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Dying well We’re all going to die, but how we acknowledge death and dying is a very personal experience. Award-winning journalist and author Tracey Spicer and anthropologist Dr Hannah Gould explore etiquette, rites and traditions to find out what makes a ‘good death’. About the episode – brought to you by Australian Seniors. Join James Valentine for the sixth season of Life’s Booming: Dying to Know, our most unflinching yet. We’ll have the conversations that are hardest to have, ask the questions that are easy to ignore, and hear stories that will make you think differently about the one thing we’re all guaranteed to experience: Death. Featuring interviews with famous faces as well as experts in the space, we uncover what they know about what we can expect. There are hard truths, surprising discoveries, tears and even laughs. Nothing about death is off the table. Tracey Spicer AM is a Walkley award-winning journalist, author and broadcaster. And she's an ambassador for Dying With Dignity. A vocal campaigner and advocate for voluntary assisted dying (VAD), Tracey penned a letter to her mother following her painful death in 1999. Dr Hannah Gould is an anthropologist who works in the areas of death, religion and material culture. She recently appeared on SBS documentary: Ray Martin: The Last Goodbye. Hannah’s research spans new traditions and technologies of Buddhist death rites, the lifecycle of religious materials, and modern lifestyle movements. If you have any thoughts or questions and want to share your story to Life’s Booming, send us a voice note – lifesbooming@seniors.com.au Watch Life’s Booming on YouTube Listen to Life's Booming on Apple Podcasts Listen to Life's Booming on Spotify For more information visit seniors.com.au/podcast Produced by Medium Rare Content Agency, in conjunction with Ampel Disclaimer: Please be advised that this episode contains discussions about death, which may be triggering or upsetting for some listeners. Listener discretion is advised. If you are struggling with the loss of a loved one, please know that you are not alone and there are resources available. For additional support please contact Lifeline on 131 114 or Beyond Blue on 1300 224 636. TRANSCRIPT: James: We're all going to die. Happens to all of us. But how we acknowledge death and dying is of course a very personal experience. With our guest and our expert, we're going to explore the etiquette, the rites and traditions seen in Australia and around the world. Someone who knows a lot about the rites and traditions of death is Dr Hannah Gould, an anthropologist who works in the areas of death, religion and material culture. We're also going to be joined by Tracey Spicer, she’s a Walkley award-winning author, journalist and broadcaster. And she's an ambassador for Dying With Dignity. Tracey and Hannah, welcome. Thank you so much. Tracey: Hello. James: Thank you for coming. Hannah Gould. Hello. Thank you for coming. Hannah: Thank you. James: Fantastic. Let's talk death! Tracey: Why not? There'll be lots of fun. James: Do you laugh in the face of death? Hannah: What else can you do? I mean, look, you know. Lots of sadness, lots of joy, every single emotion is reasonable, surely. I mean, it's like the question, the ultimate question of philosophy, of history, of every discipline. Every response is valid. Not always useful, or helpful. James: Yeah. Yeah. Hannah: But valid. Tracey: Well, it's a universal topic of conversation and that's why I've always loved dark humour. Because you do have to laugh, otherwise what do you do? James: I also think it's, it is the ultimate joke that we are all going to die, but we live like we're not going to. We live every day as though it's just not going to happen at all. Tracey: Especially in Western society, I think other cultures have got it right and we're in such deep denial about it. It's detrimental to all of us. James: Yeah. Now this is your area of expertise really, is that do other cultures have it right? Hannah: Everyone does it differently. Right or wrong is kind of a difficult thing to judge. I think certainly there's a big thing called, like, the denial of death thesis, right. And, and people like Ernest Becker, a lot of different philosophers and anthropologists and cultural, you know, analysis have looked at Western culture and gone, Oh my gosh, we are so invested in denying death, right. And whether that's through denying death by religions that say you're going to live forever, like, you know, don't worry, it's not the end. You'll pop off to heaven or whatever it is. Or through, you know, great heroic myths. Yes, you'll die, but the nation will remember you forever. So, you know, you won't really die. You'll be a martyr. Or contemporary, you know. Yes, you'll die, but have you seen how great the shopping is? You know, we can just ignore, we can deny death by being on Instagram and, you know, consuming, right, so, I think Western culture in particular, the way we've organised our society, allows us to not think about death. James: And we've organised death to be somewhere else, usually now. To be in a hospital, to be in palliative care somewhere. And they may be good, but they're not, they're not in the cottage, are they? They're not next to, not in the bedroom. Hannah: Not in the bedroom. So, we know that, say, 70% of Australians wish to die at home. Only about 15% do. And that is a rate that is lower than all these other countries we like to compare ourselves. So Australians are more institutionalised in their death than places like Ireland, like New Zealand, the United States of America, even Canada. We tend, more than other countries, to die in institutions – aged care, hospitals, and hospices. James: Yeah, right, right. The other way in which we deny death is, or the other way in which other cultures have a different attitude to death, will be that it'll either be more accepting – we are all going to die, will be part of their every day – or they may have a notion of reincarnation and coming back, which means that that's a very different attitude to death, really, than a, than a heaven and a hell. Hannah: Yeah, it's not necessarily an end so much. I think that's kind of quite common in, say, you know, Buddhist or Hindu or other kind of dharmic religions, particularly Asian religions. And then, obviously, there's a lot of Asian religion that's part of Australian society, so that's also quite present in Australia. But we can also have a kind of more secular idea about that. You know, a lot of these, a lot of my mum's generation in particular, have kind of a green environmental kind of reincarnation model where she will say, well, I don't particularly believe in heaven, but I do believe I'm going to become compost. Food for worms, you know, I'll come back as a tree or a flower or a tomato plant, you know, and that's, that's a kind of reincarnation of like reintegration into the natural environment, as it were. So there are some kind of myths or stories we can tell ourselves that perhaps help us think about death more positively. James: I've got a, a friend of mine who'd be into her 80s has said, oh, funeral? Just put me up the top paddock, let the crows have a go. Tracey: Yeah. My dad wants to be buried in a cardboard box, and I think that's a wonderful idea. James: We all say that, don't we? That's a really common one as well. I hear that a lot on the radio. People will go, mate, just, I don't care, put me out with the, on the hard rubbish day. Hannah: In the paddock, whatever it is… James: …the paddock, that’s the same sort of thing I said. You know, like, do we really want that, do you think? Hannah: Oh, do we really want that? I do think Aussies are pretty pragmatic about death. I do think we have a certain streak in us that's kind of like, you know what, it's all a bit much fuss, it's all too much. You kind of even get these people who therefore say, don't have a funeral. You know, I really don't want to have a funeral. Please don't even, you know, no fuss. That can be kind of sad sometimes because I think it's some people kind of not acknowledging how many people love them and miss them. James: Yeah. Hannah: Um, but maybe it's also a bit of an Aussie humour, dry humour, that, that black humour again of kind of, you know, trying to laugh in the face of death. Why not? Tracey: I would agree, but then we all get sucked in when we're in the funeral home, and they show you the cardboard box, and then they show you the glossy one that's 10 or 20 thousand dollars, and you think, did I really love that person that much, or should I do it? So it all feeds into what you were talking about before, that consumerism and overcommercialisation. James: Well, I also think sometimes, I would think it's about weddings. Weddings and funerals, well, who's it actually for? Tracey: Yeah, yeah. Well it's a punctuation mark, isn't it? I'm a lifelong atheist, but Tracey: I do enjoy, it sounds terrible, going to those kind of ceremonies, whether it's a funeral or a wedding, because it's important to celebrate or commemorate these changes, these huge changes. James: I love the sharing of stories at a funeral. People start talking. Tracey: Well, you learn so much about someone's life that you may not have known. And also often they're rich for that dark humour. I'll never forget my grandmother's funeral, who I was incredibly close to. And my father's new girlfriend loved my grandmother. She was so distraught she tried to throw herself into the hole in the ground on top when she was throwing the dirt in and I thought, well, that's intense. James: That's good. Tracey: That's, I've never seen that before. That's a first. Hannah: Oh, I've seen that before. Tracey: Have you?! Hannah: I will say that, you know, when you attend enough funerals or attend enough cremations for professional reasons, um, as it were, you kind of see everything, every range of human emotions. Like, we, we kind of think, you know, all funerals are all happy families. A lot of unhappy families, a lot of punch ups at funerals, lots of, uh, mistresses coming out of the woodwork at funerals, conversions, religious, you know, more and more people have recorded messages from beyond the grave that they play at their funeral, or, uh, they've decided that we're having a dance party, or we're having some sort of festivity or an event. I mean, you can do anything these days with a funeral. James: Do you go to a lot, just to observe? Hannah: Yeah, I do my research. So I, I research in death and dying and I, I work at a crematorium and I attend funerals and I hang around with other people in the death care sector. James: Yeah. Hannah: And you do see everything. James: Why do you want to… Tracey: …What got you interested in this? It's your job and I'm just fascinated by it… James: …We'll, we'll, we'll, we'll both do it. I think you've done this sort of thing! So, yeah. Well then, then, why do you want to be around death? Hannah: Oh. I mean, personal and professional. Professional, I'm an anthropologist, and anthropologists want to know what brings us together, what makes us all human, but then also why we do it so differently. And there is nothing else. It is the question, right, it is the one thing we all experience, and yet we've all decided to do it in completely different ways, and completely different ways throughout history. And then, personally, my dad died, and I thought, gosh, what on earth is going on? I suddenly was given the catalogue, of funeral, of coffins, right. James: And you were young. Hannah: I was 22, 23 when my dad died. An age that was perfectly old and mature at the time, I thought. But looking back, obviously, it was incredibly young. But yeah, I suddenly got handed this catalogue of, of kind of coffins, and they all had these really naff names, like, you know, these rich mahoganies, and like, it was like paint colours. Someone had, someone somewhere had decided, these were the options, right, that you were, that this is what was going to represent my dad. And I just felt this massive disconnect and I thought, ‘Hang on, I've got to work out what's going on there.’ So now I spend my life in death, as it were. James: Yeah. I suppose, most of us would think being around death would be a very gloomy kind of thing to be, or way to spend your day. Hannah: It can be very gloomy. But oh my gosh, the gallows humour that those boys in the crem – the crematorium – tell, uh, you know. James: Is there a joke you can share? Hannah: Ooh. Um. Not a lot of them are safe for work or anywhere. James: Tracey, you were going to jump in and ask something there before. What were you going to ask? You know, fellow professional interviewer. Tracey: I really see a connection with you being 22 when your father died and I was 32 when my mother died. Hannah: Mm. Tracey: Even at 32 I felt like I wasn't ready for it. James: Right, no. Tracey: And especially because it happened so quickly. Mum was the linchpin for the family, you know, smart and funny and she could do anything. She was one of those early super women kind of role models. And then all of a sudden at the age of 51 she was diagnosed with pancreatic cancer with seven months to live and she lived seven months almost to the day. And it was blood and guts and gore. She was in agonising pain. My sister and I were injecting her with medication every day. We wanted her to die in the home. Tracey: But it got to the stage where we had to bring her to palliative care, and that's when we started having the conversations about voluntary assisted dying, because, um, Mum and Dad had always said, put me down like a dog. And again, it's one of those things that you think it's going to be easy at the time, but it's not. We talked to the doctor. The doctor said, I don't want to end up in jail. And my sister sat there with the morphine button. She pressed it so often she had a bruise on her thumb. James: Hmm, right Tracey: …we said, surely you can just increase the morphine, because Mum was having breakthrough pain. So everything was fine until she'd scream once an hour, and there was no way they could cap that. So it's cruel, right? It's cruel. I, I don't think there's any way they would have done it. We tried to have those conversations. James: …Yeah… Tracey: Which is why one night, because we were sleeping in a chair next to her overnight just to hold her hand when she was in pain, I picked up the pillow and I did try to put it over her face because I thought, what kind of daughter am I, to let her suffer? And then I stopped at the last minute and then I felt really ashamed of, you know, what a coward I am. Hannah: No, I was going to say the opposite. What an incredibly brave act to, to have so much love and compassion for this person and so much respect, what you knew her wishes would be, that you were willing to do that, you know, for, not – for her, not to her, for her, right? That's extraordinary. Tracey: It's lovely of you to say. James: Did she know what you were doing? Tracey: Oh no, she was out of it for about the previous two weeks, actually. In and out of it. And then she died in the next 24 hours anyway. So she was very, very close. And she'd had that kind of burst, you know, had that almost honeymoon period a couple of days beforehand where you think, Well, she seems like she's getting better and we've read about that, so we expected she was close. Hannah: …Yep, the final, the final burst… Tracey: Yeah. Is there a name for that? Hannah: You know, I don't know what it's called, but you know, that is when usually the palliative care doctors, the hospice workers will call up the family and say, guess what? They're up and about, they're talking, they're eating all of a sudden, and that's genuinely usually a sign that it's not going to be long. James: Wow, isn't that interesting. Hannah: It's the final burst of energy. One of the interesting things about the rise of voluntary assisted dying, of euthanasia, to speak more broadly in Australia, is it reflects this kind of cultural shift that we have about the importance of choice and control towards the end of our lives and how increasingly like that is becoming an important part of what we think about as a good death, right. Like I want to be able to control where I die and who I die with and when and the pain and suffering, right? And that hasn't always been the case, right, you know throughout history there's been periods of that. There's been periods of, ‘Leave it to God.’ Or there's also been periods of, ‘Yes, I must prepare. I have to write my final last note or poetry’, or whatever it is. But that's increasingly becoming important particularly for, we see within the baby boomer generation that they really want to, you know, have some sort of choice, and emphasis on choice. James: Well, I mean, I wonder whether a lot of it is a reaction to, um, the, the medical control over the end of our lives is so extreme that we can be kept alive for so long. And so, it's, it's, it's a reaction to that medical control, isn't it? To want to say, well, surely I can, we can, we can have both, can't we? You can either keep me alive or I don't want to be kept alive. Could you let me go? Hannah: It's one of the great paradoxes, they talk about this paradox of contemporary death and contemporary medicine, is that all of our interventions have increased, right. The medicalisation of death has meant that not only do we have pain control, but we can keep people alive for longer. You know, we have better medicines, drugs, palliative medicine is massively advanced. And yet, if we ask people, the quality of death and dying has not increased. James: Right… Hannah: …And if we look globally, more access to medicine doesn't necessarily correlate with a higher quality of death and dying. There's some correlation, like, do you actually have the drugs? Can you access, access them? But when it gets to kind of over a certain hurdle, just because you're dying in Australia versus dying in a country with no resources doesn't mean you're going to die better. James: What do you, what's a quality of death? How are we measuring that? What do you mean by that? Hannah: There's lots of things you can do to measure it and people try. So one of them is, you know, to ask, ask the family, to ask the dying person, to also ask the physician, did you think this was a good death? You know, how do we assess it? Because it's not just up to the dying person as well. Of course, it's also up to the family, right – How did you experience that death, that dying? It's a difficult thing to measure, right, because for some people death is never gonna be… You know, the words good death, bad death are kind of controversial now because it's like, oh my God, I have to try at everything else, do I also have to live up to a good death? Like, we can't make it good. Can we make it better? James: Yeah. What is a good death, Tracey? Tracey: I think this really intersects with, uh, competition. Everything's become a competition. And also quality of ageing. Hannah: Yes, yes… Tracey: …Because my darling dad, who's 84 and still hanging on after smoking and drinking himself almost to death when he was in his 50s – it's a miracle he's still alive. He has very close to zero quality of life. He's a lovely man, we love spending time with him, but he can barely walk. You know, where's the quality of life? So I've just written a book about artificial intelligence recently, so it worries me, that medtech space, that we're getting people to live longer, but there's no quality of life and also no quality of death. Hannah: There's this phenomenon we actually call, in scholarship, we call it prolonged dwindling. Tracey: Oh, which is so true, I love that. Hannah: What a term! But it's, it's… James: …Sounds like the worst Enya album ever… Tracey: …And it never ends… Hannah: …But yeah, it's, it's, there's exactly this thing, right. So it used to be, if you look at like the kind of time, it used to be that you'd either have a sudden illness, fall off a horse, through a sword, war, back in the day, and you, and then you would die, or you would have a, you know, a serious major illness, like a cancer or a heart attack, and then pretty soon after, you'd die, right? What we have now, what we tend to have now, is these kind of timelines towards the end of life of, you know, multiple hospitalisations, in and out of hospital, or you have something like Alzheimer's, right, where you have a very, very, very slow and long cognitive decline, potentially with very high care needs, so you're in hospital, you're in care for 20, 30 years, right? Which is unheard of previously, that you would need this level. So how we die is changing, and it's a completely different timeline. James: Yeah. Does… Tracey, let's just return to this moment when you started to perhaps really think about death. You know, you're confronting your mother's suffering, and you think about, you know, taking control of that, about doing something. Was that an impulse? Was it something that grew over time? Tracey: It was knowing my mother's character as being very forthright, and she was always in control, to speak to control. She would have liked me to try to control the situation. It was also, obviously, that you never want to see a loved one in suffering. But it taught all of us in the family a couple of important lessons. Dad’s now got an advance care directive that’s 28 pages long, so we know exactly what's going to happen. My husband and I still haven't done that, but we do talk to our kids who are aged 18 and 20 about this kind of stuff. I think part of that is my husband's a camera operator, I've been a long-time journalist, so in newsrooms, a very dark sense of humour, similar to the crematoriums, so we talk about death and dying an awful lot at home, but I think it's important to have those conversations and to prepare for a good enough death as much as you can. Tracey: I mean, what does a good enough death mean to you? Have you thought about that yourself? James: Yeah, well I have. I've had some, you know, health issues, had a cancer last year, and so that sort of thing, you know, you do start to confront it and think about it. I'm the fall asleep in the bed, you know, go to bed one night, don't wake up. Tracey: The classic. James: That's the classic. Give me the classic. I'm happy with the classic. Hannah: …Hopefully after you've just finished penning your magnum opus, surrounded by friends and family. James: The end, you know. For me to be onstage, I've just finished a searing saxophone solo, and everyone's just ‘Amazing! Unbelievable!’ Down you go. Something like I mean, sudden, seems to be, just immediate. Immediate and sudden, no suffering. Hannah: Well, that's the thing. Hannah: People always ask me, you know, do you fear death, are you afraid of death? And frankly, after studying it for this long, no, not at all. And I think in an odd way, there is some kind of horrific privilege of having at least one of your parents die young because all of a sudden, you do start thinking about all these things and you learn to live with death, even if you don't like it a lot of the time. I don't fear death, I do fear the prolonged dwindling. Right, like that, the kind of ageing poorly without support in a way that I can't make the controls, and and you know, can't make decisions. That's much more scary to me than death. Death is kind of a great mystery. James: Your interaction with your mother, Tracey, led you to looking at voluntary assisted dying. What did people say about it? What was the general, when you first started to talk about it, when you first started to campaign for it, what would people say? Tracey: What I noticed was a disconnect, that people in the community overwhelmingly supported this because they’d seen loved ones die. But in our parliaments, I saw there a lot of people, a higher percentage than the normal population, are quite religious in our parliaments. Hannah: …Completely unrepresentative... Tracey: …Unrepresentative. And so a lot of organised religions are pushing back against it and therefore there wasn't an appetite for change because of that. I think it took these wonderful lobby groups to get the politicians to listen and for them to realise that there was a groundswell of support. And also, of course, with the examples in the Netherlands and Oregon and Canada who have quite different laws to us. But very successful laws. You rarely see people, I think it's 99.9% successful – only a tiny amount of people who are abusing the legislation, tiny, tiny – but the rest of it, everyone overwhelmingly aligns with it. So it's done in a very ethical and proper kind of way. James: So do you feel as though when you first started talking about it, really, most people were on board? It wasn't something, it wasn't one of those things where we're really trying to, we had to convince people. Tracey: No, that's right, except for people who were particularly religious. Because, let's face it, everyone, pretty much, unless you're quite young, has had a loved one die, so this is something that affected everyone. James: Yeah. I suppose I was wondering. Like someone, some friend, the other day, you know, how have you been, blah, blah, blah. And he went, ‘oh, I had a weird thing yesterday, like, my uncle died’. And I went, ‘oh, that's sad’. And he said, ‘no, no, it was voluntary, he did the voluntary assisted death. He died yesterday afternoon at two o'clock’, you know. I went, ‘oh, wow, you know, you're there?’ ‘Yeah, we're all there, and, you know, it was great, we had a lovely morning with him. We had dinner the night before, and then it just all took place.’ I said, wow, how amazing. And what I was really struck by was what a normal conversation this was. It was a bit like saying, ‘we went to holiday in Queensland’. You know, like it was sort of, he wasn't describing some outlandish thing, you know, it was suddenly this thing, suddenly voluntary assisted dying was just part of the fabric of our, of our lives. You know, do you feel that that's happened in Australia? Tracey: I do feel it's become more normalised, to your point, over the last 20 years. But there's still a lot of academic debate about at what, at what point should you be able to do it. At the moment in Australia, it's overwhelmingly someone with a terminal illness. And it's done by themselves or their doctor, their practitioner. But there are people who want to bring it in for people who are elderly and, and suffering and don't want to live any longer, to support them there. So we're seeing, I guess, a fragmentation of the discussion and the arguments. And I'll be interested to see which way that goes down the track. There's a lot of debate about people, to your point earlier with Alzheimer's, people who have dementia. Hannah: Sensory pleasures. Like, people being able to taste and smell and touch and hug become really important at the end of life. Tracey: Oh, that reminds me of someone I know who did have a good death, who was my grandfather, Mum's father. He lived until 94, and I cared for him towards the end of his life. Our kids were little then, they were probably 7 and 8. And he had that burst, and they said, come on in, he'll die in the next couple of days. We brought in oysters, we brought in red wine. I brought in the kids because I think it was important for them to see that, and he had a good death within the next 24 hours. So it is possible. I think it's rare, but it's possible. James: Yeah, if you know what's happening. A lot of your speciality, Hannah, is in Buddhism. What do Buddhists make of voluntary assisted dying? Hannah: Well, I will say that Buddhism is a religion with over 500 million people in it. So it's kind of like asking, what are the Christians? James: …Right. Right. Hannah: …or what are the Western people think about voluntary assisted dying? So, a range of views. James: Range of views. Hannah: Really huge range of views. James: I suppose I was just wondering whether there was anything in the Buddhist canon as such or the Buddhist, you know, view that just went, no, let life take its course. That, you know, you must experience suffering, so therefore you must experience all life. Hannah: Well, suffering is pretty important to Buddhism, right? And suffering well, and learning to suffer well, is really important. So there are some Buddhists who would oppose voluntary assisted dying because there's a prohibition against killing, right? But most people in Buddhism will, say, weigh that prohibition against killing against, kind of, the experience of suffering, right, and lessening people's suffering. So certainly there are some Buddhists who would say, no, you know, we need to experience suffering and learn how to experience the suffering at the end of life. And that can be quite instructive. It's also why some Buddhists may, uh, deny pain medication and even, you know, deny anything that kind of clogs their mind, because they want to be conscious at the end of life. They want to experience it all, you know, see where their consciousness goes to the next reincarnation. But there's also a, you know, a massive Buddhist movement that has always kind of seen humanity on quite a similar level to animals, right, that we are all beings of this world, and therefore in the same way that we would, you know, have compassion for the suffering of a pet and, you know, euthanase a pet that's going through unavoidable suffering, with many Buddhists who would therefore support the euthanasia of a human being that's going through suffering, right, in the same way. Because humans are not particularly special, right, we're just another being in this world and we'd want to show the same compassion for both of those. James: Yeah, yeah. Hannah: Huge range of views. James: Yeah. Tracey, you said, you said you're an atheist. Does that mean, you know, once the final curtain falls, that's it? Tracey: Well, I'm one of those very open-minded atheists, James, who, if I am diagnosed with something, I fully am open to the opportunity of religion if I end up needing it at that time. And I imagine a lot of people do that. And if, if I do decide to do that, I would choose Buddhism. Hannah: There's actually a fascinating piece of research that just came out, Professor Manning, a religious studies scholar, and she looked at older atheists and what they think about the end of life. Because we tend to think, well, religious people have beliefs, but we don't really study atheists’ beliefs, right, we just think they all think nothing. But she actually found that there was kind of three different kind of world views or narratives that came out, that can be summarised as: lights out, recycling, or mystery. James: I'm all three. I'm all three. Hannah: So the first one is this idea, it's kind of like – death is like anesthesia, you just, that's it. You're at the end, you know, there's nothing, and it's often very biomedical, right. It's like sleep, but you don't dream, so it's more like anesthesia. You know, we've all, maybe all experienced that, and that's what these people believe, that that will be the end. The second one is recycling. So this is the food for worms idea, right, that yes, I will die, but my, you know… Carl Sagan: ‘We are all made of stardust’, right, we'll go back into the universe and one day I will be an oak tree or a, you know, something, quite, you know, a beautiful idea, which I, you know, I think I subscribe to that, I quite like that. And then the third one that they described around atheists was just mystery. That, for a certain group of people, who knows? And we can't ask anyone. And so that it was, it was almost kind of curiosity and excitement towards the end of life. So there are, yeah, you know, this is quite a great mystery, it's a great adventure, right, that we should all go on. James: Yeah, fantastic. We didn't talk much about, I suppose, the emotion we might feel around death at various points. You know, like, I've observed lots of conversations on the radio where my parents' generation, ‘stiff upper lip’... Hannah: …Stoicism… James: …‘How's she doing? Oh, very well.’ Which means she wasn't feeling anything at all. There's been no, you know, like, that's sort of how you're meant to feel. We now tend to be very emotional about death, you know, like it's, like it's part of our funeral rites, I suppose, to release that, to make sure we all howl. Hannah: Yeah, we have this kind of catharsis model of the funeral, right, which is this idea that, you know, you kind of, even if you might not want to, you go to the funeral and you cry it all out with other people and you have this communal experience of grief. And somehow that is helpful, if not entirely necessary for our long-term grief. But, you know, there's many cultures around the world where wailing is a big tradition, right, so that, you know, women physically throwing themselves at the coffin, howling, collectively crying. You know, it might be an extended period of wearing a certain colour, wearing black, you know, gathering together. Those kind of rituals can also be a way for people to process grief and emotion. You think of, particularly like, you know, in the Jewish tradition of sitting shiva, right, that after someone dies, you immediately gather, right, and there's an extended period of everyone sitting together and dedicated to experiencing grief together. That's quite different to our kind of one-day funeral a week or two after the person's died, and we all go back to our home. Hannah: And it kind of depends on, like, what kind of level of social ties that your cultural society engages in the funeral, right. Do you have a very small private funeral where it's only the immediate family who are the ones that are supposed to be grieving? Or is it everyone you knew in that society, and you have a responsibility to go and be there because you're part of a much larger social fabric, right. And that can be quite different – it can be a 300 or 400-person funeral. You know, one of the largest social groups in Australia is South Asian, Indian, Hindu migration, right? Often extremely large funerals, 300, 400 people in some cases, right, because there's a different expectation about who are the mourners, who is the congregation, who are the people that gather together and stand against death, as it were. Tracey: Another big difference seems to me, and I'd love to hear more about you on this, is the cultures that sit with the body for three days, or have the open coffin for viewing… James: …the body stays at home… Tracey: …of the body, or the body stays at home. Because my sister and I sat with Mum's body for as long as we were legally and practically allowed to in the hospital, which was hours and hours and hours. And when we told a lot of our Western friends, they said what an awful thing to do. But it was really lovely because it cemented the idea that she was actually gone. We told her stories. My sister and I laughed. We cried. It was actually incredibly therapeutic. Hannah: Yeah, and this is one of the difficulties, is people feel, because they have a lot of… People don't have a lot of information, right, so if you're lucky, very lucky, then you'll organise maybe one or two funerals during your whole life, right, and probably there'll be those for your parents, right. And you just don't have a lot of information because we don't talk about it. So you don't know what you're allowed to do. But you know, in all states and territories across Australia, you are allowed to be with that body for an extended period of time. You're allowed to bring that body home. You know, you can actively resist pressures from the hospital and the hospice and everyone else to get you out the door. You can say, no, I would like to be with this body for a bit longer. And as you say, there is also technologies that can allow you to bring the body into the home. I mean, the reason we call them funeral parlours is the front parlour of the house. That is the room where we used to display the body and be with the body and that still occurs in many cultures around the world. You know, it's difficult; it can be difficult. It's not always the right decision, you know, you have to think about your particular circumstances, but it is possible. James: Yeah. Well, thank you so much. Any final words? Tracey: Only that I think we should all choose our own funeral soundtrack. I've been doing that with a girlfriend lately. James: …What's she gone with? Tracey: …Because, you know… well, I've gone with Edith Piaf. Hannah:…Ah, classic… Tracey: …‘No Regrets’, of course. Absolute classic. And my friend is still choosing from five. But I think, otherwise someone else gets a choice, and they might choose something terrible. James: Yes, no, I think that's very important, get your, get your, get your funeral songs sorted out… Hannah: Catering, funeral songs… James: …the whole soundtrack, the catering you'd be concerned about, you want everyone to have something… Hannah: … delicious. James: …any special cheeses or wines you want? Hannah: French. Yeah, this is what we did for my dad as well. It was like red wine, good French cheese, baguettes, you know. If you're going to grieve, if you're going to cry, you need some sustenance to support you. Tracey: Comfort food. Hannah: Comfort food, exactly. James: Yeah, very nice. Tracey: Before we let you go, what's your funeral song? James: Do you mean, what do I want people to hear as the coffin's going out or something like that? I don't know if I've made that choice yet. I don't know. Hannah: Hard rock? Tracey: Jazz? Hannah: Pop? James: No, it'll be something jazz, I guess, or something in that tradition. It's probably none of the Frank songs. Tracey: Something majestic, though. James: So yeah, ‘Zadok the Priest’, Handel… Hannah: …Oh, I like that. Old school. James: …Something huge! I haven't decided. Yeah, it's, it's but you're right. Like everything, do it, put some effort into it, you know, and have all that stuff ready for your children, for those that are going to have to do it, a little folder somewhere. Tracey: You could play some of your television clips from over the years. James: Oh, I don't think so, Tracey. I think yours might have something like… Hannah: …a highlights reel… Tracey: …a showreel! James: Yeah, my showreel. No, let's not do that. It's largely children's television, Tracey. No one wants to see that. Tracey: That would be great at a funeral. James: I could conduct a – I'd like to conduct a beyond-the-grave talkback session, probably, talkback radio or something. That could be very fun. Hannah: People could all call in to your funeral. James: Oh, I love that! Tracey: Interactive funerals! James: It's a ‘simil’ funeral. It's being broadcast on the station and then people can call in with their tributes. Oh, that's good. Hannah: Anything is possible. James: That is good. Okay, we've got it. Thank you for helping me sort that out. Hannah: We've done it. James: Well, thanks so much to our guests, Dr Hannah Gould and Tracey Spicer. You've been listening to Season 6 of Life's Booming, Dying Well, brought to you by Australian Seniors. Please leave a review or tell someone about it. If you want more, head to seniors.com.au/podcast. May your life be booming. I'm James Valentine.See omnystudio.com/listener for privacy information.

Let’s talk about death, baby From breaking the stigma to understanding the conversations we need to have before we die, beloved broadcaster and advocate Andrew Denton and clinical psychologist Dr Kerrie Noonan dissect everything we should and shouldn’t say about death. About the episode – brought to you by Australian Seniors. Join James Valentine for the sixth season of Life’s Booming: Dying to Know, our most unflinching yet. We’ll have the conversations that are hardest to have, ask the questions that are easy to ignore, and hear stories that will make you think differently about the one thing we’re all guaranteed to experience: Death. Featuring interviews with famous faces as well as experts in the space, we uncover what they know about what we can expect. There are hard truths, surprising discoveries, tears and even laughs. Nothing about death is off the table. Andrew Denton is renowned as a producer, comedian and Gold Logie-nominated TV presenter, but for the past decade he has been devoted to a very personal cause. He is the founder of Go Gentle Australia, a charity advocating for better end of life choices that was instrumental in passing voluntary assisted dying (VAD) laws across Australia. Senior clinical psychologist Dr Kerrie Noonan is director of the Death Literacy Institute; director of research, Western NSW Local Health District; and adjunct Associate Professor, Public Health Palliative Care Unit, La Trobe University. For the past 25 years she has been working to create a more death literate society, one where people and communities have the practical know-how needed to plan well and respond to dying, death and grief. If you have any thoughts or questions and want to share your story to Life’s Booming, send us a voice note – lifesbooming@seniors.com.au Watch Life’s Booming on YouTube Listen to Life's Booming on Apple Podcasts Listen to Life's Booming on Spotify For more information visit seniors.com.au/podcast Produced by Medium Rare Content Agency, in conjunction with Ampel -- Disclaimer: Please be advised that this episode contains discussions about death, which may be triggering or upsetting for some listeners. Listener discretion is advised. If you are struggling with the loss of a loved one, please know that you are not alone and there are resources available. For additional support please contact Lifeline on 131 114 or Beyond Blue on 1300 224 636. TRANSCRIPT: James: Hello, and welcome to Life's Booming. I'm James Valentine, and this season, we're talking about death. Or, on this episode, why we don't talk about it enough. Death is really easy to talk about, but avoiding the subject just makes things even harder. From breaking the stigma to understanding the conversations we must have before we die, I'll be dissecting everything we should and shouldn't say about death with two fascinating minds. Andrew Denton is the founder of Go Gentle Australia. A charity advocating for better end of life choices, but you probably know him better from so many shows on our TV. And Dr Kerrie Noonan is a senior clinical psychologist and social researcher, determined to increase our death literacy. Kerrie, Andrew, thanks so much for joining us. Do you know one another? Andrew: Yes we do. Yeah. Kerrie: Yeah, along the way. Andrew: We've had a few conversations about death, dying, literacy, all those things. Yeah. James: How did you learn about death? Like when did you, and who did you go to talk to? When did you start thinking about it? Andrew: Well, I think you learn about death the way everybody does, which is you experience it. And the first time it happened to me, I made a documentary about teenagers with cancer, Canteen, the support group, and one of those young men died. And his parents very generously invited me to visit him as he was dying. And that was the first time I actually saw what death can be. And it was, it was very hard to see and then watching my own father die obviously was a profound moment for me because that was an unhappy death. But how I've learned about it since is, I imagine a bit like Kerrie. I've had thousands of hours of conversations with people who are dying and their families and their carers. And, I've learned so much about death I feel I've mastered it and can move on. James: Yeah, true. That's right. Is that, is this what you mean by death literacy, that, that in some ways we just need to be talking about it more? Kerrie: It's, it's talking about it. That, that's one aspect. But it's, it's kind of developing your know-how and being able to put that know-how into practice. So, you can maybe talk about, maybe have some competency in terms of talking or maybe doing one element, related to death and dying. But, when you put it into practice, that's when death literacy kind of really comes to life. It kind of sits, some of the research we've done recently, it's evident that death literacy sits in networks, in-between people, within people, in communities, so it's not just about individuals. James: I suppose I'm wondering about at what point we might have this, or there'd be a difference in death literacy with 20-year-olds than there would be with 80-year-olds, right? Kerrie: Yes, experience changes your death literacy. That's probably the strongest predictor. So we started this research looking at networks of care and how people kind of come together. And so where we're at now is we're looking at what are the predictors and what are the things that we understand so that we can understand more about how to make more death literacy, I guess. So an example, that's your question, well I can give a real example. When my mum was in hospital, we were, we needed someone to help us to move mum from the hospital to home because we wanted to take her home. And we couldn't get the health system or the medical system to do that. So I put an email out, a text message out to my friends who happened to work in the death space. And within an hour we had someone, within two hours, mum was home. And so. That took, you know, that set off a little chain of conversations, emails, texts. And while I was doing that, my brother was getting the medication sorted and other things sorted for my mum. So we really, we utilised, to bring my mum home, we utilised like every bit of knowledge and our networks to do that. James: But you were at the centre of, you know, you, you study this, you're a, you know, an advocate for it, and so you're at the centre of it. You would have a network. I mean, I don't know that I've got the same network. I'd, I could put it out to my friends and they'd go, we could bring wine. Oh, you know, like, I don't know that they'd, I don't know that they'd be that practical. Kerrie: But that's actually helpful too. You need your friends to turn up with wine and, and bread and whatever comforts. So we found that younger people, for example, so we've done two kind of national studies just to kind of demonstrate your point about younger people. Between, 2019, pre COVID, and 2023, we looked at the population and we looked at death literacy and how it changed. And we found that voluntary assisted dying and COVID had an impact on people's death literacy, particularly for the younger people, anyone who's experienced a death, anyone who's been through loss, has higher death literacy than people who haven't. And so, there's lots of things that contribute to that, but, COVID, I think, we're still kind of looking at the data, but certainly voluntary assisted dying because of the way that you need to kind of have conversations, you need to actually reach out to your networks, you need to talk to doctors, you know, there are actually lots of interactions in that that really stretch your skills and, your understanding. James: It's only a few generations back when death was very present in our life. The conversation about voluntary assisted dying has perhaps allowed us to have that conversation again. Have you seen that? Andrew: Yeah, I think that's right. I mean, there's, there's a lovely, witty observation that in Victorian times they talked about death all the time and never about sex. And today it's the other way around. It's not that many generations ago where the body would lie in the house and there'd be a viewing in the house. And so it was, it was a more human thing, the way Kerrie's describing her friends helping her mother come home, that's a communal and human thing. And when I talk about voluntary assisted dying, I must and I want to bracket it with palliative care, because really, despite the fact politically they were oppositional during the legislative debate, they're very much on the same end of the spectrum, which is we're all going to die, and the concept of palliative care, which is also the same idea of voluntary assisted dying, is not, ‘Let's get you to the dying bit, but how do you live as well as you can while you are dying?’ And that dying process could be very short or it could be very long, it could be several years. You, usually you can't be really clear. So the whole point as Kerrie said about voluntary assisted dying and palliative care is you talk about these things. And interestingly, I think there's a paralysis around death, and you know, you said, well, my friends wouldn't know what to do, they'd bring wine, as Kerrie said, that's no bad thing. But if you put out a call to your friends to say, I need to move my fridge, somebody's going to say, I've got a ute. James: Yes. Andrew: …your need, perhaps, to leave hospital and go home, that's the same question… James: They might have a ute. Andrew: …It's just, it's just a human question, which is, I need help. And not only do we get paralysed in the face of death and assume that the experts have the answers, but the experts often get paralysed in the face of death. They don't know how to have those conversations either. So one of the things that voluntary assisted dying absolutely has done, and there was a, a geriatrician in Victoria who said to me. He was ashamed to admit that voluntary assisted dying had made him understand how limited his practice had been, in that he had subconsciously only been asking questions of patients that he had an answer to: How's your pain? James: Right. Andrew: I can treat your pain. What are your symptoms? I might be able to treat your symptoms. Whereas what he asks now is, how do you feel? What is life like for you? That's a much more holistic question. What is it that you need? If we can't help you with it, maybe someone else can help you with it. So I think it's about transcending that paralysis in the face of death. Which is natural, but the greater group that you can talk with it about, the better. I still remember a woman I met several years ago. And she said to me from the moment her husband was diagnosed with cancer to the moment he died, he refused to talk about it. And the, it was like a sliver of ice stuck in her heart because she was frozen in that too. James: Yeah, yeah. Kerrie: Yeah, and I think what we, what we found in a lot of our research too, Andrew, was that, carers were often, had massive networks that the person who was dying didn't know about… Andrew: Right… Kerrie: …as well. So I think that's, that's the other thing, about some of these conversations is that, once you know that you've got community who's up for the conversation or up for whatever around you that a lot of carers are, can have that access to other people. James: And you mean the person dying doesn't know because they don't ask, unless they're talking about it, then no-one thinks to bring it forward? Is that what you mean? Kerrie: Yeah. I think what happens in that situation is a carer can become quite isolated like the dying person. If they don't want to talk about it, there actually are still practical things to organise. There are still things, where are the passwords? How do you get into the bank account? What bills need paying? Andrew: I'm trying that with my wife all the time and she's not even dying! Kerrie: That's right. They continue but you don't get to have the conversation with the person. Andrew: Actually, Geraldine Brooks, a beautiful author, her husband Tony, who is a friend, he died very suddenly, dropped dead in the street, and he was young, in his early 60s. And she's just written a book about this called Memorial Days, about that whole experience. And that's the strongest piece of practical advice she gives, which is, prepare for your death by helping others. James: Yes. Andrew: Like, leave the passwords, explain how these things work. The best things I've learnt about the idea of preparing for death and thinking about death, actually I'm pretty sure came from some of your literature, Kerrie, which was the idea of an emotional will. And an emotional will is not about, to you James, I'll leave my ute. It's actually about, to you James, I'm going to leave, my favourite city in the world. Limerick in Ireland, and here's some money for you to go there, or to you James, I'm going to leave these five songs, which mean something to me. It's actually about, well this poem, it's about gifting something of spiritual life value as opposed to an object. James: Yeah. Following the, the, the legislation in New South Wales, now pretty much in every state, Andrew, where, what do you see now? What do you see in our society now? What do you see happening? Andrew: Look, there's still the same paralysis and fear about death. I think that's, that's kind of natural. You know, one of the people on our board of Go Gentle is the former federal president of the AMA, who's a neurosurgeon, and he said when his dad was dying in hospital, he was afraid to ask for, you know, more help because he didn't want to be annoying. So, you know, I mean, this is the head of the AMA. To me the big question is not so much, how individual families or individuals respond even though it's very important. To me the big conversation is within the medical professions. And I don't actually say that critically. Because we're all equally struggling with the concept of the abyss. And I think, it is an acknowledged problem in healthcare, of futile care at the end of life. It's giving a 90-year-old a hip replacement, for example, just over-treating. Because of the, I've heard it described as ‘doctor as hero’. You know, we give, we give doctors, quite reasonably, a special place in our society. Because we ask special things of them. But part of that training is, we must win. We must treat. When I was first told this by a doctor in Oregon, when I went there. When they said, oh, we see death as a defeat, I actually laughed. I thought they were joking. I said, it's… James: You know you can't win. He turns up with that scythe at some point. Andrew: So I think there's a much broader conversation about what is dying, and how do we have that conversation with people who are dying. And I think… James: I suppose I just thought, I have had a couple of conversations recently with people who have a relative or parent who has gone through voluntary assisted dying… Andrew: Yes… James: …And what I noticed was the way they talked about it, in a sense, wasn't much different to, oh, we went to Europe. You know, we had a nice trip. Like, it was very normal, the way they said it. They went, I was at my uncle's death yesterday. Andrew: It can be. It can be. You know, dying affects different people differently. There are people who have gone through the voluntary assisted dying process who totally support it and are very glad it's there, but still found the experience traumatic. It's not a silver bullet. James: Right. Andrew: It doesn't, it, it's merciful, and it's peaceful, but it doesn't, it certainly doesn't remove grief, and it doesn't remove, for many people, the unreality of dying. We hear many, many testimonies of families deeply grateful for the way in which they are able to say farewell. And I think that's a very important part of voluntary assisted dying. A genuine ability to say farewell. But people are different. There's one man that insisted, who used voluntary assisted dying, and insisted that he be only with his doctor. And the reason he gave, which I find both beautiful and heartbreaking, he said, ‘I don't want the love of my family holding me back’. So, you know, I always maintain when I talk about this. James: [sigh] I felt the same thing. I did the same thing. I know. You know, huge. Andrew: Whenever I've talked about this, I've always maintained, none of us know how our dying will be. All we know is that it will be hours and hours alone. And I think that's why I struggle with, that philosophy that somehow or other, that, our dying is about society at large or about some universal rule that we might be breaking if we don't do it the right way. James: Kerrie, you know, I sort of want to acknowledge that you've been through death quite recently, that your mother died only a few weeks ago as we're having this conversation. As someone who's then spent their life studying this area and thinking about this area, what have you learned from the death of your mother? Kerrie: It looks similar to what Andrew said before about his colleague, the doctor. Like, well, I went straight to the practical things, didn't I? Like, it's a kick, grief's a kick in the guts, let's face it. Knocks you on your butt. James: And we are very practical in those first weeks, aren't we? At the moment of death and afterwards. Kerrie: Just the other day, when we dropped my daughter off to uni, I went to text my mum, as I would usually do. And text her the photo of her in her dorm. And I think this is, you know, I was really glad of my experience because I just sat there and cried for about five minutes, actually. I just needed to blubber and cry. I could have sucked it up. We could have just, you know, driven on. But actually it was really helpful just to really deeply acknowledge that moment. That was the first time. That I'd experienced that real sense of wanting to, to, communicate with her. Andrew: I hope it won't be the last time you hear her cry about your mum. Kerrie: No, it won't be. It won't be. But when she died, because of the work that we had done, I didn't cry initially. Andrew: Yeah. Kerrie: And this is this individual kind of experience of going through this. I didn't, immediately cry. I felt intense relief for my mum. And so I was just reflecting on that. I was like, ‘Whoa, I'm not crying’. The other thing that is, is on my mind is that it took an ICU doctor on the day that mum… So mum had three MET calls. And if you don't know what a MET call is, and you're listening to this, this is where every registrar, every emergency person on call, runs to the bed of the person who is, who's crashing. James: Right. Kerrie: …and she had three of those. And by the end, I'm glad I wasn't there because I hear that mum was very distressed. James: Right. Kerrie: And it took an ICU doctor to sit down with her and go, what do you want Maureen? James: Yeah. Andrew: Yeah. Kerrie: And mum said, I'm done. And so it didn't matter that I'd done that with the doctors, multiple times, or that she had an advanced care directive, clearly stating, do not give me, treatment that will prolong my life. It didn't matter that all of those things were in place. What mattered, was that ICU doctor who absolutely, compassionately just stopped everything and talked to my mum. And it's a pretty brave thing when your heart is failing and other things are happening in your body to say, no more, I'm done. Because that does, that's a decision about you only have a certain amount of time left in your life then. So, that doctor changed the course of my mum's dying. And, yeah, I'll never forget that. And then the compassion at which she called me to talk with me about what mum had decided. And the checking. The difference – one of the other things that I found – the difference between a doctor with really, like, person-centered communication skills and someone who's focused on getting the job done. They ring and say, ‘Hey, I'm caring for your mum. I'm caring for your person. What do you understand about what's happening?’ James: Right. Right. Kerrie: And every time, they did that… James: …they want to listen to you first, yeah. Kerrie: …Yeah. Every time they did that, it just gave me an opportunity, even though I know this gig, I've talked a hundred times on the other side of that conversation with people, but it just made me realise the just incredible, that empathy, you feel it in your bones on a whole other level when someone is truly going, ‘Tell me, tell me your story, tell me your bit.’ And, that was, that was a big learning and a big reflection as a health professional, as someone who's been there. The other thing, sorry, you cracked that open, didn't you? The other, the other part was, no one asked, me or my brother, about, about our experience, our previous experiences, and who we were, and what we did, and who were these children taking their mum home. My brother's a nurse. I've worked in palliative care for a million years, and it was a really interesting thing having to, like, I just wanted someone to go, Hey, have you done this before? And maybe I'm being a bit biased there because that's something that, because I've got a death literacy lens over things. And I'm always interested in, Hey, what have you done before? Hey, what experiences do you want to bring to this one? What do you know about what you're facing? What do you want to know about next? They were all the questions that I would be asking if I was working with someone. I really wanted someone to ask me those questions. Andrew: In a palliative care setting, you would probably have been asked those questions, you would hope. Kerrie: I hope so. Andrew: In a general hospital, maybe not. I think that speaks to two things, what we're talking about, which is paralysis in the face of death and, a sense of we just treat, we treat, we treat. This is what we do. Everybody's terrified of being accused somehow of not having done enough. So I think there's that. And, the doctor, the ICU doctor you described, that strikes me as a perfect piece of medicine. And it, it absolutely accords with what a beautiful nurse said to me in South Australia some years ago. She was very emotional. She was, she was recording a piece for us about why there should be voluntary assisted dying. It was always instructive to me that the ones that really advocated for it were the nurses, because they're the ones that see the suffering. And she just said, ‘Why can't we do the right thing, human to human?’ And that's why I see this as a multi-generational discussion within the health profession. It's not that people in the health profession aren't humans or don't get that, but it's not how they're trained. And, but I also think it speaks to the pressures on the health system too. Kerrie: Yeah. Andrew: In the same way as we're talking about aged care, even though we have a much healthier health system than, say, America, it's still pressured. And we know, we hear stories from hospitals all the time of, resources that are built but not used or resources that are used but are stretched beyond reason, and so I think it's a reflection of all those things. But there was at times, and I think sometimes we don't talk about this enough, is paternalism in healthcare. Andrew: Can I explain that?! James: Yeah, that's right. Andrew: Sorry. James: Oh yeah, we covered that Kerrie, us blokes know all… Andrew: Please, do go on. Kerrie: Oh, there's a lived experience. [laughter]. Oh, yes, that. Andrew: No, I'm sorry, please do explain. James: …which you ably demonstrated… Kerrie: So, that, yeah, like paternalism, we just don't have a critical kind of conversation about paternalism in healthcare. And there's, you know, there's that difference between really great care. And then, but if you just kind of tip it a little further into ‘Hmm, do you really want to do that? Oh, don't you want to be the daughter, not the carer?’ You know, like there are, there are kind of, there are particular things that happen in healthcare that, that we don't, we aren't critical enough, is what I'm saying. I don't know what the answer is, but I would like the system to be more critical about, about some of those things that perhaps they take for granted a little. And, look, sometimes it would be maybe permission for a family to kind of, yeah, be the daughter. James: Well, even in my experience, my cancer experience in the last year or so, I've now done several talks at doctors conferences and things like that. And what, what sort of strikes me as funny about it is I go, ‘We’re thinking of taking an interest in the patient's perspective, perhaps you'd like to come talk about that?’ Patient's perspective. Is this new? Andrew: You know, I, I went on Q&A, about VAD quite early in my advocacy, which was a terrifying experience, by the way, and, and there was a, another fairly prominent doctor who was strongly in opposition, and I, I completed what I had to say by basically saying, you know, doctors, it's, it's time to listen to your patients. And this doctor, who's a very good writer, wrote this excoriating piece in a magazine afterwards, just accusing me of being patronising towards doctors. And I'm thinking, that's patronising? I mean, the worst example I know of this, there was a, a former AMA official and, they held a debate on this internally in 2016, that I had a link to and I, so I watched it. And he was a, a geriatrician, and a senior doctor. And somebody on the other side of the debate, because he was opposed, had put to him that there's a great public support for this. And he said, and I'm, I'm quoting pretty close to verbatim, he said, ‘That's why we're paid $200,000 a year. We make these decisions.’ And that's, so I think there is significant paternalism. There was another, a female oncologist who wrote a piece in The Australian against these laws, and even though it wasn't her headline, it was what she meant. The headline was, ‘Autonomy, it's not about you’. And you know, going back to what I was saying, there cannot be a more, you-focused experience than your dying. I don't care what your religion tells you, in the end, only you are going there when it happens. James: You've given, is it a decade now, to this? Andrew: More, I think. James: More, you know. Again, I suppose, what's your reflection on that? I sort of feel like I'm framing the question almost, are you glad you did that? You know, is that… Andrew: There are times, and I'm sure Kerrie would agree with this, there are times I think, you know, I've had enough death, thank you very much. Andrew: But I would have to say it's been the most brilliant second act for me after showbusiness, far more meaningful to me. The correspondence I've had and the conversations I've had, have been so privileged, and the gratitude that we as an organisation, Go Gentle, receive from people whose families had the option of voluntary assisted dying is immense. And, so yes, I am glad. And certainly I view this as the real work that I've done, not whatever I may have done in television. Perhaps if I'd won a Logie, I'd feel differently about that. James: I think you peaked at [1980s show] Blah, Blah, Blah, quite frankly! Andrew: Yeah, I think so, and it was all downhill after that first year, exactly! James: Yeah, well, I almost feel like I need to go and have a good cry. It's been, a beautiful discussion. Thank you so much for, uh, sharing it with us here on Life's Booming. Andrew: Can I ask you a question? Before you just wound up, you're getting teary. James: Yeah, yeah. Andrew: What are you feeling? James: I'm taking a deep breath to calm, so I can't talk, not necessarily to squash it. I'm always surprised when it comes up. I, I never quite know when I'm going to get teary. And sometimes it's, it can happen on air, like sometimes if someone starts talking about death or a relative, and I'll be listening to it and I'll suddenly go to speak and go, oh, the emotion's right there, you know. So, I'm not entirely clear. I think I'm moved by Kerrie, and sort of wanting to experience your grief in some ways, deal with that. Or I feel like, I think I'm feeling that you, you holding it in, sort of that, you know, we need to sort of let that, let that go a bit. So, it's interesting. I think I'm moved by your work as well. Look, we have a funny connection over many decades, and to observe you go through, deal with, deal with, you know, to see you transform into doing that work has been quite extraordinary. And I'm probably just contemplating my own death. [laughter] Andrew: And, exactly right, James. And during the height of COVID, quite unexpectedly, a very good, friend of mine, he rang me from Victoria and we knew his wife had pancreatic cancer, which is obviously a very tough diagnosis. And then he said she's chosen VAD and she's going to die in this state. And despite all the thousands of hours spent in that debate to get that law passed in Victoria, which was the first one in Australia, and it was an absolute brutal knife fight of a battle to get that law passed. For some reason, it had never occurred to me that somebody who I knew and loved was going to use this law. James: Yeah, right. Andrew: And I remember, despite everything I knew about it, on the day, Jennifer and I, we got our whisky glasses. We poured a whisky. We lit a candle. But I remember thinking as the clock ticked down to the moment, it felt very unreal to me. But the strong emotion that I felt at the moment, knowledge in the moment of her dying was not that she had died. It was actually about just the richness of life. Oh my god, life is so rich. And that's what I felt. I just felt, wow, life. Kerrie: I think that is what you say there is so deeply important because one of the reluctances around talking about death and dying is not being able to maybe lean into some of that feeling around that richness of life. When we were going through photo albums, there were photos there that, you know, that we'd never really taken notice of before. Damn, we wanted to know about them now. Who were they? Who are these people? Where are they now? It does connect you to life in a very profound way. And all of the messiness of that. And that's, I think, only a great thing. Watching my children, 22 and 17, be with their grandma. We did a very, a simple thing. Put a comb, a brush on the end of her bed. And mum used to love having her hair brushed. And we just said to the kids, just brush her hair, if you want. Andrew: That’s gorgeous… Kerrie: And so that just very simple action just then gave them something to be with her while she was dying. Andrew: Human to human. James: Yeah. Kerrie: Yeah. And my children did that many times, while she was dying. And, and that's when we would sit and talk about what we did with Nanny and things. And we, you know… So it's worth leaning into. I guess that's the other thing. It's worth getting the whisky out and having a think about, about, about these things and reflecting in on it, and how, and what it means to you and what you want to do. James: Thank you. Kerrie: Thanks. Andrew: Thanks, James. James: I'm gonna cry. Andrew: Come on. Let's hug it out. Come here. James: Exactly. It was very good. That was a beautiful moment. Thank you. Thank you. Thank you. Thanks to our guests, Andrew Denton and Dr Kerrie Noonan. You've been listening to Season 6 of Life's Booming: Dying to Know, brought to you by Australian Seniors. Please leave a review or tell someone about it. Head to seniors.com.au/podcast for more episodes. May your life be booming. I'm James Valentine.See omnystudio.com/listener for privacy information.

