedly (and surprisingly) not the case right now — with two possible exceptions.
Content Highlights
- Most traders lose money. Shapiro seeks to capture these losses by going against the crowd (3:11);
- He does this by monitoring the Commitment of Traders report for extreme positioning, which he then fades (4:03);
- The thinking behind this? The crowd is wrong. “It’s really that simple.” The discounting method is not price but positioning (6:11);
- Shapiro monitors 37 different futures markets. Two examples of where this approach worked in the past (7:03);
- Right now “I’m seeing some pretty scary stuff, because you don’t have anybody crowded” in major asset classes (8:24);
- One possible exception: lumber (11:08);
- Background on the guest (16:35);
- Patience is a virtue, especially for contrarians (27:28);
- “I have contrarian views on everything…that’s how I develop my opinion.” People are wrong because they want others to guide them (31:00);
- The set-up in cryptos is “massively dangerous” based on positioning in Bitcoin futures. This sets Bitcoin and cryptos up for a major drop… (36:36).
(On this last point, Shapiro shared the following chart)
For More About Jason Shapiro
- Website: CrowdedMarketReport.com;
- Twitter: @Crowded_Mkt_Rpt;
- LinkedIn: CMR-Publishing.
Quick Video Highlights From Our YouTube Channel
Transcript
Nathaniel E. Baker 0:32
here with Jason Shapiro of J.S Trading. I’m assuming the J.S. stands for Jason Shapiro.
Jason Shapiro 0:42
It does.
Nathaniel E. Baker 0:43
Good. You’re a CTA, up in Rhode Island. And, Jason, thank you so much for joining me contrarian investor podcast today.
Jason Shapiro 0:52
Thanks for having me.
Nathaniel E. Baker 0:53
Yeah, great to have you on. And you’re here, because you have a contrarian approach that is based on market participation, and market action. Let’s start from with that maybe tell us a little bit about your approach, how it’s contrarian and how it works.
Jason Shapiro 1:11
So I mean, it really derives from the fact that I believe, you know, there’s a very large percentage of people that lose money when they’re trading property in the neighborhood of 95%,
Nathaniel E. Baker 1:20
I was gonna say, I thought it was 100%
Jason Shapiro 1:22
probably 100%.
Nathaniel E. Baker 1:21
Go on
Jason Shapiro 1:22
So all I’m really trying to do is capture what they’re losing. So I’m trying to find out what they’re doing, and be opposite them. And if they’re losing it, then I’ll capture it on the on the good side, that’s the general idea of what I’m trying to do. I’m not trying to out think the world, I’m not trying to think that I know where markets are going better than the rest of the world. I’m just trying to capture the fact that if everybody’s losing, then I want to make and so if I do the opposite of them, then I should make over time. So in order to kind of increase the odds, I’m looking at, you know, participation data, and when people are super crowded on one side of the market, I’m looking to take the other side,
Nathaniel E. Baker 1:59
that’s cool, that’s very contrarian. So I guess where do you where do you get this data and how you know it’s reliable.
Jason Shapiro 2:05
So the main data source that I use is the commitments of traders data, which comes from the CFTC every week. And that shows actual positioning, which I think is important, because, you can look at survey data, and you can hear people talk about they’re bullish or bearish and all that. And that’s one thing. But actual positioning, you know, shows where they’re actually where their money actually is. And that’s what I’m looking to fade
Nathaniel E. Baker 2:32
Okay. Isn’t it dated, though, the COT?
Jason Shapiro 2:36
I mean, it’s three days, three days old.
Nathaniel E. Baker 2:38
Okay. And that doesn’t matter?
Jason Shapiro 2:40
Not really, I mean, I’m trading for, you know, sort of major market turns. So, three days doesn’t really make that much of a difference when it comes to this data. I have an algo, that I’ll make it daily data, which isn’t perfect, but it’s close enough. But I don’t even think that that’s necessary anyway. Because it’s a longer detox on the trading off of this data or anything
Nathaniel E. Baker 3:03
How extreme does the positioning need to be for it to interest you?
Jason Shapiro 3:09
very extreme. I’m cooking market major market times. So if major market turns, I need positioning to show that speculators are extremely short, if I’m going to be buying and obviously extremely long if I’m going to be selling
Nathaniel E. Baker 3:23
okay
Jason Shapiro 3:24
so I take this data and I turn it into an oscillator, which goes from zero to 100. And it needs to get above 95, for me to be a seller and and he’s get below five for me to be a buyer.
Nathaniel E. Baker 3:35
Wow. Okay, so it’s really extreme.
