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Welcome to Trader Talk, where we dish out the latest Wall Street buzz to keep your portfolio sizzling. I'm Kenny Poulcurry and I'm coming to you live from the Yahoo Finance headquarters in the heart of New York City, a global hub where deals are made, fortunes are built, and the next market move is always just around the corner.Next, I'm gonna share my big take on Trump versus Jerome Powell. Sit down with Slate Sowell's Dan Payne and then chat about risk and management and then reveal my pasta crudaiola recipe.Right? So let's just jump into the big tape. Trump's repeated calls to fire Fed Chair Jerome Powell are more than political theater. They warn markets, institutions, and anyone who believes in economic stability. Whether you love Powell's policies or you hate them, one fact is apparent. Central bank independence is one of the anchors of global investor.Confidence. When a president publicly threatens the head of the Fed, the message isn't about policy, it's about control. If the Fed is just another lever for political power, then the market's faith in the long-term stability crumbles. Rates rates become campaign tools, inflation targets get hijacked at home and abroad, every investor has to price in.New kind of risk. Will tomorrow's rate move be about economics or about politics? That's how you inject chaos straight into the heart of the financial system. History is clear. The more politicians meddle with the central bank, the more unpredictable and volatile markets can become. It's not about liking Jay Powell or agreeing with every Fed decision. It's about protecting the delicate machinery that keepsCapital flowing and inflation expectations anchored. The bottom line, when Trump threatens to fire Powell, it's not just drama. It's a giant red flag for anyone with skin in the game. Respect the independence of the Fed or get ready for the kind of volatility that doesn't end with a tweet. The market might love excitement, but it craves stability. Under undermine that, and all bets are off.I would love to welcome my guest today, Dan Payne. He's the chief investment officer and partner at Slate Stone Wealth. He's joining us right from Florida. He leads our firm's overall investment strategy. With over 30 years in the asset management industry, Dan has managed portfolios across the spectrum from institutional mutual funds to high net worth.Ultra high net worth individuals and endowments overseeing nearly $2 billion in assets. He's held senior roles at firms like Morgan Stanley, PNC Wealth Management, and US Trust, and brings a deep experience in financial analysis, research, and portfolio construction. Please join me in welcoming Dan Payne to the conversation. Dan, it's such a pleasure to have you come up from Florida.Join me. It's,
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it'sgreat to be here and, and quite frankly, I think I brought the humidity with me.
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I think you did too. Actually, I think it's cooler in Florida than it is here right now. Oh my God, it's so hot outside. Anyway, look, let's get right to it because we want to talk about, I want to talk about with you. I want to talk about process and risk management. And given the volatility that we've seen, you know, over the last couple of weeks, over the last couple of months.Um, first, it was with COVID, then it's with Liberation Day, most recently in April. How do you, as a portfolio manager manage risk and really deal with that volatility?
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Well, that's a great question, and I really think we're in a, in a phase right now in the markets we're gonna see more and more volatility. So to take a step back, I think first you have to define what is risk. Uh, for a lot of individuals, risk is defined as losing money, or some people might define risk as not meeting a financial goal.You know, uh, academia and us practitioners, we define risk as volatility or standard deviation around an expected mean return, correct? But a lot of really elite investors define risk as the probability of a permanent loss of capital, and that's very important and the biggest way to mitigate risk is really the only free lunch and finance, which is diversification, um, and to be properly diversified.I think there's really 3 levels of diversification. Uh, you have level 1, which is basically your broad asset allocation, your stocks, bonds, cash, and you know, over the past decade we've seen a move towards alternative assets and other illiquid assets as as another asset class. So you want to be diversified amongst the asset classes, OK?The second level of risk control, uh, and specifically within the within the equities market is being diversified within your, uh, GIs sectors, your global industry classification sectors, and you know, as of now there's 11 GI sectors and people might think of them as the financials, the technology, consumer discretionary communication services, industrials, so you want to be diversified amongst the different sectors, OK? But then there's the third level diversity.and that's where you come into the security specific uh individual issues and then within industry groups. So an example of that is that within the technology sector you have multiple industries you know you have software you have subsectors or industries you have software, hardware, networking, consulting, semiconductors, so you know it does you no good if you have a portfolio of 15 to 20 names.But they're all technology stocks or they're all software stocks because you're not diversified. And people found out that, you know, about 25 years ago in Tech Rec where the S&P was down roughly 50%, but NASDAQ was down 90%. So, and, you know, people found out the hard way. They were diversified in a number of names but not on a sector or in even an industry-specific case
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evenin April at liberation Day, if you were really overweight tech, you got smashed becauseActually, tech was the outperformer and people got nervous and they went right away to sell the, you know, the high flyers, right, the big performers and so you got wrecked.