In this episode of the Just Schools Podcast, Jon Eckert interviews James Blomfield from the International Forums of Inclusion Practitioners (IFIP). They discuss his work in inclusive education, the importance of Universal Design for Learning (UDL), and the global challenges and opportunities in creating truly inclusive schools. Blomfield shares insights from his visits to Texas schools, highlighting student engagement in career and technical education programs. The conversation also explores the role of artificial intelligence in education, the shift from inclusion to belonging, and the power of networks like IFIP in connecting educators worldwide. The Just Schools Podcast is brought to you by the Baylor Center for School Leadership. Be encouraged. Mentioned: The Curriculum: Gallimaufry to Coherence by Mary Myatt How Change Happens by Duncan Green The Name of the Rose by Umberto Eco Connect with us: Baylor MA in School Leadership EdD in K-12 Educational Leadership Jon Eckert LinkedIn X: @eckertjon Center for School Leadership at Baylor University: @baylorcsl   Jon Eckert: All right, so we are blessed to have James in our podcast studio. He flew all the way from the United Kingdom to Waco, Texas, to be on this podcast. So James, tell us a little bit about what you've been doing here in central Texas these last couple of days. James: Yeah, I've been spoiled. I've just had the best cheese and ham roll, ever. I can tell you a lot about Texan food now. And brisket. But the quality of the experiences, the visiting the schools, meeting you at Baylor has been a terrific privilege. I'm very grateful. Yeah, today, this morning, in fact, we visited three schools in Waco Independent School District. We were shown around by the loveliest people, Adam, Caroline, and Christie. I think Adam and Caroline are on from your doctoral program. Jon Eckert: Yes. James: But they're like institutional coaches. I gather. We would call them improvement offices where I come from, but they had such a light touch. They knew everyone. They were so friendly with people, and I gather that they are also about compliance, but with the coaching aspects. So they were great. And the three schools we went to, we were Midway yesterday, which was amazing. And then this morning, Bells Hill Elementary, Cesar Chavez, and then GWAMA, Greater Waco Advanced Manufacturing Academy earlier. And yeah, what impressed me was speaking honestly as an English person, it is shocking to see police in a school. Very quickly, I was unaware of them. But we have our own issues in the UK with knives and all sorts. But the staff were, despite that, throughout just so calm, friendly, loving, and attentive to the students. Asking them, talking to them in front of us. And some wonderful experienced people, trauma informed. There was someone who was training to be a social worker this morning who just came out of her office and gave us a short speech without any preparation, speaking from the heart, talking about what she was doing, how much the children matter. If you've got people like that, then you are going to be doing the right stuff. So yeah, I was impressed. But also from the type of education, obviously Texas is massive. The school footprint, I've never been into such big schools, even the elementary and yesterday with Midway, that was the biggest school I've ever been in. It took us a long time to walk around. And all of the stuff, like this morning at GWAMA, we saw robotics, drones, they have the construction academy, welding, forklift truck driving. Yesterday we saw them building an airplane. When I was doing metalwork at school, it was for like a baked potato holder. They were building an airplane. And I would love that as a student. I would be inspired by that even if I was building a small part of the airplane. Rebuilding tractors yesterday. So that's practical. That's 21st century teaching, but visible, practical, hands-on. Jon Eckert: And then the engagement that you see that's possible there through starting a cafe restaurant through the airplanes. Just to be clear to the audience, the students are not doing this on their own. It's a two-seat airplane that would be like a Cessna, and they have engineers coming in to help build. I still am not going to be the first person that volunteers to fly in that, but it was impressive to see. And I do feel like in central Texas, there are a number of schools doing a lot to try to meet the needs of the community by educating kids in ways that engage them, use the skills that they've been given, help them become more of who they're created to be in a way that benefits the community. And even the principal yesterday, Allison Smith, was sharing about the new factory that's coming in that's got a gigantic footprint, and it's going to be a huge benefit to the tax base. Before they came, they met with the high school to see if there were ways that they could integrate some of the needs they have with what the high school's developing in their students. Because at Midway, about half the students go on to a post-secondary education. And so there have to be opportunities for kids to step into things that allow them to be gainfully employed and meaningfully use the skills that they have. And many of the kids were doing things that I couldn't even fathom doing. And they're just leaning into it and gaining expertise, which is for 16, 17, 18 year olds is truly remarkable. James: Isn't that also a bit like a UDL mindset? If the manufacturer comes in and has that intelligence to ask about what would you need? What would be helpful? And then you're designing the education from the ground up. Jon Eckert: That's it. And I'm glad you brought up Universal Design for Learning, because that's something that we haven't really gotten into. Why you're here and what you do in the United Kingdom, because we actually, Eric Ellison, met you a while ago. But you were the reason why we were at a UNESCO conference in Paris where we got to work with educators from six continents that were all interested in UDL and what it means to educate each kid around the world. And there's 250 million kids that don't have access to a school. And then we're in these amazing schools where the biggest schools you've been in that are offering all these different opportunities. And so we're getting to see it, but what does it really look like from your perspective, from your organization as it relates to UDL? James: Yeah. So interesting, I am a teacher, head teacher, classroom teacher from some 25 years. And for me, it's all about practical teaching and talking to parents, making things work. But at a very practical level. And one thing that drew me to my organization, which is the IFIP, International Forums of Inclusion Practitioners, was that when I met Daniel, who's a fabulous person to work for, it's much more practitioner based. It's all about pedagogies. I felt at home straight away. But also, how do we train teachers? How do we bring them on into inclusive practice? And the IFIP is all about the voice of teachers. Daniel would say inclusionistas, all manner and range of people, teachers, specialists, therapists, but parents as well, who are committed to a more equitable and enriching education. So the majority of what we do is training. We have things like our GITI program, which is a global inclusive teaching initiative. But we do events. And that's something that Daniel, one of his strengths, he speaks all over the world. He's written many books. We were so, so grateful to have the event at UNESCO in Paris. So we were co-hosting. Daniel had been talking about that for two years beforehand. And we didn't believe him. He made it a reality. He dreamt about it, and it happened. And the same more recently in Brazil. We went to the G-20 ministerial meeting. He was talking about that. So he sees things and it falls to me to follow behind him and try and make some of the practicalities work. But yeah, the inclusion piece covers so many flavors. And I think what you mentioned just now, we talk about inclusion. Well, if the 250 million aren't in school, well, that's a level of inclusion that puts lots of other schools into a completely different context. Where does the inclusion start? And even in some of the schools I visited, I've been very lucky to visit schools around the world who would say they're inclusive and they may have a sensory room, or they may have, but they aren't necessarily inclusive. But for me, one of my favorite schools I've visited was in Rome, [foreign language 00:08:28], Our Lady of Good Counsel. It was run by Silesia nuns. And they said in the words of their founder, Don Bosco, "Young people need not only to be loved, but they need to know that they're loved." And it's very reassuring as a practitioner, a teacher, former head teacher, to come here to Texas and you see that. You see that palpably going on. And I feel at home. The elementary school this morning, because I was a primary school teacher, it was just like, I know this. I understand this. I could probably take a lesson. But they had some great ideas. And teachers, I'm a teacher, you love stealing good ideas. Jon Eckert: Well, and I think this is the beautiful thing about the jobs that we get to do. We get to see all the amazing things that are happening in schools. So much of what's in the news and what gets publicized are the things that aren't working. And the tragedy that there are 250 million kids who don't have access to schools, that is tragic. But in schools, there are amazing things happening all over the world. And getting to see them is this encouraging, oh, it gives you hope. And I wish more people could see that. I do think there are challenges though, because when we think about inclusion, we've moved as a country toward inclusive education, the least restrictive environment for students, and bringing students into a place where they can flourish. But we really, as Erik Carter, who runs our Baylor Center for Developmental Disability, you met with him yesterday. He talks about moving from inclusion to belonging. And I think we even need to think about belonging to mattering. So you keep hearing more and more about what does it means to matter and seeing your gifts being used with others. And that's what we saw yesterday. It wasn't individual students. It was teams of students doing this and each member of the team had a different role, whether it was robotics or it was the plane or the cafe. And the educators needed to step in. So the principal was talking about, I need an educator who's willing to step up and do this so that this can happen. And that's the thing that I think people that haven't been in schools for a while don't see what it means to really help kids belong. They have a sense of what inclusion was, maybe when they were in school, where there was a class down the way that was a Sensory room, which is a nice room for just, here's where we're going to put a kid who's out of control that we can't manage in so many places. It's like, no, there's so many schools that are doing so much more than that. So what are some other hopeful things you've seen through IFIP? James: Well, I think, yeah, you see a lot and on social media, and you must have found this, there's so much many aphorisms about inclusion and metaphors about what inclusion is. It's a mosaic. It's a banquet with many tastes. It's symphony orchestra with many sounds. Inclusion is a garden. That's quite a good one actually, the metaphor. And that's something that Sir Ken Robinson from the UK has talked a lot about. And there's lots of analogies with growing and flourishing, which that's a word you've taught me in my visit here. But I do feel sometimes that it is all good to talk about that. I don't disagree. But there's some recently inclusion makes every day feel special. Yeah, it does. Inclusion is the antidote to the division in the world. It is. But will that help the early career teacher struggle with their class? Will that give them the practical steps that they need? So I think all of those things are true, and we must love the students. But I would say that's just comes a standard with being a decent human being. I would expect that from you, from anyone. You treat people with a respect. But for me, I feel more inclined to say, what are the practical professional steps? What's the pedagogy? What are the teaching principles that will help me to, as we were saying yesterday, maybe to hesitate before ask another question in class and listen. And listen. That's inclusion, isn't it? Wait for someone to answer and maybe then not say anything. It's actually stepping back. So for me, I'm very impressed by... I mean, I was brought up on quality first teaching, we would call it in the UK, which is about high quality, inclusive teaching for every child. So you mustn't differentiate in a way that you've got the low table. No one wants to be on the low table. You want to have high challenge on every table. And we used to say, you want your best teacher on the lowest table. It's not like you just put a teaching assistant or some volunteer on the lowest table. It's got to be focus lesson design, involvement, interaction, metacognition. So responsibility for your own teaching, for your own learning. Sorry. And I love the dialogic approach. Someone said yesterday, Socratic circle that I've picked up. But it's like you would encourage a child to talk about what they understand because very quickly then you assess what they actually know. Sometimes you'd be surprised by what they know. But for the same reason, UDL appeals to me, to my sensibility, because it offers very practical steps. And crucially at the design stage, it's not like I'm going to apply this assistive technology to a lesson I created a year ago and will do the best we can, and that child will now be able to do more than they could. But if I design the lesson, and one of our colleagues, Helena Wallberg from Sweden, who was a co-author on the Global Inclusive Teaching Initiative, she talks about lesson design. It's a far sexier way than lesson planning. So teachers are professionals, they're artists. They need to use their profession. Jon Eckert: So when you start thinking about design, I use Paideia seminars because Socratic seminars are great, but Socrates taught one-on-one. We don't usually get the luxury of doing that. So how do you bring in the gifts of each student, not so that you're doing something kind or helpful for that individual, but so that the whole group benefits from the collective wisdom in the classroom? And so the inclusive education is not to benefit one single individual, it's to benefit all of us because of what you draw out. And that's where design, I think, is more helpful than planning. And so when we think about this in this state that we're in right now, we've never been in a better time to educate. We have more tools than we've ever had. We know more about how people learn than we have in the history of the world. James: Yeah. Jon Eckert: And yet sometimes that can make things feel overwhelming. So that beginning teacher that you mentioned. The only thing that beginning teacher knows is no one in the room learns exactly the way she does. That's all you know. And so then how do you use tools... And we've talked a little bit about this artificial intelligence. Amazing tool for adapting reading levels, for adapting basic feedback, for giving an educator a helpful boost on lesson design because it can synthesize from large language models. It can do work that would've taken us hours in five seconds. But it can't replace the human being. And so how do you see tools like artificial intelligence feeding into UDL so that it becomes more human, not less? James: So where I am, there's a shortage of specialist teachers, for example, and therapists. And Daniel's been doing a lot of work in India and parts of Asia where there isn't the expertise. So I think maybe AI can help in those places. But even he would say that will not replace a specialist. You can never replace a specialist who has the intuitive and curiosity to see what an AI system can't. But it may empower parents who have no kind of training as a teacher might have for neurodiverse situations of how do I deal with my child when they're like this? And similar for teachers and who are looking for... They've tried everything. What do I try now? So we've been working on one on an AI system that's based on all of the research that Daniel's done. It's not released yet. We've got a working title of 360 Assessment, which doesn't really mean anything, but it was meant to be assessing the whole child. And he's, through his work in many schools over many years, many thousands of hours, he's put all of this stuff into the data for the AI system coupled with his books. So when you ask a question, it will do a quick spin round and come back with some suggestions. And it's quite fun to use, I think, as a tool to empower parents to signpost them. And for teachers, it's a useful tool. I don't think it's the panacea, but I think you have to use these technologies sensibly. But my daughter, who's a nursery nurse, and she tried to break it by saying, oh... We tried it, the computer. My child is two years old, but can't pronounce S. should I be worried? And it came back with the correct answer, said no, there's nothing to worry about. Up to four years old, some children won't be able to pronounce the sound S properly. And then it gave her the advice that she would give, because a manager of a nursery nurse, the advice you'd give to her staff. Now all of her team have just started that. None of them have any experience. So that, I could see, could be useful for training numbers, the ratio of good advice to people. That's the way I see it working in the short term. Jon Eckert: No, and I think that's great because it enhances the human's ability to meet the need of the human right in front of them. Because I will always believe that teaching is one of the most human things that we do. James: It is. Jon Eckert: And so any way that we can enhance that with any tool, whether it's a pencil or an artificial intelligence tool that allows you to give feedback and synthesize things and help with design. I also believe we just need to give credit where credit's due. I don't love it when we don't give credit for tools that we use. So if you're using UDL, they're a great people cast. We're about to have a call with them later today. They do great work. And so the same thing. If you have a digital tool, share that so that we know here's what we did and here's how we can spread that collective expertise to others. And so what role does IFIP play in bringing networks of people together to do that? Because in your convenings, that's one of the main things you do. So can you talk a little bit about that? James: Yeah. Well, in the title if you like, in our forums, one of the things that Daniel is very keen on is sustainable growth. So we want to introduce people to each other. And it's surprising with head teachers and principals who struggle. I've just come back from Brazil from a UNESCO GEM, which is a global education meeting, where the focus was on the quality of the leadership. And we need to give, empower our leaders. They're often working on their own. One of the roles of the IFIP is to join them together. So we're launching in January at the BET Show, which is the biggest technology show in the world, apparently, in London Excel Center, our Global School Principals Forum. So we have a forum for them. We have a forum for specialists, forum for pastoral leads. And we've also got regional forums of South America, North America, Asia, just to try to bring people together. Because when you share the experience, and I've been really grateful this morning for the opportunity to walk through and see some American schools that you share the ideas, you see the similarities. That's the power and that's so important. Jon Eckert: No, and that's been our experience. Whether we're just in the states or internationally, there's so much good work going on. We just need to have ways of connecting human beings who are doing it, so it doesn't feel like it's another thing to do, but it's a better way to do what we're already doing. And so I feel like that's what UDL does. I feel like that's what IFIP is about. And that the most meaningful part of our time in Paris at UNESCO was not in the panels, it was in the conversations that happened over lunch, in the hallways. The panel may have sparked a conversation, but it's hey, what are you doing here? And what are you doing there? And I walked away with multiple connections of people that we'll continue to talk to because, again, there's so much good work going on. Yeah, go ahead. James: My memory of the... Because it was a very stale affair, wasn't it? And the bureaucratic approach, UNESCO, because you feel like you're a United Nations and lots of people talking were sat down for hours and hours, was when you lifted your hand and actually ask a few questions. That's inclusion, isn't it? Eric was saying that people who were leaving the room walked back in to listen because that was interesting and someone was asking them how they feel and bringing it back into reality. That's so important. But I also think inclusion, there is an interesting power dynamic with inclusion. A guy called Michael Young who's a professor of education at UCL, talks about the right for all children and young people to be taught powerful knowledge. What knowledge are we giving them? How are we empowering them? So I think inclusion is all about discovering your power within, if you like. That's so important so that they begin to see. And some of the teachers are saying this morning, kids know what they see, what they've experienced. And if you introduce new ways of dealing with anger or with pain, they don't have to fight. They don't have to resort to what they've necessarily seen. Then give them new strategies. That's empowering those children. Jon Eckert: Well, and Adam and Caroline who were taking you around, they're behavioral interventionists. And they are always busy because there are kids that are struggling with how to manage the feelings that they have. And if they don't have people giving them those strategies, how do they grow? And again, that's very human teaching, and Adam and Caroline are great models of that. James: They were wonderful. So good, and it was the light touch that impressed me. Because I've worked with, as I say, school improvement offices. And the trick is not to push people down. It's to make them think twice about what they've done or how they could ask a question better. And their observations of the displays on the walls and just the language teachers and teaching assistants use has a profound effect. I do believe that inclusion is about the students look at the way their teachers behave. It's nothing to do with this pedagogy or the post. It's about how did they respond to me? How did they respond to the other person in the class? What's important to them? How do they talk? That's the inclusion that you teach. Empowering them to make the similar choices when they're older. Jon Eckert: That's well said. So our lightning round, I usually ask four or five questions that have relatively short answers. So first one, what's the worst advice you've ever received as an educator? James: Oh, as an educator? Worst advice. Jon Eckert: Oh, it could be as a human being if you want. James: Well, when I was young, my dad had many qualities and taught me many good things. But one of the worst things he said to me was, "Don't use your money, use theirs." So he would borrow money. And that got me off to a terrible start in life. And I learned through my own experience that it was better to use... Well, I was always using my own money. Jon Eckert: Yes. Yes, okay. James: But I could use it better. But bless him because he's no longer with us. But that was one piece. Jon Eckert: No, that's a tough start. James: Yeah. Jon Eckert: Thank you for that. What's the best advice you've received? James: The best advice, I think, was to go back to university. Jon Eckert: Okay. James: I dropped out of school to get engaged, because that's what you do when you're 19. And I was going to get married, but it didn't happen. And then I went to do a summer job, which lasted for 10 years. Jon Eckert: That's a long summer. James: But my blessed teacher, Michael Brampton, who gave me a love for painting, history of art, he kept on pestering me go back to university. I went back as a mature student and loved it. I think people should start degrees when they're near in the thirties because you appreciate it so much more. Jon Eckert: Yes. James: So that advice he gave me led to such a change in my life. Jon Eckert: Yes. Well, and then you went on to get a degree in art history, philosophy, then a master's in computer science. So you went all in. James: Yes. And that took me into education. And the time I went in, there weren't many teachers that were doing anything with computers. Jon Eckert: So as you get to see all this around the world, what's the biggest challenge that you see schools facing that you work with? James: I think it's manpower. Jon Eckert: Okay. James: I think there's a real manpower issue and belief that school can make a difference. I think one of the things that we believe in IFIP is that positive change is possible. And sometimes it's shocking going to schools. And if you do make people see that the positive change is possible, it transforms them. So advocacy, shared vision. And one of your colleagues was saying this morning, just changing the mantra can make a profound difference. Jon Eckert: Yeah. So what makes you the most optimistic as you get to see all the schools all around the world? James: Yeah. Well, I've just come back from Stockholm in Sweden, and I was really, really impressed by the school there. It was one of the best schools in Stockholm. It was a school that had in their entrance hall, you'd expect it to be very austere and you don't want to see any bad stuff in your entrance hall. But they had a table tennis table set up and they had a piece of found art or hanging above. And it was the whole sense of the school's about children started there, about young people. But in Sweden, it's all about sustainability. Everyone is expected to clear up after themselves, be mindful of other people, respectful. Even in the hotel where I stayed, I had to sort my rubbish in my room. It's that approach that starts from not just in school, across the board. Jon Eckert: Yeah. James: So that impressed me. Jon Eckert: Yeah, that's a beautiful example. One of my favorite schools outside of Nashville, Tennessee, they don't have custodians that clean up the building. They have 20 minutes at the end of the day where the students do all of the cleaning, including the bathrooms. Which you start to take care of stuff better when you're the one who has to clean it up. And the peer pressure to take care of it shifts a little bit. So it's a great word. All right, one other thing. Oh, best book that you've read last. James: Can I give you two books? Jon Eckert: Absolutely. James: I mean, I've got into fiction in a big way recently. So I use Audible, the app. Jon Eckert: Oh, yes. James: And I've been working through all kinds of classics that I never read properly. Just reread The Hobbit and Tom Sawyer. But I've gone through... The Name of the Rose stuck with me recently. I so enjoyed reading it. And I've just got into Robert Harris. He's written Conclave, which has just come out as a feature film. And a series of books called Imperium about Cicero and Oratory and how the Roman Empire was lost. But they aren't the books. Jon Eckert: I love that. Go ahead. James: But the two books, one is by an English specialist called Mary Myatt. And one of the really practical books that she wrote was The Curriculum: Gallimaufry to coherence. Gallimaufry is a word, I'm not sure if it's Gaelic, but it means a mess. So going from a mess to coherence. And that book is all about how it's important that children struggle. That learning only happens. We try to protect kids all the time that way. No, they should struggle. You imagine if everything's easy. And then she says this, if everything's easy, it's hard to learn. There's nothing to hold onto. There's no scratch marks. You need some of that. So Mary Myatt, that's a brilliant book. The other book is by Duncan Green called How Change Happens. And that's all about this idea of power. And he talks about power within, that's your self-confidence power with when you've got solidarity with people. Power to change things and then power over people. But it strikes me that as he shows in his book, where you've got instances where you've got the 'I Can' campaign in South Asia, all about women who were being violently treated by men, reclaiming their self-worth. It's like invisible power. Where does it come from? The change. You can't see any difference, but inside they've changed dramatically to stand up collectively against something. And that's what we need to do with students. Build that self-power inside. Jon Eckert: Great recommendations. And we talk a lot about struggling well and where that fuel comes from. And so, love that book by Mary Myatt. I'll have to get the spelling of that from you when we get off. My also favorite thing about that is I asked for one book recommendation and I wrote down at least seven. So, well done James. All right, well hey. We really appreciate you coming over. We look forward to potentially doing a convening where we get to bring great people together who want to work on serving each kid well in this way that benefits all of us. So hopefully that will happen sometime in the coming year. But really grateful for your partnership and a chance to go visit schools and have you on the podcast. James: Thank you so much. I really appreciate it. Thank you.  

The following is a conversation with Erin Kenney, the CEO of Nutrition Rewired. Erin is a registered dietitian with a Master's in nutritional science. She's done an amazing job in building a business that helps people take control of their lives through modulating their diet, improving their gut health and ultimately looking after the gut microbiome. Today's conversation was far-reaching. We talked about fibre, We talked about gums, we talked about artificial sweeteners, carbohydrates, fats, proteins, and supplements. This was pretty much an A to Z of what to do to look after your gut health, what works and what doesn't.  I wanted to take this opportunity to thank all of the listeners and supporters of the podcast for everything you've done to help us build the name, and the brand, and to get the message out there around microbiome being critically important and gut health being important for wider body health. Timestamps: 00:00:00 Introduction 00:01:19 How Erin became interested in gut health 00:04:32 Biggest impacts on Erin's health 00:06:09 Stress and gut health 00:09:22 Does caffeine give us energy? 00:14:46 Bone broth instead of coffee 00:16:06 Coffee and our liver 00:16:48 Taking control of gut health 00:18:42 The role of a good breakfast 00:21:55 Lean muscle mass and women 00:23:07 Importance of protein 00:26:32 Role of supplements 00:29:35 Creating an optimal regime 00:32:33 Ketogenic diets 00:38:34 SIBO 00:46:24 Microbiome testing 00:49:00 Vitamin D 00:51:51 Green powder supplements 00:55:19 Heavy metals 01:01:38 Artificial sweeteners 01:05:58 Gum instead of gluten 01:10:18 Palm oil 01:12:20 Nutrition Rewired   Full Transcript: [00:00:00] JAMES: The following is a conversation with Erin Kenny, the CEO of Nutrition Rewired. Erin is a registered dietitian with a master's in nutritional science. She's done an amazing job in building a business up that helps people take control of their lives through modulating their diet, improving their gut health and ultimately looking after the gut microbiome. [00:00:24] JAMES: Today's conversation was far reaching. We talked about fiber, We talked about gums, we talked about artificial sweeteners, carbohydrates, fats, proteins, supplements. This was pretty much a A to Z of what to do to look after your gut health, what works and what doesn't. I really appreciated how simply Erin put lots of complicated topics for the listener. [00:00:49] JAMES: She podcast so that might explain why she was such a good guest. This is an amazing episode for anyone who's wanting to enter into this field, but we also digged into some [00:01:00] technical aspects, and I learned a lot over the course of the conversation. This is Inside Matters. My name is Dr. James McIlroy. I hope you enjoy it. [00:01:16] JAMES: So how did you get interested then in gut health? [00:01:19] ERIN: It was a very selfish Journey for me, I, from a very young age, struggled with digestive issues. They had to take me off of being breastfed when I was a baby and got on to formula fed. And, you know, I was struggling with a ton of digestive issues. And basically they just slapped me with a diagnosis of lactose intolerance. [00:01:42] ERIN: And basically what most of my childhood, struggling with horrible pain, horrible bowel movement. I will honestly say that a majority of my childhood was spent in the bathroom because Of how bad things were with my gut and [00:02:00] I really didn't have much help, you know, it was kind of just, you know, let's watch out for dairy and let's watch out for, you know, triggers and things like that, but it was kind of just, you know, take elodium and, and hope for the best. [00:02:13] ERIN: So, fast forward, you know, as I started to get older, I was a full time athlete, I was, you know, in high school, and really wanted to start taking care of myself. I struggled with mental health issues, I lost my father to his battle with mental health struggles, and it started to connect with me that on the days when my stomach was at its worst, my mental health was also at its worst. [00:02:42] ERIN: And so I was starting to make these connections and, you know, learn and, Spent a lot of time on Google, which, you know, we all know is not a reputable source of information. But nonetheless, I was, I was interested in, in seeking alternative ways to help [00:03:00] support my body. And when I went to college, I didn't really know what I wanted to major in. [00:03:05] ERIN: And I thought, you know, nutrition sounds like something that I could use some support with, considering everything that I'm going through and. You know, the things that I've read online and from there on out, it was just about healing myself. I learned, you know, after being on a decade of medications from birth control to fix the hormone imbalance, from PPI's to address the chronic acid reflux, you know, it was just being thrown medication after medication because doctors were just treating symptoms. [00:03:40] ERIN: So I, I've dedicated all my time to researching about, you know, the gut microbiome and nutrition. And then I was in school for nutrition. And I started following people in the field who were talking about these things, talking about the gut microbiome, talking about how nutrition impacts mental health. I [00:04:00] just lit up, you know, it was, it was like, for the first time in my life, someone was speaking to me and, you know, I felt validated too, for so many years, it's like, oh, it's just all in your head, you just gotta, you know, stop eating dairy, and I have now, Basically built a business on helping individuals get to the root cause of their digestive issues and imbalances because of everything that I went through. [00:04:25] ERIN: So I'm incredibly passionate about what I do and I'm just really excited to chat with you today. [00:04:32] JAMES: So what were some of the key things then as you went along your own journey that made the biggest impact to your own health? [00:04:39] ERIN: I will highlight a very important one that I think a lot of people don't consider and that's stress. [00:04:45] ERIN: It's Uh, you know, there was a lot of stress in my life and I was kind of putting that on the back burner as something that, yeah, you know, I'm stressed, I'm, you know, working out intensely and doing all this stuff, but that [00:05:00] can't, you know, that's not going to make a huge difference. So I really had to prioritize stress as one of them. [00:05:06] ERIN: Diet, as we all know, you know, is incredibly important. My diet was Not supportive of what I needed for my body. I played around with a plant based diet, and I have no shame for anybody who is, who loves their plant based diet, but for me it was not the right fit. I needed a plant forward diet, but I also needed protein. [00:05:30] ERIN: I needed to really hone in on, like, focusing on diversity of what I was eating. I was eating a lot of the same things over and over again. I think a lot of us can get into a rut pretty easily with that. And then I learned, you know, how much diversity our gut needs in terms of the microbiome. So stress, diet was huge. [00:05:50] ERIN: And then I had to address imbalances. I had small intestinal bacterial overgrowth because I was On proton pump inhibitors long term, I had yeast [00:06:00] overgrowth. Uh, so a lot of these things I learned from stool testing and I was able to Going [00:06:09] JAMES: back to the stress then. So how do people identify if their stress levels are too high? [00:06:15] JAMES: And you mentioned exercise, maybe exercise is a double edged sword. If you do too much, it might be actually a big stress on your body. So what are your tools and tips then for stress management? I guess a little bit is good for you, right? But too much is detrimental. [00:06:31] ERIN: Sure. Yeah, we call that eustress, right? [00:06:33] ERIN: It's that, that, that period where you're kind of in that Goldilocks sweet spot where stress is, is beneficial. It helps us grow. It's good for inflammation. But in terms of my own journey, I, I would love to say that I had this like, you know, lovely revelation of your stress and you need to pull back. It was. [00:06:53] ERIN: One of those moments, I say this to clients all the time, it's if you listen to your body when it whispers, you don't have to hear [00:07:00] it when it screams. And I was at the screaming point where I was running seven to ten miles a day and You know, I got to a point where I couldn't barely even walk because I was just like so obsessed with how exercise made me feel, how good it was for my mental health. [00:07:16] ERIN: So I was basically forced in to loving yoga. It wasn't love at first. It was a, it was, it was not love at first. It was a rocky relationship to begin with, but I thought this is the only thing I can do. Yoga is the only thing that I physically can do that's going to support my mental health and I just fell in love with it. [00:07:37] ERIN: And to this day has always been an incredible stress management technique for me because not only do I get to move my body, but I'm doing it in a way that's not inflammatory. I'm doing it in a way where I'm, I'm like feeling everything of what's going on in my muscles and how tight I am and breath, right? [00:07:57] ERIN: I'm breathing. So a lot of times [00:08:00] people will say, I'm just not good at meditation. And I'll say, well, have you tried yoga? Have you tried walking or yoga? Like those are also forms of meditation because you have to focus on your breath. If you're in a down dog position and you're sweating and you're tired, the only way you're going to get through that pose is that you're going to breathe. [00:08:20] ERIN: So meditation has been, meditation and yoga have been incredible assets to my healing journey, but also just the way that I Manage my stress now and also just the awareness of what is my threshold for stress and what are some of the signs that come up for me when I know I've hit my breaking point and become more irritable towards the people that I love. [00:08:45] ERIN: My sleep starts to suffer. My digestion starts to go off a little bit. So these are kind of my. Red flags of, Hey, Aaron, let's check in with yourself. You might be doing a little too much. So are those [00:08:59] JAMES: [00:09:00] the sort of whispers then before the screams, the irritability, the sleep? Yeah. [00:09:05] ERIN: And for females to even males, people think, yeah, changes in hormones, like you'd notice changes in your menstrual cycle or your libido, like those types of things can, can also take a hit when you're dealing with chronic stress. [00:09:22] JAMES: Cause I guess a lot of people think, Oh, well. You know, I'm a little bit tired today. I'll just drink more coffee or I'm a little bit sore today. I'm just gonna train more But what you're saying is maybe you need to just slow down to perform [00:09:34] ERIN: better. Exactly. And I also love to talk to clients about how caffeine actually works. [00:09:41] ERIN: Caffeine doesn't give us energy. It actually blocks these adenosine receptors in our brain. And these adenosine receptors are like those little whispers of us hearing the signal that we're tired. And once that caffeine wears off, those [00:10:00] adenosine receptors don't go away. They're still there to then tell our brain, hey, we're really tired. [00:10:07] ERIN: So I always Tell people that, that you're not giving yourself more energy by loading up on caffeine, you're decreasing your perception of how tired you are, which is allowing you to push through something, whether it's a workout or a long, you know, night at work. And over time, especially your body is going to shut down. [00:10:33] JAMES: As an avid coffee drinker, I'm sort of running through my head, am I drinking? I'm not listening to the whispers, but have you got recommendations then for your clients around coffee and caffeine, like some rules or suggestions in terms of when to drink, how much to drink? Cause that could be really interesting for the listeners on Inside Matters. [00:10:52] ERIN: My number one tip is that, and I say this to clients, you have to eat a full breakfast before you have your [00:11:00] cup of coffee. And when we do this experiment, sometimes my clients will say, after I had, [00:11:10] ERIN: they'll say, I didn't, I didn't even want my cup of coffee after I had my breakfast. And it's because we're not using artificial fuel, right? We're eating. Some nice eggs with, you know, some sweet potatoes and avocado and, you know, we're energized and now we don't have this craving for a stimulant. And I'm not shaming caffeine completely, especially coffee. [00:11:36] ERIN: There's numerous health benefits in addition to the microbiome, but it's, it's evaluating that relationship with it. And so. So I always say, no coffee until you've had a, a, a full breakfast. Coffee does not count as breakfast. I tell them no caffeine after noon. Uh, the researcher, Michael, is it, oh, Matthew Walker. [00:11:58] ERIN: He talks about [00:12:00] metabolism of caffeine and, you know, the half life and how long that caffeine can stay in your system. And You could be laying in bed at night if you had your cup of coffee at 3 p. m., and you're still metabolizing it in the middle of the night, impacting your quality of sleep, and then the cycle just starts again, right? [00:12:18] ERIN: You wake up, you're exhausted, you're groggy, and that's because That's You know, that the later in the day that can impact your sleep. [00:12:27] JAMES: So someone maybe like me who wakes up in the morning and finds a way over to the coffee. I know myself. It just, it's like part of the routine and I kind of love it to be honest, but so someone's addicted to that morning routine and they come to you and they become a client. [00:12:45] JAMES: How do you get them to break that cycle and get into the routine of. I don't know, maybe cold shower and then they come in, they've had their breakfast, then they have their coffee. Is it a slow process or do you just say, right, that's it, cold turkey. [00:12:58] ERIN: I'm never, [00:13:00] I'm never militant with my clients ever because I'm also human and the I also understand that, you know, when we make changes, that they don't need to happen overnight and it certainly doesn't usually feel good to our nervous system or mental health wise when someone says, just cut it out. [00:13:17] ERIN: And now, don't get me wrong, I've got clients that are all or nothing and they just, when I tell them generally what I've just told you, they'll say, forget it, I'm cutting it out. I want to do this, I want to do it perfectly, that's type of person. Right. So when we, when we start, you know, I, I get to know what their relationship is like. [00:13:36] ERIN: I had a client one time and she had this, you know, whole setup in her house. The whole side of the wall was dedicated to coffee. So for the client like that, we're going to say, okay, you know, let's. Maybe switch to a decaf or switch to, you know, less of a serving and put more, you know, almond milk in it to just cut down on the, on the portion. [00:13:56] ERIN: And then we, we work our way towards, uh, maybe after [00:14:00] breakfast, but there's lots of alternative things that you can do to still have that routine. So I'll, I'll just give my example. I drink a bone broth, hot chocolate in the morning and that bone broth, hot chocolate. It doesn't, you know, contain loads of caffeine. [00:14:16] ERIN: It's still got the gut health benefits. It's still bitter because of the cacao. And so I drink that it's got 20 grams of protein and it's warm and it's, it still gives me that so people can find, you know, there's all these like, you know, medicinal mushroom type of blends and things like that. So if you can find something that you like. [00:14:36] ERIN: That isn't that, you know, bursts of caffeine and acidity to your stomach on an empty stomach, then that might help the transition be a little bit easier. Thank [00:14:46] JAMES: you so much for that example. Mark, who's one of the hosts here at the podcast studio has bone broth and cayenne pepper. Okay. There you go. In the morning. [00:14:56] JAMES: Yep. And bizarrely, I was speaking to him on Tuesday because we're [00:15:00] planning for the week and we're talking about you. Um, and I said, cause he was drinking in the same type of Yeti coffee mug as me. And I was like, Oh, nice mug. Like you're one of the good guys. Um, is that a coffee? He explained that no, it was just his bone broth and it's part of his routine to get, you know, great nutrition and in the morning and it's still warm. [00:15:18] JAMES: And as you say, it sort of feels like a coffee, but it's not really a coffee. So. Um, I'm going to go for it. I'm going to start my day with some bone broth. [00:15:27] ERIN: I expect a report back. I'd love to hear from you. [00:15:31] JAMES: I'll give you a report. I can't promise to stop the coffee. That's not the goal. I might go from two shots to one shot. [00:15:39] JAMES: I think two shots to one shot. That's success. You know, you mentioned the health benefits of coffee. It's really interesting. I've had several people come on. So one of them was Professor Debbie Shawcross, who's like a leading authority on, on liver health, basically saying drink more coffee because for some reason it's protective [00:16:00] against, um, cirrhosis and, uh, non alcoholic fatty changes. [00:16:05] JAMES: So there's, there's something in there, isn't there? [00:16:06] ERIN: This, I think there's so many, there's so many asks. Aspects of it. I think, you know, you and I are big into gut health, right? So we're probably gonna always look at it from a gut health lens. And, you know, my scientific brain goes to, well, you know, coffee helps people have a bowel movement, right? [00:16:22] ERIN: It stimulates the liver and digestion. And if we're having regular bowel movements and, and stimulating that process, that's great for the liver, right? We don't want, that's good. You know, sluggish digestion. So just one of the many, I mean, there's, there's antioxidants in there, there's. The polyphenols that feed beneficial bacteria and you know, the liver and the gut are most certainly connected. [00:16:48] JAMES: So could you maybe walk the listeners through some of the other things you try and help your clients with? So you mentioned stress, diet, maybe we can unpack diet a little bit more because that must be huge. We hear. In terms [00:17:00] of. You know, taking control of your health and your microbiome and your gut. [00:17:04] ERIN: Sure. Yeah. As a dietician, you know, people expect that we just focus on food and we, we often do. There's not usually one client that comes in that there's not something diet related that we're talking about and everyone's starting at different ends of the spectrum, right? Some people have no knowledge that. [00:17:23] ERIN: You know, they're not even getting nearly enough protein. They're not eating any vegetables, you know, that, that kind of standard American diet where a lot of processed foods, you know, a lot of refined grains that aren't providing any fiber or nutrition. So there's so many different ends of the spectrum of things that we work on. [00:17:41] ERIN: And then you have, you know, clients who have overgrowth or SIBO, like SIBO, for example, small intestinal bacterial overgrowth, and they're eating super clean. You know, air quote clean, where they're not touching your processed food. They're loading up on fiber because they've been told, [00:18:00] fiber, fiber, fiber, if you want better gut health, eat more fiber. [00:18:04] ERIN: And that's making them feel worse. So there's that end of the spectrum where we have to. obviously address the underlying root cause, but we need to simplify their diet, make it easy for them to break things down a little bit, give their gut some rest. And then there's the other spectrum where, you know, I have a woman come to me and she's eating one egg for breakfast. [00:18:25] ERIN: And I'm saying, where's your protein? She said, well, I haven't had an egg for breakfast. I said, well, one egg is six grams of protein. We need 25 or 30 grams of protein to start our day. Right? So there's, there's all these missing links. [00:18:42] JAMES: We've talked about breakfast quite a lot then because as you know, within the sort of wellness health sphere, there's this debate around intermittent fasting and it sounds like you're very much in favor of, you should have a really great nutritious breakfast with macronutrients to set you up [00:19:00] for the day. [00:19:01] JAMES: Is that the case? So you're big, big on breakfast for you and your clients. [00:19:06] ERIN: So for me, yes, I, I've always tried to adopt that my philosophy on my own nutrition and what I think makes me feel best is not going to determine what I think is best for a client. And I think that's really important. I think a lot of, you know, health professionals, it's, you know, they find something that works for them or works for some of their clients and then everyone should do it. [00:19:28] ERIN: Now. Do I often, would I recommend intermittent fasting to people? No, it wouldn't be my first recommendation for the majority of people that I work with. I have worked with clients and most of those clients end up being males who do really well with intermittent fasting. Maybe it's males or oftentimes it's women who are post menopause and they have specific goals, maybe related to body composition and hormone balance. [00:19:55] ERIN: And they found that these practices of intermittent fasting in whatever [00:20:00] fashion make them feel really good. A lot of these are CEOs of companies that like, they love the focus aspect of it during the day. And, you know, so I'm just going to come in and I'm going to work with them and say, Well, if this works for you and you're not, Uh, binge eating at night and feeling like you're deprived during the day and you're getting good nutrition and you're fast, you're feeding window, then I'll work with you. [00:20:23] ERIN: We'll work with where you're at. But the majority of my clients, you know, especially those that are female and they're still cycling, this can really disrupt their hormones. It can disrupt their ability to work out during the day. And so we have to really personalize that if it's going to be part of the protocol and, and the research that I've seen, my biggest concern is the body composition. [00:20:46] ERIN: I've seen the loss of muscle mass be a potential and I think that's a huge issue for a lot of people, right? We all need nice lean muscle mass and if fasting, you know, if we continue to see research that [00:21:00] fasting negatively impacts our lean muscle tissue, I don't love [00:21:04] JAMES: that. Yeah. I mean, intuitively it makes sense, right? [00:21:08] JAMES: You stop consuming calories, you've got no protein intake, therefore there's no amino acids moving around. So it kind of makes sense that your body is going to look for energy. Yeah. And I guess muscle is, is, is a target is probably less desirable than, than fat and certainly your glycogen stores kind of make sense that it forms part of that source of energy that we need. [00:21:32] JAMES: Our bodies are incredible. I'm just on the muscle mass thing. Oh yeah, absolutely. And on the muscle mass thing then, you know, I guess maybe some women listeners might think. It doesn't really apply to me. You know, that's for men that lift and train and work out, but that's not the case, is it? It's, it's just as important, maybe even more important. [00:21:54] JAMES: I, [00:21:55] ERIN: I'm a, I'm not a buff woman. Okay. I, I [00:22:00] get, you know, up to 130 grams of protein per day. And I'm not, you know, what, what people, a lot of women would think I would turn into by eating as much protein as I do. But I will tell you. Some things about me is that I'm very strong, very strong in the gym. I have a good lean body mass My hormones are balanced. [00:22:20] ERIN: I don't have cravings for sugar throughout the day. Those are the things that protein does for us. And so I think we need to understand that from a, you know, biochemical aspect, protein is essential. It is protective. It increases our metabolism. It's the only macronutrient that has a higher thermic effect of food like that. [00:22:41] ERIN: That's incredible. So we, you know, just old school recommendations that always seem to sneak their way into further generation. [00:22:50] JAMES: So, um, how does someone know, I mean, if they're not got the benefit of working with an expert dietitian like you, how do they know if they're on the right track for protein? And in [00:23:00] addition to like the actual macronutrient gram per day recommendations, how important is the source of protein for people? [00:23:07] ERIN: Hmm, that's a great question. So we have two different types of protein. We have a complete protein, which is basically a protein that combines all of the essential amino acids, which amino acids are the little building blocks of what protein is. And essential, meaning our body needs them to survive and to produce the daily functions and live optimally. [00:23:30] ERIN: So that's, that's an essential amino acid. That's a, that's a complete protein. Those Food sources are things like meat, fish, eggs. These are animal proteins. And then you have the incomplete side where we have incomplete, and these are going to be plant based foods. There are a few plant based foods that are complete proteins, but the majority, things like beans and lentils, these are not complete proteins. [00:23:55] ERIN: So they're just missing a few of those amino acids that we need for [00:24:00] essential daily living. Now, this doesn't mean that non complete proteins are not beneficial, but the requirement of how much you would need per day slightly goes up because the digestibility, how able we are to digest these proteins, is not as efficient, you know, if you were to eat eggs or a piece of fish, for example. [00:24:24] ERIN: So my approach is try to get some really good quality complete proteins in your diet and also get some incomplete protein sources in your diet, like lentils and beans and nuts and seeds, if that's something that works with, you know, your individualized physiology. But this idea that everything has to be a complete protein, I think is also, you know, too far left because, you know, bone broth isn't a complete protein, but it's still an excellent source of protein. [00:24:53] ERIN: And I'm still going to have, you know, salmon for dinner, and I'm going to hit my Total, you know, amino acid needs for [00:25:00] the day, if you will, [00:25:01] JAMES: and the total amino acid needs for the day. How does one calculate what they may or may not need? [00:25:07] ERIN: That's a great question. So the amino acids themselves, you could use something like I think chronometer might do this on a very, you know, specific level. [00:25:17] ERIN: I don't know if it goes that into detail, but we look at the total grams of protein as a dietitian, you know, so we're looking for Usually around 1.2, up to two kilograms, sorry, grams per kilogram per day of protein for each person. So the minimum, like the USDA requirements for protein, we're talking 0.8 grams per kilogram per day for a person. [00:25:43] ERIN: Uh, however you need to convert that, but it's what 0. 8 is not a recommendation I use for any of my clients. We're always going above that, especially when my clients are more active or they're looking to optimize their body composition. We're looking closer to like, uh, up to one [00:26:00] to two grams per kilogram. [00:26:03] ERIN: So that's your, that's your goal is to really figure out like what is that number for you based on your body weight and then how can you spread that throughout the day. You know, you don't have to completely spread it evenly, but I usually just tell people to make it easier. Get 25 to 30 grams at each meal and then adjust, you know, add to that to meet your needs and then add snacks where appropriate. [00:26:27] ERIN: But that's a good baseline if they're kind of starting from ground zero. [00:26:32] JAMES: That's an amazing summary of protein. Thank you so much. How do supplements fit into that? And I'm asking you in the context of this minimally processed versus like ultra processed food debate we have all the time. So some people say, Oh yeah, whey protein supplement contains the essential amino acids. [00:26:50] JAMES: Go for it. But other people say, Whoa, it's so processed you shouldn't have it. So what are your thoughts then, um, on supplements and How do [00:27:00] they fit in? [00:27:01] ERIN: I think supplements can be great. I think they have a time and a place and you know, a lot of the time is convenience is, is a big reason, you know, for somebody that has a protein goal of 180 grams per day. [00:27:15] ERIN: You know, meeting that might be really challenging if they're not throwing in some whey protein into a smoothie or a shake. Whey protein is excellent. Yes, it's processed, but so is your oatmeal and your brown rice and your ground meat. Like everything is processed. And if you choose grass fed, you know, protein powder, a whey protein powder with minimal ingredients that maybe just has whey, maybe some, you know, sweetener and something to Add some salt or whatnot. [00:27:43] ERIN: But if you have like a three ingredient protein powder, it's high quality grass fed, and you add that to your smoothie, you're doing wonderful things for your body. So I think it, it really comes into when you see these, you know, those, you know, body building companies always start these protein [00:28:00] powders and it's , you know, strawberry cheesecake or cookie dough. [00:28:03] ERIN: Yeah. And. I used to eat these. I'm not, I'm not saying I've never tried them. They do taste good. They do. They taste just like they say they do, or at least when you're, you know, eating healthy, they do. And, you know, that's when we get into the long list of ingredients. We see, you know, binders and gums and artificial sweeteners. [00:28:24] ERIN: And we see, you know, things that can really not make us feel good, especially from a gut health perspective. So a good quality You know, one that's been maybe tested for heavy metals, things like lead that can be common in plant based protein powders, arsenic. If we get a good quality protein powder, minimal ingredients, uh, high quality testing, ask for the certificate of analysis from the company. [00:28:51] ERIN: Then, you know, you're, you're, you're gonna help yourself out if you're struggling to get your protein intake. Thank you for [00:28:57] JAMES: that. I've, I've got so many things written down to ask, you know, I'm [00:29:00] actually not even sure where to start. Fibers, gum, sweeteners, heavy, heavy metals, other macronutrients. Before I jump into sort of more supplements and sweeteners and the heavy metals, I'd kind of like to. [00:29:16] JAMES: Round off the diet piece with you more generally. So maybe talk a little bit about fiber, um, fruit and veg, talk about carbs and fats. Yes. You know, when you're working with all your clients and for yourself as well, how do you build like an optimal diet? Big question. [00:29:35] ERIN: Yes. No, it's, it's a great one. How do you create like an optimal regime? [00:29:38] ERIN: Absolutely. So we start with again, base, like we kind of find this base for people to start. And that's where the three meals per day comes in. You know, if someone's not used to eating breakfast, we're going to try to get them to start eating breakfast, lunch, and dinner, or we can call it meal one, meal two, meal three, whatever your schedule is like. [00:29:56] ERIN: And at that meal, we're aiming to get again, that 25 to 30 grams of [00:30:00] protein. We want to hit. half a plate of vegetables that are colorful, usually like darker leafy greens tend to be an area that a lot of people struggle. So we try to look for those dark pigments. And then the other portion of that, usually I say like a fist of carbohydrates minimum at your meal. [00:30:18] ERIN: And we try to choose carbohydrates every meal and we try to choose carbohydrates that are more complex. So things like. higher fiber carbs. So if you're looking at a label, you're going to see fiber there. But if you're just in the produce section and you're looking at carbohydrate sources, potatoes have fiber, both sweet and white potatoes. [00:30:37] ERIN: Uh, things like quinoa, plantains, bananas. These are all sources of carbohydrates that are very nutrient dense. If a client's more active, those carbohydrates Intakes might go up. We might be consuming more carbohydrates per day. Um, and then fat is, is incorporated into those meals. We, we try to focus on healthy fats, particularly omega [00:31:00] 3 fats. [00:31:00] ERIN: So things like wild caught salmon, we're looking at things like mackerel, sardines, herring. These are omega 3 rich fats that we have to get two to three servings per week. So we've got three meals per day, protein, vegetable, carbohydrate, healthy fats included. And then, then we kind of go from there. We say, okay, are you working out? [00:31:22] ERIN: Okay, well, we need a pre workout, post workout routine. And how can we adjust there? Um, you know, you're training for a marathon. Okay, your carbohydrate needs go up significantly. We're going to have to adjust that. But once we have that base, you know, and, and You don't have to focus so much on the grams of fiber, although we are aiming for about 25 to 35 grams per day, if you're choosing complex carbs, if you're choosing half your plate of vegetables, then you're likely going to hit your fiber needs for the most part. [00:31:53] JAMES: It's going to happen, right? It's going to happen just by default, you know, because it's quite difficult to [00:32:00] find the fiber on the foods and to figure out. [00:32:04] ERIN: Yeah. And if you're focusing on it, we're [00:32:08] JAMES: sorry, there's a bit of a, a bit of a, a like you. Please continue, please. [00:32:13] ERIN: No, no. I was just going to say, so if you're focusing on getting the majority of your foods from less processed foods, then you're again, likely to hit those fiber goals because you're going to be choosing those types of fruits and vegetables and things like that that just naturally come with, you know, the, the benefit of the fiber. [00:32:33] JAMES: Absolutely. I'm going to just push you a little bit, um, on. Ketogenic diets and people even go more extreme and they have these um, carnivore diets. They're great. And you've been quite clear in your recommendation around you should have some carbohydrate with each meal. So, could we just unpack that a little bit and what some of the, you know, why is that part of your recommendation versus, you know, just eat meat and [00:33:00] veg, for example? [00:33:01] ERIN: Mm hmm. So, the, the main focus there is blood sugar balance and this is something that people think this is a discussion just reserved for people who have, say, diabetes. You know, oh, well, you know, they gotta watch their blood sugar and, you know, gotta make sure they don't eat too many carbohydrates. But the reality is, is we all should care about blood sugar. [00:33:22] ERIN: Blood sugar impacts our cardiovascular system. It impacts our mental health, it impacts our hormones, it impacts our muscle growth and maintenance. So having stable blood sugar throughout the day is absolutely key to optimal performance, energy, all those things that we're talking about. And so being able to get a steady adequate amount consistent throughout the day is going to allow that blood sugar to just kind of have this nice little up and down throughout the day. [00:33:52] ERIN: And we're going to stay within this nice range that the body likes to stay in for optimal health. When you go get your blood work done and you get your [00:34:00] hemoglobin A1C tested, that's your report card of how well you've been managing That blood sugar over the past three months, how well you've been staying within that range. [00:34:10] ERIN: And when you don't eat carbs for breakfast, and you don't eat carbs for lunch, and then you have a carb dinner, you're more likely to see a larger spike in those blood glucose levels. Again, this isn't the case for everybody. If somebody has been on a low carb diet, and they've maintained that, and their blood sugar is great, and they're feeling awesome, I'm so happy for them, and I would support them in that way. [00:34:34] ERIN: But for the majority of us, We have these habits where our carbs are not distributed properly. We're not eating the right amount. We're either eating too much in one sitting, not enough at one sitting, and we're wondering why we're craving sugar all the time, and why we're tired all the time. And if we just got high quality carbohydrates at every meal in adequate amounts, not overdoing it, not underdoing it, [00:35:00] we might find a really healthy balance. [00:35:02] ERIN: And not to mention, the trouble with those low carb diets is the number one symptom is constipation. Because These carbohydrates feed our beneficial bacteria. I probably see 10 to 15 stool tests per week, and any time I see someone come in with a carnivore, keto, low carb diet, they have very low beneficial bacteria. [00:35:30] ERIN: And it is pretty much causation, right? We can pretty much assume that the correlation there is because they're not So, my theory, you know, the, the keto diet, it's originally designed for, for medical purposes, and it's incredible for, you know, patients who are diagnosed with a, a type of epilepsy, and it has, been proven to And, uh, yeah, I mean, I don't [00:36:00] think that the majority of the United States needs to be on a carnivore or ketogenic diet, especially long term. [00:36:08] ERIN: We don't really know the long term effects of eating, you know, a ketogenic carnivore diet. it's, You know, I suspect that a lot of people that have found that they feel so good on those diets could be because they have an underlying gut imbalance, and now they're not feeding it with any fiber, any carbs, and that's kind of maintained their symptoms, so they feel really good. [00:36:36] ERIN: And that's, that's just a theory, it's just my thought, you know, that a lot of people find those diets because they're looking for relief and to feel good, and Ultimately, we all want to feel good, right? But if we're not addressing a root cause, then that, that's a, that's a problem, especially if it, it forces you to be on that restrictive of the diet. [00:36:57] ERIN: I [00:36:57] JAMES: mean, the way I like to describe the carnivore diets [00:37:00] to some people is you're essentially starving your microbiome. Yeah. It's not getting anything that it needs, really. I mean, there's, there's some microbes that can metabolize amino acids, um, and, and maybe some more complex chains and proteins, but it's, as you mentioned, it's really the fibers. [00:37:23] JAMES: It's the complex carbohydrates that they really, truly need. [00:37:27] ERIN: Yeah, there's, there's a few specific bacteria that the few specific bacteria, the Fecalobacterium Presnitzii. Uh, the aphromancia, these are two keystone, I'm sure you're familiar with them, they're two keystone bacteria in our gut. And one of the things that they thrive on is polyphenol rich foods. [00:37:47] ERIN: Polyphenol rich foods are going to be things like our berries, our, you know, pomegranates and grapes and those, those dark pigmented. fruits and, uh, leafy green vegetables, which wouldn't essentially be [00:38:00] allowed on some of those diets. And those are keys on species for protecting our gut lining for protecting us against things like inflammatory bowel disease. [00:38:10] ERIN: So I just, I don't know how you could convince me that a diet void of all these amazing foods and mentally for myself, I could never, you know, that's just. No, it's not for me. [00:38:26] JAMES: I've got a note to ask you about your diet and your routine in this totality, but just like to explore this, this fiber concept a little bit more. [00:38:34] JAMES: So one of the things that you said at the start, which I think was absolutely fascinating and you just touched on that again with people getting relief. I think maybe you're talking about the SIBO and how things are just going a bit crazy and counterintuitively, whilst perhaps in someone who doesn't have SIBO and who's functioning correctly otherwise, fibre is brilliant. [00:38:57] JAMES: For them, who've got too many bugs in the [00:39:00] upper GI tract, maybe fibre's not so good. So maybe you can walk the listener through that and Also, how you help these people get them to a state where maybe they can tolerate [00:39:08] ERIN: fiber again. Yes. And, and this would go for, you know, certain condition as patients who have inflammatory bowel diseases. [00:39:16] ERIN: Well, you know, if they're dealing with a lot of chronic inflammation, again, fiber is hard to break down. And that's part of what makes it good for healthy individuals, is that it's hard to break down. We don't digest a good majority of it, therefore it feeds our beneficial bacteria. But for those who are struggling, those who really find that, you know, they start to eat. [00:39:37] ERIN: a salad and it completely destroys them or, you know, the thought of any sort of vegetable on their plate is a nightmare. Then we're basically going to go forward and do some sort of testing. So the gold standard for the the SIBO is going to be a breath test. We're going to be testing for three types of gases, methane, hydrogen, and hydrogen sulfide. [00:39:58] ERIN: And then we're [00:40:00] also probably going to do a GI map to look at overgrowths in the colon, the lower part of the digestive tract as well. And If that person has a lot of overgrowth, then typically the course of action is going to be some sort of antimicrobial. And that could be either you could go to your conventional medicine doctor and you could choose to go that route, or you could choose to take the more natural route and use things like berberine, allicin, grapefruit seed extract, neem. [00:40:32] ERIN: These are all natural antimicrobials that have been shown to be very effective at, killing off harmful bacteria, both in the small intestine and the large intestine. And it's not just as simple as killing them off, right? We want to figure out what else is going on. You know, are they super stressed all the time? [00:40:50] ERIN: Do they have low stomach acid? Are they on a proton pump inhibitor, which is again, further reducing their stomach acid. We also want to look at the whole picture so [00:41:00] that this doesn't happen again. Cause the number one thing with SIBO is that people have reoccurrence because they just go in. They say, let's kill this off, but they don't address the fact that they have motility issues, thyroid issues, you know, stress that is just like, unbearable, and then they wonder why it comes back. [00:41:21] ERIN: So that's the, that's the big thing with addressing the gut is that we don't, we don't hone in on one specific thing. It's not as simple as like, oh, vitamin D is low, we, we increase it or. You know, it's, it's okay. So how did we get here? This is your gut is like a forest, right? You go into a forest and you just pull one thing out. [00:41:39] ERIN: You still have the whole forest there. [00:41:42] JAMES: So how do you then in your practice help your patients with SIBO? Do you recommend the berberine, the grapefruit extract, that kind of thing? And have you had good success with people? [00:41:52] ERIN: Yes. Yes. So I, those are the herbs that I like to use. Those are a few of the evidence based herbs that have been very [00:42:00] effective with my patients. [00:42:01] ERIN: And I've seen a lot of my clients get better with just a few rounds of these. Some, they do one round and we've addressed everything else and they're totally better. Some of my clients have had to go through two or three rounds of it to really fully get rid of it. But we'll retest it. We'll continually see those levels go down and down and down. [00:42:21] ERIN: And it's just, it's amazing to, to see people feel better. You start to see. Their iron labs start to go up because they start absorbing their nutrients, their vitamin D levels start to go up, you know, it's, it's a fascinating, you know, uh, progression of how people can be impacted by, by SIBO and for so long, you know, the, the, the statistics show that about 70 people who are, who are diagnosed with IBS actually have SIBO and they'll go their whole lives not knowing that because they're just going to say, well, I've got IBS. [00:42:56] ERIN: It's gotta, you know, be careful, follow a little FODMAP diet, and they don't ever [00:43:00] think to look further. And most doctors, some of them don't even, you know, we were talking about belief systems. Some of them don't believe that SIBO is a thing when it's clinically documented. So [00:43:12] JAMES: still to this day, to this day, for sure, it's still not widely accepted amongst the medical community. [00:43:20] JAMES: And some of the things you're talking about in terms of. Using these, you know, natural means rather than the classical antimicrobials. Also, we're just not there yet, I don't think. What's your [00:43:32] ERIN: experience? Yeah. And there's a lot of great doctors out there, especially gastroenterologists. And uh, I can't give you a long list of them, of great doctors that I know, but I can give you, um, you know, some experiences from clients who their doctors are, are really open to, they have a good understanding. [00:43:52] ERIN: You know, they, they see this in their practice every day. Uh, a lot of the doctors that say they don't believe in it, you know, they're, they're a [00:44:00] little outdated, right? They haven't been keeping up on the research. They have not been seeing patients and, and truly hearing them for what their symptoms are. [00:44:08] ERIN: And I think that, that there actually is, uh, a large amount of. Uh, physicians out there who are, are truly taking it seriously and treating and they're very, you know, there's a lot of doctors who are very quick to treat for, for SIGO with antibiotics and they do recognize how important it is. But, you know, it's just unfortunate that there are some out there that are leaving patients, you know, feeling very defeated. [00:44:35] JAMES: And with regards to the herbs that you recommend, is there like, this is the entrepreneur in me now, just my mind's going, is there like, you know, one supplement that has all the key elements in terms of all the herbs that have been beneficial or do you ask your patients while just. Maybe try a bit of the, the grape for effect, maybe try a bit of the berberine and see what happens. [00:44:56] ERIN: Yes, that's a great question. There, there are [00:45:00] formulations of herbs out there that are designed or supplements out there that are designed specifically for SIBO. So they'll usually have a combination of. You know, some of those more broad spectrum antimicrobials, I typically use them in a more isolated fashion because I love using tinctures. [00:45:18] ERIN: I like to try to reduce the amount of pills that a client will take. So oftentimes, you know, it will be like. Three times a day, you're doing your drops of oregano, your drops of neem, and then we'll do a berberine in a pill form. And, you know, we do that for a course of four to six weeks, and then we reassess symptoms. [00:45:35] ERIN: But there are, there are formulations out there. There's ones that are even more broad spectrum that, you know, are gonna have additional things like wormwood in them, and Uh, you know, things that can address yeast and candida, you know, knowing that those things can sometimes coexist, but the benefit of my practice is that I'm able to test with coins and I'm able to see, like, okay, how can we really hone in on this and instead of doing [00:46:00] this broad, you know, formulation, we do something much more specific to what you need. [00:46:05] JAMES: Yeah, my brain was just ding, ding, ding, ding, ding. And also, I was wondering That's just how it works in my brain. The, the tests that you do, I'm also fascinated. So I'm, I'm very familiar with the hydrogen sulfide, hydrogen methane, because Um, and terabiotics is actually going to be doing a clinical trial, uh, in the IBS area. [00:46:24] JAMES: So I've been reading all about IBSC IBSD, post infectious SIBO and so on. Um, but I wondered because what you're talking about, it's fascinating, it's, it's a combination of the breath test. It's a combination of the stool test. So do you have providers that you go to and that you trust to give you the right kind of data, or do patients come to you having done a microbiome test? [00:46:46] JAMES: Like at home. Mm hmm. [00:46:48] ERIN: Yes. So the majority of, of what I will have clients do with their providers is have their standard colonoscopy, endoscopy, get their blood work done. If they [00:47:00] can get, you know, the things that I like to see, like the ferritin, iron, B12, vitamin D. Uh, so I'll usually have them do that just because it's covered by insurance, right? [00:47:09] ERIN: We try to save clients as much money as possible knowing that these types of cases can be, you know, more intensive and, and costly. And so the stuff that we will do together, luckily as a dietician, we have, uh, different resources where I have an ordering physician on my team who can order the labs for me. [00:47:30] ERIN: And I've been trained to evaluate and interpret these labs over the past 10 years. And so I get these results, we sit down, we go over them together, and you know, we either work with their physician or just on our own, depending on how willing their, their other providers are. We try to work as a team to help this client get better in whatever way that looks like for them. [00:47:54] JAMES: Got it. Thank you. I just wondered if there was like a. Best in class microbiome testing service [00:48:00] that you just thought was unbelievably good. That gave you so many insights. Yeah, [00:48:04] ERIN: I, yes, much more simple. I will answer that more simply here. So the, I love the GI map. I've been using the GI map by diagnostic solutions for several years. [00:48:16] ERIN: I also love, uh, Jenova. That's another really great one. Um, sometimes that might be a better fit for a client based on kind of their symptomatology. But those are really the two main ones. And then, you know, the breath test, I use the TrioSmart because they do all three of the, the, the breath gases versus, you know, if you go get it done in your conventional doctor, they're likely just going to test for the hydrogen and the methane and they might miss the hydrogen sulfide. [00:48:46] ERIN: No affiliations with the brands. Thank you. [00:48:51] JAMES: Thank you for that. Um, you got quite excited when you talked about vitamin D, iron, and ferritin. Can you just like maybe unpack that a little bit? Why is that so important? [00:49:00] [00:49:00] ERIN: These are basic, you know, labs that should be run for all of us. And I laugh about it because it's so frustrating how it's like pulling teeth with providers that you want to know what your vitamin D levels are. [00:49:14] ERIN: Especially when we're in New England over here. So we're not getting UVB rays from the sun to produce vitamin D on our skin for a very large portion of the year. And also just scientifically knowing that 90 percent of Americans are deficient in vitamin D. Vitamin D impacts our hormones, our mental health, our risk for inflammatory bowel disease, everything. [00:49:35] ERIN: It quite literally impacts everything. Uh, so vitamin D, I always have clients advocate for that. And if it's not done over here in the U. S. as a standard blood panel. Iron is another one. Iron typically is tested, but ferritin, the storage form of iron, is not always tested. And this can tell us a lot about inflammation in the body. [00:49:56] ERIN: This can tell us a lot about our body's ability to absorb [00:50:00] iron. So that one is another one. Especially, I work with a lot of athletes, especially endurance athletes, and they tend to be very low in ferritin. And so, you know, if a provider saw, oh, in 2017, your iron looked good, they're not going to test it again. [00:50:15] ERIN: And, you know, hello, it's 2024. Things can change pretty quickly. So, I like ferritin. I also like B12. Both B12, ferritin, vitamin D can tell us that there maybe is malabsorption going on related to SIBO. So, these are things that are common deficiencies that I see in my practice. You know, we should just be knowing regularly what our values are. [00:50:39] JAMES: Got it. Are there any other blood tests that you recommend for the sort of general person? Um, and I'm assuming you recommend vitamin D supplementation. [00:50:49] ERIN: Yep. If you are deficient in vitamin D to a point where, you know, you're getting into the twenties and lower. You're not going to be able to eat food and get your values back [00:51:00] up. [00:51:00] ERIN: You're going to need to supplement unless you're living in a place where it's very sunny And it's very clear that you've been hibernating and lathering the sunscreen and then you can change that habit But the majority of people in order to get their vitamin D levels back up will need to supplement So that's really important for people to know and you always want to take vitamin D 3 plus K 2 K 2 It prevents us from absorbing too much calcium into our, um, the vascular system, which can increase your risk for cardiovascular disease. [00:51:32] ERIN: So vitamin D3 plus K2, always have that combination together and just make sure that you're advocating for it. If you have a deficiency in vitamin D, you're going to need to supplement. There's very few food sources of vitamin D. And those really aren't likely to move the needle if you have a deficiency. [00:51:51] JAMES: And on the subject of supplements, do you recommend anything else? Like, for example, a greens powder, which are all the rage at the moment. [00:51:59] ERIN: Yeah, [00:52:00] I, I don't recommend those supplements. You know, there, there's, um. There's some out there, you know, there's ones that I've taken that I feel really good on, you know, the, the athletic greens was a big, it, it blew up and I, you know, they sent me a sample and I thought, oh, you know, this is like another greens powder and I'll be honest, I felt really good. [00:52:20] ERIN: You know, I'm not going to lie to people. I felt really good when I took it. And that could be due to the fact that it's basically like a multivitamin. And it's got adaptogens like ashwagandha, which I love ashwagandha. And, you know, it was great. I was taking it for a little while. And then, you know, consumer labs came out. [00:52:38] ERIN: They, they independently tested all of these greens powders. And they found higher levels of lead in a lot of them, which something that just naturally occurs in the soil. You know, plants are growing, they absorb these heavy metals from the soil. And lead is not good for us. As someone might imagine, that getting lead in, in [00:53:00] higher doses regularly, ideally we want no lead. [00:53:03] ERIN: But we're always going to be exposed to some level of heavy metals. But when you take something and you concentrate it down, that means you're going to get a larger dose in a small serving. And so, you know, certain brands that I mentioned, like You know were above the limit that I would consider safe to consume on a regular basis for optimal health And so I wow, you know stopped using that and I you know, I I really caution My clients to be using these powders You know, even if they are passing heavy metal testing, you know, they're, they're not a replacement for food. [00:53:36] ERIN: You know, if someone's really struggling, they might offer some assistance. There are certain fruit and vegetable capsules out there that have passed heavy metal testing, you know, don't have any fillers in them. Um, the brand like Juice Plus, for example, over here in the U S you know, they, they seem to kind of pass with flying colors. [00:53:55] ERIN: So I would say. You know, I think of someone like my grandmother who, you know, [00:54:00] she maybe eats, like, two meals a day, if even that, and she doesn't touch fruits or vegetables. She might be a good candidate for someone to take these fruit and veggie capsules, just to get something in her body, but For the majority of us, you know, we don't need 17 different, you know, powders and vitamins in one sitting. [00:54:20] ERIN: First of all, it's really tough for our body to absorb that all in one. So you've got that aspect of it, where are you really getting all the nutrients out of it? Number two is the heavy metals. And number three is there's typically lots of additives to them, artificial sweeteners and flavors and, and things like that. [00:54:37] ERIN: So I, I don't, you know, I don't recommend them, but I'm sure there are times and places for, for those and in people's lives, but the majority of us should be just focusing on high quality foods from our diet. Aaron, this [00:54:50] JAMES: has been such a, an educational journey for me, uh, in addition to the listener, cause I also. [00:54:55] JAMES: take AG1 once or twice a day and have done for quite a long time. [00:55:00] Also a powder called Vibey Greens. And I had no idea about the heavy metal piece. Just no idea. And to be honest with you, I actually don't know that much about heavy metals and how they can impact on health. So could we talk about that for a little bit? [00:55:19] JAMES: Like How do we know if we're have, you know, if we've got too many heavy metals, what's the health and impacts of heavy metals? And then if there's too many and it's having an health impact, what do we do? [00:55:35] ERIN: So heavy metals. Each different type of heavy metal, from lead to arsenic to cadmium, those are two very those are three very common heavy metals that we typically see in supplements, powders, even chocolate. [00:55:49] ERIN: We see high levels of lead, unfortunately. Big chocolate fan over here, so, trust me, I'm not Nooooo! You're like, you're taking away my coffee and now my [00:56:00] chocolate. No, but what's going [00:56:01] JAMES: on here? But again, my AG1 and coffee, now my [00:56:04] ERIN: chocolate. So again, like I will use AG1 if I know I'm going out and I'm going to have a really long run. [00:56:10] ERIN: You know that that's that's the kind of thing I'm trying to really educate clients on is like I'm not taking it every day But I'm not never using it because I like the way it makes me feel I'm also consuming chocolate regularly But I'm choosing brands that are at least not the highest in lead and I'm moderating my intake But I probably eat chocolate at least three to four times a week. [00:56:31] ERIN: Like I'm not gonna lie. It's just You know, you can't avoid all of these things, but you know, there are some that are avoidable that are just, you know, we're getting too much and that could be impacting certain people. So you know, heavy metals can impact all of our organs. A lot of them can accumulate in our body and it's really hard to get rid of. [00:56:49] ERIN: Some are actually impossible to get rid of. So the kidneys can be affected. The gut can be affected. The liver, right? We can have this buildup of these heavy metals. And then on top of [00:57:00] that, if you have an unhealthy gut, then you're more likely to have these accumulate because if you have that intestinal permeability where things can move from your gut into your blood because you have leaky gut, you're in a, you're in a worse shape to be consuming these heavy metal, you know, containing products. [00:57:17] ERIN: But generally speaking, they have, they have widespread impact on our health from our brain health to our, our organ function. And over time, this can be very serious for people and it's, it's hard to say, you know, okay, look for these symptoms, it's, it's, you know, the, the, this happens slowly. So this could be you show up with dementia or Alzheimer's when you're, you know, 50 years old and you don't realize how much of something you've been consuming. [00:57:43] ERIN: But there's testing that you can do. There's hair mineral analysis testing that can look at heavy metals, which can be really helpful. Um, you know, mercury is another one that will accumulate in the body. And even just reducing your high mercury fish can really help your body, um, [00:58:00] work more efficiently. [00:58:01] ERIN: And then, you know, you can kind of go back to working in moderation versus. Eating high mercury tuna for lunch every day, for example, so this is a very big stressor for me is like we need to think about moderation. We don't need to fear monger people into being afraid of consuming chocolate or, you know, things like that. [00:58:18] ERIN: It's education, making better choices. And then if you are someone who has really poor detox, methylation issues, like MTHFR mutation, poor gut health. We might need some extra support with heavy metals, so we might use certain, like, green algaes to help just pull heavy metals out of your system. Um, we might use things like NACL cysteine, which, you know, helps upregulate glutathione levels in the body. [00:58:43] ERIN: You know, these are things that, essentially what we're doing is we're working on chelating, um, things like charcoal and, and algae, green algae vegetables. And then we're working to support the liver and, and, and all those other Um, up regulation processes that naturally happen in the body and then we [00:59:00] support the gut and we support sweating and we make sure our bowels are moving and, you know, we make sure nutrient deficiencies are addressed and that helps us just ensure that we're, you know, well oiled machines that can handle, you know, the daily toxins that we're always going to get no matter what, right? [00:59:16] ERIN: We're always going to get these things, but how can we educate ourselves, make better choices and reduce our total heavy metal load? [00:59:27] JAMES: What are some of the signs and symptoms that someone might have if they're sort of high and heavy [00:59:31] ERIN: metals? So kidney, you know, kidney issues can be a big one. Um, having, you know, kidney. [00:59:37] ERIN: So if you're doing blood testing or things like that, if you're, you know, consuming a lot of brown rice, very high in arsenic, um, that's something that over time, especially with smaller kids, you know, they're even more sensitive to these levels of arsenic, for example. Um, but, but kidney issues, liver issues, brain, um, if you're noticing, like I said, you know, early signs of Alzheimer's, dementia, [01:00:00] Parkinson's disease, uh, there's even, this is not my expertise, but, um, you know, a lot of dieticians who focus on the autism spectrum disorder, ADHD, um, a lot of discussion around how they have a harder time with detoxification and, and Some heavy metal accumulation. [01:00:17] ERIN: And so, you know, refer to them for more information on that. But I've learned from other dieticians about how that can be, um, you know, a way that these types of things can show up, um, gut issues, you know, you know, heavy metals can really disrupt the gut, the gut microbiome. So. Again, there's not really like obvious symptoms for a lot of people that you would say, Oh, that's, that's gotta be heavy models. [01:00:40] ERIN: Sometimes it's, you know, your body just kind of slowly not functioning optimally and not realizing that your total toxic burden is just too high. [01:00:50] JAMES: Gosh, it just made me wonder, I mean, imagine how many people with autoimmune disease, for example, may actually just be too high in, in these heavy metals. [01:01:00] It's again, I think it's one of these things where the traditional classical medical community probably aren't that interested. [01:01:08] ERIN: Yeah, unfortunately not. And you know, it's, it's, it's a, it's a very broken system overall. And, you know, I wish I had, I wish I had the solution. I wish that I could say that I could see things getting better in the future. But I think when you involve finances, when you put money into the, the picture, you know, it, the, yeah. [01:01:30] ERIN: The priority of healthcare, uh, preventative care really just. Yeah, [01:01:38] JAMES: I'm with you. So I'm going to bring us back now to some of the things I've wanted to discuss with you. Um, artificial sweeteners is top of the list. So as a dietitian and expert in gut health, what are your thoughts and recommendations relating to artificial sweeteners? [01:01:55] JAMES: Because I think this is one of the ones that comes up the most when you speak to people. Yeah. You [01:02:00] know? [01:02:00] ERIN: So what are your thoughts? Yeah. So I've, you know, I'