Jason Shapiro 3:37
Yeah
Nathaniel E. Baker 3:37
when did this happen? Historically,
Jason Shapiro 3:40
I mean, it happens all the time. I, I have 37 different markets that I that I trade this in, so you know, I get quite a number of signals over the course of the year. By the way, not all that work, you know, all this really does in my view is it helps with risk reward, you know, when I lose, I lose one when I make I make five. So if I can make, you know, 35 or 40% of the time, make five lose one, then over time. That’s how I that’s how I earn positive returns.
Nathaniel E. Baker 4:10
Okay, make sense. So what is the thinking behind this? Is it just that the crowd is wrong? Is it that simple?
Jason Shapiro 4:19
To me, it’s pretty much that simple. You can look a little bit deeper to you know, how does the market discount, right? A lot of people like to think that price is the big discounting mechanism and look at it as like, oh, this thing has gone down a lot, therefore, it must be a buy. I don’t look at it like that. I look at it, like everybody has shortness thing, therefore, it must be a buy. I look at that as the discounting method in the market, you know, not price.
Nathaniel E. Baker 4:45
So if there’s a bunch of short interest on a stock then I mean, I guess you don’t trade vanilla stocks, but
Jason Shapiro 4:50
I don’t trade individual stocks. Short interest has really delayed data in stocks, and I don’t really — I’ve looked at it before I don’t think short interest is works that great over time, and stocks
Nathaniel E. Baker 5:04
So these futures so 37 markets, can you give us an idea not naming all 37? Is it just is it you know, s&p minis and some of the
Jason Shapiro 5:12
stock indices, fixed income, currencies, energies, metals, grains, softs
Nathaniel E. Baker 5:18
Okay. Okay, so So the basic stuff
Jason Shapiro 5:20
pretty much everything that has liquidity, US markets that have liquidity,
Nathaniel E. Baker 5:25
right. So can you talk us through some of the positioning that’s happened maybe in the recent past that you’ve taken advantage of, and how that’s lined up?
Jason Shapiro 5:33
So I mean, we caught the top in the stock market last November. The data didn’t show that speculators had gotten massively long, the entire run up all the way until November of last year. And that’s when it said that it was time to get short there. And I wish I could say that I rode it all the way down. But we rode it down a lot. And I’ve been flat now. But, you know, that’s one example. Bonds up at the top two years ago, we’re also showing speculators massively crowded long. And, you know, I could go through a million examples. And I could also put a million examples where I showed it was crowded and it didn’t work.
Nathaniel E. Baker 6:14
So what are you seeing now?
Jason Shapiro 6:16
Right now I’m seeing some pretty scary stuff, honestly, because you don’t have anybody crowded short stocks, right? You don’t have anybody crowded, short bonds, you don’t have anybody crowded, long dollar, right? These are all the trends that people are trying to fade at this point, right? They’re trying to find the bottom and stocks are trying to find the top and dollar they’re trying to find the bottom and bonds here, right. And you’re using price and oversold, and RSI and all these things, right. But I can tell you from a positioning standpoint, it’s not showing that at all, which to me is kind of scary. Like why aren’t people massively short stocks here? Why aren’t people massively short bonds here? Why aren’t people massively long dollar here? I don’t get it. But they’re not. So I wish they weren’t blaming, because then I could go the other way, and hopefully make some money, but they’re just not showing that. And as you see that the trends continue.
Nathaniel E. Baker 7:15
Yeah. Is it maybe that they that things have been so volatile? They don’t want to take large bets?
Jason Shapiro 7:20
no, because the positioning is a relative thing anyway. I think it’s because they’re all trying to pick the bottom. That’s what I think. I think they’re all trying to play the game of Oh, the Fed’s gonna stop raising rates soon. And once they do, you know, bonds are gonna rip stocks are gonna rip, you know, and all this stuff is gonna happen. I think they’re playing that game. And that’s what’s showing up. They’ve spent the last five weeks buying fixed income. They spent the last four weeks buying stocks. They’re all trying to pick this bottom here, you know, which is the most dangerous thing I can tell you as somebody who does nothing, but try and pick tops and bottoms in markets, right? The single most dangerous thing is trying to pick a bottom and a top and a market. Right? Yeah. And especially when you’re doing it based on price only, or oversold, or whatever you want to call it, you know, it’s extremely dangerous. And it seems like the whole world is trying to do that here.
Nathaniel E. Baker 8:14
But if they aren’t crowded into trades, and they have cash, then why would it be dangerous? It just doesn’t mean that means there wouldn’t be much movement, right?
Jason Shapiro 8:20
It’s dangerous, because we’re in a bear market, and people are buying into it, you know, I mean, which market is probably going to extend? Right?
Nathaniel E. Baker 8:28
Right
Jason Shapiro 8:29
And that’s all fine markets go up and down doesn’t mean it’s dangerous just means people lose some money. But to me, if the market is going to continue to go down, and interest rates are going to continue to go up and stocks in and continue to go down. At some point, it could actually be dangerous, you know, because you’re looking at some pretty bad outcomes there. People are gonna start getting pissed.
