STEVEN LERNER | From the Early Bird Podcast & Newsletter

It's known as the loneliness of the long-distance podcaster. Lives stunted by long hours alone in darkened studios and smoky editing suites. That's why it was great to share a podcast with fellow podcaster, Steven Lerner. Steven is the creator of Early Bird. He's been writing about financial topics since 2017, including stock earnings, initial public offerings, startup funding, and business trends. He's also interviewed CEOs of public and private companies. In his spare time, Steven invests in both the public and private markets.

Early Bird is a free daily email newsletter sent to your email box each weekday morning featuring commentary about the latest trends in stocks, cryptocurrency, and equity crowdfunding. This newsletter is easy to read and designed to help individual investors stay on top of important investing trends in three minutes or less. Subscribe to Early Bird for free.

TRANSCRIPT FOLLOWS AFTER THIS BRIEF MESSAGE

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EPISODE TRANSCRIPT

Phil (37s):

Hi, and welcome back to Stocks for Beginners. I'm Phil Muscatello. And today we're doing something different because I'm having a chat today with another podcaster called

Steven (47s):

Steven Lerner

Phil (48s):

And Steven Lerner, your from the Early Bird podcast. Is that correct?

Steven (51s):

That is correct. The Early Bird podcast and newsletter. And thank you so much for having me on Phil. Appreciate it. Yeah.

Phil (57s):

And thank you very much for having me on your podcast as well. It's great to collaborate. Sometimes you don't feel so alone.

Steven (1m 3s):

Well, no problem, Phil. Thank you so much for joining us on the Early Bird podcast. Welcome

Phil (1m 8s):

And welcome to the Stocks for Beginners podcast, but let's not piss in each other's pockets too much. Tell me about the podcast. Tell me about your podcast.

Steven (1m 17s):

Yeah, so early bird podcast, it is the companion podcast for the early bird newsletter. The early bird newsletter is a daily newsletter that comes out every morning. It's stocks, it's cryptocurrency, it's equity crowdfunding three minutes or less every morning you wake up. It's the first thing that you read as a retail trader. It's going to help you that day in the market. It's simple. It's easy to read and it's free. So that's what early bird is. And this is the companion podcast that comes out every week. It's a 20 minute episode where unlike the newsletter where it's very quick hit and we give you the information that day, the weekly podcast is going to focus more on an in-depth subject, cause it's a longer conversation.

Phil (2m 3s):

Okay. And then for me, Stocks for Beginners is my podcast. And we were talking online about what the story is because I've got a podcast called Shares for Beginners and one called stocks for beginners. And that's because just over three years ago, I started a podcast here in Australia called shares for beginners. And it took off very quickly, unexpectedly quickly. And I think it was because shares was in the name and people when they put shares into their podcast app, that was the first thing that came up. And so I thought, why not have a crack at the big apple at the United States? So I created one called stocks for beginners, where I got many guests from the United States on and that's been growing as well. And it's, it's actually fantastic that I can be here in Australia, in Sydney, currently in winter, I might add, which is very cold, but actually not as cold as what it's going to be for you next winter, up in the Northern hemisphere, it's going to be very cold, but it's just incredible.

Phil (2m 55s):

The kind of people that are willing to come onto the podcast and talk stocks and talk, investing and trading and giving lots of good advice to people who would otherwise have no knowledge of where to start.

Steven (3m 8s):

You've been doing that for some time in the podcast, right?

Phil (3m 11s):

Three years, three and a half years. Yeah,

Steven (3m 13s):

Three and a half years. Amazing time to be doing a podcast, especially on investing. The market has changed so much. Three years ago, less than three years ago, we were talking, it's a bull market. Everything's going up, not so much this year.

Phil (3m 27s):

There's an interesting time. And this is something that I've been finding. I've actually, I've got so many guests on and it's like investing in the age of inflation and hearing all of those different perspectives as well of you finding that as well. That that's kind of the topic dishwasher.

