There is a massive sector rotation taking place right now. And it started with the election of Donald Trump on Nov. 8.
Some of the previous top-performing sectors ̶ including information technology ̶ have been falling. Meanwhile, financials, energy and industrials have been soaring. That’s because investors are rotating their portfolios out of certain areas, and into new areas based upon their expectations for President Trump.
Sectors can quickly come into favor . . . and they can fall out of favor just as quickly. This is true for sectors of the U.S. stock market, international markets, and commodities.
A Top ETF Trading Strategy
One of the best ETF trading strategies is ETF sector rotation. In fact, this very strategy is the cornerstone of Ivy League endowments at Harvard University and Yale University.
I recently sat down with the newest member of the Wyatt Investment Research team, an expert on ETF trading. His name is Moby Waller, and he’s joining us as our Chief ETF Strategist. Let me take a few minutes to introduce you to Moby, and his ETF trading strategies.
On Wednesday at 12 p.m. Eastern, I’m hosting a LIVE special event with Moby. Inside the webinar, he’ll share his ETF trading strategies. And show you how to use a simple options strategy for winning more trades.
IAN: Tell me about your first investing experience.
MOBY: I got interested in the stock market while in high school. I basically began learning about stocks, options and charting back then.
I’d go to the library and read Value Line about different stocks and sectors. I would go to my stockbroker and watch stocks tick and try to understand option pricing. I charted some stocks myself by hand on paper to look for trends.
I started early . . . and small. I think my first investment was just $80, buying a Call option.
IAN: You studied Political Science at American University in Washington, D.C. How did you end up in the investment business?
MOBY: During my studies at American, I did some internships at law firms in D.C. I quickly realized that I had a huge impatience with bureaucracy. And that basically made it impossible for me to work in the world of politics or the legal system.
So, I switched directions, and my first real job out of college was with Fidelity Investments as a stockbroker. I got my Series 7 license. And that basically meant taking incoming phone calls, placing trades for clients, and helping assure that they were 100% satisfied.
IAN: Working as a retail broker is a great way to get into the investment business. What was your biggest take away from this early experience?
MOBY: I dealt with thousands of customers at Fidelity. What I found is that a large number of people have significant savings and investment in their 401ks. But a shockingly high number were undiversified and also not in enough growth areas.
For example, I would see many people who had 100% of their 401k or IRA savings invested in their own company’s stock. That proved to be a big problem, especially if their company started performing poorly. They could risk losing their job, and their savings.
My work at Fidelity focused on helping encourage my clients to diversify. I knew that in EVERY portfolio, diversification is the best way to build wealth for the long term . . . and to sleep well at night.
IAN: What did you do after Fidelity?
MOBY: I went to work for Bernie Schaeffer at Schaeffer’s Investment Research in Cincinnati. Bernie and his colleague, Price Headley, were influential in my knowledge of options, charting and technical analysis.
IAN: What happened after working with Bernie Schaeffer?
A Start at the CBOE
MOBY: After four years, I was ready to make a big move. I have relatives in Chicago, and when visiting them I met a long-time CBOE Market Maker named Dave Ofman. I grilled him relentlessly about how option market making worked and his side of the investment business.
He pointed me in the right direction of the proper firms and people to apply for a job with. I was taken on as a trainee by a small group of market makers at Kessler-Asher. After six months of rigorous and sometimes harsh training, they gave me a $100k trading stake and allowed me to choose a pit to make my new home as a market maker. I wisely chose the America Online pit, which was fairly small and growing. It would soon turn into the hottest equity options pit in the world.
I hate to brag, but I became extremely successful as a Market Maker at the Chicago Board Options Exchange or CBOE in Chicago. This was during the late 1990s and the Internet bubble.
I was in one of the busiest equity option pits in the world. News and documentary filmmakers would film us. For example, I would randomly see myself in the background of Lou Dobbs CNN show, or in a PBS documentary. As an interesting side note, Pete Najarian ̶ well known on CNBC ̶ stood right next to me trading options.
IAN: Trading on the floor of an exchange is a big deal. How did you do?
MOBY: When I was hired, I was given just $100,000 of the firm’s money to trade.
Within two years, I took that $100k investment and generated $1.2 million in profits for my firm.
I went from earning a nice healthy salary . . . to pocketing $600k in a short time period. It was a dramatic change for a guy from Kentucky who was in his late 20s.
IAN: Chicago is a great town. But you ultimately left Chicago for another financial capital . . .
MOBY: After trading on the floor of the CBOE for three years, I moved to London for a once-in-a-lifetime opportunity.
Essentially, I formed an option trading group with backers from Chicago & Amsterdam. I co-managed an initial trading portfolio with 1 million British pounds.
I and two other Chicago market makers traded options “off the floor” in London, where I was a trading partner. After a year living in Europe, I was a bit burned out from the pressure of the super-high-level trading world. And I wanted to enjoy my money a little bit and manage my own investments.
IAN: And then you decided to come back home . . .
MOBY: After years away from Kentucky, I decided to move back home. I successfully traded my own portfolio for several years. And I dabbled in some private investments, including giving my brother a small loan to start his now-successful restaurant.
Eventually in Lexington, I started working with Big Trends, which is an investment education company. It was founded by Price Headley, who was one of my mentors at Schaeffer’s Investment Research.
Tomorrow, I’ll publish Part 2 of this interview with Moby. Be sure to check your email in the morning.
You’re invited to join us for a live sector ETF trading session tomorrow at 12 p.m. Eastern / 9 a.m. Pacific.