Delusional ETF Trading with Sarah Newton

And you know, one of the things we vowed to do this year was to talk to actual and do it yourself investors of ETFs and skip the middleman, the asset managers and advisors, which are good to talk to, but sometimes it's good, like with my two dads, to talk to someone who's out there doing it on their own. And unlike my two dads, which are doing a little more retirement and estake type work, Sarah is really more of a trader. I mean, she is doing it herself.

She's almost reminds me of like the nine, The's version of the day Trader of stocks. She's kind of doing it with E t F s and so she can share some of those insights I thought, and she has an incredible story which we're gonna hear all about this time on Trillions Delusional E t F Trading with Sara Hi. Sarah, welcome you, Trillions. Hi do So, how did you get into E t F trading? UM? Actually, UH, to be honest, I first got into e t F s thanks to

something called finn twit. I was mainly into stocks before that. I would just trade common stocks and you started to hear more about E t F s UM, so I kind of heard of them, didn't really think of it as a trading vehicle. I started using finn twit, which is uh a subsect of Twitter, and I started following people like Eric Dave Nadie would post um Christian Fromhertz, who is actually a trader much like myself, And a great thing to follow with the t F S is

the flow it. It helps you UM visualize the sector rotation, which is a big, big part of UM swing trading. So that's how I initially got my INN and then it kind of segued into something more risky like UM options. But you weren't a trader to start with right, you were just doing this on the side, right, Okay, So all right, let's let's start with my back story. I started investing, I guess, I can't say trading. Started investing in the fifth grade. Fifth grade. It's a crazy story.

A father of one of the kids in my class got extremely wealthy during this time period donated twenty dollars to us to trade, So he was actually making placing trades based on what we're picking. I know, I know, insane, insane. At the end, it didn't matter what we made, what we lost, he was going to keep it. It was his money. So he was your broker, and you were just calling him up and like telling him what to do.

I don't even know how our trades are submitted, to be honest, but um, we picked I think as a class we picked uh ten and um. When I was in the fifth grade, it was the dot com bubble. Actually, when I started the fifth grade, we didn't know it was a bubble quite yet. So what we would do is pets dot com, I'm all in. We would use I believe it was the Wall Street Journal, and we would literally paper trade. And this is not the paper trading that people know of today. This is use the

newspaper to trade. We would write down our stock selection. We would track the stocks every week, and at the end we started with at the end we we ended somewhere in the fifties. Um, so this guy made money off a bunch of fifth graders. So, as you can imagine, it was an experience of a lifetime. It's stuck with me and my My mother always stocked picked a cash account. My dad actually left his job for a little bit to try his hand at day trading. So I wasn't

a stranger to this field. So being that age, seeing these astronomical returns, I was like, I'm gonna get rich one day. This is one I'm gonna do. So fast forward to you're out of college, out of you go into investing or well listen, hold on before we get there, I'll just go really quickly. And I always stock picked. I stock picked my mom's cash account when I was in high school. You know, us traders out there, we like, we like to lay our claim to fame. So I

just gotta put this out here right now. I wrote my mom a note to get into Google. I said, Google's pong tomorrow. I need you to buy me a few shares. Um. Those few shares fast forward after college helped me fund honestly where I am today. So I was one of Google's first investors. Those hold on all those c NBC articles that you see about. I was going to say that was me because I hate those I think they inspire lottery picking and like. But you're one of those people. I'm going to soften my stance

a little because it worked for you. But they'll they'll say, oh, if you were only invested in Google, you know, twenty years ago, here's how much that that money would be worth. But there were a lot of other companies that written by Sarah Newton. Okay, so you had some seed money from hitting the jackpot. Yes, I did. But okay, fast forward to college. I went to college during the Great Recession.

It was a horrible whole world time, especially since I, you know, it was pretty familiar with stocks, had money in stocks, and had access to my mom's for one K. So I watched that thing get cut in half. It was devastating, and I thought to myself, I don't want anything to do with this. So I left the world

of investing. Um. Actually, now that i'm thinking of it, I'm pretty sure that I own some fracking stock still to this day, because they were big at that time, and I still have not looked at that account since two thousand. Anyways, al right, not to get too off track, I left, and you know, it was really hard to hard time to get a job, and I took the first job I could get, and that was in consulting.