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The presenter is James Thurston, G3ict, who is joined by Chris Misra, University of Massachusetts, Amherts.  SPEAKER: Please welcome James Thurston and Chris Misra.  James is the Vice President for G3ict, where he leads the design and implementation of new worldwide advocacy strategies and programs to scale up G3ict's global impact. G3ict is the global Initiative for Inclusive Information and Communication Technologies promoting the rights of Persons with Disabilities in the Digital Age.   Chris is the Vice Chancellor and CIO at the University of Massachusetts – Amherst.  At the University of Massachusetts Amherst, information technology plays a crucial role in many key areas, including but not limited to student success and engagement, research competitiveness, and multi-modal education.   Today they will be looking at how leveraging accessibility and inclusion can provide an adaptive and accessible multi-modal IT ecosystem to support campuses. Chris will review findings, digital inclusion gaps, next steps for improvements at the University of Massachusetts – Amherst and more!   JAMES: Our goal with this session is to share with all of you some detail about how the U Mass approach to being more accessible, more inclusive through technology. Through its technology assets and deployments and Chris and I over the next hour want to surface and share with you, I think, what are some valuable and actionable experiences from U-mass, that will hopefully apply to your own accessibility journey in your higher education institution. This particular session is the third in the IAAP higher ed series. It's also the first of the next three sessions, which relate to, and are sort of sourced from, G3ict's work with universities and higher education institutions, using our smart university digital inclusion maturity model tool. And I'm just going to briefly give you a little bit of information on that, just so it will make a little bit more sense as Chris and I start to have a conversation about our work with Chris and what Chris has been leading and driving there at the University of Massachusetts model. The smart university digital inclusion maturity model tool, it's an assessment tool and a benchmarking tool. And it's really to help universities better understand how their digital transformation, how they're using technology, how their use of data is either supporting accessibility inclusion of people with disabilities or potentially presenting barriers to the inclusion of people with disabilities, including faculty, staff and students. And even, really, the broader community where the university might sit. So, the tool itself, the assessment tool, it's made up of 28 variables, we call them enablers, and they define what it really means to be an inclusive smart university. They enable accessibility and enable inclusion. These variables, or enablers, contribute to the university's building up the capabilities that we know support greater inclusion in accessibility at a university. And these capabilities, and with the tool we're able to look at the role of things like leadership, the existence of a digital inclusion strategy or not, we look at the accessibility of the university's engagement channels, how it's pushing information out, getting information back, are those accessible, we look at things like the culture of diversity, is the university employing people with disabilities, is it training on disability and accessibility. We look at things like procurement, what systems does the university have in place to make sure that its investments in technology and its deployments of technology are accessible. So, a whole range of issues that we know are pretty critical to a university becoming increasingly accessible, increasingly inclusive. And, of course, we do dig into technology and data, which are the backbone and the life blood of a smart university. And the way that we use these variables, these 28 enablers, these 18 capabilities, is in a three-step process. That is pretty straightforward. We do some analysis of documents, I.T. strategies, digital inclusion strategies, budgets, accessibility statements. We do some analysis of those. We make available to the university an online self-assessment where they sort of write themselves across these variables. And then we actually do an expert site visit where we curate a team of global experts on inclusion and accessibility and bring them in to engage with the university, dig into some of these variables, and hopefully, at the same time, provide some help and assistance on pain points, issues that the university might be experiencing. And then the final step is we deliver a road map, which includes a set of scores for each of these variables and a set of priorities and recommendations for moving forward. So, if you're at a level 2 on a scale of 1 to 5 for procurement, these are the kinds of things you might think about doing to get to levels 3, 4 and 5. So pretty straightforward. The process with U Mass, we'll be talking -- jumping in with Chris in just a minute. We, I think, started that process last spring and sort of did the site visit, I think, in early summer this past year. And in that process, we reviewed probably more than 20 documents, these budgets, these strategies, these org charts, policy statements. We talked with more than 40 U Mass faculty and staff over ten different listening sessions. And then we delivered the road map. And in the road map, U Mass, I think, had real relative strengths in the area of leadership and other areas identified where there's an opportunity to really make some steps to have some improvements in the capabilities and ultimately in the accessibility and inclusion there. So that's a little bit of a background on how G3ict came to be working with U Mass. I thought it might be useful to sort of frame our conversation. And with that, I'm really excited now, and I've been I've been looking forward to this discussion, Chris, for quiet a while, of jumping in with you and hearing a little bit about the U Mass Amherst journey, where you are, where you're headed but maybe we can start, if you can tell us a little bit about the University of Massachusetts Amherst, give us a general sense of the university and how you're deploying technology there. CHRIS: Sure, thanks, James. So, U-Mass Amherst, for those of you who aren't familiar with Massachusetts geography, I grew up in Massachusetts, so I know, we're about 90 minutes west of Boston, 175 miles north northeast of New York City. It's a relatively rural area, but it's a significant institution. We have about 24,000 undergraduate students, about 7,500 graduate students. About 1,500, instructional faculty. Largest state institution in New England, research one, $233 million, $1.3 billion budget, big. 1500-acre campus, which is the biggest thing is trying to find your way around the campus. Our journey of accessibility came about really through just conversations and advocacy within the campus in terms of this has to be a key responsibility for us. Our technology platform is really very traditional, higher education. We migrated many of our services to the Cloud, excessive use of Zoom recently, Google, exchanging out platforms, and the challenge with the campus of this size is really just managing the breadth and depth of both a campus and a highly decentralized institution. JAMES: Great, thanks, Chris. We probably started having conversations about a year ago, actually, just as we were coming into the pandemic and universities, in particular, I think, we're scrambling to try to figure out, okay, how do we fulfill our mission in this environment. Can you talk a little bit about sort of what that looked like as we were coming into the pandemic from a CIO perspective, the kinds of things that you were thinking about and needing to take steps on? CHRIS: Sure. There were sort of two interesting aspects. I mean, aside from it's amongst the longest days of my career in the past and probably ever going forward just in terms of how do you migrate an institution that size to an online education. We made a very early determines, we were one of the early schools who decided to go remote, we thought it would be two weeks, we took a double spring break. We quickly ramped up the technology portfolio. We were fortunate that we already had tools like Zoom, we had pretty good practice of online education, fairly robust online education school, but not a lot of digitally native capacity to teach instructionally remote. So, there's really two principal areas of impact. There's a principal area of impact in academics, and the impact in administration. Since we extended out the spring break for an extra week, we actually had two weeks to figure out how we were going to do these academics. But that meant we had to move the administration into an online world in a very short order of time. From the basic things, how are we going to pick up the mail to how are we going to communicate, how do staff meetings work, and recognizing that institutionally we were a face-to-face campus, our staff meetings were face to face, our one-on-one meetings were face to face and we had to comport all of that. So, the social change was actually significant, and that led quickly to substantial change in the academic side as well. We saw increases of -- astounding increases in Zoom utilization. One of my favorite statistics on Zoom utilization is in the first week of -- I'm sorry -- in the first day of the first week when we brought our academics online, we used more Zoom time the entire month previously. So, each day in April, we used the same number of Zoom hours in the entire month of February. And that pace continued through the balance of the spring semester. JAMES: Chris, I remember that data point as well. And I often use it myself because I think it is a really easy, compelling example of this accelerated digital transformation. Can you talk a little bit about where -- how accessibility fits into I.T. and into the university in general? I know, you've got a really great I.T. strategy, accessibility is embedded in there. I don't think that there's a specific digital inclusion or necessarily accessibility strategy, but maybe a little bit about strategy and organizational structure, just so we understand how accessibility fits in. CHRIS: Absolutely. So, we've actually been fortunate from an I.T. perspective, we've had staff supporting accessibility but a very modest staff. I think when James did the assessment, we had a single staff member, at a high point we had two staff, and we're in the process of transitioning that as well. So, our overall accessibility strategy comes multi fold. My team is responsible for the information technology, and that's across the board. That means we support students' technology use in the classroom, we support faculty's technology use, we provide general technology use for administration. We do not have responsibility for accessibility accommodations per se, we have a disability services team on campus, it's organized in our student affairs area. So, really, it's a key partnership working between student affairs, working with my central I.T. organization. I will say from a maturity perspective, though, we had staff, it was very much more about boutique service, solving discrete individual accommodations, and it hadn't crossed the line of being generalizable to most of our day-to-day normal use of population technology. It was very much targeted at a subset population that had self-disclosed a need for an accommodation. JAMES: And I know as part of this conversation, we'll get into a bit later, a discussion of these issues of silos and coordination and collaboration, which we had a lot of conversation about when we were working with you. So, maybe we can jump in now a little bit into this sort of notion of accelerated accessibility that happened for U Mass for sure but probably for most universities around the world because of the pandemic and what that looks like. And how -- maybe start with a little bit about how does the university deploy technology assets that are accessible and really are working for everyone, and what did it look like to have this sort of intensified effort to include a focus on accessibility as you were becoming more and more -- using technology more and more to do all of your services, both administrative and academic and teaching? CHRIS: Sure. So I'll say the structural change that really occurred was, I think, originally we treated accessibility as meeting the needs of identified individuals who had to have accommodations and making sure our web content was accessible, doing basic accessibility reviews, it was basic, W3CG, not a lot of detailed work and it was not invested across the board in terms of we had a lot of natively accessible tool set but it was really natively delivered accessible tool set, there wasn't a lot of work and push for us to drive an institutional priority around making sure our content was natively accessible, except where there was either liability or like I say, a dedicated accommodation. As we went into the pandemic, that really had to pivot because we realized, we no longer had the mechanism, we couldn't deploy a notetaker for a student in a classroom because there wasn't a classroom. We couldn't make point by point accommodations on either technology or use case basis. So, we had to start generalizing. We were fortunate that we were in the midst of a transition of our strategic plan, so we were actually at a point of making that type of pivoting. Of identify digital inclusion as a core property going forward. And, so, we had a lot of the substrate work, but I'd say the pandemic really drove us to recognize it wasn't solely about a compliance obligation but much more about reaching our community where they're at. JAMES And as you were making that shift, were you -- some of what we had talked about in the past, when you were in the middle of all this, is there some -- much like what you would probably do on the security side of your work, any sort of risk rating system, and trying to make these decisions about where are we going to prioritize and focus first and those types of decisions when it comes to accessibility? CHRIS: Absolutely, yeah. So, one of the things, for me, I consider fortunate is prior to my role as a CIO I've been in a number of roles at U Mass. I came from a very technical background. But I spent many years in a security role. So, I was responsible for information security at the organization. Within the information security field, it's very much a derivative of risk management field that works very heavily on risk and concepts like maturity models play very heavily there. So, when you're assessing implementation of controls to mediate security risk, you have to assess what is the cost of control, what is the value, what is the return. The easiest way to assess that is against a maturity model so I had a lot of familiarity with the concept of maturity models. One of the things that made me very excited about the engagement of G3ict was the application of this discipline-type technology of applying a maturity model to a domain like accessibility because I had not seen that done before, but I had a lot of experience.   What's nice about that, it gives you an abstract way of measuring your progress, although there can be a metric and a rating, it also talks about where you are legitimately relative to your peers but what steps you can take, and gives you a better mechanism to start prioritizing resource allocations. So, as I moved out of information security, into a CIO role, I changed from being responsible for compliance to be responsible for budget, priority and allocation. So being able to have a document like a maturity model that can help guide investment and show return relative to cost was a better framework for us to make ongoing decision making and I felt more at home in that security field, like oh, we know this is a high risk, let's apply a resource here, even if the resource is fairly modest, it's going to get us significant return against that issue. JAMES: Can you -- if you're able, can you talk a little bit about some of those areas where you were making decisions at the time in this accelerated period of focus on accessibility in addition to a lot of other things? Where you are identifying risk and taking some steps specifically around improving the accessibility of your technology assets? CHRIS: Sure. And in some cases, what's interesting with the technology assets is our first task, because we are technologists, is let's just fix the technology.  What it really came down to in many cases it's about the business process as well. So, when we started going through the assessment process, we realized the first and foremost, we have a 24,000 student population moving remote. We had to get in front of the faculty and instructors to explain why this was relevant. So, it wasn't so much about, hey, don't put a poorly scanned PDF up on your website, we'd already been providing those types of instructions, but it really had to pivot to, is your course content accessible natively. And in that case, it is still digital accessibility, but it may be, have you applied alt tags to your PowerPoints, have you made sure you're not doing poorly rendered PDFs, is your content screen reader able. It was these sorts of things that are actually technology related but it was about the business process behind it. What we did, we formed a working group between my team, our university library, our center for teaching and learning, and our instructional designers, we call our ideas group, it's a big long acronym I can never remember, but we put those together as ideas is the support resource, faculty primary interact with. Library is a resource that provides a lot of the supplementary external materials, I.T. is a lot of times the bridging infrastructure. So, it was really about forming a coalition within campus, identifying priorities, it was helped inform by the maturity model where those risk areas are, and providing guidance, which wasn't just apply technology, but help individuals creating content to make the content accessible natively, because the incremental cost to them was much smaller than us throwing lots of money at making the technology do it for them. JAMES: You touched on a really important point that I think would resonate with any university around the world, which is the sort of decentralized structure of universities, we'll dig into that more deeply in a minute. But I'm just wondering, as you were partnering, and leading this accelerated digital transformation during the pandemic and focus on accessibility as part of that, how was that received? I recall in part of our conversations, for example, there was, with the faculty, there may have been some incentives around going digital, maybe even going digital and accessible at the same time. But, in general, how would you say this accelerated accessibility was received? CHRIS: So I would say it was received well. I was actually somewhat surprised at how well it was received. Those of you who have been at universities, especially in large universities, they're very decentralized power structures, recognize that change comes slowly. The ship turns slowly, as we like to say, right? It will get there eventually but it turns slowly. I was tremendously impressed with the empathy and the caring shown by the faculty and the instructors involved in supporting students at a distance, but they recognized an individual obligation. And, really, our role as technologists was to reduce that barrier to them to make their content accessible. So, there was some financial structure incentives, as we went into our subsequent semester that helped faculty teaching online to build hybrid instruction. What we did, we developed a series of standards to make sure as our content went out, it met these standards, that was sort of the condition of the incentivising. So rather than make it a big deal, like hey, you all have to do accessibly, it was really embedded into an existing incentivization structure, but we added the accessibility obligations as additional compliance checks to go to an accessible by default role. I was concerned about the uptake we'd see from faculty, you but I was very surprised. The other thing with decentralized higher education, as much as the ship turns slowly, once everybody gets where you're going, they generally get on board. So, we took this more adapt to the culture of the campus, adapt to the change culture of the campus, and tie into those change mechanisms that are effective, that's what really helped us be more successful, I believe, that and the empathy of the faculty and the instructors. SPEAKER: The International Association of Accessibility Professionals membership consists of individuals and organizations representing various industries including the private sector, government, non-profits, and educational institutions. Membership benefits include products and services that support global systemic change around digital and the built environment. United in Accessibility, join I.A.A.P. and become a part of the global accessibility movement. JAMES: So, maybe take a little bit of a step back, but still thinking about the deployment of accessible, inclusive technology assets. Can you talk a little bit about your thinking, U-Mass' thinking and approach to incident management? How do you remediate issues, how does that happen? And then the other piece that I'd love to hear a little bit more is about testing, when it comes to accessibility, automated user testing? CHRIS: Sure.  So, two-fold. On the testing piece, we've employed students both in our help desk and our accessibility office to do some of the testing. We actually are just launching another program to do more broad usability testing, which includes accessibility testing, working in concert with some faculty in our writing program. They tend to have a good degree of expertise in there. So, the other advantage of a higher education institution is students are fresh, motivated, focused and quite inexpensive labor and they like the work. It's great experience, it's great value to them, it's great value to us institutionally. So, we've really tied into that, this is something we've done for many, many years, tie into a workforce that's motivated, it's interesting. We've definitely seen the awareness of our student body around accessibility issues is much greater in the last five and ten years than it has been previously. I've been asked about making sure content is accessible from a course perspective, I've been -- there's been a shift and the challenge is, that shift isn't necessarily as strongly perceived at the faculty that are instructing them because they tend to be a little bit older. So, using the students to help motivate that work has really helped improve the accessibility piece of it because we've embedded the testing more into the core processes when we role out new applications, whether it's a PeopleSoft application or a new web application, we're commissioning that testing as part of launches of applications, as well as new web properties. JAMES: Chris, Mark Nichols is asking a question. If the standards that you're talking about, before content goes out, or even other standards that you're looking at and testing on really to -- related to accessibility, are they in-house standards or are you using global standards like WCAG? CHRIS: They are in-house standards developed off WCAG. But I will get James and Yulia a link afterwards. We posted up our academic standards and it referred to those suggestions, it was built off of WCAG. One thing, just amongst everybody here, accessibility is not my first language. I'm an info set guy, I was a technologist, I was a Linux assist Admin. I know the acronyms, I know the space, but it's not quite my domain of expertise, I'm fortunate to have well-trained staff who understand this both on my team and the disability services team so we can absolutely share those standards. They're academic standards we posted for the fall semester for 2020. JAMES: So, Chris, I know, as I recall from our previous conversations and work, there were sort of nine legacy platforms that you guys had deployed. And I'm wondering if over the course of the many months since we've worked together, how you're thinking about incident management has changed or evolved or how you're approaching that and dealing with that, how much of an issue -- accessibility issues have become in this accelerated period? CHRIS: I mean, the challenge has been, before -- I believe we started talking about the accessibility review before the pandemic. I had high hopes that we would be able to make significant progress in some of our core administrative systems in the shorter term. And then the pandemic hit and next thing I knew, we were running COVID testing sites for the western part of the state. We were running vaccination programs. We were one of the earliest vaccination programs for first responders. So, unfortunately, a lot of the resources I'd have to help make accessibility improvements to our core applications really got put aside for new application deployment. What I will say, we've been strong about implementing accessibility standards for the new applications as we roll them out. So, at this point my hope is to get us back, likely as we refactor some of our applications to do a more detailed review. It's definitely a goal, it's an asserted goal, it's part of the road map and strategy going forward. It's just with the pandemic, the resource allocation tipped everything so sideways. I'm a little further behind than I hoped to be there. Legacy platforms, we haven't made as much progress as I was hoping to. We've certainly made progress. What we've made significant progress in is in the awareness and the accountability that accessibility is an issue that has to be accommodated at deployment or at refresh for an application. That was a huge improvement that we hadn't been able to make as successfully in the past. JAMES: You've shared, at least with me, what I think are some really interesting facts about how you as a CIO had to evolve into using technology to support a dramatically increased public health role of the university for the state during the pandemic, which is pretty amazing. There's another question from Peter, who decides the threshold for compliance? It's never 100%. CHRIS: And, so, again, this is where I'm going to go a little bit on my information security soap box, right? The definition of compliance is just bending the wheel to another. So, yeah, it's never 100%. It's not going to be 100%. Really what we do is use a risk-based model, understanding where the risk is. Usually that started historically, with either liability of the institution or legal accommodation requirements. That's a barrier to cross, that's a legal obligation to cross, but it's really not meeting this notion of digital inclusion as a core value of the campus. So, the threshold is really handled generally on a case-by-case basis. There isn't an arbitrary threshold. What we focus on, these are the recommendations to make your course content accessible, to make your web property accessible. These are the standards. From a web property perspective, we do actually have a compliance check less, we actually have a team inside our university relations group that will run through both automated testing and some hand-based testing to look at, does the content render in a screen reader, does it provide appropriate alt image tags and things like that. My goal with compliance is always making sure that we're investing the right amount of resource to ensure that we meet the largest degree of population as effectively as we can. Information security is a risk management game. Accessibility and compliance become a risk management game. And it's hard sometimes to think of it in those terms, but one of the challenges, I think, that I've seen working with some of my staff is, staff come with a tremendous degree of accessibility concern are passionate, profound and focused. The challenge is also balancing those resources against the other resource needs of campus, right? How much time can I spend on ensuring my web properties are accessible if, at the same time, I have to take those same resources to allocate them to make sure we're setting up a COVID vaccination clinic. It's really a continuum of resource allocations. For me, thinking about how can I make sure there's always a guarantee of resource allocation towards accessibility, recognizing that that might not be core to our mission. What can be core to our mission is deploying accessible applications on an going forward basis. But our core mission is instructing students, performing research, being a land grant institution. We always have to balance that resource allocation to make sure we're moving the ball forward in these different fronts, but serving, first and foremost, what is it we're core here to do, instruct students. Accessibility is a component of that, but it can't be the dominating component. It has to be an absolutely key component, but the dominating is us delivering students with a path to their future. JAMES: Thanks, Chris. Before we go on to the next topic, briefly, if you can talk about thinking about your staff, the technology staff at the university even more broadly, perhaps, the skill and training on accessibility and how you think about that and approach that. CHRIS: Yeah, I think there's three aspects of that. So, the first aspect was, we've had some staff transition, in our accessibility staff. Making sure we have the appropriate professional training for folks who are doing the accommodation work or engagement and consultation work. That's always been a fairly straightforward, that's an institutional investment. That makes good sense. Where the real value we've seen, both from a leadership perspective, raising accessibility as a topic of concern at senior levels at the institution. So, raising this concept, our provost is fluid with the concept of accessibility, right? He's not going to go out and do a WCAG review, but he gets the concept that he can instruct his Deans that this is going to have to be a key component of the content their faculty deliver on a go forward basis. From a training perspective, there's a lot of low-cost effort that we can put in place to raise accessibility on the radar from a leadership perspective, discuss it with a broad team of not just executive but operational, manager and cross-functional teams, we've also been very successful in engaging our students about accessibility conversations, what does that mean to you. Because my concept of accessibility is how big is the font is, a student's concept of accessibility may be how does it render on a cell phone. That's a very different problem set, depending on what technology you apply to that. It doesn't have to be, but we need to collect those voices in terms of understanding what that means and a lot of that does not involve a lot of out-of-pocket cost. JAMES: And just one more question, then we'll move on to one of my favorite topics, which is sort of collaboration across departments. From Kathy, how do you decide what to test? Do you do spot checks of certain course websites and more checking of applications used by larger populations? CHRIS: Sure. So let me break up the administrative from the academic side of things. So, from the administrative side of things, we actually have a review process for our web properties in conjunction between our I.T. team and our university relations team that's responsible for our web properties. So, there's actually a checkoff evaluative process for our core web properties. I'm fully confident there's probably some research lab websites or some individual P.I. websites that were created by word press that probably don't meet the testing. We focus on the high-visibility targets to make sure the information that's most relevant to a large population gets out there. From a course perspective, we do have a couple of very large enrollment courses. We tend to focus most of our resources on ensuring the platform is accessible natively. There is always compliance issues, right? There's always some faculty member that wants to take their PDF from 1982, turned it 10 degrees and scan it and hope it will work. We do spot checks, especially on the large enrollment course, but generally we focus on ensuring the platforms are natively compliant, and then providing strong guidance to the faculty to ensure they have the guidance and parameters of what are those steps that they can take that's relatively die minimums, relatively incremental burden for them but provides a more inclusive experience natively. JAMES: Thanks so much. Now let's shift gears a little bit, Chris, and get into the issues of collaboration, coordination, working across departments at a big university on a big campus. One of the things -- one of the other things that stuck in my mind that you said early on when we started working together was how at the University of Massachusetts Amherst, there are some really amazing, I give you full credit for this term, these pockets of heroic effort. Which I think will resonate with anyone who's doing work in the accessibility field, any kind of organization, that there are really good practices happening in parts of the university. And I think some of the ones that had come up, U Mass were around UDL, instructional design, and some other areas that the Assistive Technology Center, some really good resources and practices. But siloed and not scaled because they are siloed in departments. And even some departments, I think, that may have been a little ahead of others in terms of academic departments in terms of their approach to inclusion and accessibility. I know that since we last worked together, and during this -- these last several months, the accelerated accessibility period, that you've done some work on greater collaboration and coordination. Can you talk a little bit about that, including maybe some description of what it felt like before taking some improving steps? CHRIS: Sure. I mean, for those of you who have spent time, and this is true of both large and small higher education, but higher education tends to be a very siloing structure, at least in my experience. There's a couple of exceptions but there tends to be a lot of belief that faculty are experts in their domain, by virtue of experts in their domain, that there's a lot of notions of self-rule, self governance and that sometimes extends out to administration. I will avoid pining too deeply on that. But there are some challenges that come from that. There's communication, there's logistical challenges. What you end up seeing is subcultural development about, this is important. And what I've observed, and I've seen this both in technology fields as well as accessibility is and let me take it out of the accessibility domain, my email team for many years thought they delivered the best email application out there. They understood how it worked, nobody else understood how it worked but it made a lot of sense to them, and they thought they were doing great. And, so, within their minds, they were providing heroic effort but the impact from a user perspective was not the heroic effort they thought it was going to be. I've observed similar challenges within accessibility at the campus as well. There are these pockets of brilliance, pockets of heroes that are out there working with good empathy this. The challenge is, they don't always have, or they have not been provided the degree of leadership to have these conversations more broadly. So, why is it that one of the very small questions that came up had to do with a resource allocation around providing captioning for course materials for students that had defined accessibilities -- defined accommodations and it became this substantial issue that the costs were decentralized out to each of the departments? And many of our departments, by virtue of being academic, tend to run on very thin budgets. So, when we stopped this conversation, we went into the pandemic, said, what is the net budget impact can here? I can't remember what the number was. Let's say it was $40,000 across the campus. You know, when I brought it up to the right degrees of leadership, they're, like, we're arguing over this? $1.3 billion budget. Don't get me wrong, $40,000 is real money but that's not the thing we should be arguing. By virtue of us decentralizing decision making to that being 40 decisions of $1,000 each, it became much more difficult to get the resource allocation. So the key observation I'd say is, clearly articulating why this is important, clearly articulating that when we marshal our resources collectively, we can make changes that don't seem so big when you're working in a larger context and it really involves that collaboration between and amongst groups and I've actually been very pleased, I think, going through the review with G3ict, certainly delivered us a road map, it certainly delivered us a maturity model, it gave us a sense of where we sat, but it actually opened up conversations amongst teams that have worked and sat together for many, many years but those conversations weren't as effective. You know, we always joke, my background, like I said, is information security with auditors. If the audit doesn't tell you what you want to know, you did something wrong, right? I will say, I have been very pleased with James, had a very objective, and the team he brought in was excellent, but it told us what we wanted to hear, you've got some pockets of brilliance but there's some coordination, there's some logistics, alignment you need to do. Having a third party assert that brought more credibility to this notion of accessibility than any empathetic call from staff on campus could have. JAMES: Thank you for that, Chris. And I think to your credits, and we've done a good number of these reviews of universities and of smart cities as well, I think one of the things that you did was pretty courageous, I think, you involved an enormous number of people from both the academic side of the university and the administrative side in a large number of conversations. I think over these ten conversations that our expert team had with your university community, there were 200 participants, 40 unique individuals, I think, but they were heavily attended, some of the discussions were quite passionate, I will say, because the passion was there. Can you talk a little bit about where -- recognizing and wanting to make even more progress on collaboration and breaking down some of these silos and amplifying some of these heroic efforts. Either where some of these -- what are some of these pockets that you would love to see replicated and I'd also be curious to hear a little bit about what are some of the groups that can help promote this kind of collaboration? We had talked, in particular, in our conversations with U Mass, the faculty Senate actually had been pretty engaged on these issues of accessibility. There is an academic advisory committee, I think, on accessibility. Are there any sort of areas that or groups that can help you as the CIO promote this collaboration? CHRIS: Yeah, you know, that's a great question, James. One of the key things, and one of the things that I found sort of helpful to me in my career, both in the CIO role I'm in, and previously in the information security role, is identifying those governance structures and where they have efficacy. That's one of the things that I've observed at least in some of the accessibility staff I've worked with. They have passion, they have technical focus, they have deep empathy and deep caring, but they don't have the experience with how universities govern themselves or what the governance structures are, where decision authority really rests. It's great to think, you know, I've had staff that think I have all sorts of decision authority, I have responsibility for my $30 odd million of budget, but sort of the extent of the responsibility I have, I have responsibility for standards, as we get into decision making, I have to tie into bodies like our faculty Senate, I have the information technology advisory council, some of these academic advisory councils. We have other both faculty and administration, leadership groups, task forces that are focused on the shared governance structure of universities, we have administrative focus units. So working with accessibility teams to identify where those power structures exist, how change occurs in an institution, and how you can be effective at making this case amongst all the other many cases, that was one of the key things, which again, I was fortunate to have a lot of this experience in information security, I observed many of my peers in information security, other institutions, come in and try to win the day of information security solely on technical merit. Like, well, we're going to go to this, we're going to spend another $100,000 on this new antivirus thing, because it's incrementally better than this other thing. And quite honestly, when you're making that case to a CFO or to a Chancellor or Provost, that's $100,000 for a technical thing I don't understand. Whereas, if you can turn it into a conversation about, either mediating institutional risk, delivering institutional benefit, understanding how change actually occurs on a campus, when you make that case in business terms, it becomes more rational and plausible amongst the thousand other things the Provost or the Chancellor or the CFO has been asked in the last day. So that's the key transition for me, how do you find those power structures, how do you identify those governance structures, how do you make it a business value proposition, not solely a technical or empathetic proposition. JAMES: That's actually a perfect segue, Chris, into a topic that I know you feel passionately about and that we recognize as well in our assessment tool, the maturity model is really pretty critical to an increasing commitment and capability on accessibility, inclusion. And that is what we call, you know, the business case for accessibility. Moving beyond, particularly here in the United States, every university has a legal requirement to be accessible and inclusive, in other countries as well, but you and I are sitting or standing here in the U.S. today. But we'd like to sort of move the conversation beyond risk avoidance and legal compliance to what is the business case? As you say, the why or the value proposition, of accessibility. Based on your experience, either over the past year as a result of or as part of this assessment, or just in general, can you talk a little bit more about that, that key issue of how you are trying to tap into the why and the value proposition at U Mass? CHRIS: Absolutely. So, one of the key value conversations we have on a regular basis, and this is not a conversation unique to U Mass, it's not a conversation even unique to the northeastern United States, but within the United States, there is a significant decline coming in college-age students in the coming years based off of just changes in birth rates, patterns like that. What you're seeing is increasing competition within the field for high-qualified students, you've seen this manifest through, U Mass was deeply involved in the closure of mount IDO, we actually took over parts of the campus, we inherited some of the students from there, you know, recently, I know Becker college in Worcester announced that it is intending to close as well. One of the key things that drives university budgets is attracting, retaining strong students to maintain competitiveness. And if the population is shrinking, one way from a business value perspective is to make sure that you're delivering a natively accessible education to appeal to as broad a population of students as possible. If we are, by virtue of not providing accessible content, unintentionally excluding some arbitrary percentage, say, even 5% or 10% of our students. That's 10% of a student population that will not become paying students, high-quality students. We're excluding a portion of our population that could engage. And that's based on a conjecture of 10%. If the conjecture is much higher, we could be unintentionally avoiding potential population when we know there's going to be restrictions in that. So from a very raw perspective, if budgets are driven at institutions through a combination of both undergraduate, graduate tuition, and research education, if we're not strongly positioned, meeting the market demand, and that can either be meeting market demand because there's a growth or being more competitive and approachable to a larger population, if there's a reduction in that student -- potential student population. We are not tied into the strategic mission of the institution to provide our role as a land grant, to provide instruction to residents of the commonwealth and to create a workforce for the commonwealth. We have over 250,000 living alumni from U Mass, vast majority of them stay in Massachusetts. At U Mass, we graduate more students than the top eight private institutions from the state of Massachusetts combined. That means we're tied deeply to the workforce. So, if we cannot find a way to make our content accessible and approach that, we're not only risking our own potential economic future, but we're actually risking issues of workforce development and long-term competitiveness of the state potentially. JAMES: Yeah. A couple thing in there that I would love to follow up on. One is, you've talked about the role of students, the diversity of students as a driver for the competitiveness of U Mass in fulfilling your many roles as a land grant state university. As you're thinking about the why and the value proposition, are you having discussions or thinking about, we certainly discussed this as part of our engagement, the technology assets you're deploying, the accessibility of them, it also impacts faculty and staff, is that part of the calculus as well? CHRIS: It absolutely is. Because, again, that same, you know, rubric holds, as we remain a competitive institution, we have to be competitive in our hiring practices. And that means approaching as broad a population of the available talent pool out there. If we are not delivering natively accessible experiences, whether that is directly instructional or it's, you know, pedantic as H.R. forms, right, everybody's got to do an H.R. form somewhere, but if we're delivering, and we've had our challenges in the institution of three copy, carbon forms that, you know, our vice Chancellor of human resources loves to say, he shut off the last -- he got rid of the last typewriter not that many years ago, right? There's clearly some substantial issues that we've had. If we're not competitive with the potential workforce, both at the highly skilled faculty level, at the highly skilled technical level, but at all levels of the organization, we're going to potentially compromise the available resource pool as well. So, again, if it comes back to business case, I see a compelling business case to make sure accessibility is core to our digital transformation because it allows our long-term access to a larger candidate pool. With the move to remote work, we're having very serious conversations, what does that mean, long term, right? We've had staff working remotely, we're going to struggle, like every other public and private institution is now, what does it mean for workforces returning, if the pandemic slows as we're hoping? Would we accept this notion of more broad remote work? Does that increase our potential labor pool? Those are all interesting questions that are going to have to be worked out. But if we cannot position our institution to be natively digitally inclusive, we're excluding a portion of our population that may have accessibility accommodations that we're just turning our back to from the get-go. And that's a challenge. That's a loss both to us and it's a loss of potentially high talented, high-skill individuals that could make this university stronger. JAMES: So, Chris, I would imagine that with your expertise and experience in the information security space, you've sort of tackled this issue of the value proposition, the why of security. How is the starting conversations, advancing conversations about the business case, the why and the value proposition, of accessibility, how is that being received? Where is it being received well, where is it a bit more of a struggle? CHRIS: I'd say it's being received well at the high level when I talk about this notion of making sure we're finding the most accessible pool, we're making -- ensuring we're going to remain competitive, tying to workforce. I think the value proposition, executive level, is very strong there. We've always been very successful at the value proposition at a very operational level, for our students and our staff that are providing accessibility accommodations, who are working with students on a one-to-one basis, for our help desk who are taking calls. Where the challenge is, and I think we've had a path to move forward, is for people who do not have either the high-level strategy, do not have the day-to-day blocking and tackling is trying to make the value proposition of why is this one more thing they should do, why should you take ten more minutes to ensure accessibility, alt image tags, why should you take two more minutes to turn on the captioning features in Zoom or PowerPoint? So, I ended up teaching again this fall, I taught for many years at U Mass, I took a number of years off. When I taught this fall, I taught entirely remotely, I taught entirely by Zoom. Zoom's native captioning feature wasn't there. So, I elected to use PowerPoint, use Office 365, turn on the captioning when I lectured. I use Zoom to record the lecture. And it put the captions into it. It's not perfect. It wasn't great.  But the cost to me was thinking to do it, clicking a check box on Office 365 on PowerPoint and making sure I hit play and record. So, the incremental burden to me of applying captioning to course content, and I've taught this course material for 20 years, this is the first year I did that. So, there is two minutes of clicking, it took me about ten minutes going through each of my slide decks to apply alt image tags. That investment of my time as an instructor is absolutely worth it to make sure that content is more accessible. And that's the value proposition I think we have to hit that middle portion of the population, if we can move that population, the impact is going to be tremendous. SPEAKER: With the adoption of WCAG 2.1 in many countries, there is an increased demand for web developers, designers and other professionals with knowledge of web accessibility standards and guidelines. With this growth comes the need for an objectively verified level of expertise. The Web Accessibility Specialist exam will provide individuals and employers with the ability to assess web accessibility competence. Complete the WAS and CPACC exam to earn the special designation of Certified Professional in Web Accessibility! 

