Now Is A Good Time To Be Disciplined - Benzinga's Interview With Andrew Horowitz (EWT, EWZ, SSO, SPY)

Andrew Horowitz is a Certified Financial Planner. He is the President and Founder of Horowitz & Company, a Registered Investment Advisor.

He was kind enough to grant us an interview for the Benzinga Podcast.

Below is a transcript of the conversation.

Welcome to Benzinga! Today we have a special guest with us, The Disciplined Investor, Andrew Horowitz. Welcome!

Hey Jason! How are you?

Good. Last time we spoke you were managing your Disciplined Investor podcast that was widely popular. I think it was one of the top five on iTunes. Since that time, you have launched other ones. Can you tell us a little bit about them?

John Dvorak and I have been friends for a while. John is an old time technology business writer. We wondered if anybody would be interested in some of our little discussions. It is pretty much a couple of guys talking non-scripted about the technology, markets, stock ideas, and politics. We have a podcast once a week and it is called DH Unplugged. Basically, we have a great time talking about stocks and giving ideas.

Then we have the Winning Investor, which is a part of the Quick and Dirty Tips network. That is a five minute quick and dirty review and understanding of different components of investing. For example, we talk about simple things like what is the P/E ratio, explain technical analysis and moving averages, take a look at what is a balance sheet, and show some main components. These are all done in five minute quickies that we release once a week.

And is that you on it mainly?

Yes, Quick and Dirty Tips is only me and it is not a guest kind of a thing. It is only five minutes, so we really try to compress a lot of information and education into it. For example, questions come in about “How do I understand volume and what is the importance of volume? Why are different newspapers reporting the NYSE volume in different manners?” So we researched it and got information from some great people like Tom McQuillan and put together a five minute podcast of why this is. We take listeners’ questions, but we also have our own design. Five minutes, so it kind of brings the education right to the forefront very quickly.

Is it growing in popularity?

It is getting bigger and bigger, as a matter of fact, that whole Quick and Dirty network is very popular.

Yes, it takes the position of an investor. We had a new person, who began working here and all he listened to was the Disciplined Investor. So, let’s talk a little bit more about it. How many years and how many shows have you done so far?

It is almost 170 shows. I don’t think we have missed any week, nor have we had really more than one podcast per week. So, it is almost two and a half years and I am amazed at the guests we have had because it started out with a nothing show. We have listeners all the way in Germany, Australia, and Japan. The guests have ranged from Robert Reich to Larry Kudlow. Harry Dent and Peter Schiff have been our guests too. We host a lot of different people, so we can find different areas. Not just bullish or bearish, not just a gold bug or a stock guy, but everything all around.

Speaking of Schiff and Dent, didn’t a listener write in asking you about comparing contrastionary ideologies?

Yes. They wanted to compare contrasts, but they also wanted to bring Schiff and Dent on for kind of a shootout. They have very similar ideas from different angles. Basically, the United States is going down in flames. Schiff is talking about the excessive spending and default of the dollar eventually. He has been calling that the dollar will disappear in value due to the excessive spending and poor political and economical decisions.

Dent is talking about global slowdown, but primarily from the aging populations in the U.S., Western Europe, and Japan. He looks to the situation here as unsustainable and is looking for the next depression to occur anytime soon. They are getting to the same places with different methodologies.

Have you tried to get Nouriel Roubini on the show yet?

I have his cell phone and I try to get in touch with him, but I think he talks about his books too much and has gotten too big. I question whether or not he is someone we want to have on and I think his name is associated with all negativity. We have had Mark Faber on whose Gloom Doom and Boom report is the same genre. I just don’t know if Roubini is going to add anything more to the case right now because we all know what he is talking about. He is all over the news and he is not adding anything other than the fact that he is complaining.

We want something that is a little bit more versatile like Dennis Gartman, who talks about a lot of different things. I think Roubini is good from an economic stand point like most good economists are. You can say their economist forecasting is fine. But when it comes to the stock markets, I think you have to separate the two. Eventually, the fundamentals of economics will meet somewhere down the road, but at the same time these economists who try to call the stock markets have done a very bad job.