And so I went into consulting after graduation, which is in like two thousand, two eleven, and I was making a career as a consultant when my mother, UM, my mother got sick. UM I had to leave consulting to be her primary caregiver. Um. She had breast cancer, which you know, at first, doesn't it doesn't sound like that big of a deal. People actually go through chemo and work. Unfortunately, my mother was already sick with kidney disease, so she was on chemo and dialysis at the same time, and

it really required full time caretaking. So I left consulting and I went to care for her. And you know, at this period of time, I was like the rest of my friends, you know, had been in the workforce two to three years. They started getting promotions, their lives started taking off. I mean, it really hurt. It was hard to watch. I had always been like a great student in college. I was successful in my career, and it was it was hard to take a back seat

to that. And um, at this point in time, you know, the market had started to rebound, things were looking better. And I think, honestly, when I try and think back of like what was like the light switch a moment, I think my mom might have accidentally because she was not a frequent watcher of CNBC. I think either she had it on or I honestly might have been in a doctor's appointment and it was on in the waiting room.

I can't remember exactly how it happened, but like the light switch went off, and I was like, I should get back into this. Why did they did you when you? I thought to fifth grade and how much money I made, and I was like, oh, clearly, I can you know, make a living easily doing this and were in a place where you were like it was hard and you guys needed the money. Oh no, No. I was more at the standpoint that you know, when you're life like,

finance is compounding. When you're not doing anything, you're losing everything. And I was losing my career and I needed to figure something out for myself. Um, I think that is a very um common treat intrinsic two females. A lot of times we're put in these hard situations. You know, many of us become caretakers at all different points of time in life. Like hopefully, hopefully a lot of us don't have to do it as young as I had

to do it. Um, I know there are probably a lot of people actually my age that coming up soon are going to have to do it. Um, my parents were boomers. I'm pretty sure your parents are boomers. Um, it's just something. It's something that's coming. There's not enough workers in the field to care for all these people. There's not enough finances to pay for it, and people are going to have to bite the bullet and you know do caretaking on the side and investing or not.

Everybody can trade, but investing is definitely helps fill fill the void of that income and that lack of exposure to the workforce. We basically looked at your life that you needed to be making some money, that you were out of the game, but you could get back in the game because you knew some basics exactly, and what was your next move? Um? My next move was to return to the account that I abandoned and not looked

at since. And was that your fracking account account? That was my account that had actually the fracking stocks, It had the Google in it, and I think it had some Apple shares, and it was a fifty It was. It was a really pleasant surprise. It was not anywhere. It was five times I left it at ten. I returned and it was five times the size that I had left it. It was I had no idea that there. I know. Okay, so all these crazy articles you hear about, a lot of them happened to me. Don't don't take

this all with a grain of salt. It's not common. Um. So I returned and I had this nice little nest egg. And if you look back to that period and time, arguably from you two, you know, pretty recently, was like a really great time to be in the market. There were some extreme draw downs that were really hard when you're staring at screens all day every day, but other than that, it was a good time to be I like to call it what I did in the beginning

active investing, because it wasn't it wasn't trading. I wasn't staring at the screen all day every day because you know, I was a caretaker. Um, that took up most of my time. So more like active investing, like something in between long term investing in swing trading. That's what I was doing during that period of time. When you started doing this sort of trading for yourself. Can you remember the first E t F trade you did or what

started off the E t F portion of your account? Oh, I'm positive the first E t F trade I did a spy without a doubt. I'm pretty sure that's everybody's set of training wheels exactly. Um. You know, I really think at first when I got into E t fs pre fin twit, I really just thought they covered the indexes. You know, I think my knowledge, my knowledge pre Twitter was minimal, but almost in a in a good way, not minimal, simplistic, I'll say simplistic. And I think that

was a double edged sword. Um. I think in some ways it saved me a lot of pain. But you know, there's still a lot of more innovative opportunities that I didn't know about because of it, and E t S would be one of them. So I did. I definitely did have money in spy. Um, nothing fancy, nothing options, just sitting in spy prior to Twitter. But post Twitter is when I started to get into you know, the more exotic e T F. So, so you put would you do with that fifty? Did you go all in

