Chris’ note: We’ve talked a lot about the rise of artificial intelligence (“AI”) in these pages lately. And most of the focus has been on the technology itself… and long-term profit plays.
Today, I’m bringing you a different kind of insight on AI. This time from one of the world’s greatest traders.
Colleague Larry Benedict is trading legend who once went 20 years without a single losing year. This earned him a place among other hedge fund greats in Jack Schwager’s 2012 book on the world’s greatest moneymakers, Hedge Fund Market Wizards.
And he continues to rack up gains for subscribers of his trading advisories.
Take his subscribers over at his S&P Trader advisory. Traders who started with $10,000 this year and sold only one contract per recommended trade would be up about $11,045… a more than 110% gain in just nine months.
As you’ll hear from him, Larry thinks September will be a tricky month for the sector. But before we get into that, I asked Larry about what it was like to be featured in Schwager’s book alongside some of the all-time greatest traders.
Q&A With Larry Benedict, Editor, Trading With Larry Benedict
Chris Lowe: I want to talk to you today about the AI rally on Wall Street. But for the sake of newer readers, it would be remiss not to mention your appearance in the Hedge Fund Market Wizards book.
For folks who don’t know, it’s considered a classic by many on Wall Street.
Ray Dalio, the manager of the world’s largest hedge fund, Bridgewater Associates, was in there.
So was MIT math professor, hedge fund manager, and blackjack player Ed Thorpe. He’s the guy who perfected the art of card counting in blackjack. He was so successful at beating the house, casinos had to change some of the rules to stop him winning.
Larry is featured in Chapter 3 of Schwager’s classic book
That’s quite a line-up. Tell me about the experience talking to Schwager for the book.
Larry: He came to my office and sat with me for about a week. He watched me trade. He also interviewed me. He wanted to see what made me tick and how I viewed the market.
Jack also talked employees of mine as well as other people I had traded with. And he verified my track record.
I didn’t care a lot about it at the time. But now my kids are older, it’s nice they can read about me. It’s a kind of legacy.
Chris: I remember reading the chapter on you in that book. Schwager – himself a trader – didn’t focus so much on the money you’ve made as a trader… but on your risk management. You were coming off a 20-year winning streak. That’s almost unheard of. Is that what brought you to Schwager’s attention, do you think?
Larry: I think so, yes. Our P&L [profit & loss] was good, and the numbers were large. When you look at a guy like Dalio, his P&L in the billions of dollars a year. Mine was in the hundreds of millions a year.
But like you said, I went 20 years without a losing year. And the drawdowns – in other words, peak-to-trough falls for my P&L – was probably less than 4%.
I think it impressed Jack to see somebody run risk in such a tight manner.
Chris: Let’s switch gears now and talk about the macro environment. We had a bearish year last year. Tech stocks and crypto were hit particularly hard.
A lot of people were bearishly positioned in 2022, and now we’ve had this really great year for the market. Did that surprise you?
Larry: A lot of this move higher this year for stocks is down to the mania over artificial intelligence (“AI”) that’s swept Wall Street and so-called Magnificent Seven stocks – Apple, Google, Microsoft, Amazon, Meta, Tesla, and Nvidia.
If you don’t have those stocks, you’re not up in your portfolio. I mean, Apple is up 50% this year. Amazon is up 60% this year. And leading the charge is AI chipmaker Nvidia. It’s up 238% this year at writing.
And we’re only in September. This could be the biggest year for tech in history.
Chris: Are AI stocks in bubble?
Larry: I would call it a mini bubble. It’s like the mini-bubble we had in biotech stocks during the pandemic… or cannabis stocks in 2018. We also had a several mini bubbles in crypto.
My best guess is it will play out like it did with crypto. We’ll have several mini bubbles followed by mini busts.
But that’s great news for me as a trader. The move volatility – or price swings – in stocks we get, the better my trading results will be.
A lot of the AI stocks are fully valued right now. That will make the rest of the year interesting to watch. At some point, there’s going to be opportunity to “short” – or bet against – AI stock darlings.
Not right now because the market is too bullish. But once we see the bullish trend break, there will be a major opportunity there for traders.
Don’t get me wrong. AI is here to stay. Remember, AIs are just beginning to show us what they can do. Advances and efficiencies in this tech will lead to more growth in the coming months and years.
I’m just saying there’s going to be a lot of volatility on the way. So, this will be a trader’s paradise.
Remember, we’re just come through August, when most professional money managers on are holiday. And we’re coming into September. That’s when they start to come back from the Hamptons and Cancun. And it’s typically one of the most volatile months for stocks. So, my parting message to your readers is they need to buckle up.
If I’m right, the market is going to get a lot bumpier than we’ve grown used to this year.
Chris: We’ll leave it there, Larry. Thanks for your time.
Larry: Thank you so much. I enjoyed our conversation. I hope to speak to you again soon.
Editor’s note: Talking to Larry is always insightful. He’s been trading markets for so long now, he’s developed a “sixth sense” about how they move.
And he says we’re about to see huge money flows into the market that will create what he calls a “7-Day Blitz” of opportunity.
And with the AI boom going on, he’s identified a way to profit… using just one alternative AI play.
I’ve seen the feedback from Larry’s subscribers. Some of them have made as much as a year’s salary during this kind of blitz.
For example, one Larry subscriber wrote in to say he made $136,000 in profit. Another turned $6,706.80 into $23,393.20. Another reported a $19,164 gain from a $1,587 starting position.
That’s with a trade turnaround time of just one week… and often in less than two days.
This upcoming event is potentially so profitable, Larry’s going on camera on Wednesday in a special 7-Day AI Blitz event. He’ll explain more about how to trade during this window… including my favorite way to play it.
If you’d like to RSVP for free, you can do so with just one click right here.
It’ll go live on September 6 at 8 p.m. ET, and I promise it will be worth your time. This blitz strategy is one of the most reliable moneymaking methods of my career.
So please plan to join me. If you’d like to RSVP for free, you can do so with just one click right here.
I hope to see you on September 6!