Steven (3m 42s):

Yeah. It's inflation. It's the growth stocks going into crypto. It's the client and crypto prices. They're all kind of linked to one another early. We just started last year and it was such a different time. And what a difference a year makes investors at that time were treating it. I don't want to say like gambling, but they were treating it, you know, without care. And now there's a lot more tension, but I do think the bright spot is a lot of new investors and we've had millions of new investors since the pandemic started. The bright spot is that this is an opportunity to educate themselves. And the next time we do have a bull market. This new cohort of investors I think will be more prepared and they won't be going into the meme stocks anymore.

Steven (4m 25s):

There'll be making better decisions. They'll learn fundamental analysis and technical analysis. And along the way you have podcasts like yours in mind, that'll be really suitable for them as they're beginning their journey as investors.

Phil (4m 40s):

It's interesting as well. The number of guests that I've had on her of a different generation and they're battle-hardened investors, they've been through the global financial crisis. They've been through the tech crunch of the early two thousands, some even through the 1987 crash and to hear their experiences and what it was like for them, the context is completely different in so many ways though, the 87 crash. Well, there's only very, very small amounts of electronic trading. There was still a pieces of paper going across the floor of the New York stock exchange. And I remember hearing one guest saying about that. They didn't actually clear all of the paperwork of the day of the 87 crash until almost two days later because they actually had to physically write down all of the trades and these days, I don't know, it feels a little bit different.

Phil (5m 29s):

The crashes and the movements while volatile happens so quickly that they can correct much more quickly as well. I don't know. This is the feeling I'm getting. When I'm watching say the S and P 500, it's like one day, it's up one day, it's down one day, it's up one day it's down, but it's, it's like this long slower trend. And then when it changes like in March 20, it's a very fast upward movement. Again, this is just my impression from the outside. And I'll just preface this by saying I'm not an expert in any way, shape or form.

Steven (5m 59s):

Yeah. We are not. Financial advisors definitely seek out a financial advisor before making any big decisions with the stock market. You have a very popular podcast. I'm sure your listeners reach out to you from time to time this year with the stock market being in the state, it is what are they telling you about their situations?

Phil (6m 19s):

I think what I'm hearing from my listeners is still, everyone wants a tip. Everyone wants a shortcut. Everyone wants to know the easy way to invest. And again, not being a financial advisor and not being qualified for this. What I'm trying to say to them is this is not an easy game. It's not something that you can just take up overnight. This is something that you've got to learn. It's like learning a new language. You're not going to learn it in five minutes. You know what I'm saying? The best investors in the world spend many years educating themselves learning because there is so much to learn. You mentioned fundamental analysis, you know, some of the best investors have a fundamental approach.

Phil (7m 1s):

One of the things that I've learned and from one of my guests is to have a checklist. And I just wanted to speak briefly about the checklist.

Steven (7m 10s):

Sure. Sounds important. Absolutely.

Phil (7m 12s):

It is. It is important. And the thinking behind it is, you know, how sometimes people from different industries get together and they realize that they can learn something from the other industry or other area of expertise that they can apply to their own area of expertise. And this is where a surgeon was talking to a pilot and then realized that a pilot doesn't do anything in the plane until they go through a checklist and in surgery, they didn't have a checklist. And there's a book about the checklist and it's just very important. And then this investor has taken the ideas of having a checklist. So when he does fundamental analysis, he's going through a checklist where he's worked out these kinds of metrics in the company, balance sheets and reports that he sees.

Phil (7m 58s):

And at the end, it spits out a score that says whether he thinks it's worth investing in or not. And this is very much a Warren Buffett based value investing approach. Although he does have one little aspect of technical analysis in there. And I know that you're very interested in technical analysis as well. So talk to me about technical analysis and what it means for you.