on spy? Oh no, no, definitely not. Um I The way that I used to stock pick was not technical, not fundamental. It was I would pick stocks that I felt like I used the company's a decent amount, and that morphed. I started reading different investing books like Jim Kramer's books. Um I started searching. Oh my gosh, I remember the first thing I searched online was was I just typed in stock charts And of course the first thing that comes up is stock charts dot com, which

is actually a really great resource. And I picked up a lot of the basics that I know about technical analysis from there. So you spy and then you know, you've given me here a list of E T s used. This is like, you know, level four hundred here, so you you definitely went from one oh one to four hundred at some point. How did the training wheels come Yeah into it? So again and I like double edged Sword,

but so Finn twit came into my life. And what this is is this it's a subsect of Twitter, and it has all of the best of the best, also with the worst of the worst. Um there's people like Eric on there. There are hedge hedge fund managers you see in the movies on there. Um there's anonymous accounts that are you know, backstage geniuses. Um that you know go on there and share their wisdom. And this is

how I learned most of what I know today. And one thing I would recommend for anybody listening who doesn't use Twitter, but if you don't have to tweet, but one thing I do sometimes if I'm preparing for a quick TV hit or something, or I just want to see what the latest people are saying about an et F, just put cash tag in the e t F in the search and you can see all the latest people

talking about it. I did this for h y G recently and there was some interesting charts and things put out that really helped deepen what I was looking at. And it's free, I mean, it was an amazing quick resource. It's like Google on steroids and and very specific. If I put H y g Intwo Google, I wouldn't have gotten that specificity at that speed. UM, so it can really help. And you just put the dollar sign in the ticker and you can find everything that people are

saying about that e t F before you potentially buy it. Yes, so if you're new, if you're new to the Twitter sphere and you're hearing this podcast for the first time, UM finance, Twitter does not work with hashtags. They work with what's referred to as a cash tag, and that

is the dollar symbol. So if there is an e t F you're looking to find more research about, like MJ, you put in the cash tag or the dollar symbol mg A and you can you can filter it by top, you can filter it by latest um and you can see all different opinions. Fast forward to today, right, you're you have your account, right, so e t f s are a tool in your account that you use and are you riffing off of like economic data or interest

rates to move money within e t f s? Like do you use say like H Y G or t L T like do you know what I mean? Like a lot of people might use those to play rates. Okay, so I use e t f s in way more ways than I used to use E T s now. I use them in about ten different ways, one of them being what you're talking about, UM speaking to economic data. UM. Do I trade them all? No? Do I watch them? Yes,

that's a whole different story. H y g j N k U U p UM UP is the dollar junk bonds high yield And if I'm to trade anything, it's going to be t l T and that's bonds UM. I just I think anybody out there who who watches bonds has seen the trade that there just was recently with the experience volatility. If I'm gonna trade anything, it's

going to be t LT. The liquidity in it UM makes up for the non existent liquidity in the actual bond market because as you know, you know, bonds sell at different times UM and t l T is the twenty plus your treasury, so it definitely is sensitive to rates and also sometimes used as a as a crisis hedge, like if you think things are getting really bad, t LT could be a flight to quality as well. Yeah, and I hate to hedge. You know. If if I have to hedge, uh, I probably shouldn't be in the

trade in the first place. I don't use t LT to hedge. I do use the volatility instruments to hedge. Um there's v x x B, which is is the new v x X. But hold, let's there's this thought fear for a minute now. The volatility instruments are power tools, right right. They hold Vick's futures and so they have to roll them, and so the roll, the cost of rolling could be like years. So they're they're widely known not to hold long term. So you're you're you're kind

of going in and out of them. But when the market has a bad day, nothing goes up like a vix et f. It it's up like three or four times what a negative three times smp E t F would be up like it's the ultimate jack pot if you're right. If you're wrong, though, they it's like it corrodes on you. So do you do you like kind of come in and out of it. I've never held a volatility product for longer than two days. I never would. There's you can't there's no there's no real chart patterns

to it. People will try and play technical analysis on it. I don't believe it works that way. Um, there's some people that do. Most people don't. But yeah, after after listening to the Dad's podcast, UM, I do. I do fear there's a lot more people out there like them who misunderstand these instruments and are and are being encouraged by. So let's just step back for a second. What what do you think your strategy is right now? Right now? Okay,