Nathaniel E. Baker 8:53
Anything interesting happening in the commodity space? Soft Commodities? I guess? Which I don’t follow all that closely.
Jason Shapiro 9:01
So the one place really where we’re showing super crowded shorts, the last few weeks has been the lumber market, which is a soft commodity in theory.
Nathaniel E. Baker 9:09
Okay.
Jason Shapiro 9:10
And, you know, truthfully, all you’ve had, including today, all you’ve had is negative news in housing markets, which lumber is a big part of lumber from the beginning of October has gone from 400 to 530.
Nathaniel E. Baker 9:24
It’s ran up. Okay.
Jason Shapiro 9:26
Yeah. So you want to you want to explain that why that is? To me. It certainly isn’t because of fundamentals, because all you’ve had is a weakening housing market and weakening housing starts and all this stuff, right. And theoretically, we can, you know, so why is lumber up 25%? Well, the positioning has showed that people are massively short there so they over discount that that they’re right, whereas they have an offer discounted that for whatever reason in other places. Interest How long was a tough market that trade because it’s very illiquid, but. But that’s really been the one place where where people have been, have been overly short.
Nathaniel E. Baker 9:59
Interesting is Russia big exporter of lumber maybe is that I mean, this would not be the time for that to be happening.
Jason Shapiro 10:04
I wouldn’t even have a clue
Nathaniel E. Baker 10:07
Canada?
Jason Shapiro 10:08
yeah, I wouldn’t I wouldn’t even have a clue to me it’s all about it’s all about because people were way too short and now they’re covering and they’re getting squeezed out. That’s that’s all it is to me Russia, China, whoever housing to me that’s all just narrative.
Nathaniel E. Baker 10:26
so you say people are short so that make you interested in going long or not not yet?
Jason Shapiro 10:33
Yes that made me interested in going long back in beginning of October
Nathaniel E. Baker 10:37
Okay. Now how long have you stay in the trade?
Jason Shapiro 10:40
So I’ll stay until they’re not crowded anymore. Okay, now that’s kind of up to them not up to me. Right.
Nathaniel E. Baker 10:45
Okay.
Jason Shapiro 10:46
If I’m trading, because they’re super crowded short, I’m getting long, well, then we’re not when they’re not crowded short anymore. I’m getting out. That’s my process. That’s the edge. So therefore, that’s what I’m trying to take advantage of.
Nathaniel E. Baker 10:58
Right. And, uh, do you have the same signals to get out of the trade doesn’t have to be 95%? Five?
Jason Shapiro 11:04
No, once you get back to neutral, I get out
Nathaniel E. Baker 11:07
But lumber isn’t there yet?
Jason Shapiro 11:08
No.
Nathaniel E. Baker 11:09
Okay. Okay, well, I guess that makes it not a very opportune time to have you on the on the podcast.
Jason Shapiro 11:15
I mean, from the point of view of what should you trade right now?
Nathaniel E. Baker 11:18
Yeah.
Jason Shapiro 11:19
But the point is, it’s opportune because what I’m saying is, don’t try and pick the turns here. Right, which is just as valuable is
Nathaniel E. Baker 11:29
100%. Right. Yeah. Sometimes you need to know what to stay out for things.
Jason Shapiro 11:33
Stay short, you know? Yeah, that’s, that’s what I think is the trade here. You know, stick with your Trend followers, basically. Because they’re, they’re not crowded, so therefore, they should have much more room to run.
Nathaniel E. Baker 11:47
Jason Shapiro. Let’s take a short break. And then come back. And I want to ask you about your background, how you came to start this firm, and some other stuff. But let’s first take a break. If you are a premium subscriber, you do not get the break. Don’t go anywhere. Don’t touch the dial. We’ll be right back.
Nathaniel E. Baker 12:05
Welcome back., here with Jason Shapiro, J. S trading a CTA. This is the segment of the show where we ask our guests to tell us more tell us more about himself or herself. And how they got to this stage of their career. mentioned that this is your own firm. How did you get into investing in the first place? Where were you doing before? You don’t have to mention specific names if you don’t want to. Yeah, but just curious.
Jason Shapiro 12:29
So I got into it. You know, when I was a kid, my first job was in Hong Kong, I worked for Hong Kong Shanghai bank, I was in like the commercial banking executive development program, and I hated it. And they hated me. You know, I was not cut from that cloth, so to speak. And I had a friend who was a broker and you know, in the Hong Kong market, Hang Seng Index futures. And I started to trade it just out of kind of boredom. And, you know, I went through what I think a lot of people go through when I first started trading, it was a bull market. I was buying, I was making money, and I was calculating how long it was going to be before. You know, I was the richest guy on Earth. Right? Sure. And I clearly made the same mistake a lot of people do, which I I mistook a bull market for me being a genius. And that’s how I started trading. You know, and obviously, when the bull market ended, so did my, my genius, right? And so from there, at that point, I was hooked. And I really loved what I was doing, and I wanted to be involved in it. So from there, I went through the process of really trying to figure out what this was all about and how you really made money over time in the markets, and it’s been a 30 year journey of still doing that.