Let’s get this out of the way now: most companies will not have someone go from intern to CEO in a matter of months. That’s a situation unique to James Standley and Solé Bicycles. What isn’t out of the ordinary, though, are the many challenges and hurdles that James and his team had to deal with when scaling Solé into the success it is today.On this episode of Up Next in Commerce, James takes us through the trials and tribulations of the Solé journey, including various shipping and manufacturing disasters and lawsuits that nearly bankrupted the company, and he explains how he worked his way out of those troubles and what he learned along the way. Plus, he gives some secrets on what’s working well for Solé now, such as the strategy of finding different touchpoints to reach customers in a way that has absolutely nothing to do with selling to them. Main Takeaways:Starts With Heart: While the relationship with your supplier or manufacturer might seem like a cut-and-dry part of business, it has to go deeper than surface level. f you are working with overseas partners, taking the time to meet, and understand, the people you work with in person and form a relationship with them will carry you further and ease some pain if there are ever problems in the supply chain process.    What You’re Known For: Through unique partnerships and marketing opportunities, there is potential to reach people in different ways, even if that means you’re not necessarily selling them a product with every touchpoint. Having a relationship with customers is more important than selling to them at every opportunity, because if they know you for one thing and then find out you sell something else, they are more likely to buy from you across the board. Shot on an iPhone: There will always be a place for highly-produced, glossy marketing materials. But, more and more these days UGC and lower-budget content is what is resonating with consumers. As opposed to showing potential buyers something they have to aspire to, like a model, highlighting people and experiences that are familiar to them as they are now will convert better. For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.---Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce---Transcript:Stephanie:Hey everyone. This is Stephanie Postles and you're listening to Up Next in Commerce. Today on the show, we have James Standley. He's the president and founding partner at Sole bicycles. James, welcome.James:Hey, how are you guys doing?Stephanie:Doing good. Thanks for joining us.James:Yes, I'm super excited to talk about all things ecommerce with you guys.Stephanie:Yeah. I was just looking through your website and I am very excited to get a bicycle after this. I didn't even know I needed one, but now I do.James:Totally, totally, yeah. We have tons of great bikes and yeah, and tons of cool different colorways and options and a bike for just about anyone's kind of need.Stephanie:Awesome. Tell me a bit about how you started Sole. I think it was in college, right?James:Yeah. My business partners, that I ended up starting the business with and I, we met back, funny enough, my first venture, which was a music festival I helped start back in college. We were both partners in that.Stephanie:It was called the Coachella for the Mountains, right?James:Yeah. It was called Snowball, and the idea was Coachella meets on the mountains. Yeah, there was this guy, Chad Donnelley, who I knew through the lacrosse world. I played college lacrosse and he came up with the concept and I was always involved in music. Growing up, I was a concert pianist, and I had DJ'ed in college and been in bands growing up. We met through the lacrosse world, and he came up with this idea. He had reached out to me just to ask my opinion on the project and what I thought about it. At the time, I was a freshman in college and he was asking me about it and I ended up just going back to him and say, "Hey, I want to be a part of this. I think this is amazing."James:I was part of that initial team. We kicked off this event with ... Our first, we had Edward Sharpe and the Magnetic Zeros, and Bassnectar, and Pretty Lights, and Diplo and all these amazing artists come out and sold like 15,000 tickets. It was a really cool first venture and a first event. Yeah, so Jake and John, my original founders with Sole, they were partners in it as well, and they helped get some of the money for the project. We met, first year was a huge success and we stayed in contact. At the same time, they were coming up with the idea for Sole, and going back that summer, between my freshman year and my sophomore year of college, they were looking for some additional help on Sole.James:I said I'd come in and I've got a more like operational financial sort of background or mind, and they were more of the creatives and the visionary type of people. I came in, helped clean things up. We got the business off the ground. Then going through the summer, they ended up going and raising some money and starting another business, and I ended up taking over the business. I went from being technically an intern in May to the CEO in August. Yeah, so that's how I got involved. Shoot, that was 2011. So, we're going on nine years ago, and I've been CEO ever since.Stephanie:Wow. Very cool. That's a wild story. How many bikes were you guys selling when you took over, and where are you at now? So I can get the scale of the company.James:Totally, totally. Yeah. Our first year we were featured on this big Forbes article and the business sort of took off, and I think we sold maybe a thousand bikes our first year, which was a lot for a first year business. This past year we're going to sell about 15,000 bikes.Stephanie:Wow.James:Yeah. We've grown quite a bit.Stephanie:That's great. What is the selling point of Sole bikes? How's it different?James:Totally, totally. Yeah, for us, our main selling point is you go look at the bike and it's just going to look different than any other bike you've ever seen before. We're really heavy on our marketing and design and colorways and wanted to make something that's really, really simple, easy to use, easy to maintain, but also looks really beautiful, and something that has a personality, and really people can relate to. I think a bicycle, for most companies, is more of a utility product, something that's really spec-driven.James:For us, we wanted to make something that people were really, really proud of, and it's like, they can relate to, and find a colorway that really matches their personality, or they could this store music fixed tapes or find these other ways that people can relate to the product. That's really allowed us to set ourselves apart from other bike brands.Stephanie:Cool. It seems like pricing is also a big thing. The one thing I've always thought is, why the heck are bikes so expensive? Why? How'd you get your guys cost down so much?James:Totally. Totally. Yeah. Yeah. The biggest way we do it is we work directly with a manufacturer and we sell directly to our customers. Just the natural, by cutting out some of the normal distributors or middlemen, we're able to offer what would be a traditionally higher price point products for a lower price and pass those savings onto the consumer by selling direct.Stephanie:Tell me a bit more about that, because what did that look like finding a manufacturer? I think I saw you found, in the early days, your manufacturer on Alibaba. Right? Which I was like, oh, that's interesting because I feel like Alibaba ... I've been there before and there's a lot going on. There's a lot of people. It's hard to know who to trust, it's hard to know if they're going to send me something good. How did you guys go about finding a manufacturer there? Did it work out well? Give me some behind the scenes.James:Totally. Totally. Yeah. Our first, when we got the business kicked off, we actually were involved in this Ali-Baba business plan competition. Back when we were in college, Jake and John had applied for this business plan competition. They won it and we got a $15,000 grant from Alibaba. That grant or that money paid for them to initially go over, meet our first supplier who Alibaba had helped set up, and we got our first order of bikes in. That's what the initial financing that got the business kicked off. But over time, went through a few different suppliers and really had to iterate our process.James:I spent a lot of time over in China meeting with different suppliers, refining the product, getting it to a place where it is today. It took a lot of trips over there and a lot of refining.Stephanie:In the early days when you're picking your suppliers and manufacturers, what would you do differently this time around? What lessons did you learn or what things did you maybe stumble on in the early days that you can avoid if you were to redo it now?James:Totally. What I would recommend is, we got placed with the supplier via Alibaba, and we just worked with the first person we were placed with. I think we ended up switching a few different suppliers over time, but what really ended up getting us with a supplier that we were super happy with is we went over there, and I went to one of the big trade shows, and we ended up visiting another 15 or 20 during this trip I went on about year two or three, and that trip we ended up finding the supplier we worked with, still to this day.James:We really got to go out and meet these people and do your diligence and find the supplier that makes the most sense for you, and not just use the first one that you end up getting placed with or you end up meeting with. You got to go over there and develop a relationship with them. I mean, it's so important. They have this saying there. It's first, you drink tea, then you drink Maotai and then talk business. What I mean by that is, they want to meet you, the different suppliers and the different people over there want to meet you. They want to build a personal relationship, and then they want to talk business because it's so important there to have a personal relationship, as well as a business relationship.James:If you're going to try to source something from China or overseas, I'd recommend going over there and meeting these people and spending time with them, and learning, meeting them as people, and really developing a relationship, because that's going to help that business relationship over time and make a really, really strong business relationship.Stephanie:Yep. If you don't go and meet them and you didn't really do your due diligence, what kind of problems could a new company encounter? Did you encounter any issues in the early days with some of your suppliers that you stopped working with?James:Totally, totally. Yeah. The supply chain for a bicycle is pretty complex. For our product alone, there's over 50 parts. Those 50 parts come from 20 different other suppliers, and then those have to come into an assembler, the assembler puts the product together and then it's shipped over. There's a ton of different things that could go wrong. A good example would be we had one of our biggest shipments ever, at the time for the business. We had put in an order for summer, and it was like 2000 units. We had also set up a big sale online with a company called fab.com. At the time, they were having ... I don't know if you remember the company, fab.com, but they were one of the fastest companies to a billion dollar valuation, I think, and people were talking about it as the next Amazon.James:It was having this really big moment. We were selling really well on there. We partnered with them and we were like, hey, we're going to bring in a bunch of units. Let's have a really, really big sale. We have this massive sale. We sell like 1,500 to 2,000 units, pre-sell them, and ends up being the biggest sale ever on fab up to that point. So, do the sale, goods come in, and then we ship all the product out. Well, our manufacturer had packaged the bikes slightly incorrect to where ... The crank arm usually woven through the front wheel, which is detached, and then tucked to the side of the bike when it's shipped. They were all packaged slightly off that almost every single bike came with one of the spokes popped off.James:You get your brand new bike that you just bought offline, brand new, beautiful bike, you open it up, and one of the spokes popped off, which it's like ... You can't ride it, but it's a small problem, but it's not an easy problem to fix. Oh my gosh, that situation almost bankrupt us. What ended up happening we-Stephanie:What did you guys do?James:Yeah, we had the product on credit. We had given we had been sold the product on credit, so we went back to the supplier and we were like, hey, this is going to bankrupt us. We got to figure something out, and they refused to take any discount on it. Then, our advisor was like, "Hey, we're going to just hold payment until we get something settled." They ended up serving us a lawsuit. They came to America, served us a lawsuit.Stephanie:Oh my gosh.James:So we were served, and had to go through this entire ... Mind you, I'm like 21 years old at the time. I'm still in school. We get served a lawsuit. I'm like, oh my gosh, what is going on? So, we had to hire a lawyer who was our body. He was only like 30 and we didn't have a ton of money. We had to put together a case and actually go out and defend ourselves.Stephanie:Yeah, did you win?James:We go through this, and we hired this lawyer, and he's like, "Look, you guys don't have the money, [inaudible] afford me, so I'm going to teach you how to build this case." I went and actually built this timeline of everything that's happened, and we came up with a case theory and counter sued them. They responded and deposed me. I had to go through this 40 exhibit eight hour deposition. But we held our ground and got through it. After that, it got to the point where it was like, financially it made the most sense to settle and were able to settle for what ended up being about half off of what the original was. Yes.Stephanie:That's wild. I'm just imagining being in college, dealing with it. How was that experience being in college? I'm just thinking, all of a sudden, you have this company and you're having to go to China and now you're getting sued. What was the college experience like for you when you were having something very different than probably a lot of your peers go on?James:To be honest, it was really exciting. You felt like it was just so cool to be building something and going through this. We were so ignorant, I think, going through a lot of this stuff, which I think ended up actually helping us. It was just very shoot from the hip and like figure it out. Yeah, so many of these different scenarios could have totally bankrupt us or ended us, but I think it builds a lot of character by going through these different situations and surviving it and learning from it and growing from it. Yeah, it was exciting. It was really fun and exciting. The goal was just like, don't go bankrupt, don't die. Keep fighting and figure it out.Stephanie:That's good. I like that. I could see it also just making it seem like, well, what else ... Nothing can really scare me. I've gotten sued. I almost went bankrupt. There's nothing too scary out there after that. I think it's a good place to be.James:Yeah. I think it's part of building a business. You're going to face adversity and a lot of ... There's a reason nine out of 10 businesses fail. There's so many things that can go wrong with building a business, but you have to learn to embrace those challenges and know that you just got to fight through it. There's not always a way to figure it out, but there's oftentimes, if you keep working at it and keep fighting, you can find ways to get through these things. If you do get through them, these are like business cards, I guess you could say, or things that'll stick with you and you could grow and build on as you continue to build your business.James:After going through all this stuff over so many different situations over so many years, we've now learned to embrace the challenge and just know, hey, here there's going to be some new challenge, every year, there's going to be some new thing that's going to ... we're going to get hit with, and you just have to learn to embrace it and take it head on and not let it beat you up.Stephanie:Yeah. I love that. You guys seem really good at partnerships. I've seen some of the very well-known companies that you work with, who they get their own custom bikes built, and you've got things with artists going on and music and all that. How do you how do you view that strategy in your playbook to be able to access new customers and new markets, and how do you even develop those partnerships?James:Totally, totally. A lot of that was built from, again, when we started the company, we weren't the traditional bike guys. We were coming from the music background and fashion background. A huge art scene. We had all these relationships early on, and just out of pure having those relationships, we intertwined it in business, and you have the fixed tape series, which one of our early employees was a professional DJ, so he's like, "Hey, I got this idea. Let's create an hour long mix to listen to while I'm riding our bike, and we'll go get some other DJ friends to do it." That piece of content. Just that, that we created that and it's been rolling ever since. We just launched the Sofi Tukker one, which was, I think our 76th mix tape.Stephanie:That's cool.James:Then that artist creates that mix, and some of these DJs are very globally known DJs. We posted on our SoundCloud and they showed on their SoundCloud, and it creates this nice piece of content that people can come back to and find Sole, or find that mix each month. It's funny because we're not ... you wouldn't think of us as a music business or a bike business, but there's people out there in the world that only know us as the fixed tape company. There are people who'll find out, they'll be like, "Oh my gosh, you guys sell bikes. I thought you were just the fixed tape company or something." It's just organic sort of different little marketing tricks that we've, or little tactics we've built over the years.James:They just are organic, unique way to reach new customers and relate with our customers. We do the different partnerships. Again, I'll use the Sofi Tukker example. They're a big DJ group. If you don't know them, they're a big DJ group, globally known. I think one other fun facts, I think they have a platinum record in every country in the world except Antarctica. They're pretty big and they're up and coming. They had a song that's called Purple Hat. One of the lines in the song is purple hat cheetah print. We thought, how cool would it be to make a purple hat, their purple cheetah print bike? So, we had connections.James:One of their agencies or marketing companies or whatnot. So, we were able to get a pitch in front of them and they were super stoked on it. Yeah, now we're selling purple hat cheetah print bikes. Again, it's a cool way to ... What other bike companies are selling purple cheetah print bikes? It's just a unique way to reach new customers and provide a unique product and put a cool product out in the world that no one else was doing. I think it's just thinking that way with the bike industry has allowed us to build up these partnerships and set ourselves apart from other bike companies.Stephanie:Yeah. When you're doing these partnerships, these partners can also sell it on their website. Right? So, it's not all being sourced back to your website as a central hub. You're essentially letting these partners also sell the bikes on their websites as well. Right?James:Totally, totally. Yeah. For each partnership's bespoke and different in their own way. Sometimes like, we did a partnership with Wildfox, which is a women's centric fashion brand. We did these like really beautiful floral prints all over a bicycle. They took them in and they sold them through all their retail shops, as well as their partner wholesale shops, as well as their website, and we sold on our website. There's a bunch of different ways we can structure it. But yeah, it's usually just bespoke to whatever that partnership is.Stephanie:Well, that's a good segue into, I mean, when you're thinking about, you've got these mixed tapes going out and partnerships that aren't anywhere close to like the biking industry, how are you tracking conversions? Is your goal to try and get people to listen to these mixed tapes and then come back and buy bikes? Or how do you think about what your goals are around these different projects that you're doing?James:Totally, totally. With the fixed tapes, I think we're trying to push out a certain amount of content each month and each quarter. Then we go out and we build content calendars around what are different initiatives that we can tap into? I think when we're thinking about content, we like to look and start with email. Email is like one of our highest converting marketing channels. We're constantly filling and adding to our email list, and then from there, we're trying to push out two to three emails a week. We're mapping out our email pushes. We say, what are the different content initiatives that we can tap into? So, we try to do a fixed tape every two months. We try to do artist series every quarter and large-scale partnership once or twice a year.James:We map out all these different things we're trying to do, and then we funnel, and then that leads into email. With email, where you can't really just send very bland marketing type style emails every month. You're not going to get good engagement. So, we have to create stuff that's engaging. I think we've just gotten so good at creating this stuff very cost-effectively that it ends up paying for itself through the conversions of email. It's also a great brand building. They're all great brand building initiatives, and they all kind of build on themselves.James:If I do a big large-scale partnership with like a Sofi Tukker, that's going to come back and open up new opportunities down the road for other potential brands, or other potential artists. It's sort of all builds on itself as we go bigger and bigger.Stephanie:When you're talking about emails really high, when it comes to converting customers, how do you think about creating that engaging content? What pieces of content are working or what emails work best?James:I think one of them more interesting fun little emails that we came up with years ago and it's like the easiest thing [inaudible] to create ever, is we do what we call Sole Saturday. Sole Saturday, it's one photo by the Sole team and then three user-generated photos. Every bike we ship out has a little tag on it that says tag at Sole bicycles hashtag, and you use hashtag of the bicycle for a chance to be featured.James:Then, what we do is as we're spelling product, customers are going out and taking photos for us, and every Saturday we feature three of our customers. That, again, it's just like ... we're using user generated content and it's creating a nice email that people can go back to and see if they're featured. It's actually very high converting as well.Stephanie:That's fine. Do you think having actual customers and photos is where a lot of brands are going to be headed, less about the models and the people who look perfect and more about ... Is this someone who reminds me of myself and I can see myself riding that bicycle, yeah, feeling a better connection with them?James:Totally, totally. It's funny you say that. Because even when you look at ... you go to our paid spend or paid marketing, a lot of times the [inaudible] produced sort of content where it's on a really ... Get a really expensive content creator to produce it and it looks very professional, versus like content that's shot on iPhone or content that's just shot with customers' photos. That ends up converting a lot better than the higher produced stuff. I think that's just the people can relate more to it.Stephanie:Yeah. I agree. What kind of channels are you putting that content or the more natural looking content that your customers are creating? What channels are you finding are working best right now to convert customers?James:We're constantly testing when we're doing Facebook and Instagram ads. I've been serving different type of ads to different audiences on Facebook and Instagram with different types of content, the more professionals type of content versus the more just shot from iPhone vibe. Even like, over the last year, we've had a big uptick on our online business because of COVID, and people being at home and wanting to find a way to get outside and escape from this madness.James:One of the craziest things that we found was iPhone ads or the story ads-specific, so had to build just enough format for iPhones were converting at like crazy, crazy higher row ads versus just more static or traditional images or ads on the Facebook or Instagram. That was like a crazy thing we came up on this year.James:There's a very beautiful, simple ad where it's just like the bike on the beach and you have the sky in the background and then the sand below it. Then just the brand and a little copy below it. That little ad actually absolutely killed it for us this year.Stephanie:That's great. Are you still using, maybe not that ad, but still putting new ads into the story section on iPhones?James:Yeah. I recommend any brand out there that's doing ... I mean, I've been learning a lot of this as we go and trying to get better at it, but when you're creating your ads on Facebook and Instagram for when you're setting that ad up, you can actually split it so that it's like, you have this certain photo for the stack set up and then you have a different photo for when it's served on story. My biggest eyesore, or I hate is, when you're on a story and you get an ad, and it's like an ad that's built for the display. So, it has the kind of squared picture and then it has the words under that.James:I don't know if you guys have seen that, but it's such an eyesore to me compared to a beautiful ad that's like really built for the stories. Just making sure that you have the ad set, the story specific ads, it'll help your conversion so much. That's helped us a ton.Stephanie:Yeah, that's a really good point. What kind of return on spend should a brand expect from the iPhone story ads versus maybe Instagram or Facebook or Tik-Tok.James:That's a tough question. I think it's specific to the brand and the product they're selling, and then, even the time of the year. For us right now, our ROAS is way lower than like the middle of summer. It's almost like a 10th of what it was during the summer. That's just because it's seasonality, our product. We saw specific ... static first story during the summer, I think it was converting 3 or 4X of what it was static. But that's specific to us. I think every brand is different, every product's different. But yeah, I think that can give you an idea of the potential.Stephanie:Yeah, very cool. Is there any other new marketing channels that you're trying out, that you're like, I'm not sure if this will work, but we are allocating some funds here to try this out?James:No, for now we're focusing just on Facebook, Instagram. We're doing Google AdWords and media retargeting. I want to dip my toes in some other things. I want to try the Tik-Tok and I want to try some Pinterest. I've heard about the Tik-Tok, but the tracking is not that great on it. We haven't done anything yet. Also, Tik-Tok's I think for a little bit lower age or younger demographic than what our target audience is, so we haven't tried-Stephanie:I don't know. We've had a lot of people on here saying Tik-Tok works well. That originally, it was just the dancing videos and younger people and all that. People are like, it seems like there's still a good arbitrage opportunity on Tik-Tok right now, because the attribution and tracking might be worse, but you still get a lot of the benefit of going onto a new platform before they increase the pricing and actually understand what kind of conversions they're hitting. I don't know, [crosstalk] to check out.James:Totally, totally. There we go. That's my takeaway from this. We'll give it a go. We'll give it a go.Stephanie:Yeah, give it a whirl and see. When new customers are coming on your website, I want to talk a bit about like, how do you guide them through the funnel? How do you personalize things and show them, not only content, but also maybe a bike that would work for them or that might peak their interest?James:Totally. Totally. It's an interesting ... there's a few things we do. We have about our bikes page, where it's like, which Sole are you? That walks them through the different, we have like six different models. You have the single-speed fixed gear, you have the City Bike, you have the Dutch Step through, you have the three speed City Bike, and then you have the Coastal Cruiser. Top Bar and Coastal Cruiser are down and slanting more. We have a page that we'll walk the customers through the difference between all of those and the pros and the cons of each of those. That can explain the style.James:Then once you know the style, what we do different than maybe other companies is we actually ... Each product, each colorway has its own product variant versus like, you may go see a single-speed version of one of our competitors and they keep all the colors on one product page. We create the personality and each colorway has its own personality and its own page. It really helps customers, like okay, I like the red bike, and see the lifestyle on it, and just for that red bike. The red bike would be [inaudible] for a walk and it's got its own story, help the customer really fall in love with that product, and tell a story around each of them, versus them all being bundled up on the one page.Stephanie:That's great. Very cool. Then, I was seeing a couple of retail stores that you were partnering with, probably pre-COVID, but it seems like there'd be a really good opportunity to have those partners also kind of market and share for you while they're getting in front of their own new customers as well. It seems like they would kind of take on the budget, the marketing budget to then share your brand under their brand, if that makes sense.James:Totally, totally, totally. Yeah. We're seeing a big uptick with like these online third party wholesalers and distributors. That's been, for us, I think our product, it's got such a great look and feel to it that it can transcend from, not just traditional sporting goods or traditional bike-centric channels. We can sell on sites like an Urban Outfitters or on Zola, or some of these other more lifestyle driven sites that want a cool lifestyle product in the bike space.James:That's one of our big initiatives that we're trying to get on more of these like third-party digital wholesaler channels, because in the last year, what we've seen the biggest takeaway from all this is like, everything is going digital much faster than it was prior to COVID.Stephanie:Yep. Are those partners showcasing your brand? Are they more white labeling, like ordering the bikes and then putting under their brand to say, okay, this is an Urban Outfitters bike, or are they actually saying no, this is Sole [crosstalk 00:33:32].James:Yeah, we're selling us as Sole. Yeah, we're selling us Sole through these third parties.Stephanie:That's good. That's awesome. How are you getting in front of these big partners? Urban Outfitters is huge and super popular. How did you even get in front of them and convince them to partner with you guys to sell your bikes?James:Yeah, just cold email them. Right?Stephanie:I hear you cold emailing. Tell us your secrets. Come on, James.James:Very easy. Yeah, we'll go out there. If we believe our product could fit in someone's store or someone's space, then we'll hit them up. We're very confident in our product and our brand and we'll sell them on it. It works a ton. Then there's other partners that have reached out to us and want us to work with them. I think, a good example we were connecting ... Target reached out to us and we've just recently started selling on Target's website, which I think is ... It's interesting with them. Target's trying to, in each of their product categories, bring a more 21st century brand in. I think like we really fit that really lifestyle driven 21st century brand for a product.James:Normally, there's not a lot of brands in the space that have that kind of fit. I think we really fit those as well. That's an exciting one for us. Then, like I said, the Zola. Zola's a massive, or one of the biggest wedding registry sites. We're one of the only bike brands on there as well, and do really, really well on there.Stephanie:Ooh, that's a good angle. I wouldn't think to put a bike on a wedding registry website, but that's awesome, because a lot of times it's just the same old, same old. You're like, I don't need more plates, but I can go for a bike. I would put on my registry.James:We sell so many likes there. You'd be really, really surprised. It's a great wedding gift. We have a his and hers, so almost every single order that goes there, it's two bikes, obviously.Stephanie:Yeah. That's awesome. Really good strategy. How are you keeping up with fulfillment in the backend? Especially when you're integrating all these partners like Target and Urban Outfitters, what happens if target has a big surge and they've got a bunch of traffic come to their website, and all of a sudden, you've got 500 bike orders? How are you guys keeping up behind the scenes to make sure that you don't go out of stock or have issues on the backend?James:Totally, totally. This was something that this year that we've invested a lot of time and energy and effort into, is leveraging technology to make sure all of this stuff runs super smooth. We're using a third party warehouse that has their own systems. Then, we have to use an EDI software or partner to connect to a lot of these systems. It's just spending the time, energy and effort to really automate all this stuff and make sure all these systems talk to each other, and there's inventory pushes going out multiple times a day. You put in the front end work to automate all this stuff so that you can avoid those problems.James:There's systems that say, hey, there's inventory pushes that happen multiple times a day to all these systems, so if there's a big spike on say Target, that inventory is removed and pushed out to the other channels so that there's no overselling or minimal over selling. That still happens a little bit here and there because the inventory pushes don't go out all the time. It's a couple times a day, but yeah, it's just about leveraging. There's a ton of technology out there, like using the technology to your advantage to automate the stuff.Stephanie:What are some big bets that you guys at Sole are making over the next couple of years? Where do you think the bicycle market is headed? What are some things that you're betting on that you're not sure if they're going to pay off or not over the next couple of years?James:Yeah, totally. I think it goes back to digital. We're super focused on digital right now and we're super bullish on digital. We're investing in this technology to make sure that we're set up the scale and then we want to continue to expand where we're selling and who we're selling in front of. Then, on top of that, it's continuing to expand how we market our product and where we market our product and the media partners we can use to get in front of these different people. I think the biggest thing ... People having a stay at home as a result of COVID has set all these new habits. I think they say like, it takes three weeks to set a habit, and what? We've all been at home since April.James:Everyone's having to shop from shop online and shop at home. Once we come out of COVID, those habits, I don't think are going to go away. For us, we're super bullish on making sure we have a really solid foundation with, not only our website, but the online e-retail partners that we're selling through so that, as we come out of COVID, we continue to have really strong distribution digitally to the future.Stephanie:Yep. I could see some of the retail partners leaning on you guys also for maybe advice and best practices. I've seen some of the bigger companies kind of looking at, not that you're a startup, but looking at startups, looking at people who are able to be agile and move quickly, and trying to figure out like, well, what are you guys doing? Tell us what are the best practices right now, because what we've been doing for the past couple of years was just thrown up into the air and we have to rewrite how we do things now. So, do they ever hit you up and be like, "Hey James, how should we set this up? Or how are you guys doing this so we can replicate this?"James:Totally. No, no, no. There's always like other people in the industry that we're talking to. There's always people that we ... Whether it's people in the bike industry or other businesses, other friends that have businesses. Again, always happy to talk with them. For us, you say that we aren't a startup, we are a startup. We've been doing this for 10 years, I still feel like it's a startup. Our team's still pretty lean. There's only 10 of us. We're super nimble and able to move quick, which is great and allowed us to pivot and make changes when things like COVID happened, that bigger companies can't do.James:Once we find successes, we can double down and grow on those. Yeah, we're staying nimble and going with the flow and learning quick. Yeah.Stephanie:That's great. All right, cool. Let's jump over to the lightning round. The lightning round is brought to you by Salesforce Commerce Cloud. This is where I'm going to ask you a question and you have a minute or less to answer. Are you ready, James?James:I am ready.Stephanie:All right. Stephanie:What is your favorite business book that you think about or refer back to [crosstalk 00:40:28]?James:It's not a business book per se, but it is You Can't Hurt Me by David Goggins.Stephanie:Oh, okay. I like that. I actually have not heard of that. I don't think.James:The quick hitter on it, it's about overcoming adversity and pushing yourself. I think that's so important in business is understanding that you can overcome adversity and always setting your bar higher and higher. Again, it's not technically a business book, but I think there's ton of good business lessons you can learn from it.Stephanie:I like that. That sounds good. I'll have to check it out. If you were to have a podcast, what would it be about, and who is your first guest be?James:Oh my gosh. If I were to have a podcast, I would talk about ... Personally, my favorite thing outside of business and bicycles is traveling. I would do a travel blog and my first guess would be, Oh my gosh, I would pick Barack Obama.Stephanie:There you go. I'd listen to that. That sounds good. What is the nicest thing anyone's ever done for you?James:Oh my gosh. The nicest thing that anyone has ever done for me. The nice thing, oh, this is big.Stephanie:Heavy.James:My friend, Mario and Ken, in the early days when we started up our USC shop, these guys would come out every year and work for back to school, which is our craziest time of year for that shop. We sell like a thousand bikes in two weeks, and they would come out and stay at my place, crash on my floor and help us every year for the first four years. So, shout out to Mario and Ken.Stephanie:Oh, that is really nice. That's a good answer. What trend or tech do you not understand today that you wish you did?James:What trend or tech? Tik-Tok.Stephanie:There you go.James:I don't get it, but I feel like I need to get it.Stephanie:Okay. I've had some other people say that as well, so you're in good company. Others don't also do not understand it. All right. Then the last bigger one. What one thing will have the biggest impact on ecommerce in the next year? It can't be COVID because we've had too many people say that.James:I think the big thing impact on ecommerce, I think it's going to be shipping. I feel like shipping is going to change drastically over the next one to five years. You have like Amazon starting to do their drones. We're starting to see in LA these little robots that are delivering food. Then, on top of that, FedEx and UPS are just killing everyone with all their fees and their pricing. We've been in peak surge charges since July. I just feel like there's so much potential for disruption there, shipping.Stephanie:Yep. Oh, that's a good answer. Yeah, I agree. I see a lot of companies, a couple of them actually are in Canada who are trying to get one and two day shipping. I think a lot of more companies will be leaning into that once they figure out how to make that work, and they also see how reliant they are on the FedExs, the UPSs, and how much it disrupts businesses.James:Totally, totally. Please someone come out here, please help us [inaudible 00:43:54], it's so expensive to ship bikes.Stephanie:Well, maybe James, that can be your next business. You've done a lot in your day. You might as well just start a shipping company as well.James:There we go. There we go.Stephanie:All right, James. Well, thanks for coming on the show. Where can people find out more about you and Sole bicycles?James:Totally. You can check us out at solebicycles.com, or our Instagram, which we update daily, @solebicycles, and then my personal is @JimmyStans.Stephanie:All right. Thanks so much.James:Thank you guys so much. Appreciate it.

相信大家对下面这几句话一定不陌生：“哎呀,您太客气了,来就来吧,带啥东西啊”“您别客气,一点小意思,请收下”“那行,那我就不客气了啊”中文里的“客气”是一个蛮有魔幻色彩的词语含义非常丰富中国人也实在是喜欢客气不过你知不知道歪果仁也很是客气呢？今天跟Lydia 一起学学相关的表达吧01"您太客气了"英文怎么说？①最常用的表达：You shouldn't have. 您太客气了。“字面上的意思就是指“你不用这样子的啦” ，要注意这句话只用于口语中， 不适用在写作上。其实它原句是：You shouldn't have done/bought it for me.例：James, you shouldn't have. This is exactly what I needed. James您太客气了。我正好需要这个。Thank you so much, but you shouldn't have. I told you not to get me anything. 太谢谢你了，真是太客气了。我和你讲过不用给我买东西的。②You don't have to do that.字面上的意思是“你不必这么做” 可以用来间接地表示感谢，告诉别人“您太客气了”例： You don't have to do that, I'll pay for myself.您太客气了，我自己付钱好了。02如何回应别人的感谢“当别人对你说“谢谢”、"您太客气了"的时候，回答“不用谢”也要慎用：“You're welcome”。在一些国家，“You're welcome”听上去并不礼貌，比如，英国人就觉得“you're welcome.”带着屈尊俯就的态度，让人听着不太舒服。而很多美国年轻人会觉得，这句话经常会带有讽刺意味...那如何用地道的英语表达“不客气、不用谢”呢？①Don't mention it. 不用谢直译就是（小事一桩）别提了，其实就是不客气例：Don't mention it. I'm very proud of you. 不用谢。我真的为你自豪。I know you'd do the same for me, so don't mention it. 我知道你也会这样对我的，所以就不要客气了。②Anytime. 不用客气，(随时)为你效劳“Anytime 这个词的本意是“任何时候，无论何时”。当别人说“谢谢”的时候，你说 anytime就表示“别客气，(无论何时都)愿为您效劳”的意思。口语里，还可以说anytime my friend，对陌生人甚至也可以这样讲，很礼貌。例：Thanks for the ride!谢谢你载我一程！Anytime!别客气！③My pleasure. 我的荣幸“未来如果你帮了别人一个忙并且帮得很开心，对方向你答谢后你就可以用my pleasure来回答。例：Let me help you, it's my pleasure. 让我帮你，这是我的荣幸。It was my pleasure. I enjoyed helping you. 这是我的荣幸。我乐意帮助你。④It's nothing. 沒什么“直译为没什么，也是表达不用客气。注意：使用It's nothing.的时候，需要联系上下文的意思，再确认是不是在表达“不客气”，因为有可能是对方在认真跟你解释某件事情“真的什么都没有”。例：Thank you for the wonderful dinner.谢谢你招待了这么美味的晚餐。It's nothing.这没什么。

相信大家对下面这几句话一定不陌生：“哎呀,您太客气了,来就来吧,带啥东西啊”“您别客气,一点小意思,请收下”“那行,那我就不客气了啊”中文里的“客气”是一个蛮有魔幻色彩的词语含义非常丰富中国人也实在是喜欢客气不过你知不知道歪果仁也很是客气呢？今天跟Lydia 一起学学相关的表达吧01"您太客气了"英文怎么说？①最常用的表达：You shouldn't have. 您太客气了。“字面上的意思就是指“你不用这样子的啦” ，要注意这句话只用于口语中， 不适用在写作上。其实它原句是：You shouldn't have done/bought it for me.例：James, you shouldn't have. This is exactly what I needed. James您太客气了。我正好需要这个。Thank you so much, but you shouldn't have. I told you not to get me anything. 太谢谢你了，真是太客气了。我和你讲过不用给我买东西的。②You don't have to do that.字面上的意思是“你不必这么做” 可以用来间接地表示感谢，告诉别人“您太客气了”例： You don't have to do that, I'll pay for myself.您太客气了，我自己付钱好了。02如何回应别人的感谢“当别人对你说“谢谢”、"您太客气了"的时候，回答“不用谢”也要慎用：“You're welcome”。在一些国家，“You're welcome”听上去并不礼貌，比如，英国人就觉得“you're welcome.”带着屈尊俯就的态度，让人听着不太舒服。而很多美国年轻人会觉得，这句话经常会带有讽刺意味...那如何用地道的英语表达“不客气、不用谢”呢？①Don't mention it. 不用谢直译就是（小事一桩）别提了，其实就是不客气例：Don't mention it. I'm very proud of you. 不用谢。我真的为你自豪。I know you'd do the same for me, so don't mention it. 我知道你也会这样对我的，所以就不要客气了。②Anytime. 不用客气，(随时)为你效劳“Anytime 这个词的本意是“任何时候，无论何时”。当别人说“谢谢”的时候，你说 anytime就表示“别客气，(无论何时都)愿为您效劳”的意思。口语里，还可以说anytime my friend，对陌生人甚至也可以这样讲，很礼貌。例：Thanks for the ride!谢谢你载我一程！Anytime!别客气！③My pleasure. 我的荣幸“未来如果你帮了别人一个忙并且帮得很开心，对方向你答谢后你就可以用my pleasure来回答。例：Let me help you, it's my pleasure. 让我帮你，这是我的荣幸。It was my pleasure. I enjoyed helping you. 这是我的荣幸。我乐意帮助你。④It's nothing. 沒什么“直译为没什么，也是表达不用客气。注意：使用It's nothing.的时候，需要联系上下文的意思，再确认是不是在表达“不客气”，因为有可能是对方在认真跟你解释某件事情“真的什么都没有”。例：Thank you for the wonderful dinner.谢谢你招待了这么美味的晚餐。It's nothing.这没什么。

相信大家对下面这几句话一定不陌生：“哎呀,您太客气了,来就来吧,带啥东西啊”“您别客气,一点小意思,请收下”“那行,那我就不客气了啊”中文里的“客气”是一个蛮有魔幻色彩的词语含义非常丰富中国人也实在是喜欢客气不过你知不知道歪果仁也很是客气呢？今天跟Lydia 一起学学相关的表达吧01"您太客气了"英文怎么说？①最常用的表达：You shouldn't have. 您太客气了。“字面上的意思就是指“你不用这样子的啦” ，要注意这句话只用于口语中， 不适用在写作上。其实它原句是：You shouldn't have done/bought it for me.例：James, you shouldn't have. This is exactly what I needed. James您太客气了。我正好需要这个。Thank you so much, but you shouldn't have. I told you not to get me anything. 太谢谢你了，真是太客气了。我和你讲过不用给我买东西的。②You don't have to do that.字面上的意思是“你不必这么做” 可以用来间接地表示感谢，告诉别人“您太客气了”例： You don't have to do that, I'll pay for myself.您太客气了，我自己付钱好了。02如何回应别人的感谢“当别人对你说“谢谢”、"您太客气了"的时候，回答“不用谢”也要慎用：“You're welcome”。在一些国家，“You're welcome”听上去并不礼貌，比如，英国人就觉得“you're welcome.”带着屈尊俯就的态度，让人听着不太舒服。而很多美国年轻人会觉得，这句话经常会带有讽刺意味...那如何用地道的英语表达“不客气、不用谢”呢？①Don't mention it. 不用谢直译就是（小事一桩）别提了，其实就是不客气例：Don't mention it. I'm very proud of you. 不用谢。我真的为你自豪。I know you'd do the same for me, so don't mention it. 我知道你也会这样对我的，所以就不要客气了。②Anytime. 不用客气，(随时)为你效劳“Anytime 这个词的本意是“任何时候，无论何时”。当别人说“谢谢”的时候，你说 anytime就表示“别客气，(无论何时都)愿为您效劳”的意思。口语里，还可以说anytime my friend，对陌生人甚至也可以这样讲，很礼貌。例：Thanks for the ride!谢谢你载我一程！Anytime!别客气！③My pleasure. 我的荣幸“未来如果你帮了别人一个忙并且帮得很开心，对方向你答谢后你就可以用my pleasure来回答。例：Let me help you, it's my pleasure. 让我帮你，这是我的荣幸。It was my pleasure. I enjoyed helping you. 这是我的荣幸。我乐意帮助你。④It's nothing. 沒什么“直译为没什么，也是表达不用客气。注意：使用It's nothing.的时候，需要联系上下文的意思，再确认是不是在表达“不客气”，因为有可能是对方在认真跟你解释某件事情“真的什么都没有”。例：Thank you for the wonderful dinner.谢谢你招待了这么美味的晚餐。It's nothing.这没什么。

Thank you for joining us for our 2nd Cabral HouseCall of the weekend! I’m looking forward to sharing with you some of our community’s questions that have come in over the past few weeks… Let’s get started!    Anthony: Been taking EN's Digestive Enzyme for almost a year now daily. I understand that the body can become reliant and produce less of its own enzymes because of exogenous enzymes. Given that I did the CBO and have a clean OAT in the re-test, with the occasional reflux/burping -- what are the best ways to wean off so I don't have to rely on them? Currently taking 1 every meal and would prefer to not carry them around and be "dependent." Thank you Dr. Cabral! Deb: What approach can be made to calm low back nerve pain? I have a S1-S2 that is degenerating and can press the nerves in the lower back against my spine. Western medicine wants to do back surgery that had a 60% chance of 80% or more relief. This is not an option for me. I still exercise and try to eat right. But at night have nerve pain that can have a dull spasm running up and down my legs which will wake me from a sound sleep. Need your thoughts Salil: Do you have any free courses? Jimmy: Hi Dr Cabral, I had a CT scan on my spine (not because of any real pain, it's a long story but basically I had one) and it came back that I had a minor wedge fracture of the C6 and C7 spine.The Doctor said this could be from degenerative bone disease. Every now an then I will get a shooting pain in my neck and its very painful, but it happens very infrequently. I just wondered if there is anything I could do to combat this, apparently it's normal as we get older that the spine can start to decay, I wonder if it's my posture of diet that's making it worse though? I am only in my twenties so not old. Any tips on how to heal or combat this? Thanks Dr.Cabral Donna: Dr. Cabral, I appreciate you being a voice to educate thousands of people so that they can make informed decision to improve their overall health and to stay healthy.I've been watching The Truth About Vaccines. Could you do a future podcast to give us the understanding between being immunized or vaccinated? Also, some insight into the ingredients in vaccines and how they can play a role in our health. Finally, can you teach us how to detox our bodies from any harmful substances that may be injected into us from vaccines whether we receive them by choice or by forced mandates. Grateful to hear your knowledge on this topic. Sincerely, DC Anonymous: Hi Dr. Cabral, Thank you for all you do. I have three very embarrassing symptoms that have been bothering me off and on for years. I don’t know if they’re related. The first is a bad smell coming from my vaginal area. I try to follow all recommended advice (breathable fabrics, loose fitting clothes, etc.) but it starts almost immediately after showering and won’t go away. I also have extremely smelly gas. It will last for a few days to a week. It usually comes back every few weeks. I haven’t been able to connect it back with a particular food.Lastly, I have a lot of pain/itchiness around my anus. I have switched to gentle soap, using a bidet and hypo-allergenic toilet paper. It usually bothers me the most after I wipe with toilet paper but will also irritate me at night.I look forward to any insight you may have! James: Hi Dr Cabral, I asked a question a while back about healthy bulking and your answer really helped. Vata body type here so had to be a bit more diligent when deciding how to bulk, anyway, it's going well. I'll be transitioning into a cut in a few months when I reached my desired pre-cut weight goal, and my question was simply a reverse of my old one: How can I cut effectively and efficiently? There's not too much information out there on how to cut, mainly only how to bulk so I wondered if you could point me in the right direction on how I should cut for best results, obviously I want to lose mainly fat and very little muscle. I've heard just go on a slight calorie deficit? Is it that simple? I should mainly be reducing carbs right? Any tips? Thanks Doc, James Thank you for tuning into this weekend’s Cabral HouseCalls and be sure to check back tomorrow for our Mindset & Motivation Monday show to get your week started off right! - - - Show Notes & Resources:  http://StephenCabral.com/1584 - - - Dr. Cabral's New Book, The Rain Barrel Effect https://amzn.to/2H0W7Ge - - - Join the Community & Get Your Questions Answered: http://CabralSupportGroup.com - - -   Dr. Cabral’s Most Popular Supplements: > “The Dr. Cabral Daily Protocol” (This is what Dr. Cabral does every day!) - - - > Dr. Cabral Detox  (The fastest way to get well, lose weight, and feel great!) - - - > Daily Nutritional Support Shake  (#1 “All-in-One recommendation in my practice) - - - > Daily Fruit & Vegetables Blend  (22 organic fruit & vegetables “greens powder”) - - - > CBD Oil  (Full-spectrum, 3rd part-tested & organically grown) - - - > Candida/Bacterial Overgrowth, Leaky Gut, Parasite & Speciality Supplement Packages - - - > See All Supplements: https://equilibriumnutrition.com/collections/supplements  - - -   Dr. Cabral’s Most Popular At-Home Lab Tests: > Hair Tissue Mineral Analysis (Test for mineral imbalances & heavy metal toxicity) - - - > Organic Acids Test (Test for 75 biomarkers including yeast & bacterial gut overgrowth, as well as vitamin levels) - - - > Thyroid + Adrenal + Hormone Test  (Discover your complete thyroid, adrenal, hormone, vitamin D & insulin levels) - - - > Adrenal + Hormone Test (Run your adrenal & hormone levels) - - - > Food Sensitivity Test (Find out your hidden food sensitivities) - - - > Omega-3 Test (Discover your levels of inflammation related to your omega-6 to omega-3 levels) - - - > Stool Test (Use this test to uncover any bacterial, h. 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Welcome to Finance and Fury, The Say What Wednesday Edition - Where every week we answer your questions Today's question is from James Hi Louis, Just a question regarding owning your home. Me and my partner would like to eventually own our own home but we are worried about such a large sum of our overall wealth going into a single asset - our future house. How would you correctly diversify your assets in this scenario, were there any strategies to doing this? Especially with house prices at the moment, it really seems like all your eggs will be in one basket - and for a while. What I’ve seemed to gather is that owning your own house is more a lifestyle asset and a liability. All I seem to hear is nothing but expenses / fees / costs, a low amount of capital growth all for a relatively high amount of risk. Was this true? Thanks James – and Awesome points   In this episode – we will tackle this using the economic problem and opportunity costs – The economic problem – that we all have limited resources of savings and cash flow – and need to make this work towards achieving our goals Opportunity costs of doing so – what is the next best thing that we could be doing with our financial resources?- I.e. putting your deposit towards long term investments or your cashflow going towards the repayment of a mortgage against doing monthly investments First – What is a home? – a lifestyle asset – is still technically an asset as it has a value – as long as someone else is willing to buy it off you I personally have never really seen a home as a financial asset - because as James pointed out it technically losses you cashflow when it has a mortgage – and even when it doesn’t from a mortgage, if this has been repaid – with rates, body corporate, ongoing maintenance costs for upkeep on the property Classification – Can you live off it? Anything that doesn’t make you a passive income but instead loses you cash flow can't be used for financial independence Technically - a negatively geared investment property can set you back in FI This being said – renting also costs cashflow That is where the decision does come back to lifestyle and the fact that everyone needs somewhere to live. Everyone needs somewhere to live – Property ownership is expensive – a mortgage is normally the biggest expense – PI loans eat a lot of cash flow – but the P component can be treated as forced savings that you can’t use But does decrease your I payments over the long term Sinking deposits of $100k plus into a lifestyle asset – while it may continue to grow in value long term, you can use this to generate a passive income unless you rent a room out – but then Gov will make you pay CGT on your own home if you ever sell Opportunity cost of this is using the lump sum to invest instead and cover your rent Property Capital Growth – I’ve covered this in a few previous episodes (are we in a property bubble and many others) – but Australian property from the mid 1990s has had a meteoric rise Created a situation where people love property out of the expectation of buying and experiencing the same meteoric growth rates – Pre-1990s wasn’t the case – property grew with wages at around 3.5% p.a. from 1890 to 1990 – What changed? Banking regulations and the amount people could borrow thanks to declining interest rates But anyone looking to buy property at this stage and get the same price gains should keep in mind that it is reliant on credit growth from borrowings – so if people can afford to keep increasing the size of a mortgage from say $700,000 to $5.4m in 30 years – we won't get the same price gains – Looking back on the average mortgage growth over the past 30 years – that is what it has been – from $90-100k to $700k in most of Aus – worse in areas of Sydney/Melb – wage growth at record low rates would only be able to cover $1.9m – so I don’t think so – but may be wrong I personally sold off my last property in 2017 – was lucky timing as the market was at the peak in the area I sold – Used the funds to invest and build a further passive income – passive income from investments could already cover my rent – so this went into reinvestment Question of Renting vs Buying – look at the option of what is the interest cost, rates, BC is applicable, and spending on upkeep versus rental price Rent V Buy – in Aus with the price of property – I prefer renting if it is an apartment in the city – or house in the surrounding suburbs – why? Example – Apartment I am in at the moment is worth about $650k-$700k – pay just under $2k p.m. in rent – For same property at a 3.5% interest rate – would be paying $1,500 p.m. in interest at under 3.5% - assuming a 20% deposit of around $130k – but add on Body Corporate and rates – additional $5k p.a. ($420 p.m.) – total interest bill and minimum expenses are the same as the rent – But opportunity cost of the $130k tied up in the deposit – use this for an investment instead that provides a passive income Then add on the principal amount of $820 p.m. – at minimum – cashflow wise I am better off by around $1,362 per month – or $16,300 p.a. to direct towards investments This example doesn’t include the capital works or sinking funds requirement on the place either - This all being said – this is a financial decision - But lifestyle considerations come into play – most people want to own their own place to live long term – avoids dealing with tenancy issues, dealing with real estate agents or the owners selling out of the blue Comes down to security and ability to make amendments to the property as you like – renovate or paint a wall Lifestyle isn’t financial though – it is what you want to achieve to suit what you want If apartment living is what you like – then buying apartments to live in long term can work Have to buy for now and the future – Property (even your own) is a long term thing – if you are planning on having kids/starting a family – and want to move to a bigger home in a few years but are buying now – may as well save more and buy a bigger home Why? Transaction costs – stamp duty, agents fees Example – Buying an $800,000 place in NSW – stamp duty of $31,777. When you sell it – agents fees of around $20k – so a minimum of around $50k to buy and sell – 6.5% of the value – No guarantees that prices will jump up that much in the time you might want to turn around The risk – Shouldn’t view your own PPR as a speculative risk Speculative risk is that you lose money on it in the short term through volatility – you are buying for the long term Buying at $900k to see the valuations drop to $800k sucks – but as long as you don’t need to sell – what does it matter? The risk of owning a PPR is that it eats all of your cash flow up – through having too large a mortgage or interest rates rising – if this is the case and you have nothing left in cashflow to make additional repayments or to direct towards investments – that can be a risk Everyone needs somewhere to live – but once you retire you also need something to live off – super or investments – Worst case – Age pension which isn't a guarantee How would you correctly diversify your assets in this scenario, are there any strategies to doing this? The option is using your own property as an investment vehicle – Not advice but a strategy – Create a separate loan facility as an investment loan – and push all your cash/savings into this – Then draw the months worth of savings that you would have invested anyway to invest – debt recycling Not for everyone – and now not a great time to do it due to markets being at all-time highs The economic problem of cash flow – This is limited in most situations – as disposable incomes are the restricting factor Mortgage repayments versus investing the funds PI repayments - Interest component is covering the costs of interest – the principal is repaying the loan – and is what saves you interest long term – but at the moment rates are low – not expected to go anywhere for a little while – say you could make P repayments over 5 years and Opportunity cost factors (such as paying down debt versus investing) and also diversification factors Own home shouldn’t be treated as an asset – centrelink doesn’t as you don’t live off it but live in it   The Question – Doing what is right for you long term Me personally – wouldn’t buy an apartment – BC costs and no land to property price ratio – For me land is what is important – now building a new deposit to buy a few hectares of land around 30-40mins from the city – as for me having access to own food that can be grown and fresh water has been my plan for over a year now Summary  DO the numbers – Look at your cash flow – and opportunity cost  But also – your lifestyle considerations come into play Thanks for the question James Thank you for listening to today's episode. If you want to get in contact you can do so here: http://financeandfury.com.au/contact/  