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But if they had some exposure just to consumer staples and select healthcare stocks, and even, uh, in some of the consumer discretionary names, they had, they were mitigated for some of that, you know, massive downdraft. So that's where diversification really
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helps as they should be, right? That's exactly right. So talk to me. So when you're managing risk, right, the risk that we described.How do you actually use volatility to your advantage because volatility scares a lot of people, right? And so, how, and I understand, but explain to the audience how you actually use volatility to help you manage
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that. Yeah, sure. So, you know, like I said earlier, you want to use volatility, um, opportunistically, OK. Volatility,
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and that's the key word
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opportunistically, because volatility actually as a long-term investor is your friend because that gives you the theto add to positions that you want to add to and or add add to names that are on your on deck list at a cheaper price and the really elite investors are the ones that are that can overcome the emotion of the day and focus on the long term because they have a specified process and a definition of what they want to own and why they own it. I mean, Peter Lynch came up with that definition, know what you own and know why you own it, so that gives you the conviction.To be able to shop for merchandise when the merchandise is on sale because our industry, I think it's really the only industry in the world that when the merchandise goes on sale, people are the most reluctant
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to run out the door. Yes, they wanna sell
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everything and it needs to be the opposite, of course, you know, Warren Buffett said it best, you know, you wanna be greedy when others.Right. Yeah.
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No, 100%. And you know, and I use, I, I use another analogy and I use it, I use it all the time because you hit the nail on the head. You know, when Blooming Nal's has a sale and they mark everything down 30%, everybody runs into the store and they buy 3 of everything because they're on sale. And I think to myself, well, why don't you have that same mentality.Apple goes on sale or Amazon goes on sale or JPMorgan goes on sale only because there's nervous in the market, not because anything fundamentally has changed in that story. Correct.
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And I, I think that goes back to how we started this conversation is how do you define risk? OK. If you define risk as losing money, yes, you're gonna be very reluctant, but if you define risk as a permanent loss of capital.When the merchandise is on sale and you're buying very high quality companies, cheaper, you make your money, not when you sell the stock, but when you buy the stock at a cheaper price. And that's a very hard emotion to overcome. It is
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a hard emotion to overcome and I, and you know, you and I deal with it every day. Well, deal with it when the markets are under pressure and when the volt out. You know, certainly in April, um, you know, I was fielding calls all day long, people getting nervous. What should I do? Should I sell?What, you know, no, no, no, no, no, no. Just sit tight because to your point, know what you own and why you own it. So let's talk about that. Let's look at this portfolio. Let's talk about what's in there, right? The biggest names and the biggest sectors all fine. And in fact, we've seen the market rally back and most people, I would say the majority of people, if you didn't, if you stuck to the plan and you didn't panic, you're better off today than you were.
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Much better off. I mean, a great example of that is what we were down what, 19.0.8% from closing high to closing low on April 8th. And currently, as we sit here today, we're up 25% and roughly 67 trading days since that intermediate low.
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It's, it's been, it's been a very much of a V and I'll tell you, I was one to say I didn't think the V was gonna happen. I thought it was gonna be more volatile, but in fact, the V did happen and now markets are, are, are higher than where they were. And many of those names.Uh, are higher than where they were, right? Sure, they, they, they get beaten up. But, but again, the good names get beaten up, but they're the first ones to rally right back because, because when people settle down and they're not emotional, they realize, why did I sell that stock, you know, I, I gotta
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get back in and the cream rises to the top and the high quality all the time recovers quicker all the time. OK. And that's where quality wins out.
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Theuality always wins out. All right, hold on one second, we'll be right back.OK, so, so let's talk about how you're able to operate, right? What gives you, what gives you the guts, I guess, maybe it's just experience, but what gives you the guts to, you know, to, to not follow the herd necessarily or try to get clients not to follow the herd, right? When the, when the overwhelming, overwhelming sentiment feels like you want to sell it, you know, how do you pull people back from the edge? Correct.