Nathaniel E. Baker 13:45
Wild. Are you from Hong Kong? Did you grow up in Hong Kong?
Jason Shapiro 13:48
no, I went out there after college.
Nathaniel E. Baker 13:52
Yeah, I was there for a couple years, and I moved back in 2017.
Jason Shapiro 13:55
yeah, it was from like, I want to say 91 to like 96.
Nathaniel E. Baker 13:59
Okay, that was pre handover days.
Jason Shapiro 14:01
Yeah, pre handover. Yep.
Nathaniel E. Baker 14:04
Yeah, different, obviously, a different time than that city’s history
Jason Shapiro 14:08
brings up an interesting point that I was looking at last night as an aside the Hang Seng Index right now. Is it the same level? It was in 2007? Right. Can you tell me the size of the Hong Kong economy now versus 2007? It’s got to be a massive amount bigger than it was in 2007. Right. There’s been GDP growth every year. Right?
Nathaniel E. Baker 14:33
Well, not just Hong Kong, but China.
Jason Shapiro 14:35
Right. And the whole China thing, right. I mean, while the Hang Seng is at the same place that it was in 2007. Right now. So you know, people get into these ideas about the market, right? Where, oh, you know, the economy and the this and of that, and they have to realize it’s just not true. I mean, Japan’s the same thing, you know, Japan is 30% lower than it was in 1989. You can tell me that the Japanese economy is not all A lot bigger than it was in 1989. And then it’s grown since 1989. It has and the stock market is 30% Lower. So this thing that people get into about, you know, GDP and growth and the economy and all that. It’s, it’s completely the wrong way to approach the market, if you ask me. And those kind of numbers are proof in the pudding. Right? They spent so much time trying to figure these things out. And they’re wasting their time because they’re looking at the wrong thing.
Nathaniel E. Baker 15:28
And they’re probably there are other ways to explain it, of course, you know, with China crackdown, and all these other things, and Chinese economy slowing remember stocks are forward, you know, indicators and such. And so people are, so from that level, it does make some sense, but, but, you know, you’re certainly right that a lot of animal spirits do tend to dominate.
Jason Shapiro 15:47
If I told you in 1994, I was in Hong Kong in 1994. Okay. And then market at that time, the bull market then peaked at 12,400. Okay, 1994. Now, I went to Shanghai in 1995. Shanghai, we stayed at the corkman Shangri La, which was the only hotel at the time that allowed foreigners to stay there. It was the biggest building in Shanghai, I think it was 26 storeys tall. Okay. And that was what Shanghai looked like. Right? The rest of it was who tanks? Okay. I went back to Shanghai in 2008. When I went to the Olympics in Beijing, and Shanghai was water good two times the size of New York City. Okay. So if I could have told you in 1994, that Shanghai was going to be in China, just Shanghai, all these cities in China, right? brand spanking new, beautiful cities, right? That China was gonna go from that, which was basically nothing to this. And at the hand, saying, and that time period was gonna go from 12, four, to 16,000. Up 30%. In, what, almost 30 years, there was no possible way. I don’t care what you say about slowdown and what’s going on. Now. You would have guessed that the Hong Kong market would be at you know, 600,000 right now. And sure, maybe it’s come down from 600,000 to 300,000. Right. But you never would have told me that we would be at 16,000. If I if I could have showed you what China was going to do in that time period. Right? Yeah. Remember, 95 in China, people didn’t know this was gonna go on, right? That was when they first came out. And Deng Xiaoping said, you know, whatever it was wealth, being rich is glorious, or something like that. Right. But you still didn’t know that you were going to have the single biggest economic boom, I would argue in the history of the entire planet. Right. And all you’ve gotten out of Hong Kong from that as a 30% gain in 30 years. I’m sorry. There’s, there’s no way anybody could predicted that. Right. The big talk back then was, you know, don’t put your money in the US markets. Right? You should be in Asia. That was the big top down right Asia over time. That’s where you should be putting your 401 K and doing this and doing that, right. Meanwhile, the NASDAQ’s gone up how many times in that time period and nothing. So, you know,
Nathaniel E. Baker 18:04
interesting dichotomy, I guess. Yeah, it can take a long time for things to fundamental to adjust to reality, I guess, or if, if, if they’re, if they ever do, right, I don’t think they ever do personally. But in this case, they may not. Yeah, or right. Yeah, but but that’s a good point. Like, you know, markets can stay irrational longer than you can stay solvent. Cool. So okay, so then how long ago did you start the firm?