Welcome back to our weekend Cabral HouseCall shows! This is where we answer our community's wellness, weight loss, and anti-aging questions to help people get back on track! Check out today's questions:  Nancy: Hello Dr. Cabral! I've been learning so much from your podcast and book, and have a question about vegetable oils. In my nutrition class at college, my teacher explained how polyunsaturated vegetable oils like canola oil have been processed and are often already oxidized to form damaging free radicals, or at the very least would form them when heated during cooking. We joke that perhaps a bottle of canola oil is like a bottle of free radicals. However, a lot of heart health research studies say that using "polyunsaturated vegetable oils like canola oil" reduce heart disease risk. When I learned about omega-3s, I understood that they are beneficial and anti-inflammatory, and perhaps canola originally had O3 in it, but by its chemical nature of many double bonds, doesn't that mean the processing and heating would create free radicals, so how can heart associations say it's healthy? They even sponsor canola oil on the bottle! Can you help clarify - shouldn't everyone avoid canola oil and similar vegetable oils? Thank you for sharing your incredible wisdom with the world! Wanda: Hello! I am about to start my first 7 day detox and I was wondering if it would be ok to include 1 scoop of the fruit/veg powder with each drink? I do NOT want to lose any weight during the week and thought it might be a good idea? Reem: Dear Dr. Cabral, I hope you are doing well. I’ve been having a hard time passing out stool and suffering from bloating for more than a year now. I stopped getting the urge of wanting to pass out stool and when I decide to go I strain a lot. It’s been a year since the stool came out as bulk...currently when I strain it comes out as small soft blobs. Because of straining, I got a minor stomach hernia and hemorrhoid. I did endocsocpy, colonoscopy, stool test and blood test and all turned out to be fine. When I told the doctor that I’m on a low carb diet he suspected that I’m not having enough fiber. So, they gave me some natural fiber to eat and it does improve passing out stool a little.I’m so tired of all this. I feel down and I noticed that I started to be less social.I wanted to know you opinion on my case and if there are any further tests that can be done for example food sensitivity or any other test. Katie: Hi Dr. Cabral! I have a question about asthma. I am 24 years old and have had "allergy induced asthma" for nearly 8 years. I have been working on my gut for about two years - done CBO & finisher, taken the food sensitivity test, stool test, OAT, am now taking GI balance for 2 months per my practitioner. I've also tested HTMA & am addressing those imbalances with supplements, and I just sent in my Thyroid, Adrenal Hormone this December. My allergy symptoms like sore throat, sneezing, etc, have gotten dramatically better, but the asthma persists on (as does a recurring eczema patch, and I know they are related). I do acupuncture, nasal drains, take all my supplements, eat a clean diet (no dairy, gluten, processed sugar), and do things daily to reduce stress. But I still feel stuck! I've been on Zyrtec & Cingulair for 8 years - I even tried going off my Zyrtec recently and while my allergies were fine, I had to go back on because of trouble breathing after a few weeks. It seems to start first in my nose, the best I can describe it is like I am sniffing to get more air in. Then eventually my throat starts to hurt and I am breathing in through my mouth, trying to get deep breathes in there. It's just uncomfortable, more than anything, and I can't seem to get to the underlying cause. My immediate question for you is: Where is the next place to look? What could be the cause given all that I've already done? Second, I'd love to see you do one or two episodes diving DEEP on asthma. Thanks as always! Katie James: Hey mentor, I have a question regarding breath. I feel like throughout the day I do not breath properly, I often times unconsciously hold my breath, and when i do breath, I do not breath into my diaphragm. For a long time I have had real issues to get a "full" breath and when I breath it feels as if my breath is getting stuck in my throat/top of chest, like I have some form of blocking there, making it hard to breath deeply. I have had this for a long time, and sometimes I have to make myself yawn to get a full breath, whether I'm breathing through my mouth or nose it seems the only way to get a full breath is to yawn. When I meditate i feel the same issue and I have the urge to yawn lots of times when i am breathing during mediation. I wonder if you had any idea on why it may be that I feel some sort of blocking there, or am a unable to get a full breath without yawning. Possibly some emotional trauma type blockage, maybe a physical tightening of the chest/throat due to some inflammation, I'm pretty puzzled.Any thoughts would be great, thank you... James! James: Hi Doc, my question is about these processed food products I see sold at the supermarket. Do they hold any real benefit, or are most of the vitamins and minerals lost in the processing process? I guess there must be many factors that play a role such as what company is making the products, what product it is etc. but for example, coconut water, dark chocolate, dried fruit - can these be good for me? When Im drinking a cartoned coconut water am I really getting the electrolytes which would be present in its natural form etc. Thank you doctor, James Thank you for tuning into today's Cabral HouseCall and be sure to check back tomorrow where we answer more of our community’s questions!  - - - Show Notes & Resources: http://StephenCabral.com/1464 - - - Get Your Question Answered: http://StephenCabral.com/askcabral   - - - Dr. Cabral's New Book, The Rain Barrel Effect https://amzn.to/2H0W7Ge - - - Join the Community & Get Your Questions Answered: http://CabralSupportGroup.com - - -   Dr. Cabral’s Most Popular Supplements: > “The Dr. Cabral Daily Protocol” (This is what Dr. Cabral does every day!) - - - > Dr. Cabral Detox  (The fastest way to get well, lose weight, and feel great!) - - - > Daily Nutritional Support Shake  (#1 “All-in-One recommendation in my practice) - - - > Daily Fruit & Vegetables Blend  (22 organic fruit & vegetables “greens powder”) - - - > CBD Oil  (Full-spectrum, 3rd part-tested & organically grown) - - - > Candida/Bacterial Overgrowth, Leaky Gut, Parasite & Speciality Supplement Packages - - - > See All Supplements: https://equilibriumnutrition.com/collections/supplements  - - -   Dr. Cabral’s Most Popular At-Home Lab Tests: > Hair Tissue Mineral Analysis (Test for mineral imbalances & heavy metal toxicity) - - - > Organic Acids Test (Test for 75 biomarkers including yeast & bacterial gut overgrowth, as well as vitamin levels) - - - > Thyroid + Adrenal + Hormone Test  (Discover your complete thyroid, adrenal, hormone, vitamin D & insulin levels) - - - > Adrenal + Hormone Test (Run your adrenal & hormone levels) - - - > Food Sensitivity Test (Find out your hidden food sensitivities) - - - > Omega-3 Test (Discover your levels of inflammation related to your omega-6 to omega-3 levels) - - - > Stool Test (Use this test to uncover any bacterial, h. 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James: Let's get started. One, two, three... Hi, audience, this is James Kandasamy from Achieve Investment Group. Today we are going to be having JC Castello from our Achieve Wealth True Value-add Real Estate Investing Podcast. And I would like to welcome JC to the podcast. Hey JC, welcome. JC: Hey, thanks, James. Thanks for having me. James: So JC has what? Right now, around 725 units worth around 70 million and he has bought and sold like 1000 over units. And he primarily focuses on DFW and he's in the Bay area. So, did I get all your facts right, JC? JC: Yeah. You got in just about right. That's right. James: So, do you want to tell our audience about, how did you get started? How is your company structured? Because your company structure, it's very interesting for me. So go ahead and do that. JC: Yeah, I mean, how I got started in the multifamily business. I have an engineering degree and I've been working in the technology sector in a past life for about 15 to 20 years in semiconductors. And somewhere along the way, I always had a big passion for real estate. Pretty early on in my semiconductor career, I started buying single-family rentals in the Silicon Valley area and realized that I needed to be able to scale it a lot better because I was so busy with work that managing single-families wasn't all that easy. So I started just going to a lot of networking events, real estate clubs and whatnot, asking a lot of questions of people and I found out about apartments and found out that they were a lot more scalable. And so, I read everything I could. I got my hands in all kinds of books and went to lots of different seminars and training and networked with a bunch of the local investors here in Silicon Valley. I had sold a couple of my single-family homes originally wanted to buy an apartment complex here in San Jose. And I did all the numbers and it was negative cash flow, pretty much from the beginning. And I thought, well if I'm gonna buy for equity because there's no cash flow, I'd rather just keep buying homes because I think homes in Silicon Valley are better equity drivers than an apartment complex. So that led me to really look outside of California for cash flowing apartment investments. And I did a lot of research and everything was telling me that Texas was a great area to go. I mean, this was back in like 2004/5. And so, after a little bit of research and some time passed about 2006/7, I was ready to kinda go and take my money out to Texas and get it going. And so kind of, that's how I got started and that's kind of how my company was born. James: Awesome. Awesome. So, yeah, I was in the Bay area a couple of days back and I'm meeting some of my investors. It's just so crazy, the prices there. And I mean, one of the investors asked me, 'You know, why don't you buy in this area?" I said, "I like to make money from thin air." Then he asked, "How is that?" I said, "I like my tenants to pay for my mortgage." So which means I want it to be cash flowing and I still get cashflow on top of it. So pay the mortgage and get cash flow. So if you buy in the Bay area or even in LA, I mean, a lot of coastal cities, just the cap rate is so low, you know, you basically, appreciation play, which means you buy the deal and you pray that it's going to go up. Right? So, JC: Yeah. And look, I'm not here to tell you or tell anybody that investing in real estate in California is not a good thing. It's actually a very, very good thing. I mean, I own personal homes here in California and various places and they've been great investments for me, but they're not cash flow investments; they're equity plays. And so over the 10, 20, 30 years, absolutely; it's been phenomenally great, including any of the single family rentals that I had in the past. But I like to buy single family homes here in an equity state and I like to buy cash flowing properties for apartments in other more cashflow yielding places like Texas. So that's kind of my investment philosophy. James: Got it, got it. So you started like in 2006, 2007. So at what point of your life was that, were you working at that time and how did you get that aha moment, okay, I need to invest in real estate? JC: Yeah. Well you know, in 2001 and you would know this, James, I think you're an ex tech guy, there was the whole technology bubble burst. And I was several years out of college in a professional working environment, got laid off from an engineering job and that really caused me to do a little bit of reflection in 2001 after September 11 hit. And that's kind of where I had my aha moment, if you will. And right around that time, I read Rich Dad/ Poor Dad by Robert Kiyosaki, which changed my perspective on things as did I know a lot of other people. And it taught me about assets and liabilities first and foremost. Assets put money in your pocket, liabilities take money out of your pocket. And I realized that even though I had been a young guy that had been successful and, and bought my own single-family home, really, it wasn't putting money into my pocket because it was a liability. I had to pay the mortgage every month. So long story short, I decided that I was going to start investing in rental real estate as I got back into my next technology job, once the sort of 2001 recovery happened and that's what I did. Ever since then, I was like, look, real estate rentals are going to be what the thing that I'm going to do is and I'm pretty passionate about it anyways. I always liked real estate, so that's exactly kind of how I got started on my path. And I worked all the way up at my job until 2011 which is when I effectively left my W2 semiconductor job. I actually also helped start another company up with a couple of my other buddies from my ex-technology company. And so we did a startup company that was successful as well. And we did that from about 2012 to 2018. Actually the company's still going, but I'm no longer part of it. So I like to work really hard. James, I'll tell you that much. James: That's crazy. So, I mean, you are a tech guy. I mean, I didn't know until we talk a few months back on how many similarities we have. I used to be in the semiconductor industry as well. So I mean, why not you looked at stock at that time? I mean a stock used to be like, I mean a lot of engineers, like for me, I was like intrigued with stocks. I was always saying, let me solve the worldwide puzzle here of the stock market. So did you try that as well? JC: Yeah, definitely in my younger years. I mean, I drank the Koolaid like everybody else, you know, I was in love with the stock market. And I saw tech stocks, every day going up like gangbusters. So it was like, okay, let's pick Broadcom, let's pick Cisco, let's pick all these other tech stocks that were going to make us all multi-millionaires. And it was kind of a wild ride because there would be some big ups and then there would be some big downs. And so, it just got really frustrating because I find myself thinking about how our stocks were doing every day and sort of checking in on E-Trade accountants and seeing whether I had made money or lost money. And I just said, look, it's not worth it. I don't want to live like that. So, I think what I've learned since then is, look, I'm not here to say that the stock market isn't a great investment. I think what I'm here to say is that a financial advisor that's worth his salt is going to tell you that you should definitely have a good healthy mix of stocks, bonds, money market, and alternative assets, which real estate certainly fits the bill. And I think that 10 to 20% is about what people recommend that are financial experts in terms of how much you should be allocated to things like real estate. So I'm a big believer that people should never swing too much any one way. Make sure and be a little bit diversified, but certainly, 10 to 20% at least in real estate is a good healthy number. James: Got it. Yeah, I mean, I was intrigued with stocks as well and you know, it's all technical analysis. I did a lot of book reading and trying to solve and you know, Japanese candlesticks books and all that. But I think it works with a lot of fear and emotion. I mean, fear is great, it works with a lot of emotions. Which is, you can say numbers don't lie but in the stock market, the numbers can be manipulated using fear and greed by big institutions and that's where I got caught. Every time I go to stock markets, I lose money. JC: And the other thing too, I think the other thing that's important to understand is, it's not just about how much you're making before tax. One of the things that I think I'd made the mistake of as a younger person was not fully understanding how to invest with maximum tax sheltering and maximum tax advantage. And one of the things that I've seen with real estate investing is that there are huge tax incentives out there. Everything legal that encourages you as a real estate investor to keep doing it. And there are extremely, especially now with the tax cuts and jobs act that was passed and that went into effect in November of 2017. The benefits of the tax sheltering piece of real estate investing is extremely phenomenal. And so I think that the real aha moment is not just that you can invest in real estate and make good cash flow, but it's that you can invest in real estate, make good cash flow, and not pay taxes on that cash flow that you're putting in your pocket. That's really amazing. James: Got it, got it. So, coming back to your transition from a W2 job to a full-time real estate entrepreneur. So you said you started in 2006, but only after quite a number of years. When did you become a full-time person? JC: 2012. James: Okay. So what were you thinking in 2012, beginning January of 2012, what were you thinking and when did you resign and what was that trigger that allowed you...? JC: Well, you know, the trigger was, as I told you, I'm a 'slow and steady wins the race' type of person. My investment philosophy is 'go long, not short'. I always like to take the long route cause I believe in taking as little risk as possible to get where you want to get. So, I stayed with my company and my job for a long time and maybe even longer than I needed to because I also did another company with a couple of other buddies. But what that did was that gave me a real stable base so that I was never taking any risk. And so my route in real estate has never been to take big risks and I apply that same philosophy to our company in the way that we buy properties and the way that we look to partner with investors. We are always going to take the lower risk path. We're not just looking at yields and looking for the highest yields. We're looking for the highest mix of risk-adjusted returns. That's what we're looking for. And so that is I think a fundamental piece of why my journey took a little bit longer, in terms of transitioning away from a W2 job. James: So did you have a goal of a certain income level, a certain percentage of your W2? I mean, you don't have, tell me the percentage, but was that goal that you decided if I hit this much income in real estate, okay, I'm going to go full time into this. I'm okay to let go of my...? JC: Yeah. I mean, I definitely had some numbers in mind and they were, obviously, based on my costs of living. So as soon as I was able to bring in enough free cash flow that was greater than or equal to my cost of living with some margin, then I was comfortable exiting. And so, I think that's an important consideration for anybody that's doing this stuff. And you want to make sure, you know, you don't need to be necessarily significantly positive, but your costs of living, whatever it is, you should really be able to at least cover that. And I'm not talking about with like, you know, I'm talking about just with money coming in from rentals and whatnot, not talking about, you know all the other fees and whatnot that you generate. James: Yeah. Yeah. Correct. I mean, just advice to whoever listening. Sometimes you go for the weekend boot camp and you think that there's no point of working a W2 job. I mean, there's no such thing, right? I mean, real estate is awesome but it takes time to get to a certain level of income. And especially if you have [13:22unintelligible] in life, just don't give up on your work and go into real estate; take it slow and steady and you will get there. I mean, there's a lot of learnings to be done in real estate anyway that you can't learn in a weekend boot camp. JC: It's very, very wise words. And I hope that anybody out there would listen to that. James: Yeah, absolutely. So now you're in California, right? I mean, I don't know which year was this. So now you look at Dallas. Why did Dallas flash in front of your eyes? Why not Phoenix or Austin or Orlando, Tampa? JC: Well, Texas, as a whole. When I was doing my research, one of the big stats that jumped out to me was that I believe it was in 2008...I think it was 2008, Texas became the number two state in terms of the number of Fortune 500 companies headquartered in the state. It actually surpassed California. And before that, I had seen a lot of data that was telling me that this transition was happening from a corporate side. And from a corporate side, as we all know, Texas has a very business-friendly state. And I also saw a lot of migration patterns that were happening that were driving people away from the coastal areas, specifically California, and driving them to Texas. Also to Pheonix but not in the sheer magnitude that they were going to Texas. So really for me, what convinced me to go to Texas was the data and it was the job growth, the population growth. And the other thing that really convinced me was the quality of life that could be had in Texas for a relatively low amount of money. Back in 2006, when I first started buying out there, you could buy a pretty decent home for 150 to $200,000 in Dallas, Fort worth. Now, of course, you know, I had to decide, you know, it wasn't just Texas, it's where you're going to go in Texas. There are basically four major areas you can go; you can go to Houston, you can go to San Antonio, you can go to Austin or you can go to DFW. I chose DFW because Houston, to me, was a little bit more of an oil-based economy so I didn't like being dependent on oil. If the oil was good, everything's good in Houston. If oil goes bad, it can be a little bit difficult. And Austin, I really, really liked; I continue to love Austin. However, I always knew that Austin was like Silicon Valley. The dirt is very expensive, so the cap rates are a little bit lower so they don't cash flow quite as well. But I still do like Austin if I had to say, the second market in Texas. San Antonio is just sort of a little bit slow and steady. There's really no significant job growth, at least not significant, you know, amazingly. And there's slow and steady population growth. So everything in San Antonio is hunky-dory for a long time, but there's no real like superstar momentum there. DFW, on the other hand to me, had a lot of the characteristics that I felt was perfect for an investment home for me. I wanted to be there for 10, 20, 30, 40 years. They've got a very diverse economy, lots of different jobs sectors and they are tops in the nation for job growth, population growth, consistently. And the quality of life there is very, very good. There are 8 million people, 4th largest metroplex in the nation behind New York, one; LA, two and Chicago three. And actually, of those top three, they're all sort of negative population. So meaning, they're losing people in Texas; Dallas Fort worth is gaining. So for all those reasons, I thought back then that this would be a great place for us to go set up shop and I haven't been disappointed. It's been a great run, to be honest with ya. James: Got it. So now you decided on Dallas. What was the first step? I mean, who did you first establish contact with and how did you build your team? JC: Yeah, you know I was a big believer in shadowing people. So I had a couple of friends that I had met and gotten to know in the local Silicon Valley real estate circles who were buying apartments in Dallas. And so, I would shadow them. I would get on a plane and go with them when they would go check on their properties. And because they saw that I was willing to do that, they took me around to the local brokerage shops, Marcus & Millichap and all the other shops and they introduced me to all the brokers. And because these guys were already doing deals and established when the brokers met me, I had a little bit of credibility, not much, but I had more than just if I had come in on my own without them saying that I was a good guy. So that's the way that I got my start in the apartment world in Dallas, coming from California. James: Got it. So, I mean, if I understand your business, you own the asset management, but you also own your own property management company. JC: That's correct. Yeah. We opened up shop in 2013. We integrated the third party operations in house and we formed our own management company and we've been managing our own properties since then. James: So that's really unique because I mean, even for me, we have our own property management company, but we are here in Austin, San Antonio, so we are locals. But how did you do it from California and then you establish a property management company and why did you decide to do that rather than a third-party property management company? JC: Well, the how and the why. The why, I sometimes ask myself why multiple times. But I know after getting through all the hard times and now that we've got a model that works really, really well, I know that it was worth it for us. Because we have a large degree of predictability by having operations in house. I never throw stones at third party management companies because I've walked a mile in their shoes now. And I think it's a difficult business even when you control it yourself. And I think that third party managers, for the most part, are extremely good. I'm not here to say that we have built a significantly better mousetrap, but what we do have is we have a mousetrap that we built. And so, we know the process of how we go to market with it and we know what the numbers are and so, we have a high degree of predictability for our investors. At the end of the day, it's all about making sure that we deliver what we said we're going to do for our investors. And so the predictability piece that we have by having the operations in-house for us is key. How did I do it? You know, it wasn't easy. I think that you have to look for a superstar person that you can find that has enough talent to be able to sort of get this off the ground in the local market that you've built your portfolio in. And I was fortunate enough to find that person through a lot of hard work and some luck. And once I found that person, I knew that it was going to work and that was the big difference for me. James: And when you started in 2013, how many units did you have that you were convinced that you can have your own property management company? JC: It wasn't that many. I think we had maybe four properties, maybe five properties, something like that. James: Like a few hundred units. JC: Yeah. A few hundred units. Yeah, that's right. James: So who was this first person, what was that person's role? I mean, you don't have to name names, but I want to know the role of that person. JC: I mean, they were the VP of Operations. That's what they did. Everything related to operations was what they were responsible for. James: So you hired VP of Operations and from VP of Operation, the other person hired the rest of the crew? JC: Yeah, absolutely. Well, I mean, look, we're only 725 units currently, so we don't necessarily have a bunch of regional managers working for our company and we're set up a little bit differently than sort of your traditional management companies. But what I will say is that you really need that foundational person, that foundational piece if you want to have a successful operation in any one given market. James: Okay. Okay. Got it. But what was that aha moment in 2012 that you said, okay, I can't do this anymore 2013, I'm going to do my own property management? What was that push over the cliff moment that you said, okay, I'm giving up on this? JC: You know, I can't say that there was any one particular thing. I think that it was always our strategy to open up our own shop because we wanted to make sure that we had a high degree of predictability within the operations piece. And that's a very valuable component for our investment partners. Being fully integrated doesn't mean much unless it provides good predictability for returns. And what we've seen is that we've enjoyed a very, very high degree of predictability with having our own operations piece. So we're going to continue to have that as part of our model, but at the same time, we're never completely committed to any one particular thing. So meaning that we have a fiduciary duty to do what's best for our investors. If at any given time we understood that our operations or our management piece wasn't the best strategy, then we would certainly look at divesting that piece. I don't see that happening, but we're always open to making sure that we're doing the best thing for our investors. James: So how frequently do you travel from California to Dallas to manage this operation? JC: Well, I tried to get out there, my wife will say I'm out there all the time and I sometimes look back at my calendar and go, yeah, I think she might be right. But usually, it works out to be about six to eight weeks time, is how long I'm out there. And I'm usually out there for a couple of days and I get back to the home base. James: So six to eight weeks through it the year? JC: Right. James: Got it. Got it. So you've tried maybe like once a month or less than once a month, depends on...? JC: Yeah. And it's really as needed too because I have a pretty good system. So I mean, I can jump on a plane tomorrow morning and so it just depends. I get out there as needed, you know, immediately when needed. James: Okay. So let's go into the operational aspects. So you're in California, your operation management, the whole company is here. You have a VP of Operations, you are sitting that you're not coming to Dallas. So tell me like in a week, how would you manage this operation? Is it through Zoom calls, through weekly meetings, through properties or how do you do your asset management? JC: Well, first of all, asset management is handled by a separate person at our company, at multifamily property group. So we do have an asset management person. And in terms of operations, I think as you rightly pointed out, there's a lot of things that we do with technology these days to make it pretty efficient to be managing from another state; Zoom meeting, like what we're doing here is a great one. Lots of phone calls, lots of emails. And also I'm a big believer in driving the company by key performance indices or indicators. And so KPIs, for us, are a big deal because we pretty much keep on top of the numbers from a day to day basis and we manage according to how the numbers are telling us to manage and we go deep where we see that we're having issues with any one particular area. And so, we have a pretty structured way about how we monitor what's happening on the operations piece. And everybody's got a pretty strict lead defined set of roles and responsibilities, which kind of helps to keep everything in motion even though I'm not in the Dallas area. James: Got it. So how frequent do you look at your financials? JC: How frequently do we look at it? I mean, almost every day. James: Okay, good. So when you look at it everyday, what are the KPIs that you look for to see whether the properties are in the right direction or not? JC: Yeah. The big ones we're going to track are income to budget. We're gonna track expenses to budget, especially repairs and maintenance and CAPEX. A CAPEX, the budget, we're going to track, we're going to track current vacancy and we're going to track future vacancy. We're also going to pay strict attention to resident retention; how many people are actually renewing their leases? One of the things on the operational piece that we've learned along the way is that you have basically with the property, you've got a front door and you've got a back door. The front door is where you lease the new units and you bring the new residents in. And the back door is where you have people either renewing their leases after they've been there for a year or you have them leaving your property. And we like to talk about closing the back door because if we can get people to renew their leases, that is worth literally thousands of dollars in expenses and vacancy and marketing to our profitability. So, I think as operators and as investors, we always want to think about buying a property and renovating it and filling it up with people. But we should more care about keeping the people happy and butts in the seats because that's where we're really going to save our money once the property has been stabilized. It takes about 18 months to 24 months to stabilize a property once you buy it and create the value. But then if you're a longterm holder, like we are, you're holding the property for a long period of time. And that's really dependent on how well you operate, how well you provide customer service and how well you can keep the people renewing their leases. So for us, we really like to focus on resident retention. That's a really big deal for us. James: So that's one of the biggest KPI that you look for, resident retention? JC: Absolutely. James: Making sure that back doors close. So can you tell us like one to two things that you do to keep residents renewing? JC: You know, it's really simple, right? You don't want to get too caught up in a lot of complicated stuff so one of the biggest things that you need to do is follow up with people after work orders. Make sure that they're happy. Make sure that the work order was completed.; first of all, completed. Second of all, was it done right? And third of all was the customer happy with the experience? James: So, I think the resident retention is one of the most important things that you guys look at, especially closing the back door. And can you tell us one to two things that you and your company do to make sure that people keep on renewing or motivated to renew? JC: Yeah, I mean, it's important to focus on from a very high level, really the most what should be obviously simple strategies and have a process in place to make sure that it gets followed through. Like, for example, if there's a worker that's placed, following up with the person with a phone call, the customer, and saying, "Hey, was the work order done to your satisfaction? Did you have a good experience, how did you feel about it?" And that's a big deal because a lot of people that don't have work orders completed the right way are the ones that are gonna end up leaving the property with a bad taste in their mouth. And then a lot of people are actually surprised when we call them and they basically are just happy that we chose to call them and follow up. And that actually makes them so much happier, to begin with. So I think following up on work orders. The other thing is following up after a move in and making sure that the unit was fully functional; if there was something that was missed, making sure that you take care of it. And then the other thing that I think is really important is when it comes time to renew, you need to give the resident enough runway, to listen to them when you want to call them to renew. Because they're always going to have some concerns, either if the rent's going up or something. But normally it's actually, a lot of times it's just, "Hey, you know, I've got a couple of things wrong with my unit and I need you to fix them." And so, you've gotta be able to actually talk to them and understand why they're frustrated and fix those things and then they're willing to renew. So I think basic follow up is really the key. Following up with the resident on some sort of a documented frequency that enables you to keep a pulse on how they're feeling about their experience. James: Got it. Got it. So I presume that most of the deals that you buy, you try to do value add on the apartment, right? I mean, you guys do renovation, you've put in good management and all the smaller things in the interior and exterior, is that right? JC: Yeah, I mean basically you got it right. So number one is, acquire the deal at the right numbers. Number two is, renovate; which includes exterior amenities and unit upgrades. And then number three is, put a great operations team in place. And so those are sort of the three pillars of a successful investment and a successful life cycle of an investment for us at least. James: Got it. So what is the most valuable value add that you think in your mind that gives you the biggest bang for the buck? JC: You know, I really couldn't point to any one thing. What I would say is that your upgrades to your units are really important. Because a lot of people get sort of jaded by the exterior pops, like, you know, put some paint on the walls and stuff. But I've found that unit upgrades are really at the core of what you want to give in terms of your experience to the customers when they're walking through. And then the other thing that's really important is that there's a cohesive feel to the renovations that you do from the exterior; be it the painting or the amenities improvements. One of the things that I think people miss a lot is that they put money into exterior items, but there doesn't seem to be a cohesive feel. It doesn't feel like a clean, unified vision for what you wanted to present to the customer. And I think that's a big deal. It goes all the way down to the color schemes and it goes down to the signage and how that matches with the colors and how it matches with the amenities and also how it flows into the leasing office. You know, do the colors and the vision and what you're portraying with the signage and the exterior, does it match to what somebody is walking into the front door to lease a unit? Furthermore, do the units, sort of, match to the vision of what the exterior is saying? So, I think that it's not just one of these things, it's basically having a holistic approach to how you tie it all together so that it feels like a common vision when you drive to the front door all the way till when you go into the model unit. James: Got it. Interesting. Because you are looking at more of cohesiveness of the whole units and how they feel than a specific item. So let's go to your personal side of it. So I mean, you started in 2006 and then now it's 2019, you bought and sold like thousand units. So you must have a good write on the apartment cycles. So why do you do what you do? JC: Why do I do what I do? That's a good question. I think that ultimately what we're doing here is we're basically building a business that is focused on providing a great value to the community, to the customers, to the people that we rent our units to. I think it sounds cliche, but actually I think not enough people to do what we do actually talk about it. You know, when we come into a property and we invest multiple millions of dollars in the renovations and do the transformation of the property, really what we're doing is we're improving the lives of the community that lives there. And it makes a big difference in, we get told all the time how much they care to see all the stuff that we're doing. And so the first thing is making a difference in the community, I think is what's really, really cool. And we've done that over many, many properties now. So we've gotten to see that time and time again. I think the second thing is, partners. So we work with a lot of amazing partners, contractors, vendors, lenders, lawyers; there's so many that I can go on and on with. But what's really special about what we're doing is that we've developed really close relationships with a lot of these people that have been with us for many years. And so, we've become somewhat of friends with them as well as business associates. So it's really great to kind of see how much our success has impacted their success as well. And sort of a 'rising tide floats all boats things' mentality is where I get a lot of joy, personal satisfaction out of what we've done here. And I think the third thing is really is it's about our investors. I mean, I can tell you personal stories of many people that I'm very good friends with that have come along the ride for us, that we have literally changed their lives because of these great investments that we've been able to do over the years. And so I think that this business is about touching people's lives. Touching people's lives in every single aspect of what we're doing. For me, that's what really makes it fun for me every day. James: Would you do this same role for the next 20 years? JC: Yeah, of course, man. I'm not retiring. I mean, this is great. You know, we've got a great team, we've got a great company. And real estate investing to me it's more of a lifestyle thing too. So to be honest with you, this is something that I believe in doing irrespective of my company. This is sort of a personal belief that real estate investing is a very, very good way to take the money that you're making from whatever method that you're generating it and pump it into something that's going to give you a longterm return. James: Got it. Got it. Was there a proud moment in real estate that you think you will never forget that you can ride it on your tombstone? JC: Yeah. Well, I don't think I'm gonna put anything real estate related on my tombstone. James: Of course not. But if there was something that when you are at a very old age, you're going to think I'm really, really proud that I did that, can you describe that moment? JC: No, I don't think I've gotten there yet, man. I think there's still so much more to be done. You know, any proud moments, I think they're all stepping stones. I'm telling you, every day I wake up and I'm excited about where we're taking the company, things that we're doing to grow the company, new ideas that we've got. And I don't think we've reached our full potential in any way, shape, form, or fashion. James: Okay. no, what I mean is like, did you touch any employee in a certain way that, in terms of changing their life, any tenants, any property that you think that we really did a good job and that I'm really, really proud of that. JC: Yeah. I mean, you know, nothing particular comes to mind. I mean, look, I can give you a million examples, right? But the very last property, for example, that we renovated, I thought that it was the best one we've ever done. And I thought that just seeing the people that have been writing reviews on our property, coming online reviews and whatnot and hearing the feedback that we get from our management or our onsite staff has been so happy that we've made the change with the property. So yeah, that's very rewarding to us for sure. James: Got it. Got it. Top three things that you want to advice newbies who wanna walk your path. JC: I'm only going to give you one. I think it's the most important one. It is 'go long, not short.' Take the long road, do it slow and steady. Don't take unnecessary risks and make sure that you build the foundation and spend your time building a foundation solidly before you try to go too fast. I think that that's a mistake that a lot of people make. And I think that doing it slow and steady is there's a lot of benefits to that. And that's the way that we built our company. James: Got it. Got it. Yeah. I see so many craze out there on people want to do so many big things very quickly in real estate now because it is how the market is right now. So what's your strategy right now in this market cycle? JC: I don't think we really changed our strategy. We remain and always have been. We are opportunistic buyers and we're strategic sellers. I've talked about that before, I did a blog post on that. And the way that we've always seen it is, strategically speaking, if it's the right time to exit an asset, we're going to do it. It's been a great time lately to sell properties. It's also been a great time to keep properties, be a net keeper. We talk about that too. Opportunistically buying simply means that if we find a great deal, we don't care whether it's a hot market or a down market or a sideways market. If it's a great deal and the numbers work, we're going to pull the trigger. We know exactly what we're looking for. We've been around long enough to know that when we see that type of a deal and we've got the right relationships in place with the brokerage shop to do it. We're gonna make it happen because what we've seen is we've had some of our best acquisitions in what some people would call a seller's market or on a hot market, an upmarket. And so I think being an opportunistic buyer and always being ready to strike if the right numbers present themselves is where you need to be positioned. James: Got it. Got it. Before we end, I've asked you this question, which is completely different from what other questions I asked and normally it's not in my mind. But you are from California, investing in Dallas so you know a lot about these two markets. So do you think when recession hits...I mean, that's already a lot of people moving to Texas and Florida and maybe Phoenix. Do you think when the recession happened, there's going to be a lot more people moving... JC: Moving to Texas? James: Yes. I mean all this Texas and Florida and other markets. JC: Well, I don't know the answer to that question per se. But what I can tell you is this; it's becoming increasingly difficult to be a very smart college graduate in Silicon Valley and be able to see yourself making a life out here. And so even now with the job market being pretty decent, people are still leaving. And they're leaving because they just can't see themselves being willing to spend so much money to buy a house here, on top of the student loans that they've got and on top of the cost of living that they've got with high rents and whatnot, how do you save to buy a home here? And so, I don't think that that's going to change and I don't think that it matters whether we have a blip on the radar with the recession. The fundamentals are such that it's creating a very big incentive for people to move out, to go to other states where they can look to buy a home with a little bit more ease, can actually afford to pay rent with a little bit more ease. And so it's naturally speaking, we, as a company, believe that there's going to be continual growth. And in markets like Dallas Fortworth right now where rents are still, even as they'd gone up are still below the median affordability across the nation. Obviously, Silicon Valley is on the opposite end of that spectrum with San Francisco and San Jose, you got some of the highest rents in the nation. It's very unaffordable for how much people make here. So I personally think that the migration away from the coastal communities is going to continue. I don't see that trend stopping anytime soon. James: Yeah. No, I'm not saying it's going to stop. I think it's going to double or triple because when the recession happens, I mean, people are gonna lose jobs. And where your house mortgage is fixed, the house mortgage not gonna reduce. But if you are losing your job, people are gonna take that equity and at least move to cheapo States, like where they can pay less in mortgage and buy better houses and lead a better life, I guess, in terms of house expenses. Because I read some article that on average in the US, somebody's paying like, 60% of their pay going to mortgage. I think it's much higher in the Silicon Valley and Bay area. So what's the point of living and paying 80% to the house? There's a lot of other things you want to enjoy. JC: I agree. I agree. I mean, that's exactly why we're moving our investments out there to places like Texas for sure. I completely agree with that. James: Got it. Got it. Alright. JC, tell our audience how to get hold of you and if you want to give your contact information. JC: Yeah. If anybody out there wants to check us out, they can go to our website, multifamilypropertygroup.com. But more importantly, I actually host a video podcast with one of my buddies, Paul Peoples. It's a weekly show, it's called the Apartment Investors Show. So if you wanna actually see us in action, talking about how to make smart investments in multifamily, you can go to YouTube and search for the Apartment Investors Show. And we've got a whole host of great curated videos where we bring in experts in many different facets of multifamily investing. And you might learn a thing or two if you go to that, to our show. James: I'm sure that everybody's going to learn a lot of things because I've seen some of the videos. It was really good. JC: Thank you. James: Awesome, JC. That's it. Thanks for coming on the show. And happy that you add a lot of value to our audience and listeners. JC: Yeah, thanks a lot for hosting. I really appreciate it. I had a good time. James: Thank you. Bye. JC: All right, bye-bye.

James: Hey, audience. This is James Kandasamy. Welcome to Achieve Wealth through Value Add Real Estate Investing Podcast. Today, I have Anna Kelley from Central Pennsylvania, who owns around 175 units, around $16 million in worth until now. And you know, I should have invested passively in 900 units. And she's also under contract on around 200 units right now. Hey, Anna, welcome to the show. Anna: Thank you so much for having me. Good to see you, James. James: Good to see you too. And, I mean, for those who do not know, we also have a YouTube channel that shows all our interviews. And you can catch up with us on iTunes or Stitcher or YouTube or Spotify so go and do that. I'm actually in one of my property here in San Antonio so trying to do it from my office. And Anna, are you in your office or where are you right now? Anna: I'm in my home. I'm not actually in my office. James: Yes. Good. Good, we work from home, I guess, right. Anna: Yes. James: So Anna, why don't you tell our audience about yourself? Anna: Sure. So I started out in real estate about 20 years ago, just kind of dabbling in real estate. And I started out doing some property flips and some single-family rentals. And then I slowly started moving up to small multi-unit properties, like four-unit apartment buildings, 10 unit apartment buildings. And I recently last May retired from my full-time career, I worked for AIG for 20 years. And I really built my real estate portfolio up on the side, part-time for all of those years. So busy mom, have four children. And I just went full time. And now I'm focused on and have been focusing on for a while much larger apartment building assets. James: Got it. So let's go back to the beginning. I mean, you work at AIG, which is a big insurance firm. And can you just quickly tell us what was your role? Anna: Sure. So at AIG, I had various different roles. I did internal management, consulting, product development, and then I moved into a role that was very compliance heavy. We worked with private placement hedge funds wrapped in an insurance product. So we worked on SEC audits and filings, reviews of PBMs and hedge funds and things of that nature. James: Got it, so it looks like you have some PPM level syndication experience, even at your workplace, I guess, is that right? Anna: Definitely, we worked with alternative investments for about 17 of the 20 years that I worked there. James: So you work there for 20 years and when did you start to real estate venture? Anna: Why I'd say, you know, I dabbled, I bought some, you know, singles and I bought a flip. And then 12 years ago, when I moved from Texas to Central Pennsylvania to start my husband's chiropractic business, we were looking for properties to lease for his office space. And we found that it was very difficult to do that. But they had a lot of buildings that came with tenants, you know. Older buildings on Main Street that had been converted to businesses on the first floor, most of them had residential rental space on the top floors. And so we bought a building and inherited tenants. We had three tenants with his commercial space. James: Okay. Anna: And then that kind of threw me into the idea of having tenants and having a little extra cash to cover the mortgage. And then at that same time, James, we sold a house in Houston that we lived in, liquidated everything, we had to come here and start a business. And so I knew it wasn't very wise for me to buy another home right away. And AIG let me work from home on a very temporary trial basis to see how it worked out. So I bought a four-unit apartment building for us to live in. So we downsize significantly and house hacked, basically, to make sure that our business expenses, you know, for the space and our housing expenses were covered if I happen to lose my job, you know, 12 years ago when we started out. So that got me into starting to think about and invest in residential real estate. James: Got it. So you basically, you did not like had an ah-ah moment, I need to go tomorrow and buy real estate. You were actually thrown into it? Anna: Well, I'll say this before I went to work for AIG. I was in private banking, I was a Financial Relationship Manager for Bank of America. And so I handled the top 10% of the wealth in our bank, both small businesses and individuals. And what I found is that many of them owned real estate and had accumulated their wealth in real estate or were already investing in real estate. So in my young 20s, I was very interested in real estate thought that it was something lucrative that one day I'd like to own, but I really didn't start thinking too much about it until I had my first child in 2003. And all the flip houses shows, you know, we're coming on and I thought, oh, I can flip a couple of houses and be home with my child. And so I dabbled in flipping before the rental real estate. But my move here is what kind of gave me the impetus to think about rentals more quickly. James: Got it. So, I mean, I never had a woman guest until now. So you are the first one. And I'm very -- Anna: Oh, thank you. James: We have a lot of listeners that are listening everywhere and I'm sure a lot of them are women. So I'm trying to get from a woman’s perspective, on how could they start like what GF started, right? I mean, your husband is working and you are working too. Like, I would say what do you think could be the secret formula, or they're just the formula on how can any woman start while they are in your own position? Anna: Sure, you know, there are different ways to starting, a lot of it James truly does depend on the personality of the person, your family dynamic. You know, how much support you have for watching your children? What other income sources you have, you know, when you're starting out? And how much basically time and money that you have available to get started? So, you know, people that have very, very limited time might have the significant cash flow or they might, their spouse might make enough money that they could really get started more passively. And that's where maybe they want to start investing in other apartments syndications or getting invested as a passive partner maybe joint venturing with someone that has experienced you know, buying and managing either a single or a small multi or a larger and then just investing with money. And learning how to review the financials and review the operations each month and each quarter. Just to kind of get yourself familiar with what it's like to own and manage an asset might be a good way to get started. For someone like me, that doesn't have any cash and really wants to get invested by investing time, you have a lot more opportunity to really educate yourself through reading books and through podcasts. And going to meetup groups to learn what it takes to ask actively, evaluate deals, find them and hire people to update them and improve the values and put a renter in or you can start learning the skills yourself. You know, my husband and I when we started out, he did a lot of the maintenance and I painted every unit. And I called flooring contractors and you know, designed kitchens and help paint cabinets. I mean, we did everything actively because we started out, we had liquidated all of our, you know assets and started out with quite a bit of debt to start a business and we're running that. So we really didn't have a lot of money. So we invest at the time. So there are many ways to get started. But I'd say definitely align yourself with other people that already know what they're doing, attend some meetup groups, listen to podcasts. And then just decide whether you want to be active or passive for your first one or two until you kind of learn what you like, what your personality works well with and kind of what works within your family dynamic. James: Got it. So who convinced who between you and your husband? Did he convince you to, hey let's go and do, spend time and rehab this real estate or did you convince him or how did you? I'm trying to understand how did the discussion happen? Because a lot of people are struggling, I mean could be struggling, right? How do I convince my spouse especially from a woman to the husband side? Usually, the husband can convince the wife, right? But you are the one who's active right now real estate, how did that work out? Anna: Yes. So it's one of those things when we talk about the personality of the individual. When you're married, there are two people involved in your decisions. And my husband and I, from the beginning, have always looked at our finances and our lives as a partnership. But we kind of has our roles in reverse. I mean, he's a doctor, he's a chiropractor, he went to school for a long time. He's very smart. But he's very hands-on and a people person, he doesn't like the finances, he's not financially minded. He's not the kind that wants to be an entrepreneur and grow a big business, like he's content, just having a small practice, and letting me handle all of the finances. So because I had a background in finance and understanding investments, I pretty much have always handled our investments. And when we decided for him to start the business, I kind of took over the operations and learned how to, you know, run a chiropractic business and set up insurance and all that kind of stuff while he was the doctor and saw the patients. And so when it came to real estate, I said, listen, we're starting out with a lot of debt after paying off all of the school that it's just not financially wise for us to do anything other than buying something so we have tenants helping to pay the rent. So it was easy initially to get Vincent to buy his practice and our building, just to be financially wise and not going into more debt. But growing that beyond that was definitely me as the driver, he was busy with this practice. He did not like to do maintenance, but he learned to do it and liked the fact that once we did rehab units, they were worth a lot more and we had a lot more cash and could keep buying them. But I've been told multiple times, slow down, pull off the brakes, we have enough units, why do you want to keep growing? And I am like because I'm passionate about it. And I'm passionate about the wealth that it can create. So I've been kind of the driver. And he's been very supportive and very hands-on for the 70 units that we self manage in our area. But definitely likes that I'm now buying much larger assets where I'm asset managing and he's not involved day to day in the management and maintenance of the properties. James: He must be very happy now. Anna: Very happy, yes. James: Yes, we started with 45 units. And my wife used to be sitting there whenever we were missing our property manager in the beginning, I mean, she was sitting there doing things and I didn't do maintenance. But, I used to be with her and trying to buy this and buy that and make sure you know the contractors are lined up. And it's a lot of work, but it involves teamwork. And yes, we are two different people, we have to learn how to work with each other. Anna: For sure. James: That's good. And so you started with 70 units, with the chiropractic real estate, right? I mean, is it like a commercial center? Anna: It is. It's a commercial mixed-use building. So there's a commercial space that his business lease's from my business. And it had three tenants, three, you know, residential renters and four garages to that property. James: Got it. So you got some kind of tax benefit, I guess because the [inaudible11:44] is leasing from the owner itself, I guess, right? Anna: Yes. James: So get some write off there, good. And how did you, I mean, so after that and then what was the next acquisition that you did? Anna: So James, as many people were affected by the 2008-2009 economic crash. Imagine working for AIG at the time and AIG, you know, coming in and having one of the largest insurance liabilities of any other provider in the country between mortgage insurance and credit default swaps. And I worked for them. So I had already, I had been working for them for a year on a work from home basis. And we thought we were going to be laid off, my stock went from 1-o-1 a share to 43 cents a share. My retirement funds were almost just destroyed. They were destroyed. I lost about two thirds within a week. And I decided, oh man, I'm going to lose my job. My husband has a brand new business with hundreds of thousands of dollars in startup debt and I'm the sole income. So what are we going to do? And the only thing I could think to do right away was to borrow from my 401k, about $50,000 that I had left that I could borrow and buy another four-unit because I thought at least if I buy another 4 unit, I'll have another, you know, $1200 to $1500 dollars a month of cash coming in. And that's in the asset, that is solid and stable that I won't lose any more in the stock market, no matter what happens. So that was my next acquisition. Again, it wasn't really thinking about oh, this isn't a phenomenal investment. It was, what can we do to survive? And I know that cash flow is a good thing. And that residential real estate will not go down in value significantly compared to the stock market. James: Got it. So after that four-unit, what did you buy the next one? Anna: Another four units. James: Okay, and when did you start with the 70 units where you self manage? Anna: Okay, so what we did, we self-managed, again, initially just out of necessity, not having a lot of extra cash, thinking our finances were not super stable because I was the sole breadwinner at that point. My husband's income was nice, you know in six figures gross, but it was covering expenses. And so we just we're continuing to find ways that we could cash flow and make the most cash and be willing to put in the time to do it ourselves and learn at the time. And so we kept buying a couple of single-family homes that we bought as foreclosures, renovated them and instead of selling them as a flip, we did a cash-out refi, we kept them as rentals, we took the proceeds to buy another and another. And then we did the same thing with small four-unit apartment buildings. So four-unit apartment buildings were kind of my niche and the sweet spot for several years chains. Because there were in a smaller area, I'd say maybe a tertiary market right outside of Hershey. And there's not a lot of apartment complex supply, no big complexes, but there's a lot of demand for housing. And so most of the rental real estate here were four-unit apartment buildings that had been built that way or converted, you know, couple decades ago. And there weren't a lot of big buyers buying those four-unit building. So they'd sit for a while. So I kind of I saw a niche where I could buy properties without having a lot of competition. And I could basically treat them like a larger commercial asset, but on a, you know, on a four-unit scale instead of a five or six-unit scale. And so I kind of honed my skill in updating those units, managing those units, raising the values, cashing out repeating. And then decided, okay, now it's time, once I built up, you know, a strong six-figure passive, you know, net rental real estate portfolio, then I decided, now I can retire and I can scale and start going after much larger assets. And so that's what I did. James: Okay, got it. So when was the first time that you acquired a much larger than four-unit property? Which year was that? Anna: Okay, so in 2018, I had basically created a five-year plan James in 2013, that by 2018, I wanted a $5 million portfolio, you know, about $150,000, at least in passive income, and then I would retire and start going for a bigger one. So I'm my goal in four years in 2017. And then just started kind of working my way into, you know, saving six months of salary and expenses for all my buildings and starting to look for larger deals. So I found the first larger deal for me, it was a 73 unit apartment building, right outside of Hershey, Pennsylvania, that I found off the market and I [inaudible16:20] on that with two other owners. That was a six and a half million dollar purchase 73 unit. And we closed on that in 2018. James: Got it. So how did you manage your time? I mean, your husband is working, and you are doing this fourplex, fourplex, fourplex and your four kids. And you give some tips for people who are in a similar situation and how can they manage and be as successful as you are? Anna: You know, I think really the key to my success has just been resilience and grit and determination. I worked truly, most people say oh, rental real estates passive. But I like to say and I totally believe James, that passive income is built on the blood, sweat and tears of active income. And it takes years of active, sometimes to build up the financial wherewithal that you can truly become totally passive. So between my husband's business and my work, and my rental real estate, I truly worked 70 to 80 hours a week over the last 10 years, in order to be able to get to where I am. My four children are all involved in sports, pretty competitive sports. So we have sports every morning, we have sports after school every day. And most days, it's seven days a week, you know, multiple tournaments on a Saturday and on a Sunday. So every waking moment when the kids went to school before I started work, I did real estate. My lunch breaks, I did real estate. My vacation days, five out of six weeks a year, I did real estate, you know, evenings between when the kids got home and I worked, it was real estate. And after nine when the kids were in bed, I often stayed up till midnight to get things done. So it was very time-consuming. But I'm very, very grateful that I stuck with it and did it. And it was just a matter of utilizing every day, I didn't watch TV, we didn't have cable, I didn't go do a lot of recreational things, I really, you know, not nose to the grindstone just focused on building the portfolio so that I could retire and spend more time with my kids. James: Yes, it's really hard work, I can really appreciate what you've gone through. Because I was working and my wife was like running around in the beginning. I mean, I only stopped working after we had like, 340 units. Now we have like, 1300, it's a lot of work, right. So based on what you're saying, it can be done. It's just like not, please don't give excuses, right? Anna: Exactly. I'm here to tell you, you know, if I can do it, working full time, running my husband's business, four kids and doing it, you know, anybody can do it if you just have grit and determination. So you make the time for what's important to you. And I knew that it was important to me to be able to work myself out of my job. And especially with AIG, you know, a couple of years ago, they said, we really are going to sell our unit, and we need to all be prepared to figure something else out in terms of career. So that kind of drove me to have executed my plan in a certain period of time. And now you know, that I'm retired, I'm still very, very busy. But I have the freedom to control my time, you know, to do what I enjoy and go after larger deals where I'm not having to be quite so involved in the day to day. James: Yes Can you define what is grit and determination in your mind? Anna: Sure, so grit is the ability to stick with something, no matter what comes, no matter what obstacles without basically, you know, melting into a wallflower. And just keep ongoing. And, you know, there's been a lot of studies done on what makes people successful. And you know, some kids were tracked from high school, through college, through their professional lives and they were really surprised that the top students like the valedictorian, the [inaudible20:04] rarely ended up actually being the most successful people in their professional lives. It was usually the people that went through a lot of hardships, and just kept going and push through and got creative and figured a way through and around every obstacle and became stronger and more confident, and determined. And those are the people that ended up the most successful. So I just I think it's an extra drive and extra determination and a willingness to keep pushing through no matter what and to not give up on your goals. James: Yes, so look, I mean, I always tell my listeners and whoever talked to me that it's always, you know, whether you want to be successful, or whether you like to be successful, whether you required to be successful so, I mean, if you have been this successful, you must have that, I really need, I really required to be successful. I mean, is that true statement that you came to that way? Anna: I think so. I grew up with very, in very humble means. And I always knew that I wanted to create a different type of lifestyle and a different financial future for my kids and I was just determined to do it. So I've always been driven, I've always taken on challenges. You know, my first job at Bank of America, I won the number one ranked Financial Relationship Manager in Texas and Employee of the Year awards at multiple jobs, my first couple of years. Because I've always had, that I'm going to be the best, I'm going to succeed, I'm going to achieve and do whatever it takes attitude. So I think part of that was ingrained in me from a young age. James: Yes, I think it's important, I mean, just the personality itself and the drive to be successful and the requirement; I mean, because your husband and your AIG was going downhill and you must be successful otherwise, your family, it may not be in a good place, in terms of financial. So that's really good. So describe to me, what was your toughest day in a one day when you have like four kids and all going to all these classes and schools and all that? Have any time where you think that, oh, my God, this is just too much for me as a mom and as a real estate sponsor? And can you describe that feeling and experience? Anna: Yes, I just actually, you know, Facebook is kind of a mixed bag of whether you like it, or whether you don't. But I like the Facebook memories that kind of pop up and remind you of something. And I had something pop up this last week, about a three day in the life of a real estate investor that works full time and has four kids. And I looked back and thought, well, I don't know how I survived it. But back in February of 2018, I believe it was, I had a call that there was mould in the basement and that they were smelling mould. So they opened it up and there was a lot, well, you know, I'm thinking it's probably like a dripping water heater or something we walked in and there was literally like six inches of goopy mould hanging from every rafter of every space in the basement of a three-unit apartment building with the ground floor, a dirt floor. And when we opened it up, I mean, it was just really bad. And what had happened was a hot water heater, pressure relief valve had failed in the basement, nobody seemed to notice nobody called us. The person in hindsight said, you know, I thought my hot water pressure was kind of low and not as hot. And I should have called you well, within about a six week period, six to eight weeks, somewhere in there, our entire three in an apartment building was just covered in mould. And inside all the units, I had to meet the tenants, it was snowing and really bad weather. And I had to call, you know, restoration companies and re-home all my tenants and get all of this stuff out of the property. Right after that, we had another property where a roof blew off in another big storm. And we're handling the kids and multiple other small things were going wrong, we had a couple of frozen pipes because it was a winter that the ground was just frozen for so many days. So we're dealing with frozen pipes, re-homing tenants, working full time, insurance, the tenants all wanted to sue me because there was mould and their kids were sick and going to the hospital. And my kids were just young and very needy. And it was like a two or three week period where I thought I'm done, I can't do this anymore. It's not worth it. It's too hard. And I kind of had a little pity party for a few weeks and said, okay, I need to take a break. I'm not buying anything else. And I took about a three-month break where I didn't buy anything else. And I just kind of took care of those issues. And then, you know, said I need some breather time, we went to the beach. And after I got back from the beach, I'm like, okay, I'm refreshed. It's behind us now that I've handled that period can do anything and just kept going. James: It's crazy the amount of pressure and tense moment that you have during that kind of things with family and issues with the deal. So I want to ask one last question before we go into the details of some of the deals that you have done here. So why do you do what you do? I mean, you don't have to do this right now. Right? Anna: So a couple of things, James, I'm really passionate about real estate, I'm really passionate about wealth building. And there is nothing like real estate to build wealth. You know, I started out teaching clients about mutual funds and stocks and bonds and how they can make you know, eight to 10% returns on their money if you time everything right. And realize that it takes money to be invested in the stock market. It's volatile and it's risky. And really, people can go from nothing to multi-millionaire in a couple of years of investing in real estate if they do it the right way. And so I've just seen the real power in that. You know we went from literally negative $750,000 net worth when we started my husband's business to a several million dollar net worth and just a few years of really aggressively buying rental real estate. And so it changes lives. And I want people to know, especially women, that that you can change your financial family trajectory, not just for today, but for future generations. And also we're providing really good housing to people. So you know, I grew up in government housing, my mom was a single mom, she was a property manager for a government housing apartment complex. And I know what it's like to grow up in an apartment and we didn't have the best amenities. You know, all my friends were wealthy, and I lived in a little apartment complex. And I've worked with inner-city kids who live literally in shacks with dirt floors in the middle of Houston, Texas. And to be able to empower people and say, your life can be different. And I can show you the financial tools to take better steps and to know better so that you can create generational wealth for yourself. And it just empowers me, it drives me to keep doing it, not just for my own wealth accumulation, but to help other people to learn that they can do the same. James: Yes, that's very interesting. I mean, what you say this, anybody can do this, right? And I know a lot of people are listening to you, there will be some people who think, yes, I can do it too. Then there's another group of people, they're going to give reasons, oh, Anna has this, Anna has that, that's why she's successful. So if you are the one who's giving reasons, I know you want to stop that, because indefinitely, you can make money in real estate, especially millions of dollars, if you really work hard. And if you really, really want it, a lot of them just do not want to do the work. They really don't want the success, they just want to continue with their life and just go ahead and do whatever they've been doing and let the life takes wherever it takes them. Anna: Yes and I think part of that James, for so many years, you see these teams, these shows reality TV, and people convince you that it's easy money that you can do it, that you can be successful. There's coaching programs and gurus that you know, charging five, ten, twenty thousand dollars to sign up and learn how to do real estate. And they promise you that if you follow these three steps, you're going to be independently wealthy in a year or two. And I think when reality hits people, and they start investing, and they start to see how hard it actually can be on a day to day basis until you build up that experience and that wealth, they just give up and they feel like failures because they've been sold an unrealistic expectation of getting rich quick in real estate, when it's really the long game. You know, you're playing a long game, it takes sometimes longer than it should you know, some people get lucky or find the right network and connections and very quickly can build wealth. But for most people, it's slow and methodical growth. And it's just people need to realize that it's not easy, but it's not that complicated if they just stick with it. James: Yes. And they are people who did one real estate and failed badly. And they gave up on real estate. So there other people that you know, yes, one time fail doesn't mean anything we could, we would have failed many times, I guess. Right, so. Anna: Sure. I lost money on my first flip. And I was convinced I'd never do another one. And yes, I changed my mind quickly. And I've done a few but rental real estate is really where the wealth build up comes. James: Yes, yes, in my single-family days, I do like 11 rentals, but I was also doing two flips. And I regret doing flips, because I made like, 40,000 on one flip and I buy a loss and $1,000 on another flip. And that thousand dollars feel very painful. Anna: Yes James: Because you shouldn't be losing money in real estate, but it really taught me a lot of things on how I didn't do it right in terms of the flip. But just because somebody did one and they fail, doesn't mean the whole real estate is a scam. Right? Anna: Absolutely. James: Definitely make millions of dollars in real estate, especially if you're living in the US. Anna: Yes, yes. James: It's a country where it allows anybody to grow, there is no limit is just you. Right? Anna: Absolutely. James: So no reasons, right? So if you give reasons, that's you so that's the only thing. So let's go to some of the deals that you have been done. And you so you are buying fourplex, fourplex, fourplex. And you started [inaudible30:21] on the 70 units and you self manage and you go into the syndication, why are you going into syndication now? Anna: So, I think some of it comes back to the time and the money, that spectrum of do I have more time or do I have more money? When I got started, I didn't have money and I could have said I didn't have time, but I made time. So it was a heavy, heavy time investment. As I built wealth and as I built more cash flow, it just made more sense for me to be able to scale larger with other partners and to be able to be an asset manager, operator, rather than the property manager or the maintenance person. So I've gotten to a point in my life where even though I've retired from my job, I really want my evenings to be free with my children and just to be wife and mom in the evenings and just spend a certain number of hours a day doing real estate. And so I got to a place where I had to say, you know, how can I really scale if I'm still self-managing many, many more units, it's going to take me a lot longer of full time effort, even though I don't have a job. And I wasn't really willing to sacrifice any more years with my children working more than 40 hours a week. And so I wanted to control my time and continue to scale. So I figured I needed to start working with other people, utilizing other people's time and other people's money. And the larger multifamily allows you to do that because you can afford full-time property management, full-time maintenance staff and really become more of an asset manager and business plan executer than you are an individual who self-managing your own properties. James: Yes, business plan executer, that's the operator definition, I would say. Anna: Yes. James: How do you define operator slash active asset manager in your mind? Anna: Sure. So an operator is basically the person responsible for operating that asset soup to nuts and executing your business plan. So it's generally, you're just general partners. And there will be either all the general partners will be involved in the asset management or overseeing the business plan and making sure that your plan for that particular property is being executed the right way. So for example, if we're buying a value add property, like the 73 unit that we did and the others that I go after, it's a property that is usually poorly managed, its expenses are not being managed well, the rents are below market, and perhaps the units need to be updated in order to maximize the rents so that you can then increase the value of that property. So as an asset manager and operator, I'm working with our property management company or a property manager and with our contractors to make sure that you know, when units come available, we turn those units quickly, we update them on time and on budget, we raise the rents, we get the new tenants in there. So that we can execute our plan to raise the values before we sell or refi. And we work with the property managers to make sure that they're cutting the expenses in the way that we planned, that they're monitoring the expenses, monitoring the rents, making sure rents are being collected, and you're just basically overseeing soup to nuts, all of the things that are supposed to happen to make your asset more valuable. James: Got it, do you think there's a certain advantage of being a local asset manager? Anna: I would say yes, in that really bad, unforeseen, unexpected things happen, like mould damage, or like when blowing roofs off or a hurricane, you can be at that asset very, very quickly. And you can also stop in and visit with your property manager, your property management company on a monthly basis, bimonthly basis and just say, hey, let's walk the ground, show me what you're doing. And there's just never anything as valuable as actually being on the ground and seeing it. However, in today's world, where we have the technology, we have zoom, we have our phones, where we can take pictures, and we can walk around, it's pretty easy to do things virtually as well. So while the operator in me that's always had, you know, my boots on the ground, and always been able to see kind of likes the control of being able to be at a property within an hour. It's not necessary, if you trust your team and have a good team that's boots on the ground, and can just go to your asset maybe once or twice a year. So I haven't really done it from afar. I'm asset managing my first property that we have under contract right now, two properties in Atlanta. And so I'll be sharing asset management responsibilities there. And that'll give me a little better feel for how much easier or harder it is to do from afar. James Got it. Got it. So let's come back to value add. So all the deals that you're buying a presume are value add, right? Anna: Yes. James: I mean, you're adding some things to the operation, either the income or the expense, right? So what do you think is the most valuable value add in your mind? Anna: So I really like Class A to B areas and an older building because your area you can't change, a lot of syndicators go after class C area, workforce housing and older buildings. And so you're struggling not only to bring the asset up to today's standards but also with a tenant pool who may suffer more heavily if we head into a recession or they may be more susceptible to losing jobs and not being able to pay rent. Where when you're in a nicer area where there's really good school districts and people want to live, there's a lot of good employers and a lot of good shopping and things around, you're always going to have people that want to move into that area because it offers the best lifestyle for those people. And so if you can find an older asset, you know, you're not struggling with the area to keep your units filled. It's just a matter of now offering an asset that people want to live in while they are in that area. So I'm really a value add investor, not doing like full major repositions, taking units in a C class area, that's 40% bacon and trying to fill them up. I like stable assets in a stable area that just needs some updating and operational efficiency in order to bring them up to today's standards. James: Good, that's very interesting. I never heard that from anyone else. Because the strategy is for you to look for the good area, but look for older buildings and try to improve from those older buildings, I guess. Anna: Yes. James: Okay. Interesting. But what about the like interior rehabs and do you do any like rehabs on the inside? And do you think is there any specific rehab that you think is more valuable than others? Anna: Sure, you know, it's really market-driven James's I know that you know, but for your listeners, every market demand something different. So where some parts of the country in order to get you to $1100 a month rent might demand granite countertops, and they might want really nice luxury vinyl plank flooring, other areas like tile, and they don't like granite, they like maybe stone countertops, and other areas to get that much, you might be competing with a $3,000 a month luxury apartment that would have granite and vinyl plank and maybe 1000 would get you carpet and a nice floor-laminate. So you've really got to look at what does your particular market demand and not just assume that every rehab has to be a cookie-cutter that looks the same. So what I do is I look at what is the competing market? What is the complex is offering to get that top rent that they're getting today? And I kind of secret shop those complexes or go on their website and see what those units look like. So for the 73 unit, for example, our property was a 1985 vintage when we bought it in 2018. So it was a little bit older, had a lot of original oak cabinets, plain commercial grade carpet, old looking vinyl. And basically we went in and we just changed up the flooring to vinyl plank flooring in the main living areas with carpet in the bedrooms. And the reason we did carpet in the bedrooms is because it's really cold in the northeast. And so a lot of people don't like solid flooring in their bedrooms. So we kind of save a little bit of money on doing carpet in the bedrooms and vinyl plank elsewhere. And we replace some countertops and updated old cream-coloured appliances to stainless steel, or very nice white depending on the unit. And then we painted the apartments, a soft, grayish color kind of more on the gray side. But the flooring has kind of had some greys and browns that go well with everything. And really for just a couple thousand dollars in new flooring and paint and some countertops and appliances, we were able to raise the rents $200 a unit. So it was a significant increase in rents because when we bought the property, not only were the units kind of dated, but the owners had not raised rents on several other tenants for several years. And so the property right next door to ours was asking 175 to 225 more a unit with the exact same floor plans as we had. So it was a great property because we didn't have to do a whole lot in order to bump those rents and achieve that big increase in value. James: Got it. So I want to go a bit more detail on how did you choose your rehab plan because you said you did countertops, you did stainless steel and a few other things there. But it's for example, how did you choose? Why did you want to install stainless steel appliances? Can you give some education on how did you go to that process, say I want to do stainless than black appliances? Anna: Well, and again, this is we've kind of left appliances, we've kind of played with it a little bit because we had so much room to bump the rents. And we looked at what is next door offering? They're the biggest competitor. So next door had certain units where they offered a premium package with stainless steel appliances. But the standard package didn't, it had white appliances. So we said for the first couple that comes available, let's do the vinyl plank, let's paint them. And if there's a cream color, for example, one unit had a cream color stove and a white refrigerator and cream color, you know stove and we said let's keep the brand new white refrigerator. And let's just put in a white dishwasher, a white stove and see if we can get the rent that we want without going stainless. So we did that on a few. And we had a huge waiting list of people that wanted those apartments, they couldn't care less about the stainless steel and so we didn't do it. So you know initially we thought we were going to go all stainless but people, we've been achieving the rent bumps we want without having to do stainless. And so we haven't done it at this point. James: Got it. Yeah, that's how you and I think that's a good strategy to look at the base on where you didn't want to overspend versus how much rent bump you need, right, because -- Anna: Yes. Sorry, go ahead. James: No, I mean, somebody can use that extra money for something else. Anna: Exactly. And the other thing, you know, because I focused primarily in my general area, I know the market like the back of my hand. So the buildings that we bought the 73 unit and the subsequent 31 unit that we just brought too, they're basically my direct competition. So I know what tenants are looking for, I'm already offering it in my town. And basically within a 30-mile radius, we know this is what the market demands, this is how much room we can get for it. And so while people think, oh, I need to do all these fancy bells and whistles, you really just need to look at what your competition is doing it over, improve it to the level that you're going to get the top rent, but don't over-improve it to the point here that you're spending needless cap backs, that aren't going to get you that much of an incremental rent bump. James: Got it, sounds really awesome man. Let's go back to the slightly more personal side. Is there a proud moment in your real estate career that you are really, really proud of, one moment? Anna: One moment, I think, on my 73 unit, sitting down with my JV partner and his partner that he had partnered with stuff, and really being able to convince him that this was an amazing asset to invest in. And he agreed to fund my first large syndication deal. So I was just really proud that I was able to build up the financial knowledge and build up the confidence and the track record from what I had done on a smaller scale that investors would trust me to take their investment and really manage an asset well for them. James: That's where you broke out from the four units to more than 70 units, which is a big achievement, I guess, right? Anna: Yes. And I think that and the day that I retired, when I was able to retire from a job where I worked with accredited investors to be able to say, you know what, I'm retiring, I've replaced my income, I've more than doubled it, I'm now an accredited investor. And I don't ever have to work for someone else, again, I think is probably one of the best moments of my life. James: Yes, that's really important. Can you name like three or five advice that you want to give for newbies who want to walk along your path? Anna: Sure, I'd say educate yourself as much as you can, you know, listen to these great podcasts and just learn from people that have already done it because you learn the things not to do and you learn that the good habits to do to kind of make yourself an excellent investor. So really commit to your education, podcast, read some books and attend some local investor meetup groups so that you can align yourself with other investors. So one is education. One is networking and alignment. And you'll get some continual growth and continue education just from learning from people that are in your network that are already doing what you want to do. I would say also start really looking at yourself and what your goals really are. So like you said early in the podcast, many people think they want to be a real estate investor. But when they discover how hard it is to do so, they kind of back off and maybe flounder for a while. And all of us can do that if we really don't know why we're doing something. So look at yourself, ask yourself what you really want in life. And why do you think real estate can get you there and then back into how much time and money am I willing to commit to my real estate investing venture. And if you don't have a lot of time, you've got to commit yourself to find money or finding other people's money or working with other people. And if you have a lot of time and not money or I think vice versa, then you need to really be willing to put in that time. And so look at your why; look at your time and your money and start figuring out how best to utilize every moment of time that you have, every moment of cash you have and other people's time and money so that you can start to scale as quickly as possible. James: Awesome, awesome. So Anna, why don't you tell our listeners how to get hold of you? Anna: Sure. So I'm on Facebook as Anna ReiMom Kelley. And I have a Facebook group called Creating Real Estate Wealth that lasts with Anna ReiMom, where we talk about real estate and really creating wealth and kind of the good, bad and the ugly of all the different asset classes. And you can email me at info@reimom.com. James: Well, Anna, thanks for coming into the show and providing tons of value. Anna, you gave a lot of very good perspective from how you juggle your role between being a mom and being a wife and trying to grow the business and I think our listeners would absolutely get tons of value out of this. And as I say there's no reason not to be successful in anything that you do and real estate is just a tool. You can be successful in anything but you can be successful if you really put your heart into it. If you really, really want it you will be successful. I mean, if you give reasons, there are tons of reasons you can give not to do something. Anna: Absolutely. Thank you so much for having me, James. It's been my pleasure. James: Thank you, Anna, bye. Anna: Bye.