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Yeah, that's, you know, that's one of the hardest things we deal with is dealing with that emotion.Um, you know, really all investing in all of what we do is, um, you know, it's a social science, OK? And so behavioral finance plays a big role, um, in that and overcoming your emotion and the fear and the volatility and the, the fear of losing money. So the way you overcome that is by having conviction. So how do you have conviction? I think that's kind of where where we're going here. So you have to have a.Find investment philosophy and process that you hang your hat on that when they're going this tough, you know with conviction, you can buy on the cheap.
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And so I think the key word is there is you have to have a process and you have to feel comfortable about your process. And so you've designed, I mean, you obviously have a process and you felt, but you've designed this process over your 30 plus years in the industry. So, so talk a little bit more about.About that process for you,
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sir, so it, you know, uh, the process is one part of it. So I mentioned the first part. So we like to call it the four Ps which leads to the three R's. So the four P's is philosophy. You want, you gotta have an investment philosophy. The second P is your process, OK? The third P, and this is very important, is the people behind the process. You gotta have a good team of analysts, portfolio managers, and an investment committee behind you, OK.And then the 4th P is obviously performance because what'll happen is that the 3 Ps will lead to the 4th P and the way you generate performance over time is through that process and philosophy you buy things on the cheap, you make your money when you buy a stock and not when you sell the stock you buy at a good attractive valuation and so the four P's philosophy, process, people performance what you have to have that is the 4 excuse me, the 3 R's.Your investment process has to be rigorous, routine, and repeatable, OK? So the 4 R 3 R's lead to the four P's and so through that, that's how you have the bedrock or the cornerstone to give you the, the gumption and conviction to buy when the convent.Uh, the consensus and the herd says sell, sell, sell, things are falling apart, the world's coming to an end, right?
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And, and, and yeah, and it's so funny because when liberation day happened and everybody panicked, you know, the mood went from in the weeks prior, the mood was very bullish and people and then suddenly.The mood turns negative and everybody's screwing you, which is to the point is, especially when you get clients that, you know, both you and I are talking to that that get unsettled and you have to really, you talk them through the four P's and the 3 R's and why the process works. The fact is, look, if, if, if Apple or Nvidia or any of these JPMorgan Bank of America, whatever, if any of these stocks are, are pulling back because the market is nervous, that's not.Reason to buy those stocks. That's actually more of a reason uh sell those stocks. That's more of a reason to buy them.
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Yes, that's exactly right, because the underlying fundamentals of those companies have not changed and so all you have is just a temporary dislocation from price and value. So in your investment process you should be able to determine what a stock is valued, OK? And then there's temporary dislocations both above and below the intrinsic value of the stock. And so therefore when you have a market dislocation.That is the opportunity to load up on a company at the at a lower price than where you value the company
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100%, you know, I said that I was on, uh, I, I was on.Fox one day and they asked me, it was in the middle of that elephant. Apple was down and I'm, there's like, you know, when you sell your Apple, I said sell my Apple. I'm gonna back up the truck and buy more. It's crazy that people listen, first of all, uh, first of all, I said to them, Apple makes $100 billion every 3 months. Think about that just one minute. $100 billion every 3 months. And so, no, I'm not selling my Apple. But, but also the story hadn't fundamentally changed.Not at all for any of those. Now, when the story changes, then you have to have another conversation.
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That's exactly right. And that's when you have to make a decision had the fundamentals changed so that the company will not be be able to recover or compete further in the marketplace, OK? And so during broad pullbacks, you wanna own companies that when the pullback ends and the correction is defeated, those companies emerge strong.Because they take market share from the weaklings, so you don't want to own the weaklings. You wanna own the market leaders.
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So in fact you do want to sell the weaklings, right? That's when, that's when really you see the separation, right? Um, and so I would say
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you'd want to avoid owning the weaklings
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from the very beginning. That's why they get like you and we have the process. That's right. That's why the people like you and me, but, but, um, you know, if, if, if people are doing this on their owns, then they, they recognize.The weak and the strong, right, the weakest link in the chain and, and, and that's when it becomes, I think, evident to them. Um, but I think what's really interesting, and I think, you know, you make the point, it's really about having a process, whether you're doing it with a, with a wealth advisor and manager like you, or whether they're trying to do it on their own, they have to have a process that they're comfortable with.