We all recall the debate between Timothy Sykes and Jim Van Meerten. Especially, since you and I are friends with these people. What do you think about that one?

Both of them got into a tiff over a couple of different stocks. Tim was basically calling Jim out because he was recommending some penny stocks that crashed and burnt a few days after. Tim made some serious accusations saying that Jim was pumping and dumping. I do not think Jim was really doing that, but Tim was attacking and he had his reasons for doing so. Then Jim was coming back attacking and it became a real war. It became this ridiculous five-year-old fight and I said “Guys do you want to talk? Come on the show and we’ll get this over with.” I don’t think we got anywhere, but both of them had very good points and I think it was a very good lesson overall.

I believe you just finished your new book. I read your previous one that was very helpful and it is like a beginners guide. We actually have it here on our bookshelf and newbies do read your book. Will you tell our listeners what your first book was and what this new book is about?

Sure, the first book is called The Disciplined Investor. It is essential strategies for investing. Basically, there are a lot phrases, terminology, ratios, chart patterns, and ways of investing, but which is the best way. What do I use and how do I use it? What newspapers should I read? What are the best ways to put all this together? So it is a really good guide for beginners and one step above.

The next book coming out is called The Winning Investor. I don’t want to call it “idiot’s guide,” but it is like a reduced version of The Disciplined Investor, so the readers can understand the very basics. It is designed to be a very easy reference book so that even the novice investors can understand it and step up to the next level after that. It should be available by the end of this year.

Now we are going to get more into economics. One of you recent podcasts talked about earnings season, last week’s volume, the low volume, and you were talking about important reflection points. What are you seeing, as we get into the heavy earnings season in the next couple of weeks?

It is the same thing we saw the last earnings season, but in a little bit of a different light. This earnings season we are seeing economic slowing down, but earnings looking much better. If you recall the last earnings season, we saw that we continued on a growth pattern on our economics, but outlooks from these companies were very concerning.

What is happening is that there is a good amount of skepticism when you see the economics. For example, most of the manufacturing numbers are coming a little bit light. There is a question: are we seeing an economic backup – are we seeing a situation that is going to get us in trouble or is it just moderation? In any cycle, whether you are in a growth cycle or when you are in a contraction it doesn’t go in one direction constantly.

I still think there is a bid underneath these markets after we saw the dramatic fall, and I believe a lot of that was from forced hedge fund selling. Even if we have had a lot of falls, we are starting to see the color of equation changing a little bit. There is a lot of confusion going on with all the things that the FED and the government are doing with the financial reform bill etc. I think if we can calm down on some of that we have a great shot on the market. The economy will see lower numbers, as we are in the end of the inventory stocking cycle, but there are other things that will pick up. So it is a very mixed picture, but the earnings outlook looks very good.

You manage a portfolio and that is your main business, which we really have not talked about. Are you putting your clients more so long in this market?

We move in and out quickly. Right now we are probably 65 percent long after we were about 18 percent long two weeks ago. The fact is that, even though there were a couple of hiccups along the way and I do agree that certain economics are slowing down, the commentary from most of the companies is that they are seeing very good numbers.

You saw the Chinese situation overseas the last few days, where they still have a very substantial growth rate. Singapore and South Korea are off the charts and we love Taiwan as an investment, so there is a lot of things going on that are very interesting when it comes to the world economies.

Do you play ETFs at all?

We use ETFs primarily for two things. First is for international exposure, so when I talk about Taiwan we use EWT or when I talk about Brazil we use EWZ. Then for super-long or short hedging, so in other words, we’ll have a whole portfolio of stocks we can fill in the blanks by using ETFs like SPY or SSO. When we go short, we’ll use like TWM and QID. That gives us a nice hedge against our portfolio all the times.

You had Jon Najarian from optionMonster on in May and the episode was titled “The Goldman Sachs Fetish”. Can you tell me what this Goldman Sachs Fetish was about?