Steven (8m 21s):

Yeah. I really don't follow too much technical analysis, but I know that for a lot of retail investors, it's becoming more of an important thing. I should focus more on fundamentals. That's just what I kind of look at things. My preference is always going to be at a value stock. A lot of the investors who have been hurting recently from a growth stocks, that's not me. I'm not one of those. I will say though, that this market right now what's really striking me as interesting is you're seeing a lot of the pandemic darlings. This is thing that I've noticed. Those pandemic darlings. They kind of fall into one of two categories. So the pandemic darlin's just so everyone knows these are the stocks that performed very well during the pandemic, during the lockdowns

Phil (9m 8s):

Peloton

Steven (9m 9s):

Peloton, I pad on a bike. We're talking DocuSign, we're talking about Teladoc, all these stocks. In fact, there's so many of these tech driven stocks that did very well in the pandemic. Two types of these stocks exist. The first type, these are the ones who realized, you know, the pandemic will not last forever. And so we need to evolve our business. And there's several of those out there. And they're great bets for the long run. And then there are the Peloton that you mentioned that didn't really reinvent itself that kept doing the same old, same old, whether it's Peloton or Teladoc or just the name to those are the ones that I think are just, they're going to suffer the most. You can put Robin hood in that same bucket too. Robin hood is not going to be worth anywhere near its IPO price.

Steven (9m 53s):

Probably we'll see. But that to me, I think is kind of the big story. A lot of investors are scared of the pandemic. Darwin's I take a different approach. I think it depends on the darling. If the pandemic darling has evolved, if it's moving beyond its traditional revenue source, I kind of like it a bit more. If you're looking at the Peloton is ones who haven't evolved. Those I would avoid.

Phil (10m 14s):

It's interesting that you use the word story because I think this is what happens. So many people come into the stock market. They don't really have any idea of what's going on, but they've got this story. It's like, you know, oh, we've got a pandemic. Remote working work from home is a big thing. So these are the stocks that are going to benefit from that for yourself. Okay. You might be hearing a story like that, but what are the fundamentals that you would look at in terms of valuing some of these stocks and possibly now that they're a bit unloved?

Steven (10m 42s):

Yeah. I got to go with the PE ratio. That's the number one thing I look at, but then I want to see, you know, debt to income ratio. I want to see is the revenue going up? If it's a dividend stock, is it a good dividend? Cause just because you have a dividend, it doesn't mean it has a good yield. I don't look only at dividend stocks, but if I want to factor that in, it has to be a strong yield. And so I wanted to take a look at that. Is this a company where it's actually growing? And I don't like to say buy on the dip always, but you know, you want to buy a stock when it's down. You know, it goes without saying, everyone knows that, but that's just something that has struck me as just so important.

Phil (11m 18s):

And that's as something that technical analysis comes into it. And this is the, the way I've heard it explained is that fundamental analysis tells you what to buy. Technical analysis tells you when to buy. And I just wanted to just dwell on that. And again, I'm not a technical analysis expert, but I've read quite a bit about it. And I've got friends who swear by technical analysis. And what they're saying is you're seeing the psychology in the chats. You you're seeing the way markets are feeling about charts and just simple concepts about resistance and support volume. And these kinds of things are really important. And this, this guest that was on the podcast, who was talking about the checklist, he's got one form of technical analysis, and this has changed my life, this technical analysis, because you know, you usually see these daily charts with candle sticks and you're seeing things in a very focused manner.

Phil (12m 12s):

What that's doing is showing you what's happened yesterday or the last week, and nothing much else where his chart is a five year line chart monthly. Okay. So all he's looking at is the process action of the stock over a five-year period. And he draws these two simple lines through it. It's called the three point trend line. I mean, it's very difficult in an audio context to explain this, but looking at a chat that way for me has zoomed out for me and made me consider much more about the long-term horizons that are really important.

Steven (12m 54s):

So Phil today, you know, we're talking about our experiences that we've had as podcast hosts and talking to different guests, as well as our audiences. You mentioned this checklist. So I take it. You use this checklist yourself as an investor. And I guess if that's the case, I guess what are some examples of things that might go on a checklist?

Phil (13m 17s):

Well, to tell you the truth, I don't use the checklist. I've been through it many times and have gone through it's things like what you're talking about, price, earnings ratio and free cash flow, strong balance sheets, and those kinds of things. I think one of the important things is to have a camp, to be wanting, to be invested in a company that has very strong balance sheet, that you don't want a lot of debt. You want a company that when there's a downturn, which is we're finding at the moment, cash dries up cash just disappears. And the companies that have got a good, strong balance sheet with a lot of cash on the books, they will survive these times because they don't have to go out and borrow money or raise money at insane rates.