James:  Hi, audience and listeners, this is James Kandasamy from Achieve Wealth Podcast. Today, I have Glen Gonzalez who have been a big operator out of you know, Austin, Texas, and Glenn has deals which he has done in Dallas area, Corpus Christi Clean and south of Houston City, called Lake Jackson. And he is currently owning about 3,000 units at some point, in the past few years, he owned like more than. 4,500 units and he also have a strong property management company, previously, which used to manage up to 6,500 units. So he brings really good value to this podcast. Hey Glenn, how are you doing? Glenn: Hey, James, doing great. Thanks for having me on, this is exciting.  James: Yeah. Yeah. Did I miss out any of the story behind you that you want to clarify? Glenn: Maybe. I think where I came from, you know, because people are always interested. You know, we talk about all the success that we have, but I actually started as a maintenance man. James: Wow.  Glenn: I was kind of at the bottom of the barrel, picking up trash and I was like a porter, really. And then I was eventually painting apartments and fixing stoves and stuff. So my involvement in the apartment industry started about 30 years ago. So I actually came through as a maintenance man, leasing agent, property manager, then a regional manager, director of operations and so all the way through. Pretty much all the different ranks of Property Management until about six years ago, when I started buying my own, as the owner. And that really changes the perspective on apartments, you know, you got an operator perspective and an owner perspective, so maybe I could share some of that today while we're all on the call.  James: Sure. That would be really, really interesting. I mean some of the big guys that I know in this apartment, such as Ken McElroy. I mean, he started as a property manager, right? And I interviewed Eddy Lauren who has done like more like 1 billion in transactions as an operator. One of the big first advice that he told our listeners when I interviewed him like a few podcasts back was like, start from the ground, start to learn from the ground itself. Be property manager or be a maintenance man or porter and then learned in the business because you can learn so many things. So it looks like you have that 'coming from the ground' experience. Now, you have no more than 3,000 units and you used to have 4,500 units, which is awesome. I mean looking at from the ground itself up to the asset management; like when you were maintenance man or a porter, what did you think about the owners? Glenn: Oh my gosh, I used to get so nervous when the owners would show up to one of my apartment complexes because my boss would call me and say, hey, the owners are coming so I want to make sure this place looks perfect and everything is in order. And then they would tell me things like, you know, if they ask you a bunch of questions, you know, they would say let me do the talking. So I was basically supposed to keep my mouth shut and that just kind of made me nervous, you know, because of all the hype and stuff.  So I don't know, you kind of think the owners are almost not like real people to some degree, but they are, they're just like you and me. They're just common folks.   James: Yeah, it's interesting. I mean sometimes, especially the maintenance crew, right? I mean usually when owners come into a property, when we go and visit our property - I mean, most of the owners, we talk to the office staff, right? Because we think we control the whole thing but the backbone of renewal in the property is the maintenance. Because people are happy when work orders are being taken care of and people really like that. So we really make it a point to really take care of the maintenance people and that's another advice for all the listeners out there. If you own property, don't just look at the property managers or the leasing agents or the assistant managers; go and say hi to your maintenance people because they are really, really important. Don't you think so? Glenn: Absolutely. I would add a little bit to that. You know, when I go visit a property, I always speak with the maintenance guys, always because they will tell you everything that's going on on that property, even the stuff the manager might not know. I mean, they know how often they're recharging air conditioners or how often they're fixing things. I mean, they know the work orders like the back of their hand, but beyond that, they even know the tenants. I mean they know which ones have pets and which ones don't have pets because they're in there, doing work orders. They know everything. And I would say that they're often the ones that are neglected because like you mentioned earlier, when we go and do a site visit, a lot of times we'll sit down with the property manager and we'll talk about the lessee and the marketing and the delinquency and some of those common things but rarely do we talk to the maintenance guy about, hey, is there anybody out here that's like a bad apple, that's like creating a lot of havoc? And they will tell you who's dumping the trash out there. They will tell you who are having parties late at night and whose got like 5 dogs in their apartment. You know, I mean, they know everything. So my advice is if you need to know what's really going on behind the scenes, get to know your maintenance guys. James: Yeah. I think it's also important during the due diligence process right? Because sometimes we are with the Brokers and we have the managers and you can see that they like to hide the people who know the real stuff which is the maintenance guys, right? So try to get to them to ask more questions. Did you have any tips and tricks to get to maintenance guys while doing due diligence so that we can get the truth from them?  Glenn: Yeah. Yeah. I think part of it is just making them feel appreciated and that their opinion matters, I'll tell you this just like I was sharing my experience. I used to get really nervous when the owners would come around because to me, when I was younger, they were very intimidating. So if one of those guys came up and wanted to talk to me, I'd be like, um, you're talking to me? So find a way to make them comfortable, you know, really, at the end of the day, just make them feel appreciated for all their hard work and acknowledge that they are such a big part of the team. And when they feel appreciated and they feel acknowledged, trust me, they'll share with you a lot of important information.  They may offer information that nobody else knows. They may say things like, hey, by the way, I would go check the roofs on building 3 because we had several roof leaks on that one building in the last four months. They know everything because they're doing all the sheetrock repairs on the inside, right? And so they even know where it's leaking. It could be around the chimney or something in there. Just be like, good idea, thanks. I will check that. So yeah, due diligence, maintenance guys, you're absolutely right. James: The other thing that we do, just to share with the listeners is you know, we also ask the maintenance guys to rank the property managers. So it's not only like property managers control the whole thing, I think six months, once a year, we do this 360 feedback on the property managers from the maintenance right? Because you know, sometimes you need to give them the voice, right? And I think we have to just give them an official channel for them to voice what they want to share in terms of how the property managers are doing,  what these people are doing. Glenn: You know and I've shared this with some of my friends in the industry that you'll never ever have a successful manager without a successful maintenance guy and vice versa. If one of them are really good at their job and the other one is not, you will not be maximizing the value of that apartment complex. I mean, it's almost like a marriage, you know, the manager and the maintenance supervisor, they're married at the hip. They've got to be on the same page and if they're not, if they're complaining about each other, you know, that's an opportunity to stop and pause about why they're not on the same page. So just FYI, you know, and if one of the maintenance guys like you said gives a rating to the manager of a very low number like, oh, that manager is a 2 at the best, you might want to go talk to the manager.  Like how do you rate your maintenance guy? He's like a negative 2 at best, you know, and it's like, what's going on and who knows what the problem is? Before you could then read the financials. The financials will tell you the story too because if your way out of budget, you know, say the maintenance guy is not very good at painting so he wants to contract out every paint and your turned cost could be very, very expensive. There's a lot of you know things that you can learn from each other. That's why it's on your part.  James: Absolutely. Absolutely. So, how did you climb that ladder from porter to maintenance to becoming an owner? Glenn: It's a funny story, James, it's really funny story. To be honest with you, I'm out there trying to do work orders and I started my industry in Salt Lake City and it's really cold outside. So when you're picking up trash, you're freezing cold, especially when you're going from apartment to apartment, carrying all this stuff. Anyway, so I went and I told my boss, you know, I don't want to be a maintenance guy forever. I want to be a manager because they get to sit in the office and talk on the phone. That was my motivation, I was young. I just don't want to be out in the cold. So they're like well, we don't have any openings for maintenance guys to be managers. I'm like well just so you know, that's my next step.  So they had a 60 unit apartment complex that needed a part-time manager and a part-time maintenance guy so I said I'll take it. So I was part-time on each one of those so I got to learn the manager skill and you know talk on the phone and then I needed the work orders and make ready and I learned with this valuable lesson. Somebody moved in and they had to fill out one of those move-in checklists to make sure that the units in proper condition when people move in and they turned it into the manager after they signed the lease and it's got all these things that don't work. The stove doesn't work right, the toilet is running and the dishwasher won't cycle or whatever. So that I got to know who fixed this apartment, you need to get them back. So I'd go back later in the day and I would take my tools and change my clothes and they're like, hey, what are you doing here? I'm like, well, I'm the maintenance guy. And they're like, oh, so you're the one that got this apartment ready? I'm like, yeah, that was me. And I realized then I was not a very good maintenance guy, but that was my transition.  But I really was able to turn that apartment community around. And the problem with occupancy and revenue and it got to the point where it was doing very, very well because I kind of was able to see it from both sides. I knew how much we can rent them for but I also knew we had to get them ready first and I work my little magic as a newbie to the industry. I was very successful.  My boss recognized the success and they had another, I think, it was larger, I don't remember exactly, 200 or 300 units. It was struggling with some of the same stuff and they asked if I would go there and give him my opinion. So I went, kind of as a manager, over to this other community and found that the leasing agent and the manager were really good friends but that leasing agent wasn't very effective at all and the manager was too good of friends to fire her friend.  So I said, well, let's do one of those secret shops and do an evaluation and kind of did all that and I showed the manager. Look, you know, you're not a very good manager because you're not able to make a business decision. You've got to make changes on the leasing and that leasing agent is affecting you as a leader. So she kind of said she realized at that time that if she wasn't able to make an improvement or change it was going to stifle her own career as well. So she made that change and all the sudden, the leasing got better and collections got better and people were giving better reviews and my boss recognized that I had this knack for identifying problems. Well, then I got to oversee multiple apartment complexes and I became what's known as an area manager so I had two or three that I could oversee. So my career just started kind of progressing a little bit. I graduated college and I was supposed to be a hospital administrator and I did my internship at a hospital and I did not want to do that the rest of my life. So here I was at a crossroads, maintenance manager/hospital administrator, now what?  So I said, I'm just going to make Property Management my career. And then I just started getting more educated with real estate licensing, then I eventually got my CPM designation and I was involved with the apartment association stuff. So there you go. That's kind of how I moved up the ladder a little bit. James: So at what point did you buy your first property? I mean, syndicated or you know, start using some other.. Glenn:  Sure that's a great question. So in the time frame from that point, it was probably another, gosh, 10 or 15 years later. I was now working for a big REIT, a Real Estate Investment Trust, in the Pacific Northwest. Equity Residential, they're very big property owner-manager REIT and I was getting great experience there. Well, I had a mentor that was serving on the board of directors for the apartment association, his name is John Gibson, also from Washington. And I went to John and said John I want to buy an apartment complex one day. And I showed him this little 60 unit deal that I was analyzing. And at this time I was still a regional manager. I still got a W-2 paycheck. When I went to John and I said, "You know, tell me what you think."  And he said, "You know, you'll probably do okay."  He said, "But I have this little 44 unit apartment complex, I'll sell you and I'll make it much easier to buy."  I said, "How so?"  He's like, "You just need to come up with a $150,000 down payment and I'll carry a note back for the rest."  And I said, "Great. Let me go look at it."  So I went and looked at it and this guy wasn't managing it very well and I knew how to manage pretty well so I'm like, 'This is great, we can make money on this."  So I went to two of my friends and I said, "You guys want to go in on this apartment complex with me?"  They said, "What do we need?" I said, "$150,000."  And they said, "You know, what are the splits?"  I said, "A third, a third, a third."  And they said, "Okay."  I said, "But you each have to put up $75,000."  And they're like, "Whoa, well, for a third, a third, a third, shouldn't we split that 150,000, a third, a third, a third?" But I didn't have any money. So I'm like, "I found the deal if we're gonna make money and you guys put up the equity, you guys will get your money back before me but once we start making money, we'll split a third, a third, a third."  And those two friends said, "All right, sounds good."  We did it. We bought that apartment complex. He carried a note back and we own it for like a year and a half and we sold it for about a million dollars more than we paid for it in eight months. So that third, a third, a third, those folks were pretty happy. So the mistake I made is when I sold it, I carried back a note on part of our profits and the guy that borrowed or bought it from us has defaulted on that note. So, actually, we made a lot of money on paper, I lost half of it to a bad note. So word to the wise if you're going to be a lender to a buyer, do your homework.  James: So you seller-financed to someone else, I guess. Glenn: Yes. We still pocketed a half million dollars. So I mean we did okay, but we carried a note back. That was my very first deal, it was 44 units and it was while I was still working as an employee. James: That's very interesting because you really came from the ground up and you made that transition to a owner, you know, and you found the deal and you able to convince your friends to finance it. So at what point did you had the realization that, hey, I'm a regional now, I want to buy and why did you want that thought process came in? Why did you want to be an owner?  Glenn: Well, a couple of reasons. One, I knew that these owners that came seemed like they had a lot of money, in my mind. I assume that they were pretty rich people. They drove fancy cars and stuff and from my perspective they were wealthy. But the other one is I realized that when I got really good at property management and I increased the value of that apartment community, that owner would eventually sell that property and he would take his money and run and I would get a thank you and he would get a lot of money. And they always said, "You know, Glenn we really appreciate your property management efforts. You've done very well for us and thank you very much."  So I got a lot of thank yous, not a lot of dollars and you know, that was a motivation for me. It's like someday I wish I could trade that value for myself. My wife always encouraged me. She's like, "You know, you're really good at making other people a lot of money. Someday, you got to do that for yourself." And so that was motivation too. You get really good at Property Management, you should maybe be the owner but I didn't have any money.   James: But you have that knowledge on how to increase the NOI, which is the most important, I would say. Having a lot of money and buying assets if you do not know how to increase the NOI from the ground up, you're maybe just half-blindfolded.   Glenn: Yeah, and I think you know what made me successful later in life, is that experience and the knowledge that I had from the ground up. It gave me great insight in helping me find good deals that I could fix if they're broken. And then, later in my career about six years ago, I started to buy my own. And I remember having to raise over a million dollars on my first deal and when people realize that you have experience, you know what you're talking about and you came from the ground up, they're more likely to invest with you than they would be with somebody who has no experience,19:48inaudible]  just go syndicate deal with no experience. So, the experience really paid off in the end for me.  James: Yeah, I'm sure it's paying off right now itself. So I want to go into some of the secrets in Property Management because you are the insider. Glenn: Yeah, that's right. James: Because I mean, for me, my wife does a lot of property management and just because of the knowledge that we have in asking questions to our employees and all the employes doesn't really tell us stories. They don't tell us like it takes five days to make ready or two to three weeks to make ready and all that kind of thing. I mean, property management is a people business, there's a lot of detailed things happening inside the property management itself. And if you do not know the details, people are just going to take you for a ride. So, let's go into the details. So how would you know a leasing agent is not a good leasing agent.   Glenn: So great question, James. There are indicators that are quite obvious, but then there's some that you kind of have to peel the onion back a little bit to figure out. The first indicator is if your occupancy is struggling, where all your competitors are saying, in the 90s and your property is like in the 80s and you have enough product that's already made ready, and it's priced correctly, but gosh, people are just not leasing so that could be an indicator.  You know, there are remedies to that. You can hire a secret shopper that will come and pretend to be a renter and they will give that leasing agent an evaluation.  James: And what does the secret shopper do? Glenn: They pretend like they are an average person coming to rent an apartment. You know, they give a name, they go on a tour and they kind of evaluate whether or not the leasing agent was able to connect with them as a renter if they took them on a tour of the apartment. Mostly if they followed up to say, "You know, are you still interested in renting?" You know, some leasing agents never follow up. Some agents aren't able to connect with people like emotionally connect with people because you know renting an apartment home it's an emotional decision. There's apartments everywhere. So the only thing that makes your apartment may be different than your competitors' apartment, maybe that leasing agent.  So if the indicators are there, there are remedies but sometimes you just got to peel the onion back and what I mean by that is you just need to listen to how they talk to people. You need to get feedback from the residents. As an owner, you can always send out a little flyer or a little questionnaire. You know, we get what's called the Move-in Report, where it talks about who moved in, in the last 30 days. I look at those moving reports to see if they've hit the targets on the rent and stuff, but you can send a little questionnaire or you could even call them on the phone, as the owner, and say, "Tell me about your experience from the time you moved in till now." And that'll give you a lot of insight.  The other thing is the closing ratio. There are averages in our industry about if 10 people apply, what percent actually come back and sign a lease and move in? And that percentage could be anywhere from 30 to 40 percent of the people come back. Now, granted some of those get denied because of credit, criminal activity or addictions and we expect that. But if some leasing agent has a closing ratio of 10% or 15%, you'll want to stop and say there's a problem here because that's below the industry average. And where do you find those industry average? Well, you got to talk to people in the industry. They're not widely publicized on closing ratios but that information is readily available. You can get it through the apartment association. You can get it through people who own and operate apartments and you can just ask, network with people.  James: Yeah, and what do you do if the leasing agent gives reason saying that our apartment is priced too high? Glenn: Well, there's your 'trust but verify'; she could be right, you know, I mean if they have a low closing ratio and you as the owner said, "Hey, we renovated this unit and I know we can get a thousand dollars for these two bedroom units." And all your competitors and your leasing agent saying, "Yeah, but all my competitors are at 950 to 900 and you want 1000." If you argue with the leasing agent say, "But I spent so much money and I need to get a thousand out of this deal." You know, she's going to get frustrated and so are you. But if I were you, I'd go verify that. If the leasing agent is saying all your competitors are renting their two bedrooms at 950 and she's right, you as the owner better eat some humble pie and take her word for it. And when you get the facts verified, you better adjust your price because you may lose a good leasing agent because you're a bad owner.  James: Correct. Yeah, so it's important that because sometimes as owners. We might hear a certain performer on rents and that may not be true because you are doing it pre-closing, you know. Only when the rubber meets the road then you really know whether whatever you projected in your performer is being able to be captured on the ground. All right, and it's very skill to identify [25:41crosstalk and unintelligible]  Glenn:  That's correct. I had a boss of mine one time, he was the CEO of a company and he said this to me one time. He said, "You know if it comes down to your opinion versus my opinion, my opinion wins because I'm the owner."   He says, "But if it comes down to my opinion versus your facts and your facts are right, it doesn't really matter what my opinion is, the facts always tell the truth." That's why we do Market surveys. That's why we figure out where competitors occupancy is. And if you're a good owner, you'll realize that sometimes the information is right in front of your face talking to you and you're just not willing to listen.  James: Correct. There's a lot of data that we can use to really see whether I priced it correctly or not. Such as, how many people are applying, how many vacancies you had for that certain configuration and all that, right? Glenn: Yeah. Yeah. James: And how do you select a good property manager?  Glenn: That's a tough one. That's a really tough one. Gosh, you know I have, in my career, when I was an asset manager for Pacific property company and I think we had like 8,000 units and we had hired two or three different property management companies that did fee management for us as an owner and I was an asset manager. But some of those were some big name brand management companies that had all the bells and whistles but you know what it came down to James? It came down to two individuals, how well did that regional manager get along with that property manager and how often is that regional giving support?              If they are pretty well connected and they're good communicators, chances are all the other things will fall into place. The bills get paid on time and you know, if the manager needs some overrides or permission to the regional and they're on the same page and readily available, that property will flow better. Sometimes I've seen that a regional manager may have 9 10 11 or even 12 Assets in their portfolio. How often can an effective Regional go visit 12 Assets in a week or a month or two months? Not very often. They're going to be spread so thin.             The trick is that I know a lot of fee management companies are moving away from this but their profitability increases because they get a management fee increases when they have one fixed cost of a regional manager spread out over many assets. So from the property managers company's perspective, they may give that Regional a big portfolio to cover their salary. You, as the owner, want that portfolio to be small because you want their undivided attention, you know, so that's a good question you can ask a management company. Is how many assets are in that regional manager's portfolio and how often that manager works with your property manager on site. Those are two key elements.  And of course, the other big one is the back office. How often are they producing your financial packages and are they reconciling every month and do they catch the bounced checks fast enough? The back office, people don't really jump into as an owner, they just look at what's presented to them on the front end. So there's lots of good bells and whistles.  James: Very interesting. So what is the good ratio for regional versus property that they manage? Glenn: Yeah. That's a great question. I think an effective regional manager shouldn't have more than seven or eight assets in their portfolio. That number can go up to 9 or 10 if all those properties are maybe smaller or they've got one manager that oversees two or three that helps or they're all stabilized. They are all stabilized in their the assets and they're all doing very well with the regional, then they could then handle more.             But if the regional manager has a new lease up or repositioning or undergoing a renovation or you're trying to change the demographic a little bit, those are very, very time-consuming. And if that's the case, you don't want them to have more than five in their portfolio.  So there's a big range. Variables are stabilized in the size and then the complexity of the assets that are in the portfolio. James: Yeah, yeah, that's a very interesting feedback on the regional because as you know, and I know is that property management is a business of issues, daily issues which a lot of asset managers don't want to touch. They say that is a thankless job, we do not want to touch it and all that. But how important do you think Property Management, in terms of the efficiency or the NOI optimization of a multi-family? Glenn: Again, it comes down to that regional manager and the property manager. You know, I guess the fixed costs are you know, some property managers charge you more, a larger percentage of the management fee. That's a cost that's going to affect your NOI. The property management company has to have some buying power. Hopefully, they buy so many carpets and so much paint that they get significant discounts on the product that they purchase and they pass that right along to you as the owner, that would be a great benefit.  You know, if you're paying, call it $10 a yard for carpet installed and the property management company can get it done for eight or nine, that's pretty significant overall your Capex. So all those are little variables that you need to kind of ask what kind of benefit you get as the owner. And some of them are the opposite. They're very expensive, some of them pay for very expensive software for the property management and they pass it right along to you the owner and you're, "Gosh, this is expensive every month." And then you start asking about this fee and that fee and there's like an accounting fee on top of the property management fee. They charge you a fee for processing your own payroll and like, "Why am I paying you to process my payroll? Isn't that part of the services?"  And they're like, "Oh, no that's an extra."  So, you know, gosh darn, you just got to dive into it, to be honest with you. That's a good question. It's really complicated. Call me and we'll talk offline. James: Yeah. That's good. Glenn: I used to be a property management company,[32:56crosstalk] and I know there are areas that the management company wants to make money on. James: Correct. Correct.  Glenn: It doesn't always benefit the owner. It benefits the management company. James: Yes, but I mean we have to understand property management is also a lot of work and they are the backbone of your operation. So choosing the right property management and how the profit centers and all that is how everybody... Glenn: Yeah. James if you step back and you realize sometimes it's worth paying those little fees to these property management companies if they're really good at what they do. Because if you step back, they're really good at what they do, they're going to make you Millions on your asset. if they're not very good at what they do, they're going to lose you Millions on your asset. And here's the key; sometimes they just make excuses on why they're poor performers. And I struggled with a very large management company at 30,000 units. I owned a 650 unit apartment complex up in Dallas and my occupancy was going down and down and down and the bad debt was going up and up and up and I'm like, "What the world is going on here?"  And they said, "Well, the market, the sub-market is getting worse."  And I scratch my head and I said, "Well, how could that be? Because our competitors are 94 and you're like 81."  They're like, "Well, that's because they have just filled it up with junk people."  And I'm like, "I talked to the owner of that one and they said their delinquencies are only like two and a half percent. You guys are like seven. I mean that doesn't an add up either."  So what's really going on and they were a mess. They were going through changes up above and they had two Regionals that quit because of leadership and the property manager had quit because she didn't like the management company and my 650 unit was struggling financially now after it had just had its best year. Her name was Letty, she was the property manager for us for a year year and a half. When Letty left, everything unraveled and I ended up having to terminate that management contract and I gave it to a different management company and they were very successful. And they turned it all around and I ended up selling that complex about a year and a half after the new property management took over. And guess what? They out-performed all of a sudden and it was the same submarket, it was the same community. So all the excuses the previous management company gave me was just a bunch of BS.  James: Yeah. Yeah. It takes a lot of leadership to really fire property management because as an asset manager who just know asset management your hands are tied. You can listen to one excuse this month and next month, I'm going to give you the same excuses. But at what point do you make that call saying that, okay, these guys are not good? So it's very hard for you to make that call if you do not know the details and how to read the financials; as you say, you know the owner on the comps, right? Glenn: Yeah. James: But not everybody knows the owners. So, how do they find out? It could be very well true that if [36:07inaudible] so do you have some tips on how to identify bad property management? One point should be fine.  Glenn: I know a couple of them by name.  James: We don't need names.  Glenn: I can't say it on the podcast; call me. How do you identify? Here's one indicator. There's a lot of turnover for some key people. You know if the bookkeepers are quitting and the regional managers are quitting and the property managers are quitting; if you can't have access to interview all those people and talk to them about why they're quitting, you're losing out on an opportunity, but that will tell you, that's an indicator. By nature, I think we turn over about 30 percent of the site people a year, you know. One of the indicators that I chart so if you're up to 40 50 percent of your site people move, including your maintenance guys and releasing agent, but if you're up above 30%, there's a problem. Either with the leadership or how it functions or they just can't get enough training. There's something going on because people don't just walk away from their jobs. And the way to indicate a good one, management company, is if they've got long-term employees that stay with them long term over and over and over again. So there are some indicators there.  And your intuition; let me just address that. If for some reason a property management company is telling you excuses over and over and over again and in your mind, it doesn't add up but your guts telling you something's not right here, I would say trust your intuition because there's probably something not right there. James: Got it. Got it. Let's go back to, as you said, the most important person in the whole pipeline for an owner, asset manager. So you have leasing agent, you have property manager, you have Regional and you have the property management leadership. So you said, if I remember correctly, Regional is the most important on how they communicate and... Glenn: The regional and the property manager those two together.  James: So how do you identify the qualities of a good regional?  Glenn: Yeah, you know the good regionals, you can always tell if they're pretty effective because you can ask them a question about, you know, call it turnover expenses or you know, we notice this big expense for HVAC, you know that Regional says, "You know what? I noticed that too because the manager had booked it up in the operating expenses and I reclassify it to Capex."  And if the regional knows what's going on, how the property is spending their money and where they're booking it and she just knows it or he knows it right off the bat, they're on it, and they are on it and you should be very grateful that they're watching your asset and your financials pretty effectively.  Now if you ask a regional manager, 'Hey, what's going on? Why did it go up?"  And she's like, "I've no idea. Let me get back with you."  And you're like, "okay, get back to me, let’s talk. " And she never he never gets back with you and you send them another email says, "You know, what did you find out? I mean, our NOI took a dip 10 grand this month and it's been pretty consistent, what's going on?"  If you have to follow more than one or two times, dude, you've got a problem. They're not looking at your bottom line. They're not talking to their manager and they're certainly not watching your asset.  James: Got it. Got it. Okay. It's very interesting. Let's go to a bit more personal side. Is there any moment in your whole career when you started in real estate up to now, is there a proud moment that you always remember, you're going to remember that proud moment for your whole life? Glenn: That's a good question. You should have given me some lead time on that. James: I'm really proud that I did that. It could be anything.  Glenn: You know, I think part of it is a feeling of satisfaction that I get. You know when we syndicated deals, when we bring investors together, when we take that money that they've trusted us with and we apply it to the apartment complex and we do what we said we were going to do. We renovate the office and we raise the rents. And then, down the road, you step back and you look at the community and I go, "Wow! This actually looks better than it did when we buy it." And then it feels better and our delinquencies are going down. It's almost like your baby. It's like your kid, your little offspring. Like I'm so proud of this community.  And then you sell that and you give all the investors back their money and they call you on the phone, "Glenn, dude, I'm so happy. You actually did what you said you were gonna do and did better than we expected." To be honest with you, I get so much satisfaction out of that and I like making other people money, you know. And when that happens, they don't mind sharing the profits with me. And now, I'm making money so it's not always about the money, but it's about doing what you said you were going to do and doing it well and kind of being the best in the industry. Not all deals have gone has planned, not all deals have been successful and those are tough pills to swallow but I think, for the most part, my greatest in my career is seeing the magic that we work and executing the plan, I love that. And then there is one other if you don't mind me sharing? James: Sure, absolutely. Glenn: There's a gentleman that was a maintenance guy that would come and talk about if you spend this, you know, I think we need more rent. If you fix this over here and you know, I mean really, I wouldn't do anything on the one bedrooms because we have so many of them we can't even random, you know, but we can make a lot more than that. I took that maintenance guy and I said, "Have you ever thought about being a property manager?" He's like, "No way, there's no way; that's the last job I want."  I'm like, "But you think like a property manager."  And this is just a deal here at Austin that I was managing as a fee manager and I convinced him; I said, "Dude, you could do this."             And he did. He got out of his comfort zone and we moved him from outside to inside and he was the same way. He was so effective, I love the way he processed. And his name is Louis and Louis was a very good manager. He had a wife and a child and he was later moonlighting for a company for Best Buy, you know, he was working in the evenings and on weekends and stuff to make ends meet for his family. And we were at lunch one time, talking and I saw what he had done for the community. The occupancy went up, it had stabilized and he was right. We were making more money on the two bedrooms and I told Louis, I said, "Louis, why don't you quit? How much are you making at Best Buy a month?"  He said, "I get an extra eight or nine hundred dollars a month by working kind of part-time, on the weekends." And I said, "If you were able to just devote more time to the community, do you think you can make it more money?" He said, "I just can't afford to not."  So I told him, I said, "Let me raise your pay by a thousand dollars a month if you quit that job."   And I said, "Then, you could be a better husband. You could be a better father to your kid and you won't be so stressed. You don't have to work every single weekend because you're going to get burned out, you're going to get sick and then you're eventually going to quit."  And he's a grown man, he just started crying. Right there at lunch, it was kind of uncomfortable. He's like, "Why would you do that for me?"  I said, "Because I see in you great things, Louis."  And I said, "You should be a better dad and a better father to your child. If you're gone all the time, you're going to look back and you're going to say it wasn't worth it."  So the community had benefited so much from this guy, it could afford to give him a $12,000 a year raise and it would have zero effect on the properties bottom line because he had increased in a while. And he stood up with tears in his eyes and he's like, "I'm gonna go give notice."  I said, "And I'm gonna raise your pay this afternoon." And he gave me a big hug, and we've been friends ever since. He's very successful. But that was a proud moment where I identified that it's not always just about the money. It's also about being a good dad, a good husband and have less stress in your life. And sometimes we could take real estate and make dreams happen for people. Now, that was a good moment in my life. You know, it wasn't that long ago.  James: It's very fulfilling when you impact people's life. I mean you can make money in many ways. Glenn: That's right. James: You make a few million dollars and then you forget about it and you give it to investors and you forget about it. But when you impact someone it follows you throughout your life and you remember that's a big impact, you can't really put a monetary value. Glenn: Yeah. James:  And I've had REIT investors who when I paid them back through refi, they were like happy, "Oh, okay. I really needed this money and you gave it to me." It was just like a mind-blowing thing to me because I didn't really think that they really need that money. I mean, some people just invest hundreds of thousands of dollars and we give, you know, a hundred thousand back to them. They are like, "Wow! It's like I needed this money and you gave it to me. I'm so happy." So yeah, it's very fulfilling. Glenn: Fulfilling, yeah. That's neat. Yeah.  James: So do you have any secret sauce for your success? Glenn: Do the right thing, in the right place at the right time, little bit of luck. I do a lot of praying, help from above and just do the right thing. You know, I mean, I've gone through business relationship changes with business partners because we're not always aligned with doing the right thing and I say if you really want to be successful, just always do the right thing and what comes around goes around. James: Yeah. Yeah. I mean, I think one thing that I want to share with the audience is that I know about you and another buyer which is part of our same masterminds when you had details of that property which had a chiller system when it was down like one or two weeks before closing. And you had a choice whether you want to disclose it to the buyer or not and you made the choice of disclosing it, which is I think it's absolutely, the right thing to do. [47:15unintelligible]  Glenn: Not only did I disclose it, James, I also bought the buyer a new Chiller.  James: Absolutely. Glenn: He was already passed his due diligence, he was closing on it. He couldn't come back and re-trade me, his earnest money was more than a chiller so I could have just said it is what it is. I could have put a bandaid on it. But this is a small world we live in. And I've had business partners that have said, "Well, actually you don't have to tell them that kind of stuff." And inside my heart, I think I do. So I bought the guy a new chiller and he heard about that and he picked up the phone and he called me directly.  A lot of times the buyers and the sellers don't always talk to each other because they have brokers that represent them and then they have attorneys that work stuff out. But he called me on the phone. He's like, "I just want to say, thank you."  And I said, "You're welcome."  And I said, "You know, it's a small world and I know how I would feel if the roles were reversed."  And I was buying an apartment complex and I got stuck with a pretty big bill and somebody had knowledge of it because that actually happened to me. I bought Oaks Creek up in Dallas, a 280 unit deal and after due diligence and even after you know, we should have caught it but we didn't, there was a couple of buildings that had questionable foundation issues and my Engineers didn't catch me with my contractors.  Later I found out that the owner knew about it, the seller and I said, "Why didn't you tell me I could have just budgeted for it and fix it? Now, I've got to figure out how to scramble to pay for it because it's not on my rehab budget." He said, "Gosh, I just didn't feel like it was you know, I didn't want to tell you because I don't want you to re-trade me."  I'm like, "Yeah, I wouldn't have re-traded you. I just wish you'd have told me because I could have raised a little extra money to fix it." Anyway, just what comes around goes around. Secret Sauce, do the right thing. You also have to analyze your numbers. With 30 years of experience, when I come across deals today, I will jump in and I will verify rents, I'll verify rehab, I'll look at how we're going to finance it and some sponsors like me or you, we don't do this but some people do and they just convince themselves that it's still a good deal even though the numbers don't say so or like, "Oh, my guts telling me that we're gonna make a ton of money." "Uuuh, I don't know, man. The comps suggest that you're not."  And like, "Well, the taxes aren't really going to go up that high." I'm like, "Yeah, it's going to go up pretty [49:54inaudible]  and so the insurance."  So people convince themselves that you know, not to listen to reality. Well, Secret Sauce, listen to reality, be honest with yourself. Listen, the numbers don't lie. You might lie to yourself but the numbers aren't gonna lie to you if you do your homework.  James: It's so hard nowadays, I think for newbies, especially, who want to get started. I mean, they've been looking for deals for many, many months, sometimes years and they feel so frustrated because the market is good and everybody's a champion. A bull market, everybody's making money. Like I need to get jumping in to buy something. And even though they find the numbers are not really strong, I mean, you have to make a lot of aggressive assumptions. And then, they just go ahead and do it. It's very hard for them. I can understand that but it is what it is. I mean, real estate is not forgiving in a downturn.  We have been in an upturn for the past nine years and a lot of mistakes has been [50:52inaudible] Glenn: Well, here's a little Golden Nugget for our current environment. So interest rates are down. I believe they were kind of reaching the top. Everybody talks about that. Well, one way to mitigate your risk is when you buy a deal in today's market and here's what I'm doing is I actually raise extra money for my investors for a rainy day fund. It's not applied to anything whatsoever. It's just going to sit in the checking account as an emergency. Well, you know, you kind of have to pay some preferred return sometimes or a return to investors for all that extra money, but I'm doing that in my own personal acquisitions just so that I don't ever have to go back into a cash call to an investor and I know things will come up that I can't foresee and the market is gonna take a couple bumps. Well, I'm preparing for that now so, FYI. James: Got it. Very good tips over there. What is the advice for newbies who want to be like you? Glenn: Yeah. Be better than me. I think it's important for people that want to get in the industry to actually latch on and become friends with and partner with somebody that's done it before. It doesn't mean you have to form a company together and you don't have to be long-term, but at least do one deal with somebody who's done it over and over again. You're going to learn so much just by having a mentor friend on one transaction. And once you've been through a full cycle or something with somebody holding your hand and don't be afraid about giving up some of your money to that person or the profits, you know, you will get much more out of the education and the experience and then you can go do it on your own without those people after you've done it once or twice.  Some people like to just jump in and say I can do this. That's my advice, I would do that. James: Got it. Got it. This is a very exciting and inspiring advice. Let me go to one last question before I let you go, Glen. Why do you do what you are doing on a daily basis?  Glenn: Oh, man. It doesn't feel like work James. I kind of work and I look the deals and I just love it. I mean, it doesn't feel like work and I could have been a hospital administrator that feel like work. I didn't want to do that for the rest of my life. For some reason, I'm just attracted to this and I get to pick and choose who I do business with. I get to can pick and choose which brokers I like to do business with. I get to put together a team of people that I like to do business with. Not just people in the office but partners that I do business with; investors, lenders, I get to pick all that and you can do business with whoever you want to do business with and you can be kind of in control of your own destiny and it's fun. That's why I do what I do, James.  James: Awesome. Awesome. Glenn:  My question is James, why do you do what you do?   James: I that a real question? Glenn: Yeah, It's a real question. James:  Actually, no one has ever asked me that question when I ask that question but that's a really good question. I do what I do because I'm trying to make a big impact in the world.  So real estate is just a tool for me. I mean, basically, my reason would be how I impact. I mean, I love impacting other people's life. I mean, you say it, you made an impact to those employees lives and we make, as real estate entrepreneurs, we make impacts into many people's lives, into the communities lives, into our employees' lives. We also give a lot of donations out. And how do I impact orphans, kids who are orphans in the third world country and we pay a lot of money for their education and all that. So impacting their lives and it gives you fulfillment. I mean that's why I do what I do.  Glenn: I love it. I love it. You ask me hard questions. I get asked you one at the very end. You want to make a difference in the world, I think it's awesome.  James: Yeah, yeah. As I said you can make money and you can forget about how much you made after a few years but impacting people's lives, when you really see that you've touched someone's life in a big way that comes with you until you die so that's important. Glenn: James, you're a good man.  James: Thank you. Glenn: You're putting together some cool deals, you're writing a book and you invite people like me to come on your show and share our story and I just think you're a pretty cool guy, man. Thank you. James: Thank you. Yeah, why not tell our audience and listeners, how to get hold of you, how to get in touch with you.  Glenn: Oh, yeah. Yeah. So my phone number... James: You're really gonna give your phone number? Glenn: Yeah. 5 1 2 9 3 7 5 9 6 4 and I have an email address glenn@obsidiancapitalco.com  And you can also go to the website, we're there too.  James: Thank you very much, Glenn, for being on the show and sharing all your awesome tips. We have so much value in terms of property management, in terms of your personal thought process and that's what I want to get out of the podcast because sometimes, as I said, it's not only making money it's also what's behind the person. That's why I do this podcast.  Glenn: To make a difference in the world. Thanks, James. James: Exactly. Thank you very much. Talk to you soon.  Glenn: Ok.  James: Bye.