Yeah, every time you listen to a variety of talk shows, specifically CNBC and even Bloomberg, you always hear about Goldman Sachs. Fast Money is always talking about Goldman Sachs and how great they are. So I was asking him: “What is it with the fetish with Goldman Sachs? Why is everybody so enamored with this company?” He kind of gave me the answer saying that he thinks I am right. It is a little bit over the top how we talk about them.

What about the finreg? How will it impact average-joes vs. institutions? Do you have any opinion on that?

I think the finreg will affect a lot of areas. Once again, it is like the health care bill, as we don’t know this for some time. I don’t think it will address the “too big to fail.” It is going to slap some extra cost on a variety of areas like the fees on credit card companies. It is going to try to raise money and create additional government oversight. I do think this is another level of problem because the regulatory environment is too broad.

I don’t think the individuals see the impact except for extra costs associated with anything that is going to be paid in taxes in regulatory requirements etc. through the mutual funds, ETFs, hedge funds, or money management. So once again, it is going to fall right back on the consumer, but I don’t think they’ll notice anything.

I think it is going to be a lame duck paper that has a lot of holes that will be filled when the time comes, but by then it will be too late.

One more international economic question: What do you think about the PIGS?

You have got Portugal, Ireland, Italy, Spain, and Greece. These are the countries that have the biggest problems right now. They are obviously facing austerity and they are facing possible defaults. It appears to us that Germany is probably the biggest benefactor, so that is an interesting place to look at, as they are also going to see enhanced income due to the fact that Euro has been beaten down. We do not really think that the area is a long term play and just decided to stay away from it. We won’t invest in Greek banks, Spanish banks, or real estate.

What about Flash Crash high frequency trading. Did you interview Tyler Durden?

Yes, we had Tyler Durden from Zero Hedge on a few times. He is a good and smart guy. We talked about the Flash Crash. It was a series of several different factors that went into it. It was investors’ concerns, stop-losses, and I think they pulled the plugs on the algorithmic trading with the hedge funds. I suppose it can happen again, but right now it looks to us that it was not a true investor crash, but more of a technical crash that happened that day.

Do you guys ever participate in high frequency trading?

We leave that to the big boys to screw around with. There is no reason for us to do it. There is a plenty of other money we have made in different ways.

Some of our listeners wanted to know what are some of the sites you read everyday other than Benzinga. Are there particular sites you go to everyday?

We have a Bloomberg terminal, so we use that. We like Wall Street Journal and Marketwatch. FinViz is one of our favorites and it is a great site to take a look at. Of course, I also look at Zero Hedge and I read Afraid to Trade by Corey Rosenbloom, who has a great technical analysis site. We try to do our best also to get our news from the pure source.

Coming to a conclusion little bit. There is an interesting social media story about you. Tell our readers a little bit about the time you were at a restaurant and tweeted about a web cam.

I was in New Orleans a couple of month ago at an oyster bar. They sat me right at the bar below the web cam, where they serve the oysters. So I tweeted it saying “Here I am. Take a look. ” Ten minutes later the manager comes over and says “Are you Andrew Horowitz?” He told me there are like ten people on the phone who want to buy me drinks.

That is hilarious. You have a lot of Twitter followers and you don’t just tweet out the stories. Where can people follow you on Twitter?

It is twitter.com/Andrewhorowitz. If you hook up with that, you get the first crack of all the different stories that we write and when the podcasts come out. All that is twittered and you get it before anybody else.

Is there anything else that our listeners should think about when they go to the Disciplined Investor site? Anything you want them to pay close attention to? I know you just wrote an interesting piece about Apple, but by the time the listeners hear this it may be old news.

We put out a lot of economic work on the site and we are always updating it. On Sunday nights we are coming out with the Disciplined Investor and on Wednesdays DH Unplugged and Winning Investor. Ask any questions that you have. There is also a fourteen minute virtual tour on the site that shows you exactly how we manage money and what we do.

We want to thank you Andrew for joining us and we look forward to speaking to you in the future.

Thank you so much and go Benzinga!