Phil (14m 2s):

For me, my own personal story, I hate to use the word journey. So overused. I want to call it the investing safari or Camino something different. But for me, in my own personal investing, I suffered from what's known as the Dunning Kruger effect, which many men pray to. And that's where you basically think you're smarter and know much more than you do. So where I've gone from individual stock picking very poorly for many years with the assistance I might add of a financial professional who should have taught me a few more things, but you know, really it comes down to me and what I've done to now, basically being in broad-based ETFs because I've got six podcasts and it takes up a lot of my time.

Phil (14m 47s):

And I do understand that to pick stocks individually does take a lot of time and I don't really have a lot of time to do that. So I've really pulled back. My own investing is long-term ATF focused. You know, I've got Australian ASX, 200 ATF, I've got S and P 500 ETF. I've got a couple of bond ETFs and some cash, and that's basically it.

Steven (15m 8s):

Nice. So that's a nice, smart way to look at the market. A lot of investors, especially beginners, that's a good way to go. Especially if you don't have the time to learn stocks or, you know, I'm a beginner, that's a very smart way. There's nothing wrong with that at all. Absolutely. That is incredibly smart.

Phil (15m 27s):

And it's also, there's so many micro investing apps these days that are available to make it so easy. I mean, I believe Betterment's one of the bigger ones in the U S is that correct?

Steven (15m 36s):

Yep. At our men stash, acorns, these are all, some of those apps where you can buy coffee and you can use your spare change to invest in an ETF or something. Those apps exist out there for sure.

Phil (15m 48s):

And the magic of compounding as well, but the absolute magic of compounding.

Steven (15m 53s):

Yes.

Phil (15m 54s):

So how about you? Have you made any mistakes investing

Steven (15m 57s):

All the time,

Phil (15m 58s):

Lay it on the line now, Steven,

Steven (16m 0s):

I think we always learn from our mistakes. Personally. Most of my money also goes into ETFs. Those are the safe accounts. Those are my retirement and tax advantage accounts. I put them in there, but outside of that, I do invest in both the public and private markets, to be honest, my private market accounts, especially in real estate have actually performed better this year than anything else. But I'd say the biggest mistakes I've made. Certainly there've been stocks I bought at wrong times, but I think beyond individual stocks and I mean to disparage the company, but years ago when I was just starting in investing, I bought into the whole peer to peer model and I invested in lending club.

Steven (16m 49s):

Now, did I lose money? No, but did I make money? No. And that, to me, even though I didn't lose anything, it was time wasted with lending club. I'm not saying peer-to-peer is bad. You know, I've explored other private market opportunities since then that I've worked out for me. But I've learned at that point that, you know, just because it's private off the market alternatives, which I'm all for, you still just can't expect to have the same type of returns. There is a good amount of risk. You know, I always say that even in the newsletter that we put out early bird equity, crowdfunding, huge fan of that. I think it's a great way. If you're looking at alternatives for investor small portion of a portfolio, it's one of those options, but there's always a risk because you're investing in a startup.

Steven (17m 34s):

So definitely look at alternatives for your investors. That's what I always recommend for retail investors for early beginning stage traders, but make sure you know, the risk crypto is another great example. I'm all for crypto. I have money in crypto. There are so many scams out there in cryptocurrency. You have to do your homework, that the great thing about ETFs. For example, if it's a reputable financial institution, you're not going to lose your money in terms of scammed, you should be confident in what you're getting when you have an ETF. And that's kind of what I've learned is make sure you really do your homework when it comes to risk, especially when it's outside the public markets.

Steven (18m 14s):

When you're talking about the private markets, you really need to do your homework there to gauge potential risk.

Phil (18m 20s):

What's an example of one of the most important things that you've learned from a guest that you didn't know about before.