Jason Shapiro 18:28
So this firm I started about three years ago
Nathaniel E. Baker 18:30
Okay. Okay, you’re up there in Rhode Island.
Jason Shapiro 18:33
Yes, I had taken I had left the hedge fund, started my own firm, which was a lot bigger and had a lot of people working there. And I ran that for three years. And then I just didn’t enjoy it. And I was cut divorced. And I went through a whole sort of life thing. So I shut that and I took about a year and a half off, to kind of, you know, get my life together, moved up to Rhode Island, and then started this firm with the idea of I wasn’t going to do it how I did the last time, this is an operation. I don’t have any people working for me, I will never have people work for me, you know, people ask me, oh, what’s your capacity? How much money do you want to manage? And I’m, like, you know, as much as I can with one person working here. Because I’ve never having somebody work for me again, that’s just not my thing. Right. And I also, you know, there’s so many aspects to why that is, but you know, having a big nut and having a big expense, and then you have to go out and raise money and do all and once you have to raise money, you have to start doing things that are not necessarily in the best interest of your trading type of thing, right? You have to fit yourself into the boxes that they want to fit you into because you want to raise the money. I don’t want to ever be put in a position like that against the clients that I have now know exactly what I do know what my return stream and my process does for their portfolio. And so my only job is to do what I say I do. And that’s Yeah, that’s pretty easy for me. So,
Nathaniel E. Baker 20:02
yeah, I think a lot of people I’ve kind of gone that route. I mean, I’ve certainly in covering the hedge fund industry have seen that, you know, you have these brilliant traders at prop desks or whatever we still had propped up, I guess you still do, which is not at the banks. And they would leave and the task of managing a company, and employees and all these headaches became, you know, too much. And it became a different thing than what they were doing before. without straining and making money. And that’s exactly yeah, yeah. So so we see that a lot. But it’s yeah, it’s interesting, though, at some points, and in other areas of the economy, you kind of see that to where people just kind of get a little tired of the bureaucracy and the headache, and not that I’m speaking for myself here. But But anyway. Okay. Very interesting. So is there any concern here that that the, there will never be do you ever, like, worry that there’s never going to be opportunities again, and this is just going to be how things go?
Jason Shapiro 21:03
Okay, no, I’m not going to love it. I trade enough market sector crossing up assets, you know, markets will move, people will move, positioning will move and right. You know, this is the least stuff I’ve seen in 15 years, right. But it’ll come back. There’ll be opportunity, there’s always opportunity somewhere, you just have to be patient. And that’s a big part of this, at least for me, right? Is patience, right? And then it’s also a part of my whole one man thing and all that not having a, you know, not having a cover or anything like that. I can be patient. I don’t have to make money. You know what I mean? I don’t have a mortgage. I don’t have car payments. I don’t have college payments anymore. I don’t have anything I think, right? So I can be patient. I can sit back. I mean, look, I’m up on the year this year, I if I don’t make another dime the rest of this year, I’m fine. And my clients are fine. So you know, I have patients is a big, big part of this, especially when you’re picking market turns, you know, they only happen once, right? So patience is a very big part of contrarian investing, right? They say a lot contrarians get run over, right? And the reason they get run over because they’re not patient, you know, they’re buying stocks for the last month. They’re buying bonds for the last month, you know, they’re selling dollar. They’re not being patient. And they’re just buying because it’s oversold. And that’s that’s a death knell.
Nathaniel E. Baker 22:30
Or even worse than just buying because they have the cash on their board. That’s right, sometimes. No, that’s actually in bull markets, and it’s fine if it goes up, but then it doesn’t. Yeah,
Jason Shapiro 22:38
yes. Yes. So I am fortunate that I’ve been doing this for a long time now. So that whole aspect of I’m bored. I’m going to make a trade that doesn’t. That doesn’t come into play. If I’m bored. You know what I mean? I’ll watch the Yankee game. Like, I’m not gonna I don’t fool around with trades anymore.
Nathaniel E. Baker 22:56
You’re from New England?
Jason Shapiro 22:57
No, I’m from New Jersey originally.
Nathaniel E. Baker 23:00
I’m kidding. A tough place for a Yankees fan but okay.
Jason Shapiro 23:03
a Yankees fan and a Dolphins fan. By the way. I’m surrounded by nothing but Patriots fans.
Nathaniel E. Baker 23:08
Yeah.