James: Yeah listeners, this is James Kandasamy from Achiever Wealth Podcast.  Achieve Wealth podcast focuses on commercial real estate investing; across all asset classes. Today I have Kathy Fettke from real wealth network. Hey Kathy, you want to introduce yourself?  Kathy: Hi there, sure. I'm the founder and CEO of Real Wealth Network. We've been around since 2003 actually. And we've been helping people, mainly in high priced markets, find cash flow properties nationwide. And then over the past 10 years or so, we've helped people get into syndication; a lot of our members just wanted totally passive. So we partnered with developers and we build single family homes, one to four units, and then also some apartments and now the opportunity zones, so we're excited about that.  James: Oh, cool. Yeah, Kathy runs one of the top podcasts in the nation and what's the podcast name, Kathy?  Kathy: Real Wealth Show and then I have a news show that's just seven minutes for busy people, but loaded with information; The Real Estate News podcasts.  James: Yeah, I've listened to both real estate news, which I like, because it's pretty short and it just give me the high level things; sometimes we're really just so busy. And I've listened to [01:25 inaudible] So let's go a bit more details into, how do your company or your group helps the investors? Let's start with investors, so are lot of them passive investors or do they still manage the property at all in single family?  Kathy: Well, you know, most of our members are busy Silicon Valley workers or their Hollywood people in the industry, that is pretty unforgiving. Both industries, Hollywood and Silicon Valley, you're working a lot; sometimes people are working 70, 80 hour weeks. Even if you're making a lot of money, what you don't have is a lot of time. So they can't be, managing their own properties or flipping; people who try to flip when they're that busy, it’s just tough to do a good job at it when you've got all these other things. And then to add a family or just trying to be healthy and exercise; there’s only so much you can do. So, we really decided about 15 years ago, both my husband and I decided we wanted to invest where there was cash flow and we couldn't find it in California.  So I had the Real Wealth Show then and Robert Kiyosaki was on it back then and he said, I'll tell you what, I am selling everything I own in California because it's a bubble. This was in 2006 when nobody else could see that; everybody thought it was just going to be this incredible boom forever. And he said, no, no, these loans are going to melt down and he was selling everything and exchanging it for a high cash flow, low cost properties in Texas because that's where the jobs in the population and we're going; so we did that   I talked about it on my show, on the Real Wealth Show, and our listeners wanted to do it; so we said, well, you can use all the team that we set up. You can use the property manager, they're great, and you can use the agent that we use, the contractors; and then we realized, this is really a need; we can make this a business. And that's really what real wealth network became; it's just finding these different resources nationwide to help people find deals that you just couldn't find on your own; and have them managed for you.    James: So is it a fund, or is it like a property, buy property or how does it work?   Kathy: We have both. I mean, for the first five to seven years it was basically brokering. We have a real estate brokerage, helping people sell their California properties and exchange them for really high cash flow.  I had a woman come to me back in 2007, somewhere around then, and she was desperate to retire; she had bought these three properties in Stockton thinking that would be her ticket and they were just a pain; always needing repairs. They were old properties and not very good parts of Stockton. And all the cash flow was just going to repairs, so she wasn't able to retire; her dream of real estate was turning into a nightmare.   And she listened to my show and I said, well look, let's sell these; they were $420,000 each. They rented each for $1,200, not a good deal. So we helped her sell those three properties at the peak and then buy in Texas at basically the beginning of their boom; we got her nine brand new homes in Rockwall, Texas. It was an hour outside of Dallas but we knew a new freeway was coming that would make it just a 20 minute, 30 minute drive to downtown. And she ended up quintupling her cash flow.  She was able to walk in and hand that resignation letter to her boss; she was able to retire. And about 18 months later, the market crashed; the home she sold for $420,000 each, these little dumpy homes, they were worth about $75,000 after. So she saved herself from complete disaster and in fact, her properties in Texas have tripled in value since she bought them. So ever since then, that's really what we do. We help people see; look, you need an asset that's performing, whether there's going to be a market collapse or not; a $420,000 piece of junk in Stockton that rents for $1,200 a month, is not a deal. We've been helping people understand the fundamentals of investing. James: It's so crazy because I think a lot of people thinks that, oh the house price is going up and they're getting richer. Actually, you're not getting richer? It's a dead equity; your equity is trapped in your house.  And I see a lot of people with a lot of money, who buys properties in high class neighborhood where they want to live. Which is completely opposite from how the whole cash flow should be; because the rent doesn't really jump up by that much, compared to your price on the house.  And it's just so crazy, they don't realize it and they keep on buying two or three houses in their neighborhood and they say; I have all these houses. Some people have gotten used to that appreciation play rather than a cash flow play.    Question for you is, I know every market has cycles. So I know from California to Texas in 2008 was an awesome, brilliant move. So what about today? Where would you invest? And where do you think both California and Texas market is?  Kathy: Excuse me.  I didn't mean to cough at the question but it's a big question... So it would appear that today is very similar to 2006; prices have gone up dramatically, in some cases they've doubled in value, tripled in value since rate recession. So people have made a lot of money and they've heard other people have made a lot of money by buying a property and doing nothing with it. So, it's tempting to think that that will continue, that is just not possible. You have to understand the metrics and people can only afford a property that's about three times their income. So if your monthly income is $5,000; you can only afford a property around $1,300 a month with the mortgage and the taxes and insurance.  So, there's only so high prices can go. Prices were very depressed for the past 10 years, they’re not anymore, they're way past their last peak; salaries are not going up as quickly. So to buy a property thinking that you're just going to get a bunch of equity gain,  I think you missed that. However, will there be another housing crash? That's what people want to know, right? My answer is, I don't think so, because in the last 10 years you have had people have to really qualify for a loan. They also got very low interest rates, some as low as 2% over the last 10 years; and values have gone up.  So they're locked into low interest rates, they have equity, salaries are going up. Even if we had a recession and jobs were lost, I don't think people are going to rush to dump their properties, when they're locked into low payments, just so they can pay more in rent; I don't see it happening. Plus 10 years ago there was no Airbnb, you didn't know that you could just rent out half your house, I did. Rich and I actually did that when we were having a tough time back in 2003. We rented out a bunch of rooms in our house to get by; we had to use Craig's list and that was crazy, you never know who you're getting, very different today. And, add to it that households are forming, yet we're not building enough supply. Where anything that we're building, that builders and developers are building, is higher end because permit fees have gone up, labor costs have gone up. You cannot build the same house today for the same price, certainly not for the price that most people own their property; they couldn't rebuild it. I live in Malibu where there are a bunch of fires and people are not able to rebuild their houses for what they had an insurance; so make sure you have really good insurance. So no, I don't think there's going to be a housing crash. There's just not enough supply, there's so much demand. We've had 10 million more renters in the last decade than we have before; we have probably another 10 million over the next decade. There's again, not enough supply in the affordable rang, so even though you're probably not going to see a lot of appreciation over the next 10 years, you're going to see a lot of cash flow.  James: Okay. Just because of the demographic shift, I guess, that you’re seeing in terms of the renters and all of that? Do you think it will continue in Texas? Because you’re looking at it from California; at that time when you bought in Texas, Texas was early part of the whole cycle. I came during the downturn and I didn't really feel there was an economic downturn here.  But now it has gone up so much, do you think that taxes will continue to grow?     Kathy: Well, it is very scary when you look at a chart and you look at the home prices in Dallas, it just goes, whew, and that is scary. But you have to understand that when we were buying in Texas, it was 26% undervalued, so that the houses were so cheap compared to income. So just to bounce back, the most important metric to look at is affordability and what we know is that there's just a massive amount of jobs in the Dallas, Fort Worth region. I don't think prices are ever going to go back to where they were, it’s the new reality there. Will they go up much more? It just depends on salaries and jobs. I certainly don't see any kind of crash or decline there. But we were never buying in Texas for appreciation, we got it and that was wonderful; but that's not why we were buying.    It all comes down to cash flow and there are parts of Dallas where we still think there's opportunity for cash flow and appreciation. But it's getting harder and harder to find, like it's harder and harder to find anywhere. There are still deals, especially in the opportunities zones. These are areas that are going to be gentrified, there may be higher crime, not as good as schools, but a lot of that is going to be changing; there's going to be more jobs coming in because of all the tax incentives. So, whether or not you’re getting those tax incentives, if you invest in those opportunities zone areas, you could see some appreciation along with cash flow.    James: Yeah, opportunities and some new incentive, compared to the 1031 and some other gentrification that's happening. So, you talk about Dallas, what about other markets in Texas, what are the other markets that you're excited?  Kathy: Well, one of the people I follow for my economic advice is John Burns. He does consulting for builders and we have developments all across the country and he's advised us on quite a few of them. He does an economic analysis annually, probably quarterly, he's constantly consulting. And one of the slides he showed recently was where the jobs are going. A lot of my California members of real wealth network say, what about Portland? What about Seattle? And based on the graphs that John Burns shows, that is the area that is having the least job growth in the country. So that should give you the answer you need. In addition to that, you've got all this rent control stuff happening in Portland and Seattle; it's like, no. If you're going to own a rental property, you don't want to be in a place where people hate landlords.   So I would skip the northwest, I'd skipped the west coast entirely, in my opinion, for that reason. Because whenever housing gets expensive, it's on the west coast where they decide it's our fault, when it's not; it's the fault of politicians who don't allow you to build anything, so it's frustrating. But where we're seeing the growth go 100% is the southeast. That's in Florida, Georgia, Texas certainly; these are no income tax or low income tax states. When you've got 10,000 people turning 65 every day, trying to figure out how they're going to retire, they're going to go to areas where they don't have to pay a lot of state tax. So that's one reason, plus the jobs are going, I believe the Orlando area, central Florida area is the fastest growing area in the country at this time. So yeah, we’re all over it, we’re building houses there and we're renovating houses and we're providing lots of done-for-you ,rental properties to our members.  James: So what about Phoenix and Las Vegas? I know that seems to be the last leg of boom, I guess. Because they are the ones who's recovering the last, but it seems to be a lot of people trying to look at that market as well.  Kathy: You know, I always get a little sick to my stomach when I think about Phoenix and Las Vegas because....   James: Positive experience, right?   Kathy: I had the opportunity, we were in contract on two properties before the collapse and we got out of them in time and got our money back. But oh boy, we would have been pretty upset. But no, I'm more upset that I didn't take action after the crash in Phoenix, there were so many foreclosures that just freaked me out, but obviously it would've been good to buy.  So it's hard to buy today when prices have doubled, if not tripled, from when we were able to buy; but at the same time, Las Vegas and Phoenix continue to grow, they will probably continue to grow for a long time. The problem is the cash flow is not quite as good as in some of the other areas in the south east, so I haven't been active in those markets. But if we had a really good team there and they were able to find us good deals and renovate them, and get them rented, and good property management; we'd probably still go in.    The problem with the Las Vegas is you have very low paying jobs, so the rents kind of cap there. But that could change if different kinds of jobs come in, but you've got a lot of people in the hospitality industry, who don't make a lot of money.  James: And also I would say a luxury, it's basically depends on luxury, right? If the economy tanked, nobody is going to go to Las Vegas to spend all their money and that's where the swing will come, I guess.  Kathy: Lots of people are moving there for affordability. My sister just bought her first house; she's 57 and bought her first house. But it’s in the Phoenix area because she could afford it.  They bought it, they rent it out and they hope to retire in it in 10 years. So you're seeing a lot of that type of thing.  James: Okay. Got it, so when you say cash flow, you're talking about single family turnkey cash flow, am I right?  Kathy: For a lot of our members, they want to max out that 10 conventional loans that you can get through Fannie and Freddie.  So even though they might invest in multifamily and other people's deals and syndication, they definitely invest in our syndication. Nothing really compares, in my opinion, to maxing out those Fannie and Freddie loans that you can get at 5%, five and a half percent. Are you kidding? Fixed for 30 years and you could get one to four units. We have a lot of our clients buying four-plexes in Florida and so you can get 40 units with those 10 year loans; and you're locked in at that rate for 30 years. You know rents are going up, I know a lot of people aren't fans of single family, but to me it just makes so much sense.  You can take all that cash flow and pay off the first loan, the second loan, the third loan; You could have all 10 loans paid off from the cash flow in 12 years, so many of our members do that. Then they have 10 properties free and clear, cash flowing. Again, multifamily is great; it's just a different animal. I think having a good mix of both because it's so easy to get in and out; a single family, it can be challenging, I've had massive challenges. We had a 92 unit building in Indiana that had a gas leak, in the middle of the night and the city required everybody to move out. We had to pay, we had an empty building, and we went from fully occupied to empty overnight literally, because of a gas leak.  And then we had to pay these people off to go find a new place, we had to fix; multifamily can have the same problems that a single family can have, only times a hundred.   Don't think that there are no problems, but it's a different animal; there’s different upside, there's different downsides. But, for people starting out,  just getting into some single family rental homes; just single, one to four unit, it's a great way to start to really wrap your hands around it and understand it and lock in those low 30 year fixed rate loans.  James: Yeah, you make a good point.  I'm a multifamily guy but I started in single family. So the cash flow in single families is unbeatable. I usually buy really good deals, so I usually make 30, 40% cash on cash, on single family. I buy by direct marketing and we rent it out. And we have that equity and you have that Fannie Mae loan, you just can't beat it. The biggest problem that we have in our single families is the 10 loan limit. That’s the limit, after that where do I go?  Kathy: That's as far as you can go, unless you both, you and your spouse can qualify; you can each get 10 but yeah, then you're stuck. Then you got to get to commercial, [20:19 inaudible] or something, you’re going to run out of money. But, for people just starting out or if you've got one property in the Silicon Valley that you bought for $400,000 and now it's worth 2 million; you might want to take that and do something else with it.  James: Yeah, correct.  I think the biggest challenge in single families is managing the property. So we were managing it, it takes up a lot of time, especially in the first few years because things are being stabilized. So once you get a renter, which doesn't leave, then everything is cash flow. So, does your company provide turnkey property management for single family?  Kathy: Yes. So what we've done is basically what we did in Texas. We'll go to an area where we think there's a lot of growth, a lot of job growth, a lot of population growth and it's landlord friendly and low taxes; Texas isn't low taxes, but we still have. And there we'll find people, like you said, people who know how to wholesale, they know how to get these deals. They do direct marketing and then they'll maybe look at a hundred deals to find one; but then they'll find that one deal that has a lot of potential. They'll fix it and get a tenant in place, have property management in place and sell it ready-to-go rental, to somebody who's busy and doesn't have the time to do all of that.  But we ask that there's still be some equity in there, it's getting harder and harder to do because prices have gone up and there's so much competition. There are E-buyers everywhere [21:58 inaudible] an E-buyer now; E-buyer meaning that they've raised billions of dollars to buy a house, sight unseen; instantly, instant offer. So, that's making it a little tougher on wholesalers but with that said, we still have boots on the street in 15 different markets that have either really high cash flow and prices are still undervalued; like Detroit and Cleveland, or in areas where there's just massive growth and people want to get in the path of progress and watch the sun rise.  James: Got it. I want to go back to the 92 units multifamily, because I think it's a very interesting story. Everybody tells all the good stuff about multifamily, how much they make? And there are a lot of people who doesn't tell all the bad stuff or deals that are losing money or what deals are under water. Kathy: Nobody wants to talk about it, I'll talk about it.  James: Yeah, I want to talk about that because I think it's a very good learning. So, you talked about 92 units where there was a gas leak, the city said you have to leave and you went from a 100% to 0%.  So what was the key learning from that experience?  Kathy: The key learning would be to make sure you've got the right insurance in place. A lot of people get their insurance policy but maybe don't really understand it; so, get an attorney to read it through and make sure you’ve got everything you need for that kind of situation. If you have the right insurance, then you can get through a situation like that. Unfortunately, in our case, the city made us do all kinds of things that were not necessary, before we could get a certificate of occupancy and  bring people back in; so, it took years to be able to occupy it again. And on top of that, when you have a vacant building and you got vandalism, so we'd have vandalism. And again, insurance can cover that, but it was hard, it was really hard.   So have plenty of reserves, really good insurance. Make sure that somebody, a professional, has looked at that insurance, to make sure that it will cover everything. And then you can get through those hard times. And if you're syndicating, if you brought in other investors into your deal, make sure that you have key man insurance or D and O insurance; because you’re responsible for your investors' dollars. I was able to go to the lender because we were sitting there vacant, no income and still having to pay that mortgage. And it was just cleaning me out, it was so difficult. It was so difficult; so we just stopped making the loan payments and I didn't know what to do. I had a million and a half of investor funds in there. So I just went to the bank, I flew out to Indiana, I met with the president of the bank and just said, here's the keys;  it's empty, it's vandalized, the city won't let us do anything with it, you can have it. And we were probably $1 million in arrears. And they say, I kind of knew they were going to do this, but I didn't know for sure, and it was a really scary moment; but they are like, you can have it. They cut the loan by over a million and it was still very difficult.    And so I think it's important that people understand the risk because there are so many young investors syndicating deals. They don't have the experience, they're taking other people's money and I literally talk to these young people and they are like, what's the big deal? It's easy, it's easy.  But their Performas are  only accounting for rents going up,  what if they don't, you know?  James: Correct.    Kathy: You just don't know. So you've got to have run that stress test on your Performa, understand that rear-ends can stabilize. That if there's a recession, a class property is the hardest to fill because people have lost their jobs; so they start discounting and then now someone's got the choice to live in a or a B class property for the same price, they're going to go with the A. So then to get tenants, you've got to lower your prices on the B property and that trickles down to the C. Whereas nobody's really accounting for that and I don't want to say nobody, a lot of new investors aren't accounting for the possibility of that scenario.     James: Yeah. And I can bet you that none of the gurus out there teaching about key man insurance and D and D, and E and O insurance, which you just mentioned this now. Because I know a lot of gurus and even they do not know because they just do teaching, a lot of them.   Kathy: There's a lot that going on and it's kind of terrifying. On the one hand, I feel like wow, there could be a whole lot of really good deals in about five years, but I don't want to think that way.  I wish everyone success, if you're really young and you're following a guru, so to speak, who's telling you how easy it is, just make sure you have someone on your team who's a little seasoned, who's got a little gray hair; you don't want to jump into an airplane with two young guys. If you're going to jump into an airplane and you know that it's blue skies, okay, fine. A couple of inexperienced pilots might be okay, but if you know you're flying into a storm, don't you want that old guy?    Just know that we are in turbulent territory right now, this is not the beginning of an expansion, and this is the middle or the end. So it's, it's, it's different. It's not as easy. So it's, different, it's not as easy; there's clouds, there's potentially a storm coming. Get that person with experience, who knows how to ride through storms, to be a part of your team, whether they're on it in an advisory position or you give them a little bit of shares so that they're invested in it. But just get that wise person with experience to help guide you.  James: Yeah. It's, interesting on how much deal is being done at this peak market cycle. Actually, if you look at the latest data by Dr. Glenn Mueller, we are in hyper supply state nationwide for apartments, we already passed the expansion cycle.   Kathy: Really? Oh, I haven't heard that. You know, I hear so many different things, I've heard that we're over supplied in Seattle and maybe Dallas and New York. James: Yeah, I mean that is national data, national data and then there's another data which shows each cities and where they are. And if you look at a lot of cities, a lot of cities are in hyper supply stage And the last batch of cities, which is at the last part of expansion, there's like 10 different cities, which is the last part of expansion; so even that cities is going to go into hyper supply. So, that's the data that is being published, I think we are [29:03 inaudible] if I remember correctly, Dr. Glenn Mueller is like 50 or 30 years, who has been doing analyses, research, on all commercial real estate asset classes. I follow him closely and since last June, we already in hyper supply, nationally.    Kathy: That's terrifying but I guess there could be deals for you and me in about 2 or 3 years James: Well, I still have my properties, but I usually buy value, that way we can try to push income. So if you're buying at  low prices, we are pushing income so that we have buffers, so in case it turns down, hopefully, that buffer is not eaten up.  But there are a lot of people who are buying deals which doesn't have any buffer, there's no real value added component to it. They just buy because they're getting a good loan, cash flowing, there are a lot of investors who want to invest; and there are a lot of gurus out there also telling that there're still deals out there and people are just jumping, it's fear of missing out.  Is it a similar sentiment that you see in 2006, 2007?  Kathy: The thing that feels similar, is a whole bunch of people giving other people advice,  who don't have any experience and people with no money and no experience, doing deals; that's what scary. And lenders coming in and so much money, they'll just lend on just about anything, so that feels familiar. What's different is that there are fewer people who can afford a property; you really have to qualify, to live in a home. I don't see a single family housing collapse. In multifamily, there's just going to be rental demand for years to come. So it's really only the people who make bad decisions, who buy the wrong property, who don't calculate the repairs adequately or overestimate rent increases; those are the people who get hurt. They over leverage, anyone who over leverages that's concerning. or in ballooning short...  James:: Short term loans, Like bridge loans and all that, got it; so coming back to that insurance issue on the 92 units. So I'm trying to understand the root cause; I know we didn't get the right insurance, there's something were not covered. What was your insurance selection process in the beginning? Did someone recommend you to this insurance?  Kathy: I trusted my partner. I didn't have enough experience; everything I'm teaching is really from my own experience. I certainly didn't know how to look at a multifamily insurance policy and know that it was enough; I should have run it by an expert and I do that now on everything, we have experienced experts that look at it. But at the time I didn't know and  insurance companies are always going to take advantage when they can, so it's difficult to know what to look for; especially when you'd never in a million years expect something like that. If you're buying an older building, which many people are because they're doing the value adds, these are things that can happen. You have old pipes, the city ended up making us replace all the water lines, all the gas; it was, like having to build a whole new building. It was just a nightmare.    James: Yeah, and what kind of loan did you take? Was it an agency loan or was it a small bank loan kind of thing?    Kathy: Small bank, yeah…    James:   I recently had one of my buildings under fire. So, I did look at insurance in the beginning when we bought it, but there are so many details behind that policy coverage.    Kathy: Yeah, how could you know? No you can't   James: I didn't know, until the fire happened when I was talking to the adjuster, he said, oh the good thing is I have really good solid insurance.  But the amount of details in terms of coverage, it's just shocks me, that so many things that cannot be covered if we don't get it.   And in multifamily, just for the listeners education, the insurance is one thing that people can play around with, you can't play around with taxes because taxes by  the county and all the expenses is pretty small. Payroll is something it's a bit hard for you to control; you need good staff to run the property. So you have to budget it properly, taxes, you have to budget properly. But the insurance is, yeah you can pick around here and there; get slightly lower premium and that contributes to your LTV; which is how much loan they're going to give or how much loan proceeds. So, sometimes it's very tempting to do deals to get higher proceed by compromising insurance. And insurance is one thing that always comes at the end of the whole loan commitment process.  Let's say you're closing in two weeks, the bank is going to give you a loan commitment and insurance is the last one that comes, as the final price. And if the insurance agent messed up or if the syndicators or the sponsor messed up, in estimating that amount; the deal can fall through at the end. So what happened is people, there's a lot of possibility that people take shortcuts in insurance because they didn't want to deal to fall through, so it’s crazy.  Kathy:  It is just so important to have good insurance.  I have a friend who is a big fund manager, a multimillion dollar fund and he's savvy,  very smart investor and he owned a bunch of buildings, commercial buildings, I believe apartments in Houston before the floods. I don't know if you know this, but if your insurance doesn't specifically say it covers named storms, and of course what hurricane doesn't have a name, if that's not specified, then it's not covered. And he did not have, I don't know specifically, but he was not covered in that storm. Which again is, an insurance company is going to do what’s best for them? So make sure you've got an attorney who specializes. I've got a neighbor who that’s his job; He’s a specialist in making sure your insurance is what you think it is, because it would be just so easy to change one little word. James: That's interesting, I didn't know that. Good thing I don't have anything in Houston, but it can happen anyway, whole Texas.. So, did you try to hire a public adjuster and tried to fight for you and they gave up on it just because it's not covered?  Kathy: We hired an attorney to help us find it and it didn't get anywhere. I think we got money for the vandalism, but even that, you have to make sure when you have a vacant building, whether it's a single family or multifamily, you have to make sure your insurance company is aware of that and there's a different policy for that. So, there's just a lot to understand, when managing these properties. But, now I know what it's like to manage other people's money and be in a situation like that; I couldn't sleep for years.  I think you could probably hear me on the balcony crying. I would have investor calls where I would just burst out in tears halfway through and these lovely people just worked with me through it, because they knew it wasn't my fault; but I will never go through that again, that's the worst feeling, it's terrible.    Nobody sued me, but they could have maybe, I don't know. They've been very understanding. But today when I do syndications, we eliminate as many risks as is possible. One of them is we do a lot of building subdivisions and it was really the builders and developers who got wiped out in the last downturn. Because a few banks just failed, they couldn't pay their construction loans; even if you had $20 million construction loan to finish your project that was gone. So, you literally couldn't finish your project, so builders just went out of business left and right, and land became dirt cheap, cheap as the dirt that it was on. We were able to buy a lot of that land because I was just getting into syndications back in 2010, we bought some incredible land; 4,200 lots in Tampa for a 10 cents on the dollar and things like that.  But we didn't want to be on the other side of that this time around. So the way that we have handled all of our developments is we raise all the money, believe it or not, we raise all the money to acquire the land, and title it, get a horizontal construction, the utilities, the roads and everything and build the first phase. We raise all the money for that, we don't take any bank financing because we do not want to get stuck in that situation; which again, took down the biggest of builders. National builders went down because of their loans, because they're financing. So we just own it with cash, we take all the money from the first phase, use that to build the second phase and our investors get a nice 15% preferred return in a situation where there's no leverage.    Now I love leverage, I love leverage. And it's different on a multifamily and certainly on one to four units; I’m all about leverage. Just make sure that it's the kind of leverage that you could live with. On a single family home, just make sure, again, you've got the right insurance on that property too. I do know somebody who owned a single family home in Houston, didn't have that named insurance, their house flooded and insurance didn't cover it. So even for a single family up to a big multifamily, you really need advice on your insurance.     James: Interesting,  I just learned something new, that construction loan and how the builders, because we always wonder how did the building not happen. So now it makes sense because the construction loan, the bank doesn't have the money and they just said, no more, already done.    Kathy: You're done. You had everything you need, it all lined up. But even people who had their money in the bank, they couldn't access it. For a lot of people our equity lines, they were just gone. In 2009, I had a developer come to me with somebody who actually listens to the real wealth show and he said, you're just not going to believe the kinds of things I can pick up from the banks, from the REO departments. And these asset managers don't know what they've got; they don't know how to value it. But there were these subdivisions one after another that literally could not be completed because the loans were gone. And I didn't know that I could raise money, but I tried it and we raised $3 million dollars in one event. And we were able to buy 27 waterfront town homes in Portland, in the Pearl district, the hottest part of Portland. They were 70% complete, they were totally built; the only thing that wasn't done was the interior. All we had to do is put in the kitchens and the bedrooms and the carpets and finish it off; and, so we were able to buy it for $3 million, all 27 units, when the loan alone had been 13 million. And then we just finished them off because the builder couldn't do it.  James: That's the opportunity you get in the downturn I guess, if you've got the cash and you know how to do it kind of thing, very Interesting. So, let's go to a more personal side, Cathy because you have a big network of investors and you have a big presence on the radio and also on the podcast side of it. So why do you what you do? I mean, what's your big why in your whole venture?  Kathy: That's a great question. It started out more self focused. My husband was told in 2003 that he had melanoma, that it had spread, and the doctor thought it spread to his liver and metastasize and told my husband he had six months to live. No one should put a timeline on your life and the doctor was wrong, and Rich is fine today. However, 16 years later, he is fine. Although he gets regular checks, make sure his skin is okay because he's a surfer and a rock climber; and he's still out there in the sun. So in the beginning it was like, I got to figure out how to make money. I don't believe the doctor is right but if he is, I've got two kids, I've got a house, I've got to figure this out. So I just changed my radio show to, how to make money. So in the beginning it was a passionate desire to take care of my husband and my children and learn the secrets of the wealthy and that's how the real wealth show started.  Then when I learned the secrets, and found out that people are willing to share them, people like Robert Kiyosaki, he was willing to come on my show and tell me his secrets; that's how we ended up investing in Texas.  I just couldn't believe what I was hearing; I just couldn't believe that there was this way to build wealth that no one had told me.  I just couldn't believe it and all the ins and outs of how to get loans and how to clean up your credit and the tax benefits and the leverage; there’s no other way to build wealth. I just couldn't believe it.   So it opened my eyes, gave me hope. We followed, we made mistakes, but even with mistakes and even with losing our money and other people's money in the beginning, we got back up on our feet and it works. And now when I help people, I see, I have people who've been following me since then. And I just had someone on my show last week who said, I did everything you said and I'm retired now, it worked, it worked; 10 years later. So I know it works and  so I'm passionate about helping other people who were in the same situation I was in, which was absolute terror. How was I going to take on the payments of our big house and raise these two little children as a single mother, if the doctor was right? We blew through our medical bills. What was I going to do? I wasn't going to go get a job and be away from my kids for 10 hours a day. So to learn the secrets of the wealthy, to learn passive income and to be able to share that with other people and see their light bulbs go on and like, oh my gosh, this is incredible, how is this possible?  I don't know, I don't know why we're not taught it in school? That’s my why.  James: Yeah. I realized with my first single family, when I start getting that monthly cash, [44:07 inaudible] actually, this really works.  Kathy: It works, it works. James: Yeah. Somebody else paying for your mortgage and cash flows and you buy it right, all kinds of things, it definitely works. It's amazing. Correct.    Kathy: I got my daughter, when she was 24; she got a job right out of college, worked for two years, was making pretty good money. She lived in Chico, which is northern California, and  you know the  home prices there aren't totally inflated like they are today, but they weren't two years ago when she bought. She's only 24 years old, and she came to me and said, hey mom, I'm going to buy a new car. I said, no, no; before you buy a car, because that's going to affect your debt to income ratios, let's just talk about buying a house. Oh Mom, I'm too young, I'm too young to buy a house. I'm like; do you know who your mother is? We need to talk. So we went to a mortgage broker and sure enough, she could qualify for a house up to $300,000; she was blown away.    It turns out that her payment was less than what she was paying in rent for a two bedroom; she could get a three bedroom. So we went house shopping, she found a house that needed a little bit of work, so she got a good deal on it right across from Bidwell Park, amazing location. And then when she bought it, she realized there was a lot of work and then she got real mad at me for about six months. She's like, mom, I'm 24 I'm too young for all this, I don't want to be settled down, I'm a millennial. I'm not supposed to be settling down, it’s too much, I hate this house. I said, honey, just trust me.  Well then the fires happened, right? And Paradise got completely wiped out an entire city, suddenly. She had put her house on Airbnb to rent out a couple of rooms on certain holidays and so forth. All of a sudden her Airbnb app was just blowing up with people saying, I'll pay $4,000 a month for your place. And her rent is $1,600, not her rent, her mortgage, PITI, taxes and insurance, $1,400 and she was getting people willing to rent for 4,000. So she took that offer, she rented it to a very nice family who lost their home and she went cash flowing incredibly. And she's like, I get it now, mom, this is better than a car, I get it.    James: And she can buy a car with that money, right? And be comfortable paying for it too.   Kathy: That's right, she can buy a car.   James: Can you name a few of your secret sauces that you have grown this big, in terms of popularity and getting known by people? What's your secret sauce? Kathy: You know, everybody has their thing. I happen to love broadcasting, that's my background. I went to school in broadcasting, so radio and podcasts that was just something I love to do.  I love to write, I love to educate, so I just followed my passion.  I know a lot of people want to start podcasts right; maybe they're not suited for that. For me, it was just passion and bullishness and desire to learn. And I think because I was on a major San Francisco station, I got invited to speak at a lot of [47:29 inaudible] before I knew anything about the business. It was terrible; I'd stand in front of the room, I don't know what I'm talking about. But that's when I realized, a lot of people don't know what they're talking about.  So I just made it my mission to understand and to read as many books and to truly become an expert because I started to see that people who were being treated as experts, really weren't, and that was upsetting because they were guiding people in the wrong direction. So I guess you could say that's part of what... another thing is, I'm just really bullish. If I want to go to an event and I don't want to pay $2,000 for it, I'll just call and ask if I could be a speaker and a lot of times they'll say yes; sometimes it was just for personal reasons.  James: Okay, that's interesting. When I hear you on your podcast, it's like a newscaster, like Fox or CNN, you know? Its like, is that Kathy? Oh, it sounds really good. You have a really good voice and a presence on the radio and podcasts, that's awesome. Is there any proud moments in your life that you think it's going to be with you until the end? Do you think, I am very proud of this moment, related to business? Kathy: Related to business? Wow, there's been a few.  I would say it's our ability to raise money.  I'll tell you one, a developer that we love came to us and said he'd been working on entitlements on this land for 10 years; it had been very difficult to get the entitlements, but he wouldn't bring us in, until he had them. Which was great and we wouldn't do the deal until he had them. Well, he got them, but he was in a hard money loan because it took so long. It was actually a friend of his, lent him the money for six months and he was at the five month mark, and he thought his friend would extend it and his friend said, no. The loan was for 4 million, the property was worth 9 million. So this friend lent the money for six months, knowing that he would probably foreclose and take the 4 or 5 million in equity, from his friend. So he came to us and said, I just can't believe he's doing this, can you raise the money in a month? And I said, I don't know? So we did, we did an event, we raised the money, we paid off that hard money loan the day it was due. And that guy already had come to the property telling everybody he was their new boss.  James: Wow. So he was really wanting to take it, I guess  Kathy: He was a shark, yeah. And so to be able to come in and save this developer, because we had built a network of people who are willing to write a check so quickly, it really meant a lot. He invited us to a dinner once we closed and he had 50 employees there, all who would have lost their jobs, if we hadn't been able to do that. So, I would say that was a moment that I was very proud of; and our investors are going to be the ones who benefit from all that equity, not this guy who is just a shark.  James: Got It. That's very interesting. I can't resist asking you one question because you raise a lot of money from investors. So, who would you invest with? What kind of sponsor or syndicator that you would look for? What are their characteristics? You don't have to have no names, but what are the character types or characteristic that you would look for, if you want to invest. Because you have seen the whole gamut of our real estate cycle and what people do and all that.   Kathy: Well,  and I am investing in other people's deals. What I look for is kind of what I told you. Track record, experience, a deal that favors, I don't want to say favors the investor, but is very fair, investor friendly. I don't like seeing deals where they're fees here  and fees there, so you get a piece of the profit, but there's no profit at the end because they've charged so many fees along the way, there's nothing for you. So just investor friendly projects, but mainly it would be people with a tremendous track record and who has been through several cycles, at least someone on the team has several decades of experience. At this point, I think a lot of people are looking for cash flow, though a lot of our deals have been development, it's not cash flow, we just get a big check at the end once the project's done. But the ongoing cash flow, there’s only a few that really know how to keep that cash flow going in any kind of cycle. So those are the people for my retirement that I would want to be investing with.  James: Okay, awesome. All right, Kathy thanks for coming on the show. Can you tell the listeners how to get hold of you?  Kathy: Sure. You can go to Real Wealth Network. Real as in real estate, wealth as in your money and network as the network we have nationwide; Real Wealth Network.com. You can join for free and it just opens up all these portals in our website. It gives you data on different cities, where the job growth is, the demographics; you get a session with one of our investment counselors and ongoing education. It's all for free@ realwealthnetwork.com And then of course, my podcast, Real Wealth Show.  James: Awesome. It's really nice to have you on the show and I'm sure you add tons of value, so happy to have you here.  Kathy: Thank you so much.    James: Thank you.    Kathy: Take care. Bye.

In this episode, Jen, Annie and Lauren are joined by James Fell, the author of The Holy Shit Moment, a book that explores epiphanies and how behavior can change overnight. James shares his insights from his own radical behavior change grounded in a lightning bolt moment of permanent change, and talks about the science and stories behind these important moments. Tune in and learn how you can find your own shift, what drives lasting change and how everything can come together in an instant.   What you’ll hear in this episode: What James Fell’s epiphany was and how that changed his life How personal responsibility can be empowering Global versus focal change – what’s the difference Identity shifts and their impacts on relationships The model of personality and how it relates to change Vanity goals: do they work? Are holy S. moments always bad? Gradual vs. Immediate change What supports immediate change? How does gradual change work? Crystallisation of discontent defined The breaking point and change The quest for greatness as an impetus for change Does sucking it up every work? Building habits and enjoyment over time Weighing the pros and cons of action and committing even when it’s unpleasant Acting like a tortoise but thinking like a hare – what does that look like? Post diet rebound, pendulum swings and coming back to centre Resources: Good To Great by Jim Collins The Holy Shit Moment by James Fell Lose It Right by James Fell Learn more about Balance365 Life here Subscribe on Apple Podcasts, Spotify, Google Play, or Android so you never miss a new episode! Visit us on Facebook| Follow us on Instagram| Check us out on Pinterest Join our free Facebook group with over 40k women just like you! Did you enjoy the podcast? Leave us a review on Apple Podcasts or Google Play! It helps us get in front of new listeners so we can keep making great content. Transcript Annie: Today’s long awaited guest has been a longtime friend and supporter to Balance365 and whenever we ask our community which guest we should have on our show his name always comes up. You might know him as the man behind Body for Wife but we can’t get enough of his straight shooter honest approach to behavior change. Joining us today is the one and only James Fell. James is a highly regarded science based motivator for lasting life change. James recently launched his second book and on today’s episode he shares with us how love and a Joan Baez as quote changed his life forever, how getting clearing your values can make change feel easier and why relying on willpower is a bad idea. We had so much fun recording this episode with James and we know you’re going to love it too, enjoy. Jen and Lauren, we have been waiting for a really, really long time for this podcast episode and I know our community members have been too. Are you ready for this Lauren? Lauren: So ready. We had to reschedule. Annie: Jen, are you? Jen: Yes I’m ready. Annie: Sorry, Lauren, what was that?  I’m so excited I just cut you off. Lauren: I was going to say, we had to reschedule so I’ve been waiting for like an extra week. Annie: I know and every time we ask our community insider Facebook group Healthy Habits Happy Moms who we should have on as a guest, notoriously this man’s name keeps coming up. It is James Fell. Welcome to the show, how are you? James; I kind of feel like a rock star right now after that intro. Annie: You kind of are a rock star. James: Yeah, well, tell my kids that one. Jen: We also get a lot of referrals from you so thank you. James: Oh you’re very welcome, you know- Jen: A ton of women that said they found us  through you. James: We have like minded followers I would say. Annie: Yes. We, James and Healthy Habits Happy Mom’s which is what Balance365 was before it became Balance365 go way back so we’ve been pals for a while and Jen and James, you guys met, I think before James and I met, how did you two meet? Jen: In Vancouver. Oh, like, we just met online, small world as we talked about, when you are not shucking B.S. to people and then we met up in Vancouver and we had coffee which was awesome. James: Yeah, that’s right, I was in Vancouver for a conference. So we got to do the, you know, going from being internet friends to real life friends which is always exciting when that happens, so high five! Annie: Yeah and I met James when I went to the fitness summit in Kansas City many years ago, I mean, gosh, that was probably 3 or 4 years ago I suppose but it was, like, one of those whispers in the lobby like, “That’s James Fell.” James: Don’t make it weird, Annie. Annie: That’s what the women were whispering in my ear and I’m like “Oh, OK, OK.” It was fun to have a couple of drinks and since then our relationship with our company and you have fostered and we are excited to bring you on because you have a new book coming out. This is actually your second book, second to Lose It Right, is that correct? James: That’s correct!   Annie: It comes out January 2nd and I told- James: January 22nd. Annie: Oh, sorry, January 22nd and I told you before we started this that we have labeled our podcast as clean, which means it doesn’t have any explicit lyrics and the title of this book is called the Holy S. Moment and that’s what we’re going to call it for this podcast because we know we have people listening with little ears within earshot but you can probably imagine what the title of that book is and I just have to say it’s not actually out in print yet, is it? James: No, no, we’re, so January 22nd, so as of recording right now we’re 6 days away, so it depends on when you publish this. Annie: So by the time it’s released, this episode is released they’ll be able to find it, where can they find it? James: Anywhere, so it’s being published by St Martin’s Press in the United States and Canada and if you have any listeners in the U.K. Harper Collins is the publisher there so this is this is my 1st international released book. My 1st book Lose It Right was just published in Canada. Annie: That’s exciting, do you feel good about it? James: Oh yeah, I’m really stoked. So yeah, they can find it in any bookstore, any platform, there’s an audio recording too so if people don’t hate my voice, I’m the one that did the narration for the audio. Annie: I love it when authors do that. Jen: I do too. You really feel connected to that author. James: Yeah, I love it too because they paid me to do it. Annie: Winning and the cover of the book, unless it’s changed, because you were kind enough to share the digital format with us, the cover has a lightning bolt on it, right? James: Yes, it does. Annie:  And I don’t know if you can see that but I’ve got a big old tattoo on my trap so, you know, I feel like it was clearly, this was a book that was meant to be in my house. James: Annie Brees, me and Harry Potter are all big on lightning. Annie: Except I’ve never seen Harry Potter, I’ve never read Harry Potter- Lauren: What? Annie:  I know nothing about. I know. James: OK, you just lost some fans. Lauren: I’m sorry. I’m not cool. Annie: Okay, I just wanted to get this out too because on page 6 it just says “hi mom” and I was like- Jen: Oh, that is so sweet. Annie: So you definitely earn some bonus points but what I want to talk about is, if you know us, you know that the 3 of us are all about slow and sustainable change but you actually wrote this book because you found yourself as a coach encouraging slow and steady change but that actually hadn’t reflected your experience in how you forever changed your life. Would you mind sharing the story about the moment and the quote that you think shifted for you? James: Yeah, so before I get into that briefly, like, when it comes to say health and fitness, I don’t mean, you know, jump into your first session with Attila the trainer and go hard core and wreck your self on day one. When it comes to the the change of changing one’s body, you still need to be rational and don’t destroy yourself but the change that I’m talking about is the way that you’re motivated, that quite often we talk about motivation as a form of baby steps, being a tortoise not a hare as well, you slowly, step by step drag, yourself over a motivational tipping point developing, you know, habits that become sticky and the reality is that there’s a lot of people that don’t do it that way. They go from 0 to 100 miles an hour in a moment and they stay that way because of some transformative life changing event that just wakes up a part of their brain where they achieve a new purpose in life that endlessly and vigorously drives them forward. So that’s what the book is about is the science of that event and so there’s the, you know, all the scientific aspect but there’s also a lot of anecdotal stories that run the gamut of, you know, relationships and career change and battling addiction but also, yes, there are some weight loss stories in there as well but to my personal, the first big transformative experience for me happened when I was about 22 years old and I was in university and I’d actually gotten a letter that said, this isn’t verbatim but it boils down to “Your grades suck, we’re kicking you out” and I was, you know, I was in debt, you know, the credit card companies were calling. And I wasn’t looking after my health, I was drinking too much and and I was in a state of despair and part of that had to do with my girlfriend was that she was a very driven woman, straight A student, destined for med school and I knew that if I got kicked out of school and I do not say this to ever speak ill of her but I knew if I got kicked out of school that it was going to be the beginning of the end, that, you know, she wasn’t going to stay with a guy that was a drunken dropout who was letting his health go to hell and so I was, I was really kind of freaked out about what am I going to do and so I’m reading the university newspaper and there was this section that’s like there classified ads called 3 lines free and it’s, you know, a mixed bag of things from quotes and witticisms and proclamations of undying love or temporary lust or whatever and there was a quote in there from of all people Joan Baez the folk singer and the quote read “Action is the antidote to despair.” And I read that and it didn’t hit me immediately but it’s the 1st thing was I realize that, you know what, all these problems that I have can be fixed via action. If I get down to get to work I can fix this stuff and that was the first little wake up and then the next part that hit me bigger was the realization that I had been pretty lazy my entire life. I’ve been skating turned on cruise control, not really putting much effort into anything, these problems that I was experiencing were of my own doing. You people know me that I’m not one of those guys that say “Oh, just suck it up” and you know, I realize that there are people that, you know, life is garbage sandwich and it’s not their own doing but my this was my fault. I had dug this hole myself and only I had the ability to dig my way out and and so there was that realization that I’ve been really lazy and I was actually putting effort into being lazy by, you know, the mental gymnastics it took to, you know, shirk my responsibilities each day and that was when my brain woke up in an instant where I said, “If I just put effort in a positive way, if I just got down and started working, I could fix all this” and that’s the way that these life changing epiphanies work is that they are there a big picture concept, they’re fuzzy, they’re not usually very concrete. The concrete action plan comes afterward, after you have the event but the event happened was like, “If I just work I’ll fix everything” and in that moment I experienced what’s known in Psychology of behavior change circles as dramatic relief, where suddenly you see the light at the end of the tunnel, all the problems haven’t gone anywhere, still there but you know you’re going to fix them and you know that the light is there, you can see it and you’re going to race toward it and everything’s going to be OK. And from that moment, in that instant, I was a changed man. Jen: Wow. James: I got 2 master’s degrees. I didn’t flunk out, I went on and got 2 master’s degrees, oh and that woman, the girlfriend, we’ve been together for almost 30 years now and so yeah, I told you she was the one and you know, got in shape, got out of debt all that good stuff, I don’t brag. Annie: I don’t want to spoil, I didn’t want to spoil it for everyone but when I was reading this part about your, like, this moment that you were having reading that quote I was like “Did he do it?” and he did! And that’s, oh my gosh, that’s so sweet. But I love that realization that you said, I was in this position because I had put myself there and while that can maybe feel a little like, “I did this to myself” it can also feel like that “I can get myself out” like the flip side of that coin is, “Yeah, I put myself here but also I can get myself out” and that’s really like encouraging and empowering I think. Jen: I got goosebumps and I don’t know if you can see that on camera but my hair is standing on end. So I see that shift with some of our Balance365 members sometimes and I agree some people get a garbage sandwich but it is so important to reflect on our contribution to where we’re at in life. I believe that wholeheartedly that it is so important to reflect on that. There are obviously things that were out of your control but there are also things that you have done and you know, for this is a very complex topic but especially, you know, just the different members we have in the different lives they come from but I feel like that can be such a light bulb or that lightning bolt they need to go, you know, maybe they can’t change everything about their life but maybe they have more control than they have let themselves believe, leading out to that moment. James:  And the thing is that there’s focal changes and then there’s global changes, what I experienced was largely a global change, that I just decided that it wasn’t that I was going to get in shape or that I was going to stop flunking out of school, I was going to fix everything and so that was a global change. Other people had these focal changes, like the example in chapter one of Chuck Gross, who had started with his weight because he weighed over 400 pounds and that was a life changing epiphany after having struggled and tried and failed to lose weight many times, he had this transformative experience and that he knew it was going to work and the direct quote from Chuck was “I didn’t have to struggle with my motivation. It came built in.” And he lost over 200 pounds and has kept it off for more than a decade but the interesting thing there is that these experiences often have cascading effects where afterwards, he ended up, he went back to school and he was a straight A student, he went through a personality shift where he went from very introverted to, you know, more confident and more extroverted, it was better for his relationship and it just had a lot of other positive impacts throughout his life. Jen: What about, something on the other end of the scale, I was listening to a podcast the other day with a therapist and she was talking about the high failure rate of relationships after somebody has weight loss surgery and they didn’t dig into that but it relates back to what we’re trying but here is because a lot of people, it’s not about the weight loss, it’s about the identity change that they have because of that huge event and I can also see it going the other way, that, I mean, this happens all the time in relationships, I guess, you have people go through identity shifts throughout their life and it can also affect your relationship negatively. And so I can see it also, you know, not that anyone should stop themselves from changing but it’s just to show this is radical, right, it’s radical what happens to people and this cascading effect that you’re talking about, it can affect, we have in Balance365 these women that go on, like, one woman has founded a feminist nonprofit in Vancouver and is building this huge community and she talks about how it was Balance365 that just, it just was that moment, right, everything changed from there and it’s just interesting to see and we’ve had women applying for jobs they didn’t think they were qualified for and we’ve had women leave their husbands, we’ve had, you know, it’s just that radical personal growth shift that just, yeah, cascades everywhere. James:  Well the research you’re talking about with weight loss surgery, of which I am very supportive, I’ve written an article about how I think that if people that think that that is the right decision for them I’m the last person that would ever shame someone for doing so because the research shows that it can be quite effective but I’m not aware of and I’m not denying it, I’m just saying that I can’t speak to that. Jen: Right. James: However, in these instances I didn’t interview anyone for the book that had undergone very bariatric surgery but there were a few people that had experienced significant weight loss and as well as gone through many other changes and the one theme that I noticed is that what we’re talking about is, yes, there’s an identity shift, yes, there’s a value shift, that’s what makes it effortless. There’s the whole, it refers to Roky, social psychologist Milton Roky teaches model of personality which is, like, the whole, you know, ogres are like onions. Well, people are like onions, too. We’ve got our actions and behaviors at the extra layer which is, if you focus just on changing behavior, that’s why you need to be slow and steady because you’re in conflict with those more internal layers of your values and your identity, whereas if you go through an identity shift and a shift in values, the outer layers just sync up effortlessly which is what happened with Chuck Gross. He went through a rapid identity and values shift which just brought his actions and behaviors into line immediately. But so here’s the thing that, yes, this entire book is about a shift in identity and values which sounds scary. So this is anecdotes, not data but the examples in the book, many of these people were in relationships when they went through this dramatic shift, those relationships got better. Jen: In the examples in your book. James: And I can posit a hypothesis as to why that happens, which is that it’s actually and there’s even some philosophy in there and psychology is that this is not a false construct that you’re creating. When you go through something like this, it’s more like the current identity that you’re letting reign is the fake one, that’s the one that is, you feel that you need to survive each day because of societal pressures and pressures of, you know, maybe toxic people in your life or your job or whatever else is going on that this is the thing that, you know, it can be referred to as the despised self that you’re letting rule your life and then all of a sudden, the true self that, this is the person you’ve been yearning to be your entire life, is suddenly let loose. It’s not invented out of thin air, it was there deep down and it was like every little movie that you watched where there was a hero that did something that impressed you or a story that you read that you say “I wish I could be that brave” or all these little things are tiny bits of data that get lodged in your unconscious that that have the ability to coalesce in a profound way in a moment. So when you go through this type of identity change, this is not slow and steady, it’s such a dramatic emotional event that it’s something where it’s unleashed, it’s like, it’s like a volcano where the magma has been bubbling under the surface, building for years and then all of sudden kerblewy, it explodes.   That’s why it’s a, it’s a holy s. moment because you have this sudden realisation and because and when we look at our relationships with other people that when you fall in love with someone, you have a tendency to idealize them and you’re falling in love with what you, the vision you have of them as their best self. You see, you know, they’re not always that way but when you see the best in them, you have a tendency to overlook the bad parts the parts that annoy you, hopefully. I know my wife does it with me all the time. Then when that real true best self comes to the surface and is allowed to let reign, it’s, like, yeah, the other member of that relationship is very welcoming of that, so I’m not saying it’s a guarantee, I’m not saying it’s going to work that way every time but it sounds good, they said. Jen:  James, what do you think of this, all of this in terms of dieting. So in our community, really, what we have founded everything on is that dieting does not work and a lot, I mean, it doesn’t work for the majority of people and what happens with women is that dieting becomes a part of our identity over time, so you are or losing weight or maybe you’ll tell me, I’m not using the correct scientific terms for all of this but it may feel like part of our identity. It is so ingrained in us to be basically defining our self-worth based on our ability to lose weight or at least trying to lose weight makes us feel worthy and we get, you know, many pats on the head for it as women when we’re doing that. I would say men probably experience that as well and so feel like when women join Balance365, when we help give them, you know, turn the light on a little bit and they join Balance365 and they realize dieting doesn’t work, and for some of them it happens like in “Zing! This does not work. This I have been doing for 25 years does not work” or sometimes it happens slowly, it’s like, “OK, maybe it doesn’t work” but then they, like, come back, you know, and then maybe they pull back from us a little and go, “Well, I’m just going to try one more diet, just to double check” and then would you say that’s a change in identity happening? James: Absolutely and I think you really nailed it, that a lot of people, so that’s that is, sort of a despised self identity that is being allowed to flourish because their values are the approval of other people or living up to some toxic ideal that you see in an air brushed model on a cover of a magazine and looking at food as something that, you know, what they consume is something that they need to suffer through and this is, the thing about these type of events is the whole goal is to remove suffering, when you focus strictly on behavior change, that’s why the tortoise’s preached over the hare because if you change too much all at once, the amount of suffering you experience is quite high because it’s at odds with the more internal layers. And that’s why they say baby steps is because you’re trying to minimize the discomfort until it gets to the point where you just kind of get used to it and you come to tolerate it and yeah, you know those things can work but we all know that the failure rates are pretty high and what can be a much more positive shift in identity is having self compassion, realizing that you are a fallible human being and that food is something that is supposed to be enjoyable and nourishing and necessary for life and that you can stop caring so much about what other people think and worrying more about the way that you, what you think about yourself. And how you feel about the way you look in the mirror and how you feel physically, like, when you wake up each morning and you know hopefully bounce out of bed and then looking at food as something that nourishes you and because you have compassion for yourself that you want to feed yourself in a healthy and nourishing way and that you want to exercise because it’s good for you and it’s enjoyable and it’s OK to have some vanity goals but if vanity is your overrunning motivator I’ve never seen that work out well. Yeah, you know, for many years I had a shirtless photo of me on my website. And you know, I’m wearing the short sleeved t-shirt- Jen: Snug fit. James: And I think it’s OK to have some of those motivations but you also need to think about the, you know, I’m never going to be as buff as the next guy, I’m never going to be as ripped as the next guy but that’s OK because my wife likes the way I look, I like the way I look and I like running, I like lifting weights, I like riding my bike, I like fueling appropriately, I like the way I feel when I eat mostly healthy food, I like the way I feel when I don’t drink very much, all those types of things, that’s part of my identity, that just being kind of Zen about this whole thing. You know, just do the best you can, enjoy your life, enjoy your food, enjoy your exercise, that’s identity and values right there and that’s a positive one as opposed to all “Oh my God, I’ve got this flab from Christmas” which I totally do and you know, that’s a positive shift that people can make because they hear me talking about it, they hear other people talking about it, they read it and this type of information percolates in your brain and maybe one day it bursts through the surface and you say, “That’s who I am.” Lauren: Can I ask a question before we kind of move on or switch gears? When you were telling your story, I kind of had this realization that I listen to a lot of podcasts and there’s always people, you know, being interviewed and telling their stories and it’s usually someone who has accomplished something or done something and a lot of times you’ll hear them have that Holy S. Moment, you know, whether it’s, you know, they had a big realization or whatever and I am realizing that a lot of times, it’s kind of like they’re, it’s a bad moment, right, like, they’re kind of in a low place when they have that moment, is that and I know you have a lot of examples in the book, is that true for all of them or is there another way you can kind of come to that moment? James: It’s common but it’s not the law so, you know, in my example when I talked about the one when I was flunking out of school, yeah, the whole action is the antidote to despair quote, I was in a state of despair so that’s one of the reasons why it really spoke to me. Despair is not same thing as depression, just so we’re clear. And but and so what happens with a lot of people, one example is called crystallisation of discontent which is a psychological term which refers to discontent is, you know, say there’s one problem that’s bugging you and it’s not that big of a deal by itself you’re like, “Yeah, whatever, I can live with that. Crystallization is when you look at all the other little problems and the whole is greater than the sum of it’s parts where they suddenly crystallize all together and you reach a point where you’re like “OK enough of this, you know, we’ve got to go in a new direction because this is just not working for me anymore.” So that’s an important shift people can make. Then going deeper, we also have the breaking point, which we see quite often with addiction where people are in a horrible state and they realize that they just can’t do it that way anymore and they’ve got to go in a different direction and it is very common for people battling addiction where one day they just “No, this is it, never again” and they’re done and they are done so that’s another way but on the other end of the spectrum, we also have the good to great mentality which is and I’m stealing that from a book of the same name by Jim Collins and and the book is actually about corporate change where corporations want to go from being good at something to being great but it actually, there’s a lot of good stuff in that book that applies to people as well and what it is is someone, you know, life is pretty peachy, things are going along OK, you know, it could be better but then suddenly a quest enters your mind, like, “I gotta do this” where where it’s not like you want to be great for greatness sake, you have discovered something that makes you want to try to create it. And you know, for me people who have that big life changing event often have more later on clarifying epiphanies and for me it was being a writer that I had reached the age of 40 and I had an MBA, I had a successful business career and I didn’t hate my job but I did not love it and I knew that writing was something that I love to do and I realized life was too short to spend the majority of my waking hours doing something that I wasn’t really passionate about and I was going to give it my very best effort in order to make a career out of this and so that was a, life was good and then I became a writer and it became great. Maybe not quite financially great right away. But trust me, you know, I just turned 50 last year and my forties were awesome because I decided to become a writer and my fifties are looking to be even better. Lauren: Right, that’s good to know, you know, you can have these epiphanies without being at like rock bottom. Annie: I would just like to say that James pretty much just described my last year of therapy in like 15 seconds. Because we actually have a section of our program called The Story of You which is where we help members get clear on their values and I think Old Annie, Annie 2 years ago would have just poo-pooed that, like, “Why does this even matter, I just want to lose weight, I just want to build muscle, I just want to, you know, run this or lift this or whatever, like, I want to look a certain way or I want to feel a certain way, why does my values even matter?” and you wrote in a blog post that you encourage people to spend less time worrying about the exertion of will and engaging in continual resistance and suffering and forcing yourself to do what you really would rather not and spend some quality time on examining who you really are deep down and you encourage people to, like, really look at their values, like, what really matters to you and you’ve found in your book evidence that supports that that will help, as you said with that one gentleman that he didn’t have to rely on willpower because this is just what he wanted, like this is was him. This is what he wanted and so we hear it from a lot of women that they feel like they need more willpower and more self control and you’ve dug into self self control, self love and willpower in your book and on your blog post and as you know, the fitness industry loves this like “No excuses, just shut up and do it, grind through it.” So after looking at your work in the book and knowing you and knowing your personal and professional experience, what do you think about that? I mean do you want to expand on that barfy noise? James: There was a lot of research in the book debunking the whole myth of willpower  and seeing it as a limited resource that you can strengthen and you just gotta suck it up, we know it doesn’t work, people have been told to suck it up forever, there’s research showing that the efforts to to strengthen willpower are futile. There’s more research in the book that people who do use what they call grit, that you just tough it out no matter what even though you hate what you’re doing, it’s actually physically damaging, it has negative cardio metabolic effects as well as negative effects on I think the telemores which has to do with your life expectancy and so yeah, it’s and it’s just not fun. Willpower and grit and powering through all imply suffering and I just, we don’t want to suffer, we seek to avoid it. Our entire evolution as a species has been about trying to find ways to make things more comfortable for us so instead a person’s ability to do things, like, I will get up and put on a ridiculous amount of layers of clothes to go out for a 6 mile run in minus 30 and it’s not because, you know, I don’t hate doing it, I actually feel a sense of accomplishment, like, it’s kind of cool for me knowing, “Hey, I’m out doing something that other people think is crazy” and so that’s one of the things that motivates me to do it is that it’s, you know, it’s just I get a bit of a an excitement out of it even though, yes, it’s really cold out there and I’m kind of slow because I’m trudging through snow but it’s just, it’s this neat little sense of accomplishment and also a shower after a run at minus 30 feels really, really good. Jen: And I’m over here like, “No way.'” It brings me zero joy to do something like that. James: So that’s not, I’m not suffering. Jen: Right. James: All that being said and I’m really hoping this book takes off because if it does, not only will I feel validated which I kind of need, then I want to write a sequel about what happens after the holy S. Moment and you know, how do you keep snowballing the success from it and I think that doesn’t rule out discipline, so discipline is different from willpower. Discipline is about things, like, you know, getting, formulating routines that you stick to even though you don’t want to and yes, there are days that I don’t feel like running but you know, I just, you know, I figure I’m still a runner, that’s who I am and I don’t always succeed but there other times when I don’t want to but I’m going to do it anyway and you make yourself do it and then you get out there and yeah, maybe the first kilometer and sorry for the Americans that are listening, the first kilometers kind of drag but then you get into it and after it’s like, “Yeah, I’m really glad I did that” so there’s it’s not like everything is a joyous “Oh yeah, I can’t wait to do this.” But it’s just, it’s because it’s who you are, it’s not that big of a deal. Jen: Annie just talked about this in a workshop last night that we did for our members around exercise, you know, it’s like we do encourage people to find exercise they enjoy or can tolerate and Annie just said “Look, it’s not always going to be super fun, you’re not always going to be like I can’t wait to get to the gym but even if you can tolerate that exercise and afterwards feel accomplished and glad you went” Annie:  Then, yeah, there’s like this like acclimating period for a lot of people that aren’t super jazzed about exercise or movement that it’s like they kind of just have to get over that hump of maybe they’re a little bit sore or they’re getting into a new routine, they’re like, I think of it as like snowplows, you know, like or you’re going through a gravel road, like the first time you go through like fresh gravel it’s like a little bit wonky and then you keep going through and you keep, like, grinding those, like, pathways and-“ James: Grind isn’t a good word to  use, we don’t want to be in a rut. Lauren: No. Annie: But eventually, the pathway is a little bit smoother and you have less resistance but initially, when you’re getting going or maybe you’re trying something new, you’re learning a new skill, it’s not all fun and there’s certainly days where you’re just tired and you just don’t want to do it for whatever reason. James: And sometimes you do and that’s great and other times you don’t, you know, don’t beat yourself up over it because you know, tomorrow’s another day and one of the things that I want to be clear about is that, you know, not throw out the tortoise approach to this because if you think about motivation as, like, a mountain and at the base of the mountain that is 0 motivation to do the thing. And then the peak of the mountain is absolute 100 percent motivation to do everything associated with this goal with inspired vigor. Well, if you’re down at the base of the mountain, you don’t just hang out there and wait for sudden inspiration to arrive and Star Trek transporter your butt all the way up to the top. That can happen, sometimes it does, that’s what happened with Chuck but it doesn’t always work. You increase your odds of success if you start to hike awhile and you do those baby steps, because what it does is that it opens up new experiences to you. It gets you thinking because this is something that happens in the brain and if you are having these new experiences and starting to think about this and examining yourself and how you feel about it and looking at your, this is an emotional experience and that’s what happened for me is I talked about the, you know, the change in school and the change and you know, getting out of debt, all that kind of stuff. I didn’t get in shape right away, that came 2 or 3 years later when I finished my undergraduate degree, stuff was really busy with school and I was really busy with working to pay off my debts and those kind of things and I didn’t do anything about my body because I felt like I didn’t have time and then as soon as I finished my degree I looked in the mirror and said “Wow, I got kind of heavy. Maybe I should do some about that.” That became my next mission, I’d learned how to work hard but it doesn’t mean that I liked it. I started going to the gym and I did not like it one bit and it was after about 2 months that I was, you know, just forcing myself to go because I knew that this was something that I had to do and I was powering through on that grit and that willpower and I came close to quitting so many times and I felt like I was losing no weight whatsoever and then, so I was doing that that slow hike up the mountain of motivation and then one day I’m walking out of the gym after a couple months and the person at the front desk said “Did you have a good workout?” and I stopped and I thought about that for a moment and I said to myself, “Well, it didn’t totally suck” and I thought “It used to totally suck” and hopefully we can say suck on your podcast. Jen: Yes. Annie: Yes. James: OK, so it went from totally sucking to not totally sucking and I thought, well, if I could evolve from it toward it not sucking then one day I could learn to love it and in that moment, I wouldn’t say that I transformed into loving it but I did make a life altering decision that said “OK. One day I can learn how to love that” so therefore, I’m going to keep doing it until I die and that was 25 years ago still going so, go me! Jen: There are a lot of aspects that suck about running a business, it’s coming together but ultimately when you’re, you know, values, you know wake up in the morning and being safe, having financial autonomy is so so important to me, I will, we will show up and we will do those sucky things because ultimately our value of having financial autonomy overrides the pain of doing those sucky things. James: Yeah and it’s, you know, the alternative is is worse, right. Jen: Right, is way worse, yes. Annie: I think that that’s an important point that I hope our listeners grab, especially, you know, I’m talking about exercise because I’m a trainer but so often people think that they love something so then they’ll do it and that’s how you do more things, right, you have to love it first but like you just described, you can actually do something, get a little bit better at it and that cultivates a sense of love or enjoyment, so you can, in essence, learn to love something, like, you learn to love exercise and I think that that’s what so many women who don’t naturally love exercise like I do, I get it Jen and Lauren have expressed that they don’t share their passion for exercise like I do all the time. But that that doesn’t mean that they’re just out of luck. James: And for the analogy that I would use to describe it is that when you take this approach hiking up that mountain and then waiting for sudden inspiration to move you much further up the mountain, you know, dramatically increase your motivation all of a sudden, I refer to it as acting like a tortoise but thinking like a hare and so people need to be receptive to the possibility of this sudden gaining motivation and if they’re more receptive to it, if they’re more mindful of it happening, it dramatically increases the likelihood of it taking place. Annie: I like that, that’s really good. Jen: One of our members, her husband’s in the Army and she had this really good saying on one of our podcasts around motivation and behavior change and self-awareness, I guess, sometimes you need to know when to advance and when you just need to hold the line and I feel like that was a real, like, that’s kind of the hare and the tortoise thing, right, like you just, sometimes you have an opportunity in your life to advance and you need to take it. Motivation isn’t bad, it’s just knowing, yeah. James: Something interesting happened with me, so I was talking about how new experiences and an openness to new ideas that wake up a part of your brain that wouldn’t have happened if you hadn’t gone out and tried that thing, that’s what absolutely happened to me with running. So when I decided to take up running, so I’d lost a fair bit of weight with weight lifting and dietary changes and then I decided, well, I want to lose more and this was before Facebook, so I actually knew that that running was good for weight loss, that it could work because I hadn’t bought into all the fit pros saying “No, cardio makes you fat.” So I decided that for me that running would be a good choice and that it would also be not just good for weight loss but just good for my health, it’s good for organ health and all that kind of stuff and so I decided to start doing it and I was terrible at it and it was painful but I just started it, really short distances and gradually built myself up and I was just thinking about the outcome, like, this is good for losing weight, this is good for my health, that’s why I’m doing it and something completely unexpected happened was that that being a writer and being a person that likes to create stories and tell himself stories is that became the most creative part of my day was when I go for a run my best ideas come to me, either when I’m running or going for a bike ride and I just love the free association that I get to do. I’m away from technology, you know, I don’t have my phone with me or anything like that and it gives me that time alone in my head that, you know, that I just didn’t realize how much I craved that. And it makes such a big difference to me that that was really what I fell in love with, that if I hadn’t actually tried running I never would have known that that was the thing that I needed. Annie: Yeah, that’s really pretty, that’s a beautiful story. Lauren: That’s really pretty. Jen: James, can I get your take on another behavior we see quite often? James; Sure. Jen: So what happens very often in our community when women have the epiphany that diets don’t work and they’ve been living for years and years under a very restrictive way of living, they have their pendulum swing out the other way so many of our members talk about, after they join Balance365 they overeat, go swing into this period of eating all the things that they have denied themselves for so many years and that usually comes with weight gain and a lot of them say it became a necessary part of the process for them in order to have their pendulum swing back to center and be able to be more objective and balanced in their approach. What is your, do you think it’s necessary and or do you, is there any science or anything that you know of to explain that or what’s your take on it? James: So, I mean, I, the first caveat is that I’m not actually a psychologist. Jen: Right. James: I interviewed a whole bunch of psychologists for the book and we didn’t specifically get into that type of stuff. I would say that if you are hearing a lot of people saying that that was necessary for them and that it worked, then it sounds like there’s got to be something to it. For me, like I always would like to say err on the side of caution a little bit but you’ve got to do what you gotta do. Jen: Right. James: If you have been punishing yourself this much for so long and you reach this breaking point and you just got to go in another direction where you’re like “OK, I’m sorry but this is, I just need a break” and that what happens then, then that makes sense to me but at the same time, you need to keep something in the back your mind that says “This is temporary, that this is a reset” because you don’t want to go off the rails, right? You don’t you don’t want to never stop because and it’s not about shaming people for their body weight but just being concerned for their health and you being concerned about your own health and how you’re feeling and that as long as you realize that this is a temporary reset and that it’s part of finding a mentally and physically healthier way to move forward it sounds OK to me but- Jen: Right. James:  Just realize, OK, how far does that pendulum need to swing the other way before it comes back and don’t go beyond what’s necessary? So just little bit of caution. Jen: We have to have these come to Jesus talks with our members often on how far that pendulum has swung out and how far, how long they’re willing to stay there because in the end, a lot of women feel they came from a space where they were controlled by the diet industry saying- James: Oh yeah. Jen: Right, but then they’re screaming out into this other space where I’m like “But you’re still not really free, like you’re still not making free will choices if you can’t get your pendulum to come back to center.” James:  Exactly- Jen: You’re just in a rebound state. James:  You let the food hedonism rule instead. Jen: Right. James: You go from restriction ruling the life on one hand to highly palatable food ruling it on the other hand. Jen: Right. James: So you’re still, like you said, you nailed it, you’re still not really free, so be careful how far you let it swing- Jen: Right. James:  Consider it a bit of a mental reset that it’s almost like a statement that you’re making- Jen: Exactly. James: A rejection of this toxic diet mentality where OK, and then you make your point, “Forget you diets.” And then you come back to what you really feel is going to be both physically and psychologically nourishing for you. Jen:  Right, exactly. Annie: James, I know you have to get going because you have more interviews, you are just an in demand man. The first time we tried to schedule this episode you were just coming off of another interview and it was right before another one and everyone wants to talk to you, so I’m so thankful that you gave us some of your time. I know our community is just going to really enjoy this episode and I bet they cannot wait to get their hands on your new book which comes out the 22nd of January, so by time this should be available. James: Yes, indeed. Annie: And where, I know they already know where to find you but if they’re new to you, where are you hanging out online, where is the best way to connect to you? James: So if they want to find a book probably easiest place is well, they can either walk into a bookstore or go to bodyforwife.com and there’s a book tab that has links to every possible platform they can want. I think I mentioned that I did the narration for it so they can also get the audio if they want to do it that way. We have a lot of fun on my Facebook page, really good crowd there. Jen: Oh yes. James: It’s, I think we’re over two thirds women on the page and they’re very accepting, very feminist environment, sometimes some very foolish men show up and get their butts handed to them righteously and that’s an awesome thing to witness. Annie: You’ve had some threads that are like “Get your popcorn ready” sort of thing. Jen: You know, I don’t even say a word, I just read through them and I’m like, “Whoah!” James: Yeah, well and the thing is that people like the smack down because it serves as a lesson to other people and I learn things by, because there are so many really intelligent women on that page that, you know, people say “Oh, you know, you really get this whole kind of feminism thing” and it was like “Well, it’s only because I’ve been reading comments on my Facebook page from awesome women who know this stuff really well” and so yeah, that’s Facebook.com/bodyforwife, Twitter, Twitter sucks. I’m on Twitter let’s stick- Jen: What about Instagram? James: I’m not on Instagram, I don’t take good selfies. So Twitter is Twitter.com/bodyforwife as well. Annie: Awesome, well James, thank you so much, I cannot appreciate you enough, I’m really excited for everyone to check out this book and we’ll hope to have you back soon, OK? James: I’d love to and in closing, the one thing I will say to everyone that’s listening, that when it comes to these types of life changing epiphanies, the most important thing is to understand these things happen all the time and it is really important to believe that it’s something that can happen for you because that’s what opens yourself up to actually experiencing it. Annie: Awesome, thank you so much. James: Thank you. Annie: We’ll talk to you later. James: Bye. Lauren: Bye. Annie: Bye.     The post 51: James Fell: Epiphanies and Life Change appeared first on Balance365.