Steven (18m 26s):

Great question. I had a really good guest a few months ago. Talk about Tesla and Rivian. This guest has a background in valuations and you know, Tesla and Rivian for the past year or two, every early stage, beginning investor, oh, I love Tesla. I want to put my money in Tesla. And it's like, no, no, wait, listen to the valuation experts here. They're telling you something mightily important. They are telling you to really look at those valuations. And I I've thankfully never invested in Tesla, even when it was hot. I avoided it because I just couldn't buy into, I couldn't buy into that valuation. It was just, it didn't make any sense.

Steven (19m 7s):

And now the past three months, I don't even want to look at the numbers. It's been awful Tesla. So that to me was a big lesson I learned.

Phil (19m 16s):

What about psychology? Have you learned anything about psychology for me? One of the great things that I've learned from a guest Stanley Teitelbaum, who's coming back on the podcast and you might be interested in having him on the podcast as well. He's got a great book on psychology of investing. There's so many things that I've learned from, and that's why I'm getting on for a second time, because there's so much more to learn. One of the main things is about some of the emotions and one, the emotion that I hadn't thought about, which he made very clear is shame. And how much shame can affect negatively affect your investing. For example, you might feel ashamed that you've lost money, not even in investing something else, you've lost money because of some other reason.

Phil (19m 56s):

And because of that shame, it drives you to try harder when, as we all know, trying harder, doesn't make you a better investor.

Steven (20m 4s):

Yes. Trying smarter does, but not that at all. You're right. I think for me, I think there are two things emotionally that comes to my mind, FOMO with younger investors, fear of missing out, oh, I need to jump on the stock. Everyone else was doing it. I don't think there's a good way to invest, but also the Robin hood apps, the gamification side of it, it's almost like an addiction for some investors where you're investing and because of the way the app set up, not just Robin hood, but many of those apps where it's like, oh, it's like, you're playing a game. There's clearly a psychological component to that. And I just think that, you know, when you're making major financial decisions, including investments, you really need to take a step and you know, you can't be emotional about it.

Steven (20m 51s):

You have to be objective.

Phil (20m 53s):

Yep. And that's right, because the emotion comes into it in so many ways. And it's almost the opposite. One of the other thing that Stanley talked about was the guru effect where you feel like you need a guru and you've got to follow the guru, which led him down the path of some poor decisions with financial advisors for many years. And in that episode as well, which I commend to listen, as he talks about the seven questions, you should ask any potential financial advisor, which kind of cuts to the chase on so many issues there. However, the psychology of gamification is one thing that I think hasn't been studied well enough as well. I mean, because we all know the kind of psychology that goes behind these, that it's going to be the same as your gaming app, you're betting app.

Phil (21m 35s):

And you know, you shouldn't have your trading app next year, gaming app on your phone in any way, shape or form. And I'm just hoping that people get introduced to it. They don't lose too much money, but then realize that there's a lot more work to be done, especially now when we're seeing the way markets are moving these days to learn much more from many of the wise old foxes out there that have got plenty to share with, with investors.

Steven (22m 1s):

Absolutely. I think, you know, we're going to look back at this era of new investors in the market and how they got into the market. And we're going to learn lots of things. We're going to know some positive things. I think the democratization of markets, that's a good thing, of course. But then I think we'll also look back at this era and go, wow. People were led down the wrong path. There were so many scams, there were so many opportunities out there that were lost instead of making it an educational one for investors, you have new investors going in and just, it's not gambling, it's not gambling at all.

Phil (22m 41s):

How did you start investing? What was your gateway to investing?

Steven (22m 45s):

Yeah, so several years ago, I first after inheriting some shares for my family, I wanted to diversify my portfolio. At that point, I just paid off my college loans. I was debt-free and I developed a savings account and everything, but that was kind of the last component for me personally, was investing. So I started investing. It's been six plus years now of going from brokerage accounts as well as retirement accounts. And now the private market the past few years as well. And I think my timing in entering the market, it's interesting cause I entered during a bull market, but I also entered into a market where there were more investing opportunities for retail traders than ever.