Jason Shapiro 23:09
Yeah, it’s pretty brutal. But at least I was from Jersey so that could be a giant fan when the giant when the when the Patriot fans all want to squack. Anyway, yeah. So I don’t like make trades because I’m bored. You know, I consider what I do to be, I have a job to do you know what I mean? I’ve told my clients, this is what I do, right? I do this turn picking stuff, which gives negative correlation to the other things in your portfolio. That’s my job, right? So I take my job pretty seriously. That’s all I do. I don’t I don’t make trades because I’m bored or make trades because maybe there’s something here I just don’t do that stuff. And I think that’s the difference between, you know, trading for fun and trading as a as a profession. Not fun to me. Oh, it’s not? No, that’s not fun to me. If I want fun, I got plenty of things I can do for fun. You know, I can go play. I can go play guitar, I can go out with my wife. I can go to a concert. I can go to school. You know, that’s fun. This is not fun. For me. This is a job. Okay? People want it to be fun, right? If you want to have fun, that’s great. You want to be a hobby? That’s great. But how many hobbies do you have that make you money? Right. You know, I have some hobbies. I play guitar. It doesn’t make me money. I gotta go spend you know, $2,000 for new Les Paul, I gotta go spend $4,000 for a new AMP. No one’s paying me for that. I mean, it’s a hobby. It cost me money, right? I don’t think hobbies making money. So this is not a hobby.
Nathaniel E. Baker 24:37
Interesting, but you do enjoy it. I would hope somewhat?
Jason Shapiro 24:40
Oh, I enjoy it. But it’s my job. You know, I mean, it’s work. I enjoy it. I love what I do. You know I love and it’s not only do I love it, it’s necessary for me because, you know, I’m such a sort of a controlling person to begin with, right? That there’s not a lot of places that you can It satisfaction going against the crowd. You know, trust me at Christmas dinner when I’m going against the crowd, you know, you’re not getting a lot of satisfaction out of that all I’m doing is making my wife’s sister cry and making her mother mad at me again and getting her mad at me, you know, that’s all being contrarian does in those situations, right? But fortunately in this situation, you can be rewarded for taking contrarian approach. So, not only do I enjoy it, I need it. For my mental health for my mental health and survival.
Nathaniel E. Baker 25:30
Yeah. Do you have any other another contrarian views on other things, be it in markets or elsewhere?
Jason Shapiro 25:36
I have contrarian views on everything.
Nathaniel E. Baker 25:38
Okay.
Jason Shapiro 25:39
That’s the only views I ever take, like, people are like, what’s your opinion on this? I’m like, What’s your opinion? Because whatever your opinion is, in my opinion, is the opposite. That’s how I develop my opinion. Right? As crazy as that is, right. I just think people are so wrong. So often. That’s how I develop my opinions. You know? That’s just become my, my way. Yeah.
Nathaniel E. Baker 26:02
Well, you know, there’s another element here also, which is it’s not just that people are wrong is that the media guides, people I know, this having worked in media, that they, you know, people are very much guided by media.
Jason Shapiro 26:14
No question. I mean, look, it gets into a very deep philosophical thing. But that’s why people are wrong, because they are looking to others to guide them. They don’t want to think, right, because there’s a thing if you think you can be wrong, and people don’t want to be wrong, for whatever reason, I don’t I personally don’t understand it, I think being wrong is the greatest thing you can ever do. Because how else do you learn lessons other than be wrong? You know, from your dealings with other people, people do not like to be wrong, right? So therefore, they don’t want to form an opinion based on whatever they want to be told, right? This is what I in my view. And I don’t want to offend anybody here. But this is all about religion, politics, all this stuff comes from that very basis. And I have friends and family who I see do this all the time, all their opinions. Oh, well, I know this, because I read it in the New York Times. Okay. That’s how you know it, like really hit me. But it gives them a fallback. This is why people like to act in crowds, because it gives them a form of safety. Right? And this is why I fake the crowds. Because to me, that type of thinking is wrong. Okay, and why you can’t prove it in many places in the market. It does prove out, right. So that’s why I do it this way. I mean, you can go throughout all of history and think about when the masses were all agreeing on something, I mean, Nazis, whatever it was, right? They all agree, and it becomes like a cult thing. And it’s wrong over time. You know, timing, it is a different story. Right? If you’re short, the Nazis the day they started, then you were wrong. But if you were patient, and you waited, you know, then you got it. Right, you know? So that’s kind of how it all goes. It’s it’s a lot deeper than than just the market. It’s really human nature and how brains work.
Nathaniel E. Baker 28:04
Yeah, very cool. And that’s a very good actual defense or kind of mission statement for contrarian ism, which I’ve never quite been able to articulate. So it’s great that you did that for us and for our listeners. Yeah. So it doesn’t sound like you’re a big believer in research, then. I mean, in like, other people producing research for you, unless it’s just raw data.