so the commodity play. Um, I think this year, uh, we're going to see a significant move in gold, and I'm playing that out via g LD. Wow, she seems really confident about that. Listen, I think gold is uh why do you think gold is going to move? Because gold has zero correlation, right, so it doesn't necessarily move opposite stocks. I mean, I won't bore you guys with all of my technical analysis jargon, but technically it has the potential to break the downtrend line from two thousand eleven,

which which would be you know, a very large move. Also, I'm also playing this off of the chance that you know, we might be entering our recessionary period in the next two years. Like I'm not saying that definitely this year, but most definitely in the next two years. Um, this can be played out for easily. I I'm playing it out through actual shares of the e t F. I know other people who are playing it out through leaps, which are options that go out into UM, so you've

got time on that. So they're not as volatile. They kind of they don't really move much at all. But honestly, if there is a big move to the upside, you know they're gonna they're gonna read for the reward. I see one on here that I want to really unpack a little bit. Um. You like em. There's two reasons I find find that interesting. A. You know, merging market has been beat up for a long time, so why

do you like it? And be you know, amongst the CTF analysts, e M is a tough pill to swallow because it's so expensive, So we are so inclined to say, you know what, use I MG or v W Oh they're way cheaper um. But traders do like e M. Can you kind of break down why you like that? I like em because of the way it looks technically. Again, like most people who are traders trade on a technical basis, So from looking at e M, it's been in a

consistent down trend um. And the reason why I'm watching it right now is because uh, and I shouldn't even say watching, because I have been playing it. But I've gotten burned several times so far. So Um in October I was in it, thought it was going to break to the upside. It kind of did a fake breakout failed again. Um. But E E M is you know, it's it's almost like volatility, like the volatility products, in

the sense that it's got a wild ride. You can't get in it and expect it not to move a lot. And I think the reason why traders like it is because the upside potential if it works is big. Um, the payoff is big. And you know, since we don't have to be in these products for long, the cost, the cost of things like management fees is not really important to us. How long are you typically in a position something in my active account, I would never be

in for more than three weeks. That would be and that would be long, like a long term swing trade. We did a study. There's a thing you can calculate the break even holding point on where the bidass spread versus the cost like and I think, E M. This is like five years ago. I did this. If you're to go be in within three weeks. It's actually cheaper to use em because the expense ratio is pro raded over a year, so the bitest spread and the liquidity

is such that it's cheaper. That's really all I'm ever looking at. I I honestly, I know from following so many et F guys, what you know the BIPs are? Do I really care? Now? I'm focused on the bidass spread. That's the end all be all for me. When you put on here, which again I find interesting, it's the best performing e t F this year's MJ. We've covered cannabis a couple of times on this podcast, Like we had Barry red Holts on even though he believes that pot is going to be a big deal, he just

won't touch it. You have it on here. Um, what is your take on the cannabis industry as a trader and m J? Alright, so I have two viewpoints on this. One is from my my trading lenses, which is technically and technically right now, m J is back above its two day moving average, where it's arguably been hovering for

a while. Now. Um, it's got impressed of relative strength comparatively to the market, which means that you know, in this in this increased volatility we've been having, you'll see some weak stocks and then you'll see stocks with momentum, and those are the ones that you want to be in. So MJ. MJ is showing that it's it's got strength comparatively to the market, and technically it's it's currently bullishly flagging, which means that it's got a lot of potential to

break to the upside. And then again, like part of the reason why I like to be exposed to E t F and let me just like switch my goggles here. This is more from like an active investor, long term investors standpoint, and like picking themes and picking trends. Marijuana arguably, I mean, it's it, it's and it's the ball is just going to keep rolling. Things are just going to keep advancing. You're just bullish because Jeff Sessions is no

longer Attorney General. I also want to that you're totally delusional, yes, which you know talk about explaining all of the content of this problem. I love your blog with the Delusional Trader, which is the name of your website right where you blog. Correct, I do blog that is actually not the focus of it. Um and what it is is it's curated content. UM. You know, I've I've brought up Twitter past and um essentially when I was first exposed to Twitter, you just

you're inundated with information. And this this speaks more to than to just Twitter. This is to CNBC, this is to the Wall Street Journal, this is to what we're doing right now. There is just so much information out there, and you know, you'd be remiss not not to take it in. It's extremely helpful, but then you're also bogged down and drowning when you try to consume it all. And a big issue is that most of it's biased.