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Yeah, and, you know, uh, we've told, I've told people this over a number of decades, to effectively manage money, you gotta have 4 things and if you're.Missing one of the four things you're not gonna be able to do it as well as a professional that's where it's a full-time job. You gotta have time because it's a very time intensive process. You gotta have the desire, OK? You gotta want to do it. If you don't want to do it when you're not gonna be successful, OK? You gotta have the access to information. So you know, 20-30 years ago that was more important. Now I would say there's too much information, so a lot of noise too much noise, so you gotta ferret through the noise and know what information is correct, so access to information.And the fourth attribute is expertise, time, desire, access to information and expertise. And if you, if you're missing one of those things, you're not gonna be able to do it as well as somebody's dedicating their whole life to it.
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And you know what I think is important in that conversation, especially now, because you're like 20 years ago, right, there wasn't nearly as much information available so quickly. But today, there's so much, and I call it noise because a lot of it is noise. It's information overload. Look what happens when, when, when a post comes out on Twitter.That could, that, that could positively or negatively affect the, the stock, how quickly the market reacts because then you've got these smart logic algorithms that scrape and read every headline everywhere, and then they reactahead of everything else.
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And it might be frustrating at the time, but that provides the opportunity.
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That's exactly what it does. It's exactly what it does. You know, there are times when you say, you know, that, that you get frustrated when it happens, but then if you're, if you're agile enough, then you takeadvantage of it.
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Um, you know, 11 factor I want to point out is, you know, a few years ago, I noticed a study that Morgan Stanley, uh, advertised, and this was done, I don't know if the study was done by Morgan Stanley, but it was done, uh, with 20 year data through 2015.And so that that data started from 1995 to 2015, 20 years worth of data, which obviously included 250 50% plus corrections in the market, you know, tech rec and financial crisis, but it included the, the, the great bull market of the late 1990s and included the recovery from tech rec and included the few years after the financial crisis.that 20 year window, the annualized return for for stocks was 9.9%. OK. The annualized return for bonds was 6.2%. Then you had gold and other assets. The average investor performance during that 20 year period was 2.5% annualized, which was 20 basis points higher than the rate of inflation.So what caused that massive dislocation, 700 basis points from stock returns to the average investor returns and then, you know, 350 to 400 basis points on bonds to the average investor is because they could not master emotion and they sold and got out at the absolute worst time and missed the recovery and you see what it did to the long term returns,
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yeah, completely, completely. Wait, I wanna ask you one more question because then we gotta, we gotta get on to, uh, the recipe of the day, um.Can't miss that. Wait. What do you think? Do you think Trump replaces him or tries to replace him, or do you think he lets him go till May?
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Um, I think the odds are he lets them go to May. However, I do think he's gonna appoint somebody in December when we have a Fed governors, um, uh, ends, and I think that replacement will be the pseudo next head. And so you'll have a period of a number of months where you have a lame duck pal.
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That'smy perception, and I agree with you, but I think then the market will then start to look towards this new person who will then.Most likely be more considered more dovish and and think of lower rates and so that should help fuel
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the market and you know, don't forget the point it's gonna remove uncertainty. That's right,
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removeuncertainty. OK, listen, we gotta get to the pasta today. I'm giving you the pasta crudaiola. Now this comes from the southern regions of Italy, especially Pula and Basilicata, where hot summers and abundant local produce inspired meals that don't rely heavily on cooking. The name.Crudeola is derived from crudo, which means raw, because the sauce isn't cooked at all. It celebrates the raw sun-ripened tomatoes, aromatic herbs, and grassy olive oil. The dish born out of necessity and tradition, farmers and field workers would, uh, would toss these just picked tomatoes, uh, local cheese and pasta together for a fast filling meal that required little more than boiling the water so that you could cook the pasta or the chiti.Also known as Little ears, is a classic Apulian pasta shape that perfectly cradles the tomato juices and the cheese. The ricotta sallata adds a salty tang at the end, and the arugula provides a peppery contrast that brings a whole dish alive. Over time, the pasta crudaiola has become a staple of cucina bora, which is simple and honest food. And as a shining example of how less is truly more in Italian cooking. YouYou can scan the QR code that's on your screen for the full recipe and you can thank me later. Look, that's a wrap for today's trader talk, but the conversation continues. Subscribe on Apple Podcasts, Spotify, Amazon Music, or wherever you get your podcasts. You got questions or topics you want covered, Email me attradertalk@yahoo Inc.com because I'm always listening. Until the next time, stay sharp, stay disciplined, and stay in touch. Take good care.
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This content was not intended to be financial advice and should not be used as a substitute for professional financial services.