Steven (23m 34s):

And you know, that is to me interesting because when I became an investor for me, I wanted to get as much as a handle as the market, as possible private and public markets. There wasn't really a source for me to do that. If I wanted to get that type of handle, I had to subscribe to multiple newsletters or you have to pay something somewhere. That's why I made early bird the newsletter because I was frustrated and I wanted to give my fellow new investors, some type of source. That was simple. That was easy to read that was available daily. So that's kind of how I started as an investor.

Steven (24m 15s):

And it's from those frustrations as an investor is kind of where I started early bird.

Phil (24m 21s):

It's beautiful, the personalization these days, because as you say, you knew exactly what you wanted to learn and then that would be what you would share with subscribers, listeners and so forth. That's, what's so beautiful that the customization of investing because not every style is going to suit every investor, but it sounds like you're from quite an early age, realize that you needed to have your own personal style. My correct in saying that

Steven (24m 48s):

The past few years, once I was at a place where financially I was sound, I knew that in order to grow wealth, you're going to have to invest. You've got to get used to compound interest and you have to be smart about it. You have to take some risks, I'm young, but you have to be smart about it. And I think information is key. When you're talking about investing, you can have all the opportunities, all the apps in the world. If you don't know what you're doing, if you don't know the pulse of the market at that time, it doesn't make any difference. And that's kind of where early bird came from.

Phil (25m 25s):

Okay. So when you decided to start learning, how did you learn? Was it reading YouTube videos,

Steven (25m 31s):

YouTube videos, podcasts, reading. I got my hands on everything and I still subscribe to newsletters. I still listen to podcasts. I still watch YouTube videos and they're all great. They inform what I produce for early bird, but I don't know. There's just a sense of incomplete out there. You know, like, okay, this information is great, but for me to compile it every day, it would be time consuming. So I just thought, you know, if I could go back in time, if there was a version of me five, six years ago, who didn't know anything about trading, never invested in the stock market, never did anything with retirement accounts or ETFs.

Steven (26m 13s):

What would that person like to know? If that person knew nothing about stocks, they just wanted to get on the ground floor and just learn what would be the best way to reach that person. And it's a newsletter and it's three minutes or less each day, everything you need to know. And I think what's really interesting about that is I'm still learning as an investor. I've only been doing this for a few years, so it's an audience of new investors, but it's also created by a new investor as well. So I think it's interesting.

Phil (26m 48s):

So if listeners want to find out more, how can they get in touch?

Steven (26m 51s):

Good question. Www early bird.email, early bird dot emails, sign up, sign ups, pretty easy. It's free. And you just put your name and email address right there, early bird.email. And that's it. That's all you got to do

Phil (27m 5s):

And it's free.

Steven (27m 7s):

Yep. Free the podcast and the newsletter are both free.

Phil (27m 10s):

Fantastic. And I'm loving your New York accent.

Steven (27m 14s):

Thank you for that originally from New Jersey, but

Phil (27m 19s):

Yeah,

Steven (27m 19s):

That's fine too.

Phil (27m 21s):

I had a few listeners there've been in talking to you from New Jersey recently, which has been fun.

Steven (27m 26s):

Nice. I just have one final question for you. And it's the big question for today's discussion. That question is if you had a cookbook, what would you name that cookbook?

Phil (27m 38s):

Oh, can I think about that one for a moment, the Southern Italian cookbook of family strength and honor,

Steven (27m 47s):

I would buy that book. That sounds interesting.

Phil (27m 50s):

There's a whole story behind that. My interest in the region and my family background there, the cooking of the region, it's like the home of what they call the Mediterranean diet or one aspect of the Mediterranean diet, which is supposed to be very healthy for us. I guess, Steven, thank you very much for appearing on the stocks for beginners podcast.

Steven (28m 10s):

Thank you so much. I appreciate it. Thank you.

Stocks for Beginners is for information and educational purposes only. It isn’t financial advice, and you shouldn’t buy or sell any investments based on what you’ve heard here. Any opinion or commentary is the view of the speaker only not Stocks for Beginners. This podcast doesn’t replace professional advice regarding your personal financial needs, circumstances or current situation.