Most of it is is just content that's being put out for free by different services just trying to you know, um, create more information about either they're they're audict, whether their advisors, whether they're like, whether they're selling actual et F s, whether they're just passive or whether they're active in they're they're trying to you know, rep their brand. Um. So you've started to curate it a little bit more, filter out a lot of the most biased stuff. It goes

take away the noise. And essentially what I did was I was doing this for myself and then I was figuring, well, if I'm just doing it for myself, why don't I just put it on the web so then other people can enjoy it too. And it's interesting. Um, I like uh self deprecating titles of anything. I was attracted to it when I when you're um, Sarah came to our et F event and it's a delusional trader on her badge, and I was just like, oh my gosh, that's the greatest thing. Yeah. So um, But I do like the

self deprecating nature. I think a lot of people are bombarded with sites and books that are sort of how to make money in you know, in the stock market. Uh, you know, all of these very confident type ways that things are being presented to you, which I always wonder, why would you write a book if you figured out the secret to making money the stock market. That's in a whole different question. But to come out and call

yourself delusional, I think is attractive. Um. In this day and age, I think people are trust will trust that a little more than that sort of typical um sort of the titles of things. That's just my view on that. But as part of this, if you're delusional, I also want to know, like, how delusional are you? Like? What's your performance been? Like? Okay, so my performance, although I will not share numbers with you, has been good enough to keep me doing this full time now for six years.

So Europe, I am up. Another thing it's interesting about you is finn Twit. As you said, it's very male dominated. I think it's a lot of gen extras with young children who just use it as a vice, like the bar down the street. But it also very good. You learn a lot. But there aren't that many females in the sort of finn Twit underworld. You're one of them. Can you talk a little bit about that and being a day trader in that sort of more male dominant

dominated world. Right, So I feel like that this is this is a question that comes up a lot um. Why why are there not more women in finance? Why aren't there more women in trading? And honestly, I'm kind of surprised there aren't more women in trading um because it kind of speaks to my story in the beginning. You know, a lot of times, as women we get we get placed in these situations where we kind of have to make things work. You know, some people open

cupcake shops. Other people decide to go on the internet and try to make money fast. I don't know. I'm the latter apparently, But you know, I think one of the characteristics that has helped me most, and I think helps you know a lot of the female fund managers out there is that, you know, we take risks, but we take well defined risks risks and I think, um, there's something to be said about the male ego, and I think that that can get in the way when

it comes to trading. I think my my sensitivity to risk is what has kept me in the game this long. Um. Also, something else that I'd like to touch too, that you know, I get in arguments quite frequently with the quants about is the emotions. You know, quants like to believe that you should check your emotions at the door, but I disagree with that. I think you need to acknowledge that

we're human and we have emotions. But that being said, you know, identify what they are so that way you can take a step back and kind of make more objective decisions. But you know, we're human, we have emotions. You know, when you take a loss, you're gonna you're gonna feel that when you're winning, you're going to feel that. Um but you know, when you're winning, don't don't put on more size because you're winning. You know, when you're losing, don't put on more size because you need to make

it back. You know, I'm just I am, and women are and I'm sure there are men that are too, just in touch internally with what's going on and where their head is at. I mean arguably the market. You know, it is just an exchange of emotions going on. When you think back to that moment that you had spy and then you took the training wheels off, what do you wish you would have known then? I wish I would have known that all of the information out there

is not it's not true. Don't don't take everything for face value. Do your research. So the way that you can apply this to E t F S is so and E t F might say that it's tracking something new and innovative, like she like, oh, we're tracking female board member companies with female board members. It's kind of just tracking the SMP. Honestly, UM, so kind of know what you're what you're getting into? Is this like is this actually a special E T f is it actually

going to create alpha for me? Or is it really just a beta tracker? Sera. Thanks for joining us with thanks for listening to Trillions until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, and wherever else you'd like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Weber Show, He's at Eric Fall Tuns and you can find Sarah Newton at FILI Trade. Trillions is produced by Magnus Hendrickson.

Francesa Levie is the head of Bloomberg podcast by