Jason Shapiro 28:26
I think it’s garbage. It doesn’t make any sense to me. You gotta do research on a company. I mean, okay. But this is the problem I have with these people all the time. Are we talking about a company here? Or are we talking about a stock? Okay? Because just because you could tell me that the company is going to grow revenues at 20? Plus, let’s say you’re right, even though you’re most likely not because they never are. But let’s say you’re right. Okay. The company is going to grow revenues at 20%. A quarter for the next four quarters. Okay. What does that tell me? That tells me that the company is doing well, it tells me zero about what the stocks gonna do. 00. And that’s all these people talk about on the TV all day long, right. Jim Cramer is a classic example. He knows a lot about these companies. And not once does he talk about the stock. So that doesn’t make sense. And in retrospect, they come out with you know, some crap about why the stock went up or down, right. But we’re trading stocks. I’m not but people are trading stocks. You’re not trading company, you can be the greatest company in the world. Right? I don’t understand what that means. And you could be the worst company in the world. And I don’t understand what that means either. The question is, which way is the stock going?
Nathaniel E. Baker 29:45
Yeah, I guess they would say that, you know, you want to be a you know, the whole Buffett Munger, you want to be a shareholder in the company and you’re buying a slice of their future revenues and such and it’s more of a long term thing and blah, blah, blah.
Jason Shapiro 29:55
Again, if Buffeett ain’t been the greatest company in the world that 50 times sales either I know ventures, you know what I mean? Like that works because he’s buying it at a discount.
Nathaniel E. Baker 30:05
Right, exactly.
Jason Shapiro 30:06
So there’s that question too, right? Just because companies Great. Well, if it’s trading at 55, everybody knows it, ie It’s everybody’s crowded long, right? I can tell you that. It’s not going to do well, you know, you could take the five Dave, the list of the most widely held stocks, you could take the five most widely held stocks, let’s call those that most crowded five stocks, and short those against the index all day, and over time, you’re gonna make money blindly. I don’t even care what the stocks are. And you have to figure out which ones to roll and when it comes out of that five list, or is it the five? Or is it the top three years at the top 10? You know, you’d have to go back and test all that right? And which when the roll out of it and roll into another one, you need to test all that. But in general, you take the x number of most widely held stocks, in short them against the rest of the market, you will make money. I don’t care what the fundamentals are.
Nathaniel E. Baker 31:01
Interesting, I wonder here in closing, I’m not sure I want to go here, if I’ll just ask it that cryptos. The reason I ask actually is, Well, two reasons. One, I’m curious if it’s not too long, what are your thoughts are? And secondly, just the lack of volatility we’ve seen there in the last month or so, when they haven’t really moved at all. If this had been even look at I know there are some futures on cryptos, I believe right now, on Bitcoin
Jason Shapiro 31:27
futures on Bitcoin right now. And the history isn’t that long. But it has speculators the longest they have ever been in the history of the contract
Nathaniel E. Baker 31:34
right now?
Jason Shapiro 31:35
Yes. I think it’s massively dangerous. I don’t I can’t tell you that I know a thing about the blockchain. I couldn’t even tell you what it means. And that I couldn’t tell you what it means. I’ve yet to have somebody tell me what it means in a way that made any sense, right? Maybe I’m not smart enough. Maybe I’m not young enough. I don’t know what it is. But what I do know is they’ve been massively long crypto for the last, you know, really, since the top and they’ve done nothing but get longer, right? So to me, I can almost build my world around that one chart, the commitments of traders or crypto, I can build it around that one chart, okay, because of crypto has massive Longs here, right, which in my view means that it’s going to go down a lot, because if we’re gonna, if they’re massively long now, where’s the market going to be when they’re not massively long, right, which means they’re all getting out, it’s gonna be a lot lower. So where’s the world? When crypto is 50%? Lower than here? I wouldn’t think that stops are higher. Right? I wouldn’t think that interest rates are lower, right? It’s gonna be more what’s going to get crypto in theory to go down that much. Is this continued? sucking out of liquidity? You know, that’s what crypto is. It’s a liquidity instrument, right? That’s how it trades, right? So if there’s going to be that much less liquidity, that crypto is gonna go down 40, 50%, even in the next year, or whatever, then where’s the rest of the world going to be at that same point, I can build a whole thesis just around that one co T chart on crypto here. So and people get mad at me, you know, Oh, you don’t know anything about crypto there. Right. But you know what, I don’t know anything about any of these things. I have trades all the time, and corn and wheat and whatever, you know, I don’t know the first thing. Man, I’m not a farmer. You’re gonna tell me some farmer doesn’t know more than me about wheat. They better right? I’m freaking some guy sitting here in Rhode Island. You know what I mean? I don’t know anything about these things. I don’t even know anything about the s&p 500. Right. But
Nathaniel E. Baker 33:31
I know when they get 500 stocks, everything.
