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Peter Brandt: A Trading Legend's Long-Term Playbook

The Factor Trading founder on his investing philosophy, why he views the S&P as a long-term store of value, and his take on Bitcoin, gold, bonds, and more.

Hi everyone,

For our “Summer Fridays” Talking Markets episode today, I had the great pleasure of being joined by a true legend -

, founder of Factor Trading and classical chartist extraordinaire.

This was truly a phenomenal conversation - Peter was incredibly generous with his time and his knowledge, and shared a ton of for-the-ages guidance that is super useful in this environment.

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You can watch the entire interview above, but here’s some of what we discussed:

Store of Value Trades

Peter’s core investment philosophy centers on the preservation of purchasing power over the long term, rather than short-term gains or speculative trading for most individuals.

  • First Job: Preserve Purchasing Power: “First and foremost, an investor has to think about protecting purchasing power. Only after [they] solve the riddle of protecting purchasing power, can an investor then go on and look, okay, now I want to add alpha to the protection of purchasing power.”

  • Long-Term Horizon: He strongly advocates for a “long term opportunity, big time horizon” approach, contrasting it with the "short termism" prevalent in modern retail trading.

  • Diversification: He personally follows a diversified approach, risking “only 1% of [his] capital in any given trade.” For younger investors (20-30 years old), his model is "80% SPY, 10% gold, 10% Bitcoin."

The US Dollar: A Misunderstood Narrative?

Peter distinguishes between the dollar's value relative to other fiat currencies and its purchasing power.

  • Relative to Other Currencies (USDX): He says that the US Dollar Index (USDX), which measures the dollar against a basket of other fiat currencies, has not experienced a “collapse.” Since the US came off precious metal standards 54 years ago, the dollar has “really drop[ped] 17%,” not a “super terrible” performance.

  • Purchasing Power: This is where Peter says the dollar's “collapse” narrative holds true. “On a purchasing power basis, the dollar has been tanked,” he said. His “only sure bet” is “to be short the purchasing power of the US dollar.”

  • How to Go "Short" the Dollar's Purchasing Power: Converting dollars into other assets is the mechanism. “Long the stock market is a short US dollar play, but it's a short US dollar play in terms of purchasing power,” he said. “Because when you buy stocks, what you're doing is you're taking US dollar and you're converting those US dollars into another asset.'“ This applies to gold and Bitcoin as well.

US Equities: A Store of Value, But Not Always an Investment

Peter views US equities, particularly the S&P 500, as a long-term store of value, despite popular perception of them as risk assets.

  • S&P 500 (SPY): He strongly endorses investing in SPY for long-term wealth building, echoing Warren Buffett's advice. He recommends it for young professionals, suggesting “put 80% of what you can save in SPY and then 30 years from now, you're going to be worth a lot of money.”

  • Protection Against Inflation: Equities act as a hedge against inflation. “All the more money that gets printed reflects itself in CPI,” he said. “And that really drives the store of value home on the S&P… [The S&P has advanced] +430 basis points on the compounded annual rate of return relative to inflation itself.”

  • Forecast for Next 5-10 Years: Trading Range: Peter’s forecast for the next 5-10 years is “no progress,” with the S&P likely trading “plus 25% minus 25%” around a midpoint of 5,500 (or 6,000), meaning “somewhere between, let's say, 4,000 and 7,000.”

  • Buying Opportunities: Within this range-bound scenario, “there'll be some great buying opportunities” when the market is weak. He doesn't foresee a “massive collapse” because he doesn't anticipate a “collapse in the money supply,” which “drives CPI, CPI drives store of value.”

  • NASDAQ/Tech Stocks: While currently “a little overheated” (5-10% overvalued), Brandt believes NASDAQ will follow a similar long-term uptrend as the S&P, as “we are in the age of tech.”

  • Rotational Market: He expects natural market rotations, where small tech or Russell 2000 companies might lead the S&P at different times, as opposed to gains coming from a “very small, limited number of stocks.”

International Markets: Emerging Opportunities

Peter sees potential in specific international markets.

  • Europe: He is “very constructive on the Euro stocks bank index.”

  • Japan: He is “very constructive on Japan,” owning Nikkei futures and projecting a “30% upside over the next few years.” [Paging

    & !]

  • US Dominance: Despite international opportunities, he says the “US drive the world financial markets” and “that's not going to change,” given its entrepreneurship, capital, and stock exchange volume.

There’s so much more in this interview, including Peter’s Bitcoin analysis, take on gold, view on bonds, the potential he sees in commodities (but not silver), and more.

Hope you enjoy - let us know your thoughts in the comments…! And have a fantastic weekend.

Maggie

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Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.

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