Jason Shapiro 33:34
There’s 500 stocks. That’s about all I know, know. And I know wheat is a grain. And clearly when I’m making a trade, when I’m seeing that things are crowded, I’m starting to read. I’m trying to figure out what people are thinking as to why the market is doing that. Right. So then I can watch for sign for when I should go the other way. Right. So I know a little bit about it, you know, but I certainly don’t know as much as people that are really in it. In crypto, I don’t even know the first thing about I couldn’t even tell you the blockchain and all that. I don’t know what any of that is. Let’s wait.
Nathaniel E. Baker 34:11
You’re not short Bitcoin?
Jason Shapiro 34:17
I don’t trade it.
Nathaniel E. Baker 34:19
Oh, you don’t trade Bitcoin. Okay, okay.
Jason Shapiro 34:20
No, it doesn’t really have a long enough history for me to count on the data. But, you know, I need like 20 years of history to make sure if not longer, right. But all I’m telling you is they have been buying this thing. They were super long at the top and they’ve done nothing but buy it the whole way down. And it’s just and when you combine that with the fact that the same thing is going on in stocks and bonds and dollar and all that. I think it’s like I say I think it’s a very very dangerous time here.
Nathaniel E. Baker 34:50
All right, got a word of caution to close. Then now although in closing, finally, would you tell our listeners how they can find out more about you about your firm? How to get in touch They would prefer they would
Jason Shapiro 35:01
choose to sell my firm and there’s nothing really to know. You know, I don’t, I’m close, I’m closed anyway, you know, I don’t like new investors or anything like that. So there’s nothing really to sell. But we did start I was in this book a couple of weeks ago. It’s Market Wizards. But and so suddenly, I had hundreds of people contacting me on LinkedIn and all this and they liked my chapter, and could I help them learn how to trade and, and I think that that’s an important thing to do, especially once you hit your 50s. And all this, you know, you feel this need to, you know, maybe try and help other people. But I couldn’t help 300 people at the same time, obviously, I have a busy life. So we started this web page called the crowded market report.com. And this way, it was actually one of the people who contacted me, and I told him, I can’t help 300 people do it, I’m sorry. And he said, Well, what about if I start a web page, and you know, we can put it all on there. So we started, he started that. And I produce a newsletter every weekend, which is a newsletter I’ve always produced for myself for the last 20 years, especially my weekend, write up of positioning and all that which helps me in my trading, and we put it up a little bit and we distribute the newsletter on that webpage. And then we also started which I didn’t even know what this was, quite frankly, when we start when he started it, but we started the discord page. Oh, yeah. I didn’t know what that was. Okay.
Nathaniel E. Baker 36:23
Yeah, I’m on Discord. I don’t know what it is either. But yeah, go on. Yeah.
Jason Shapiro 36:27
we have all these people on there now. And they’re all on Discord, and talking all day about the markets. And it’s, it’s been that part has been phenomenal. Because there’s a bunch of people on there. And I’m learning a lot from them as well. You know, there’s a bunch of different people that take a different approach to trading than I do. You know, what I really talk about the most in there. Yes, I tell him when markets are crowded, and I show him like the trades that I’m looking at making and all that but I think more importantly, I really try to focus with people on the most important things about trading meaning, risk management, discipline, you know, these types of things that I’m not going to be like, Oh, do what I do and make the money. I tell them not to do that. Right. I said, let’s I want to try to help you guys are you people, you learn how to fish right? Instead of me giving you fish I’d rather have helped me learn how to fish right. So that’s really what it’s been most of the time and they’re talking about the discipline of trading, the risk management side of trading, the position sizing the stock law all this type of stuff is really what I spend a lot of time talking about but there’s other guys on there other people on there who talk about are things a bunch of guys that are into technicals and Elliott wave and this and that kind of thing. And it’s become really interesting, the discord pages become has become very interesting part of that too, which, you know, again, you talk about hobbies, and what do you do when there’s no trades? Well, I could be on that we talk on there all day to talk to these guys about all kinds of things all day and that kind of helps me really not have to trade right very cool to talk about this stuff. So that’s kind of the best place crowded market report.com We also started doing some YouTube videos, I think under the same name. I think it’s also in the credit market report on YouTube. So certainly, I’m all over there.
Nathaniel E. Baker 38:14
Okay, cool. I can I can find those. I’m not sure I’ll be able to find the discord.
Jason Shapiro 38:18
Well, you can’t get on the discord unless you
Nathaniel E. Baker 38:20
unless you’re a subscriber.
Jason Shapiro 38:22
yes, right.
Nathaniel E. Baker 38:23
Same with my Well, technically is the same as mine, but I let people but or at least for a little while and kick them off. Alright, I’ll put those all in the show notes. And you can go check them out. Jason Shapiro. Thank you so much for joining me contrarian investor podcast today. Very interesting conversation. I know I learned a ton. I’m sure that our listeners will agree. And with that, we thank you all for listening. And I look forward to speaking to you again next time.