Change is scary, and yes price trends do matter in the online marketplace, particularly if you are in the market for buying or selling a business. Today we're discussing the frightening possibility of tighter margins, particularly for Amazon businesses, as a result of the most recent US government tariffs on Chinese products. Here at Quiet Light, we get a lot of questions from buyers regarding what we can expect from the Amazon marketplace now and in the future. The reality is that entrepreneurs need to learn to see these changes as par for the course as well as opportunities for growth. The internet today is so much different than it was 11 years ago when we started Quiet Light Brokerage. In fact, we started the same year the first Iphone came out  – to give some perspective on just how much things can change! When it comes to the geopolitical nature of e-commerce, specifically as it relates to the US, who better to bring in than a Canadian? Today's guest, James Thomson, is a Partner for BuyBox Experts, a managed services agency specializing in marketplace management for brands, manufacturers, and resellers. He was formerly head of Amazon Services, the division of Amazon responsible for recruiting tens of thousands of sellers annually to the Amazon marketplace. He's crazy knowledgeable about everything Amazon. We're talking all about the tariffs and their potential impact on the e-commerce marketplace. Episode Highlights: What tariffs are coming out and what tariff trends are going to affect business? Impact on first party sellers. Ways to work with and around these tariffs. How the manufacturers in China will see that they can suffer too. The length and scope of the tariffs' impact will have a lasting effect over time. Parallel imports may happen eventually, creating retail arbitrage. The foreseen impact for third party sellers. How the tariffs are creating more incentive for Chinese manufacturers to become sellers and sell products directly to customers in the United States. We discuss the consequences for Amazon sellers holding inventory. How Amazon monitors expected sell through rates to deflect inventory increases. Things sellers should keep in mind in order to keep their buy box percentages up. Indicators that there may be opportunities for competitors like Target to swoop in in certain spaces as early as the end of this quarter. If the tariffs prevail, one year from now will be the time when the retail increases will  show. What countries might be viable alternatives to China as suppliers and when to start investigating those avenues. The people who end up capitalizing and doing well in situations like these are the ones that look at these problems as opportunities. Transcription: Joe: So Mark I just launched a listing a couple of weeks ago. It's under contract already, multiple offers, it went very quickly. Actually, it's a re-launch because when we launched last year it didn't sell because of flat trends on the top side, slightly down on the bottom side and we pulled it. And the owner of the business implemented all the growth opportunities that he wrote about and now business is up 27% so it went under contract very quickly. So for those people that are listening that don't think that trends matter they definitely do because eight months ago no one wanted to buy this. Eight months later it's under contract in what was literally like four days. And I can't say the price of course but the thing that I wanted to touch about in regards to that is that he's importing products from China and the potential tariffs have changed since we last listed the business. And so we addressed that in the client interview. We're trying to stay current with it and he has a person through his manufacturer that helped him with the proper coding of the brands. And there was a slight increase in terms of the landed cost of goods sold but it was so minute it really had no impact on the discretionary earnings or profit. And I think that this is a topic that we need to address more and focus on in our client interviews and make sure that the sort of scary possibility of tighter margins is really looked into because not everything is going to have an increase and those that do it may be so small that is a very tiny percentage of that landed cost of goods sold. Now you just had an expert on to talk about it, our old friend James Thomson, right? Mark: Yeah absolutely when it comes to US issues and the geo political nature of e-commerce specifically as [inaudible 00:02:27.4] the US who better bring in than a Canadian? So, James Thomson, he is the first account manager within Amazon's marketplace. He's the co-founder of Prosper Show. He's a principal owner over at Buy Box Experts. The guy … I mean he's crazy knowledgeable about everything Amazon. And so we've been getting a lot of questions from buyers both on deals that are under offer right now and also from people just kind of trying to understand the landscape, what are we looking at here with Amazon in the future. So I thought let's go ahead and bring somebody on. Let's talk about it. Let's kind of dissect this. And he said a couple of things which are really really important about this and I'm not going to give all of it away because I need to tease of course so that people can actually listen to the entire interview but a couple of things. One, the nature of business is always changing. I mean the Internet today is way different than what it was when we started Quiet Light Brokerage. I'm actually just … I'm putting together a presentation right now for Ungagged coming up here soon early November and I'm taking a look back to when I started Quiet Light Brokerage. We started Quiet Light Brokerage the same year that the iPhone first came out so … I mean that's how much things have changed in just 11 years. Joe: Wow. Mark: I know right. So I say that this Quiet Light Brokerage was the biggest event of 2007 followed shortly after by the iPhone of course. Anyway let's get into the point here, James and I talk a lot about why are the tariffs in place, what is going on with these tariffs, what is the future of it look like, how is it going to impact e-commerce business owners, what's the hope of the US government with these tariffs. And I'll cut to the chase there the hope is that people start buying from other countries and most importantly what should you be doing about it. And on one thing that I'm just going to say here, I reiterate this at the end of this discussion with James. These sort of changes need to be looked at as opportunities among people who own businesses, among entrepreneurs. I've been an entrepreneur for 20 plus years now and the nature of the internet is constantly changing. Those who are looking at these changes and saying there is opportunity here, I have a great opportunity here to be able to adjust to the changes, find a new problem and solve that problem they do really really well. They're the ones that are absolutely killing it. Those who take a look at stuff like this and get all scared they end up leaving and not continuing onto the world of the Internet, their entrepreneurial career. So this is an interesting topic, very relevant to our time right now. Definitely, take a listen to it and then James also offered an email address if you have any questions for him to be able to speak about it. He's got a couple of really practical solutions that you can implement right away to be able to absorb some of these costs both in working with the factories and manufacturers in China but also just some very simple things that you can do on your side with your product launches and your products coming out to be able to pass this cost on. I'll say one more thing and I know I've talked a ton here; I'm kind of all around the place here. And I think it's really important to understand that everybody is facing these problems. When your costs go up 10% it's not just you, it's all of your competitors are seeing the exact same things. So it's a matter of how do you absorb those costs, how do you plan to be able to compete with that, how do you address your Amazon account so that you're not getting … losing your buy box share so on and so forth. Pretty simple stuff but you do need to have a plan. Joe: Yeah and I think you and I have been around long enough that we know it's not the end of the world, it's just another hurdle that an entrepreneur needs to get over. Get over the hurdle. And knowledge is power. If you learn about it, focus on it, and if and when you decide to sell your business you'll have that knowledge and you'll be able to address and tell people how you addressed it. And for buyers, same thing learn about it. Not every category is going to have an increase in tariffs and increase in cost of goods sold. So James is very bright, one of the smartest guys in most of the rooms he's in so I am looking forward to listening to this myself. Mark: James welcome back to the Quiet Light Podcast. James: Thanks for having me, Mark. Mark: All right so let's start off with just a quick introduction as to who you are. You have been on the podcast once before. I'm going to let you introduce yourself as far as your background … especially your background with Amazon and Prosper Show and Buy Box Experts. James: Right. Well, I'm James Thomson. People may know me as one of the co-founders of Prosper Show which is an educational event for large sophisticated third party sellers on Amazon. I am also the partner for Buy Box Experts which is an advisory and account management company at sports brands on Amazon. And I spent almost six years at Amazon doing a number of third party related responsibilities including running Amazon services and being Amazon's first FBA account manager many many many years ago. So thanks for having me back on again. I'm looking forward to talking about the ever increasing challenges of being a successful seller on Amazon. Mark: Well, I'm going to admit this is a show that I have been sort of dreading to do. James: Yeah. Mark: But it's really necessary and I know we've been starting to see more and more questions on the whole issue of tariffs. Before we jump into it real quick I am just going to give a shout out to Prosper Show. We go to a lot of shows at Quiet Light, Prosper show is awesome. If you're selling on Amazon and you're looking for a show where you can actually learn things and make good connections check it out, Prosper Show, what we're going to be there next March probably with all the booth and all that so. James: Thanks Mark, thanks. Mark: The thing is I'll make it for you because it's worth making. And also I don't want to talk about tariffs but let's talk about tariffs. And as everybody knows we've had one round of tariffs slapped on a lot of products coming from China, 10%. There is a threat of more tariffs coming out in January. And I'm going to fess up publicly to everybody to say I've really been kind of putting my fingers in my ears and saying I don't want to know about this, please make it go away. Let's get everybody up to speed on this as far as the tariffs that are coming out and what the general political landscape is that we need to be aware of in moving forward. James: So just to be clear I'm Canadian. I don't vote in the United States. I don't get to decide who does or doesn't make decisions around the tariffs that are going to be charged. But for folks that haven't been paying attention Mr. Trump is dealing … or has decided to enter into a tariff war with the Chinese around basically what dozens and now hundreds of products that are manufactured in China will be slapped with rather significant tariffs when they're imported into the United States. As many the people listening in today will know these private label sellers gosh we have a lot of stuff made in China that ends up being consumed and sold here in the US. So I work a lot with private label sellers who are saying gosh I thought I had the opportunity to make some decent margin being a private label seller but now that my products that are coming in from China with this extra 10%, 15%, and possibly 25% tariff depending on what specific type of product you happen to make, gosh that's an awful lot of money and I can't really absorb that long term without it destroying my financial situation. So what do I do? I think to tackle this problem we should split it into two parts. There are going to be those companies that wholesale products to Amazon. We'll call that the vendor central relationship and then there's all of the companies that are using seller central to sell those products themselves; two very different situations. Let's start with the … either one is really very easy but let's start with the vendor central situation. If you are a brand and you are bringing products in from China and you're turning around your wholesaling to Amazon … not surprisingly Amazon doesn't buy price increases and they don't really care about your profitability. That's your problem and so if you're now faced with an extra 10 to 25% COGS … 10 to 25% of higher COGS, absorbing that amount unless you're making insane margins most of us can't absorb that kind of money. And so the question then becomes A. can you get your manufacturer receipts absorbed? Some of that in cost reductions and we've definitely seen some situations where some of the overseas manufacturers are willing to make certain price concessions, especially if the North American sellers are buying the inventory in time to be able to avoid some of that initial tariff. So if you're prepared to load up on some of your inventories, if you load up on your inventory now then next year are the first lot of x-tiles and units your Chinese manufacturer may absorb some of that extra cost. Because the reality is the Chinese manufacturers they're also going to suffer through this. It's not just the American brands, it's Chinese manufacturers that also recognize that there isn't going to be as much demand unless they absorb some of this cost. Mark: Yeah and let me just make a point here real quick. I mean the goal of this and the Trump administration has been pretty clear, the goal of this is to get China to change some of their policies towards the US. And so they're literally trying to disincentivize business owners importing from China you know a lot of these 1P and 3P as you put it, the vendor central and the other people selling through Amazon to buy from other countries. And so they're going to make … through these tariffs they're just making business more expensive for everybody. And ideally, there is going to be this internal pressure from the Chinese manufacturers on their government to be able to change some of the policies of the US. That's kind of big picture. James: The problem is … and I speak anecdotal experience, I live close to the harbor in Seattle and I see all the used tanker ships come in and more than half of them come in from China. So if I think of all this product that comes in that we consume here in the United States is being manufactured overseas if more than half of that's being created in China the reality is our overall cost of buying stuff, whatever it is … plastic stuff, apparel, whatever … it's coming from China. And so unless some of these other countries can very very quickly not only ramp up production but more importantly identify themselves to companies here in the United States that otherwise buy from China, unless they can do that and find a way to say hey come and make your products over here instead of in China, the reality is this is going to take a while and some of this pain around higher costs is going to affect both the manufacturers in China, companies here in the United States, and of course consumers in the United States if in fact some of those costs overruns or pass through as higher resale prices. Mark: Right and just to be clear I'm not a geopolitical expert by any means but China has been pouring money in subsidizing their manufacturers for a really long time to be able to ramp up production levels that can provide basically manufacturing services to the entire world. That's why their economy has really been juiced up to where it is today. So for people to look elsewhere to other countries it's going to be darn near impossible for somebody to find prices that can be matched in other countries that may be seeing this as an opportunity. And even if a country does pop up for a particular industry it's going to take years for the capacity to be able to grow up to the level where we really need it to grow up to. James: Yes. Mark: So this is a problem. Let me ask you a question on this real quick and I want to get into specifically how Amazon is treating this as well. You started to get into it. I think it's going to be an interesting conversation but isn't this going to affect everybody the same way? And at the end of the day I mean it's the consumers that you would think are going to be left on in vague. If there's a 10% tariff on Blue Widgets, all the Blue Widget sellers have to pay that 10% tariff. James: Yes. Mark: So eventually their cost is up so they're going to have to raise the prices as well. Is this really going to impact the businesses themselves in that way since they could in theory pass that cost on? James: So there are a couple of things here, and different people go to market on Amazon with very different distribution approaches. So if you are buying product overseas, bringing it in into the United States and turning around and trying to wholesale it to Amazon through a vendor central account, Amazon has made it clear they do not accept price increases. This is your problem Mr. Brand; you need to figure out how to absorb this. So what I see happening is some brands will say gosh this is inconvenient right before Q4 our biggest time of the year. Some of these brands will say you know what, as much as we hate to do this we will suck it up and we will absorb this cost. And so many of these manufacturers will end up with much much smaller margins while Amazon continues to have the product at the same price that it had and some consumers won't see a price increase on those items. Unfortunately … and that's fine short term but long term these manufacturers are going to say unless I can find cheaper sources of manufacturing elsewhere I'm no longer going to carry these products or I'm no longer going to sell them to Amazon 1P or I'm actually no longer going to sell them anywhere on Amazon; that's one option. There is another type of distribution model that's very common on Amazon which is the product diverter, and I'm not passing judgment on the product diverter, the reality is there's a lot of product diverters on Amazon; companies that gray market source products. And so the opportunity for companies to go and proactively can parallel import and bring in products from let's say Europe that came in from China nut they're now coming in from Europe … I see an, potentially in some categories there will be a significant increase in parallel imports because somebody can buy that product in another country and to the extent, they're not necessarily answering all the questions correctly about where these products are manufactured there will be more opportunity and more incentive for companies to do parallel imports. Again so as to be able to bring products in at a cheaper price than what they would otherwise be paying if they bought directly from China. Mark: Is that illegal or do you literally have to be lying on your forms in order to be doing this parallel importing? James: Oh please deter, I'm not suggesting that anybody does this. I'm just saying I fully anticipate this is going to happen. Mark: Sure. James: And so if the other thing is if the tax … if you can ensure the tax has already been paid at least once there may be opportunity for you to capitalize on nonetheless being able to re-import it back in and be able to source it. Brands don't like product diversion and so knowing in there will be an issue there for brands long term having their products … basically, people capitalizing on retail arbitrage across borders and getting cheaper prices in one place so as to capitalize on that. What is more likely is if there is a price discrepancy in another country and you can buy the same item in Europe for 10% less than you can here in the US, some folks may decide to … depending on the math, it may decide to start buying stuff indirectly just because they can capitalize on price discrepancies in order to make things work. The logistics are more complicated but in the end, they still need to make some money and they're prepared to take on these extra logistic steps just so they can make some money. All of this is short term because in the long run if a brand wants to continue to wholesale on Amazon they have to make money. That's what … it's why we're all here. And so what I anticipate happening is some brands are going to stop supplying certain products and they're either going to go and find production in other countries or they're going to find completely different products that don't involve China at all. And so that will mean that some products that we as consumers rely on … and I think for example all the Q4 toys that get sold in this country, the vast majority of them are made overseas and a huge proportion of those are made in China. And so it will be interesting to see specifically in the toy category what happens because with Toys R Us going out of business this year, there's been a lot of discussions that some of the other brick and mortar retailers are going to be very aggressively going after Amazon. If Amazon for some reason in most of the toys that Amazon gets come from 1P, if those manufacturers for some reason say you know what we can't make any money selling you these products we're not going to sell it to you because you're not prepared to take a price increase, we may have a situation where Amazon actually runs out of stock on an awful lot of top selling toys. Which is bad, bad, bad for Amazon. So I think the toy category of all categories is the one that may push Amazon short term to accept the fact that it is going to have to absorb some higher costs in order to have inventory on absolutely critical selection in Q4. Mark: Interesting, so let's move over to the 3P and I have also some questions maybe about competition to Amazon which hopefully we can get to but let's move over to the 3P. What's the impact that you see and I know we're all crystal ball in here but what's the impact that you see for 3P sellers? And 3P for anyone that doesn't know this would be FBA merchant fulfilled, anybody that is not selling vendor central but still selling through [inaudible 00:18:43.2]. James: I'm going to separate 3P into two groups there's the resellers and there are the private label sellers. If I'm a private label seller and buying stuff from China I make the decisions myself on what pricing should look like. So if I have to raise my prices 10% to maintain my margins I can choose to absorb some of that for competitive purposes. But I always have the flexibility of saying I'm going to raise my prices. An important … a very tactical issue, let's say that you're selling your product for $25 today on Amazon and you added list price information into the Amazon catalog, you can't just raise your price from $25 to $30 to cover your extra price. You need to also increase your list price because otherwise, Amazon's going to flag you in selling products significantly above the list price and also press your Buy Box. So you've got to make both of those adjustments at once. As it relates to resellers the question becomes if you're buying from a distributor or a brand here in the United States that you're then turning around and reselling who's splitting the cost increases there? And that's going to differ widely on brand by brand. Some brands may already have a lot of inventory here in the US and they say well we're just going to ride this out and hope this tariffs disappear sometime in Q1 or Q2 in which case they're willing to … you know if they're using some kind of a lifo … I'm sorry a phyto model of inventory there may not be any price increases at all for wholesale pricing. And so the retailer can turn around and continue to sell the product at the same price. The problem is all you need is one competitor in the same space on Amazon the whole price is tight and not move prices up and if they've got lower prices and they're still doing the right thing with organic search and driving traffic they may end up with a higher proportion of total traffic on their products. Granted it's very low margined traffic but it is nonetheless higher traffic. And so the question is how long is any particular reseller prepared to take lower margins for the benefit of higher traffic which isn't necessarily high quality business. Mark: I mean in defense here we see this happen anyways where we have people come in and try to break into a market and will purposely go low margin just to be able to break into that market. But this is kind of who could hold off the longest with the higher prices. James: So there's been a very important development this week with Mr. Trump getting out of the postal shipping rate agreement with China. There was a significant subsidy that the United States was paying for overseas companies to ship products one order at a time into the United States. A lot of these individual orders today don't clear customs with any customs payments. And so if you got a 25% tax for example on those products, if they're brought in bulk but there's no tax on the individual orders, you don't also want to create a situation where there's that much more incentive for example for Chinese sellers to send products one at a time in the United States by removing some of these price subsidies on the shipping costs that will help to balance things a little bit. But you still have a situation where a Chinese seller can send an individual order into the United States and realistically most of those orders are going to get through without customs being applied on those on off envelopes and boxes. So in many ways, the tariff only creates more incentive for Chinese manufacturers to become sellers and to sell products one at a time in the United States. And so that continues to be a challenge. Mark: Let me ask you about a tactic that I've seen sellers employ here in trying to get ahead of potentially … I know there's threats of an additional tariff being imposed here coming January so possibly increasing the tariffs even more. And I've seen some sellers bulking up on inventory because of that; trying to get ahead of that. It has kind of a cascading effect though from what I understand if you're a 3P and especially using Amazon's fulfillment services. Does Amazon look closely at the amount of inventory that you're keeping with them and are there consequences for maybe having inventory sit on their shelves longer? James: No it was early this year Amazon evolved the way that they designed how much FBA capacity every seller has. And it has to do with the sell through rate of each individual skew that they choose to put into FBA. If you're selling a product that sells a thousand units a day, Amazon will let you put as much of that in as you want. If you're selling a product that sells one unit a month you can't load up five years of inventory. Amazon actually won't let you put that in the FBA all at once. And so as much as a seller wants to ramp up their level of interest they hold in FBA, Amazon will cap it based on their expected sell through rates. So if you happen to sell products that sell fast enough you're not going to be putting more than six months of product into FBA, great you may load up a little bit more. But if you start bringing in pallets and pallets more than you'll ever sell in the next six months, Amazon's going to put the kybosh on that. And you're going to have to figure out where to hold that inventory. So I think it's a system that basically corrects itself. I think it's worth a seller today if they're planning on doing this in the next four to five weeks they should create an FBA shipment right now to see if Amazon even allows them to put whatever level of incremental inventory into FBA. They may well say sorry we don't have that space because your expected sell through rate doesn't by any means justify the load of inventory. Mark: And I know a lot of sellers are using even a 3PL of sorts just to store Amazon inventory that they are eventually going to ship off to Amazon and that's … if you're not doing that and you store inventory for anywhere longer than a few months I think because of the storage rates you can get much better storage rates elsewhere but that's something to look at. James: So to that point if you do have to bring in an awful lot more inventory and hold the inventory so as to bypass the expected additional duties that come likely in January, one thing we may see is an increase in the number of sellers that decide to start using seller for full prime. And that's a mixed bag in terms of whether it's a good thing for sellers, in some situations they may be able to use the higher shipping costs that come with seller for full prime that may be adequately smaller to offset the expected cost of having to pay another 15% in a tax on imports. But you know we may see some … in certain categories we may see more sellers deciding to use seller for full prime in part because Amazon says you can't send that much stuff into FBA but you know we'll have to have to see what happens. My view is I don't see this tax staying in place indefinitely. I see this is a game of chicken between two countries. And quite frankly I think the United States has more to lose than the Chinese do because the Chinese low cost production capabilities in China will continue to be there even if those costs are a little bit higher now that there's tax added to it. And so reality is we Americans, we like cheap stuff and so if you go to the source of cheap stuff … and so I suspect at some point that there will be some counterbalancing that happens and it's a matter of how long can people hold on without going out of business. Mark: Yeah. Let's talk about the Buy Box a little bit. You touched on this earlier about things that you may want to watch out for if … when your changing prices on your site. What are some things people should keep in mind if they do decide to pass on some of those costs to the eventual customers at the end of the day? What are the things that they should watch out for so they don't lose their Buy Box percentages? James: Well the first one is you still … when you offer your product you want to make sure that it's at or below the list price. So if you're having to increase your price over whatever the current list price is today then you want to make sure that you can update the list price information. If you are a reseller of someone else's products and they haven't updated the list price then you're going to be in trouble because you can't sell that $30 item for $35 when the list price is 30. And if the manufacturer controls the list price or you as the reseller don't have brand registry ability to go in and update the list price you're going to be in a situation where you don't have the buy box because you've had to sell the product in a price above the list price. So start that conversation now if you don't have the ability to change the list price on a product you resell have that conversation now because you need to get that information updated. Otherwise, the brand is going to lose out to any other brand that has the ability to update their list prices. So even if the brand you're reselling doesn't want to do this you need to explain to them listen if you don't do this everybody that sells your product is going to be in a situation where they can't win the buy box which means the consideration of your brand or other brands is going to be significantly hampered. Mark: That's good advice. Let's move on to Amazon and their adjustments that they might be making on their side and also possible competitors. And I'm thinking Wal-Mart here who has been pretty aggressive in trying to eat in Amazon's market share. I don't know how successful they've been with their two day shipping on anything, no membership fees everything else. You've already described how Amazon is right now at least probably pretty unforgiving as far as price increases on them [inaudible 00:27:44.9] side. James: Yeah. Mark: Do you see any opportunity here for some of these competitors and even if it's not one competitor maybe that fragmentation of Home Depot taking care of their pit space and actually increasing their presence target doing the same, Wal-Mart doing the same, and have you seen any indication of this yet? James: Well what I have seen … I go back to the toy example, what I've seen is that both Target and Walmart are aggressively looking for ways that they can win in the toy space this Q4. And it only takes one or two of the big toy companies to tell Amazon 1P that they're not prepared to send any shipments unless there is some modification to the pricing. Unless that happens … oh, I'm sorry if that does happen then I think it could be a very painful Q4 for Amazon in a category that they actually absolutely need to win. But the problem with Amazon is they usually win anyways. The reality is if they can't get it directly from the distributor or the manufacturer they find a secondary source. They go and find a distributor that will unload a product at low margin, Or they will do parallel imports. So I think if these duties remain in to place for 12 months it's going to be next November or December that the pain is really felt by brands. Because right now a lot of them already have inventory, they already brought in to the United States. While they may have paid 10% extra duty it's not 25% duty but at the time you have long term 25% duty that absolutely is going to impact what their retail prices look like. So as bad as it may be coming out of this December if that tax remains in place for another 12 months that's when companies are going to have to say okay we're going to have to discontinue certain skews. We're going to have to launch new versions of the existing skews under different UPCs so that we can have new list prices on these items. I've seen situations already with some companies where they're already loading the 2019 version of an item with very slightly modified packaging but that's the product that's going to replenish the 2018 version that they're very soon going to run out of and have no plans on ever replenishing as long as the tax is in place; i.e 2019 version cost 25% more retail because everybody has to continue to make money doing this. Mark: Okay one of the things that we've been trying to educate people on especially in this e-commerce space there's a lot of people out there that want to find a couple of evergreen products that are just constantly bringing in cash. And then there's always the question of well how do you handle competition? When we brought it up time and time again now on this podcast where look good product based companies come out with new products on a regular basis and so that's actually … it's something I haven't heard before. That's a great way to be able to address this is come up with a 2019 version or a slightly different model version which your cost can absorb that new price and be able to work it out to the price that self. Last thing I want to talk about, let's assume that this does last for a while, you know a year or more. The intended effect is for US importers and retailers to move and look for other countries. So what are some of the countries maybe that people can start looking into. And I know it's going to vary industry by industry but what countries might be viable alternatives to China if people want to start looking at and look for manufacturers in different places that could possibly replace their current supply? James: I don't know how much I knew I can add to this. I mean a lot of the companies I know they look in Thailand and Vietnam today. Some of them look in Laos. I know the Southeast Asian countries, a lot of them have low cost production but they're not necessarily known for the sophistication of bringing together manufacturers the way, for example, Canton Fair does. And so I see an opportunity here for … let's say I'm the business development government organization in Thailand or Vietnam to the extent of they can put together a major event that will attract thousands of manufacturers and thousands of overseas buyers, I mean I see that as being rather significant. If you can spin up a Canton Fair like event or even a very small verison of that in one of these other Southeast Asian countries. Part of the challenge here is visibility. There already is an Alibaba that helps people find every Chinese manufacturer. Is there a similar concept in Vietnam and Thailand? To this point, it's nowhere near as visible and so it becomes something that basically has to be centrally organized either by large associations of manufacturers in country or potentially the government. And so if one of those countries is able to step up and do something like this and create visibility that will help. But let's be honest even if I said to you your product can be made in another country basically the same way starting today you're still looking at six months of testing and small minimum order quantities to verify and make sure that you have got the right payment structures in place. And so I would challenge everybody who's listening today if we're looking at a 12 month or a long term situation with this tax being in place you've got to start these conversations in January figuring out where is my alternative source going to come from. Because it's going to take time to work through and figure out am I really getting the same quality? Am I really getting the same delivery promises and so on from my overseas manufacturers that are now coming out of a different country? Mark: Yeah. So I've been an entrepreneur now for going on 20 years and the way … I would just like to close out here because some people might be hearing this and saying oh my gosh this is so incredibly scary. And what I want to say is this, these things happen. These things happen in business. The conditions change all the time and the people who end up capitalizing and doing really well are the ones who look at these problems as the opportunities that they are and figure out the way to make it work. There will be people who drop out. There will be people who do not pay enough attention to this and don't make the right moves. And so when we see these things rather than getting all scared and actually ironically enough this episode is probably going to air right around Halloween. I think we're going to publish it the day before Halloween and do our email newsletter advisory the day after … so you know a good timing for that. But to understand that there is definitely opportunity here. I think there's a couple of really good tactics. I think James you brought up just one simple one was just bringing up a new version of products that have and make them a 2019 version. That's a really simple type that we can have to see what's going to happen. And then also just have your ear to the ground as to where you can also find other products. So this has been really really enlightening. James, thank you so much for coming on. Where can people reach you if they have questions about this or honestly your work for consulting with Amazon sellers is unparalleled so if they have other questions even unrelated to this where can they reach you? James: I can be reached at info@buyboxexperts.com. All those emails go directly to me. And I appreciate your time today Mark. Mark: Yeah, absolutely. Thank you so much for coming on. Again James is one of the best in the business by far. Prosper Show check it out and then if you have questions feel free to reach out to me and I can do an intro or [inaudible 00:34:40.8] James. Thanks again for coming on. James: Thank you, Mark.   Links and Resources: Email James BuyBox Website Prospershow James's LinkedIn James's Book on Amazon

July 2018 Podcast James Cordier and Michael Gross Michael: Hello everybody. This is Michael Gross of OptionSellers.com. I am here for your July Podcast. This month’s podcast will be in audio format. I’m here with head trader James Cordier. James, welcome to the show. James: Thank you very much, Michael. Always happy. Michael: Great. The topic of this month’s podcast is Fast Cash from Selling Options in Over-Bought or Over-Sold Markets. James, as you and I know, we’re not really in the business of looking for fast cash, but we’re more in the business of long-term investments. Every once in a while, when you’re selling options, there comes certain opportunities where there might be a place to sell the option and you see that time decay in just the first 30-60 days. Often times that can be when markets get to an extreme, like some markets we’re seeing now. Wouldn’t you agree with that? James: Michael, it’s interesting, we are very long-term investors. When we’re looking at seasonal positions or headlines that create a slightly shorter-term opportunity, then we do look at things like timing and certainly all the headlines going on right now with trade are probably offering some really good opportunities of the slightly shorter variety and we’re looking forward to taking advantage of those over the next 10 days or so. Michael: Great. I know, as you and I have been discussing, as are most investors right now, the big topic is trade tensions with China. I don’t know if we call it a trade war yet, but certainly having got some investors attention and pushing the stock market around. Maybe talk a little bit about how that’s affecting commodities right now. James: Michael, if this doesn’t turn into a trade war, this is the most well played game that I’ve ever seen between the U.S. and China. I mean, we are right to the brink of what could be quite a significant trade policy coming down the pike. It is definitely worrying some investors that are looking at certain parts of the global economy. Uncertainty is always not welcome. Anyone who is looking at investing for their company or inventories or what have you, when they see uncertainty they usually hold back and that is probably going to be swelling some economic growth globally if this doesn’t come to a head here in the next week or two. Michael: Okay. As most of you listeners know, as far as being an option seller, it doesn’t really matter to you which way the market or prices are moving, especially when you’re trading different uncorrelated commodities. Often times, situations like this can create opportunities and that’s what we’re going to talk a little bit about today. James, would you like to go ahead and move into our feature markets? James: Michael, certainly. Natural gas is one of the markets that are very near and dear to our hearts. In the very heart of winter and the very heart of summer, which is coming up relatively soon, we did take positions in natural gas much earlier this year, trying to sell put premium. We were fairly successful doing that. Generally, the market bottoms in winter and rallies into spring and the natural gas market did that. Right now, we are looking at a seasonality for natural gas. It has had a very nice rally over the last 3 months or so and basically a lot of headlines talk about the need for natural gas in summer for cooling homes and cooling businesses, of course. We think that’s quite overplayed. Generally speaking, when it’s extremely cold in the U.S. or throughout Europe, demand for natural gas does spike and that is real. As far as buying natural gas for summer cooling, I don’t think the numbers dive exactly. It takes approximately 25% of the natural gas to cool a home in the summer as it does to heat a home in the winter so, generally speaking, when natural gas rallies because the warmer temperatures are ahead, that’s usually something you want to fade. Of course, at that time, inventories are usually being built in a very big way. So, we’re looking at selling natural gas calls over the next 2-4 weeks to take advantage of that seasonal position. Michael: Yeah, you make a good point there, James. The seasonal tendency for natural gas used to get a little bit of a spike in summer and, yeah, you can but it seems like the tendency over the last 5-10 years seems to be more of, as they build that inventory into spring and summer as those supplies rise, it tends to just kind of overlook the summer demand for just the reason you mentioned. Now we’re seeing a seasonal where the seasonal prices tend to start declining in June and keep going right through fall so it appears they’re following that pattern right now. Now, we’re not at a particularly high level of natural gas supplies right now. From what I’m seeing we’re a little bit under where we typically are this time of year. Is that what you’re seeing as well? James: We are. Natural gas supplies in the U.S. are under the 5-year average and they’re below levels from last year, not a great amount, but what a lot of market participants are looking at is all the drilling all around the U.S. Of course, the bi-product of that is natural gas. A lot of investors and a lot of the analysts in natural gas feel that $3 natural gas is probably a fairly decent price considering that drillers are getting it for free as a bi-product. So, it used to be that natural gas was produced in the Gulf of Mexico in Louisiana, and when you had demand shocks it really moved the market a great deal. The beauty of option selling is that some of that volatility is still in the market even though we’re now producing natural gas all over the country. We have just massive fines in Oklahoma, Arizona, and Kansas, the Dakotas, Pennsylvania, Ohio. The supply is always going to be there for natural gas right now and taking advantage of small swings, up and down, during the year should be fruitful for selling options and that’s why we think selling calls over the next few weeks is probably going to be a very good idea. Michael: You know, James, you made several good points there. In talking about the seasonal tendency, when we go back to where you were talking about selling puts in the spring when we recommended that in the newsletter, prices have rallied almost 10% since that point. Now, with supplies building, as you said, it can start putting a little bit more pressure on the price of natural gas, at least that is what you’re expecting. We’re going back to Fast Cash from Selling Options in Over-Bought Markets… I think two points, and maybe you can hit on both of them, one is natural gas, as of at least a couple days ago, hit a pretty good level where it was and looked pretty over-bought, especially for this time of year when you have a seasonal. Technically, the market is over-bought, that tends to push those option premiums up higher to where they get to an over-valued level at some point, especially with a little jolt like that. Also, natural gas is probably one of the markets that would be least affected by any type of Chinese trade tariff. Would you agree with that? James: Michael, the natural gas market that we trade here in the United States is purely a domestic market right now. It’s not coffee, it’s not steel, it’s not sugar. Those are all world traded markets and the natural gas market is probably 99% influenced by the supply and demand that happens within the 50 states. Of all the markets that we follow, several won’t be affected by the tariffs and natural gas is definitely the bull’s-eye of the one that will probably deem what goes on with tariffs probably be the least of all of them that we follow. Michael: Okay. So, we’re here at the beginning of a potential seasonal downturn here, at least that’s what we might be looking for. When you talk about this, and for those of you listening, natural gas is the feature market in our upcoming July newsletter, which you can keep an eye out for. It should be out on or before the 1st of July in your mailbox or e-mail box. James, in that, you’re recommending taking a look at selling call strikes at the $4 or above level. Right now natural gas is under $3, so we’re looking at strikes at least 25% above the current market. So, you’re not really calling a top right here, what you’re saying is, “Hey, it’s a 3, it’s not going to go to 4, especially at a time of year where supplies are building.” James: Michael, it certainly does look like an opportunity. The natural gas market has risen off the lows that we spoke of earlier this year and the ones you just mentioned recently. Natural gas was down to $2.50 and $2.55 earlier this year. Right now it’s approximately $3 so it has had a decent rally. We’re looking at strikes at $4, $4.50, and $5 and we think that the time to probably jump into those positions is really soon. We have had a nice rally in natural gas. A lot of it is based off of the hot temperatures that we’ve had in the Midwest and the Northeast recently. I’m looking at the 14-28 day forecast and it cools off quite a bit. While I don’t make that big of a deal over the temperatures exactly, a lot of traders do. That’s why I think we got this rally and we really like selling it here right about this level that we’re at right now. Michael: We go back to what we’re talking about here… The Fast Cash in Over-Bought Markets. Even if you’re going out deeper out-of-the-money contracts, which you recommend going out to December and maybe even March contracts, if we do get a typical seasonal move, which there’s no guarantee that happens, but if the price does and we get a pretty decent price drop over the next 30-45 days, I’m guessing what the market is still looking a little bit over-bought, you could see some pretty significant decay in those options. Is that what you’re looking at as well? James: It is. The decay on these options that we’re considering would probably, if in fact natural gas does have a slight decline going into the 3rd and 4th quarter, we would expect these options to lose a great deal of their value well before the winter timeframe. So, we are probably anticipating decent decay where these options might start out at $600, might have a value of maybe $100-$200 before we even reach the winter season. As far as our looking at the market, that’s a relatively short position for us and we think the decay in selling these options over the next 60-90 days could be very good. Michael: Okay, good. And again, those of you interested in taking a look at this market and what James is describing here, you will want to take a look at the July Newsletter. It is in the premium sniper column there. James, let’s move into our second market, which is the soybean market. If you want to talk about a market affected by or potentially affected by a Chinese trading tariff, this would certainly be it. You have soybeans just off the rumors since President Trump announced he wanted to have another potential tariff on some Chinese products up to the tune of, I believe, it’s 200 billion… is that correct? James: That’s the latest that I’ve heard on the wire today, yes. Michael: Okay. If that has stoked fears that China is going to retaliate and put tariffs on U.S. products. Soybeans, one of the main markets that a lot of investors fear may be in the cross hairs because we export a lot of soybeans to China. Soybeans have declined sharply on these fears just in the last few weeks. That and the fact that planting has gone nearly perfectly in the Midwest. Right now, the weather is ideal so we’re looking at fundamentals but we’re also going to be looking at this China pressure, but you’re thinking they might have pressed, over-pressed, on the downside right now. James: Michael, it’s so interesting the gamesmanship taking place out of China right now is just being played to perfection. We certainly have the ability to see China import soybeans from other locations, of course, Argentina and Brazil. I think we spoke of that earlier this year. What’s so interesting is the amount of livestock that has to be fed both corn and soybeans. That will not change, but the brinkmanship coming out of China right now is excellent. I can’t believe I’m going to mention this, but here I go. There are elections coming up in the United States and with China playing the tariff card on soybeans and watching those markets just absolutely fall out of bed, that is going to certainly be a bit of an irritant to the Midwest and the great plains in the United States right before elections. Don’t think that these farming states don’t know that. We just saw soybeans fall practically 20% in value with corn and soybeans over the last 30 days on these tariff scares. The fact that soybeans are a global market and there’s only so many to go around, while we were bearish soybeans earlier this year, it really looks like that might be overdone on the downside. If this is simply brinksmanship and this is simply bargaining going on, this fall in soybeans, the fall in price is probably just about run its course. We were just pushing $11 on soybeans. Now they’re in the high $8’s. We think that this might be a good place to look at selling puts in the next week or two. Michael: You know, James, just to point out in your feature article in the Spring, you suggested investors selling calls in soybeans based on, one, the seasonality and, two, what you mention and you hit it right on the head, there was no guarantee China was going to put tariffs on U.S. soybeans but if they did or if people believe they were going to that would just be an added bonus for the trade and really sink soybean prices. It looks like you hit it right on the head. That is exactly what happened right in the middle of seasonality where soybean prices tend to decline anyways because when they wrap up harvest, that anxiety goes out of the market, prices tend to decline. They don’t tend to decline as much as they did this year and that looks like it’s right off that China fear, just like you said. You’re talking about the elections, there’s a possible factor that could mitigate that, but we’re also looking at the core fundamentals where we have ending stocks this year 385 million bushels projected for 18-19, next year. It’s not high but it’s substantially lower than we’ve been for the last couple of years. So, when you look at the longer-term fundamentals, we’re not that bearish. I think you’re right. It looks like the market probably overreacted here. If they would slap tariffs on do you think that would bring another leg down or do you think we may have already priced that, at least for the most part? James: Michael, this is truly speculation on my part, but I think all the leaders around the world agree that major tariffs that are being discussed right now are going to simply be detrimental to a lot of the economies. When you look at the locations like Japan and Europe, which are starting to slow already, so many of these nations and their economies are certainly in need of a strong U.S. economy and a strong Chinese economy. Without those they slow down. I’m starting to think that this is simply negotiating to hopefully get a better deal, I think, is what the administration is thinking. We really like the idea that soybeans are going to be in very good demand later this year. As livestock feeding continues, that has certainly not changed at all. As far as I can tell, we’re going to have record demand for soybeans this year and the beginning of next and this very steep fall-off is probably going to be a good selling opportunity for puts. In other words, taking a bullish position from these very low levels coming up quite soon. Michael: Yeah, that’s a great point, as well. Record global demand for soybeans this year and the market tends to be discounting that because it’s been all wrapped up in this China story. When you have record demand you have very little room for any type of weather error or weather problem developing. Right now, this market is pricing in a perfect harvest, it’s pricing in perfect weather, and they are just sinking the price. In addition to what you’re saying as far as maybe this whole China thing is a little bit overblown, I think the core fundamentals here are enough to prop it up at least from the levels it has been to the last couple of days. Just looks like a market that, when we’re talking about over-sold markets, this looks like an extreme example of that. James: You know, what we started out saying is headlines can often create slightly shorter-term opportunities. The headline right now with the potential tariff is certainly one of those. Record demand, that’s not about to change. The demand for production of livestock throughout Asia, that’s not changing, that’s only growing. Many metals and other soft commodities, these can be transfixed into using something else. Coffee supplies, we can use coffee supplies from 20 years ago. It winds up at Starbucks and McDonald’s and such. Cocoa supplies can be used from 15 years ago. Sugar can be stored for a decade. That’s not the case with soybeans and feeding livestock and, thus, there really is no alternative for corn and soybeans. That’s why we think these headlines are probably going to be an opportunity to be selling puts here pretty soon. Michael: Okay. One final point I wanted to hit on the soybean market, and you made this in your article this week on the soybean market, which is on the blog. If you’re listening and you’d like to read the article and James’ suggested trade, you can see that at www.OptionSellers.com/Blog. It is our soybean feature market this week. The point you made, James, is even if China slaps a tariff on U.S. soybeans, they still need the beans so they’re just going to have to go to Brazil or somewhere else, Argentina, to buy their soybeans. So, they’re still getting the soybeans there, the U.S. beans get cheaper and they become more attractive to other importers and it’s really just a shift of who’s buying from who, but on the overall global stage it doesn’t really have that big of an impact on soybean supply and demand. I think that’s a great point you made. James: Michael, that’s exactly right. Whether the soybeans from Argentina and Brazil and soybeans from the United States go to Europe, it really doesn’t matter. We’re still talking about the same global supply and the same global demand. At the end of the day, it really doesn’t matter which soybeans are going to what part of the world. It’s a supply factor and it’s a global market. I think that’s an excellent point that you made, as well. Michael: So, as far as the trade goes now, we’re talking about again Fast Cash from Option in an Over-Sold Market. As we said, this market definitely fits the definition of over-sold and I’m not necessarily calling a low there but you’re willing to go $1-$1.50 below the current price and sell puts. As far as a trading strategy goes, what are you looking at there? James: Michael, as long as the market is still considering record demand and they certainly are, that part hasn’t changed, as long as the U.S. is now going to be the main grocery supporter for soybeans as Argentina and Brazil runs out, we’re looking at selling puts and soybeans at levels that the market hasn’t traded in years. We’re looking at selling soybean puts around $7.80-$8 a bushel. We think that the market’s going to probably be in the low $9 to mid $9 level later on this year. That would be putting these puts out-of-the-money by 20-25% and I think that’s a really safe basket, if you will, for us to be outside of the money. As far as soybeans falling down to $8 or $7.80, that would be a real eye opener. That would really set up a long-term position to sell puts then even lower. We don’t think that’s going to happen and we really like the opportunity that we think it coming up at selling puts around the $8 level. Michael: As far as fast time decay, maybe and maybe not, but I’m of the opinion, and you tell me if you agree, that this market has gone so far in ignoring the weather, which has been ideal, but if you get one little weather blip this summer in Indiana or Illinois, I think the market is so oversold that you could easily see a $0.50-$1 rally in soybeans over a period of just a couple weeks. You know what it can get like in the summer. If that’s the case, you could get a pretty fast decay on these, as well. James: Michael, you mentioned just a short time ago that we have near ideal conditions in the Midwest, the growing regions of the United States. We will have a week or two of hot weather coming to Indiana or Ohio or Iowa this July and August and that’s all it takes. They show this ring of fire on weather maps later this summer and up go soybeans, probably $0.50 a bushel. Shortly after that, if in fact that happens, I think you’d see really rapid decay on the puts that we’re looking at selling at this $8 level. Michael: Of course, if you’re an option seller and you are selling puts down at the $7.80-$8 level that James is talking about, all these things we’re talking about don’t need to happen. The only thing you need to happen is for the price to stay above your strike. So, any of these scenarios could play out and, as an option seller, you still take the premium. So, that’s really why we sell options in the first place. There’s many ways to make money with it, there’s only one thing that can happen for you to lose and I know that’s why we started selling options in the first place, James. James: Michael, we’ve often said the market can go up, down, or sideways, just as long as it doesn’t exceed your strike price and, of course, there are a lot of books talking about how often they do expire worthless. You do keep the premium, you’re the house, and from time to time someone leaves the casino with a smile on their face, but often it’s upside down from that price. Michael: Of course, those of you listening, if you’d like to read more about our strategies, the strategy we recommend for selling options in commodities as an overall investment approach, you’ll want to pick up a copy of our book, The Complete Guide to Option Selling. It’s now in its third edition through McGraw-Hill. You can get it on our website at www.OptionSellers.com/Book. You’ll get it at a discount there, a lower price than you’ll get it on Amazon or at the bookstore. James, I think that’s it for this month. I think we’ve covered quite a lot of ground. If you’re and investor and you’re looking at these markets, certainly follow up on our blog where you’ll see the written parts of these or the newsletter. Take them on your own merit. We will be incorporating these into our trading plan for our managed portfolios this month. Speaking of managed portfolios, our waiting list is now out to September; however, we are still booking consultations through July and August for those September openings. So, if you are interested or thinking about opening an account, now is the time you’ll want to book your consultation. We’ll have those interviews and we’ll see if you match the profile for a client. James, as far as one final parting comment here, as far as this volatility goes that’s coming from the Chinese trade tariff worries, does that make it a better or a worse time to be selling options? James: Michael, once or twice a year inevitably there are headlines that create volatility. A couple years ago it was the talk of the Brexit, there was Switzerland leaving the Euro currency, it was 2 years ago the surprise election results. These headlines seem to come around once or twice a year and a lot of investors feel that while that type of uncertainty is something I don’t want to invest in, but that plays into our hands perfectly. The fundamentals of the markets that we follow change very in small fashion, you know, 1%-2% moves in commodities, but to listen to headlines it’s like the markets are moving a great deal. That plays right into our hands. We sell options so far out in time and so far out in price. We love headlines like this and tariff talks with China is just the second one for this year and we really enjoy having headlines like this. It causes uncertainty, it causes high premiums, and that is something that has been feeding us for the last several years. One or two headlines like this every year or two is just fine with me. Michael: All right. I hope everybody got something out of this month’s podcast that you can use or help you decide if option selling is a good strategy for you and your overall portfolio. Again, if you would like to book one of our remaining consultations in July or August, you can call the office at the main number… 800-346-1949 and speak with Rosemary. If you are calling from overseas, that number is 813-472-5760. You can also e-mail an inquiry at office@optionsellers.com. You’ll be able to hear this podcast on our blog but you can also subscribe to our YouTube channel and/or iTunes and hear it there. James, thank you for all your insights this month. James: Michael, it’s my pleasure. Michael: For everybody listening, have a great month of option selling. We will talk to you in 30 days. Thank you.

Cracking the Focus Code to Prevent Chaos James is Author, Speaker, Business Planning Strategist and Business Management Consultant, providing real and permanent solutions to business planning challenges through programs creating radical focus and accountability   Transcript of the Interview with James Burgess Hugh Ballou: Greetings, this is Hugh Ballou and Russell David Dennis. Russell, how are you today? Russell Dennis:Greetings and salutations. It's a beautiful day here out in the mountain west. Hugh: And in Virginia, it's lovely. Our guest is from the Toronto, Canada area. Lovely place. I just love Toronto. It's like a clean New York City. It's got all of the great stuff, and it's clean. It's got great people there. I love going north of the border. Russell, why don't you tell people who our guest is and what his sweet spot is? He is going to introduce himself. Russell: Greetings. Today, we have a real treat. We have imported some brilliance from our neighbors to the north up in Canada. We have James Burgess, founder of Focus 31. He is a master business strategist who works with small companies, from start-ups to under $25 million in revenue, who tries to help them get out of their own way by focusing on the right things, creating the right systems. He has done all sorts of work with both businesses, profit-making businesses, not-for-profit entities and is well known throughout the Canada. Many associations he has made presentations to. James, welcome. Why don't you tell our friends on Facebook a little bit about yourself? James: Thank you, gentlemen. It is absolutely delightful to be with you this afternoon or this morning, depending on how far west your audience reaches. I would like to start before I introduce myself to dispel rumors that Canadians all live in igloos. It is equally gorgeous without the thin air that Denver has. It is about 77 degrees, clear, blue skies, and we are headed probably for about 82 by the weekend. Yes, I live in a house as you can see by the walls behind me. I say that all in fun. But every time I get to educate on what Canada is all about, I take the opportunity. It's a pleasure to meet all of your listeners, virtually of course. My name is James Burgess. I am a speaker. I am the author of the international best-selling book Chaos: How Business Leaders Can Master the Power of Focus. I'll give everyone an opportunity to get a free copy of this book at the end of the podcast, so stay on. I am the founder of Focus 31, a business that sells a service that no business owner wants, and yet we do it extremely successfully. Every business owner I sit down with or passes the table where my book is sitting says, “Yep, this is me. My business is in chaos, and I need focus.” Whenever they say “focus,” I know what they also need to be saying is I need accountability. That is entirely what Focus 31 does. I act, or my team acts as virtual CEOs for small businesses, as you indicated, from start-up to up to $25 million in revenue. In the past, we have worked often with not-for-profits to get them understanding just what it is they want to do, where they want to get to, how they are going to get there, and hold their feet to the fire, not in Tony Robbins' way, but holding their feet to the fire to ensure they in fact act and implement their game plan that will get them to that new platform of success. Learn more about your ad choices. Visit megaphone.fm/adchoices

The Flavor MatrixThe Art And Science Of Pairing Common Ingredients to Create Extraordinary DishesBy James Briscione with Brooke Parkhurst Suzy Chase: Welcome to the Cookery By The Book Podcast with me, Suzy Chase.James: I'm James Briscione, author of the new book The Flavor Matrix, which I wrote with my wife Brooke Parkhurst.Suzy Chase: Let me just start with a few of your impressive titles. Director of Culinary Research at the Institute of Culinary Education, ICE. Celebrity Chef. The first ever two-time champion of Chopped. I'd like to add culinary scientist to the list because you teamed up with IBM super computer Watson to discover flavor combinations based on different foods compatibility. Before we dig into the book, I'm dying to hear about your time at IBM and cooking with Watson.James: Thank you so much for having me on, Suzy. That was really an incredible experience that changed so much for me in the way I cook, and the way I think about cooking, and flavor. That opportunity, working with chef Watson, which all began in my role at ICE, the Institute of Culinary Education. IBM came to us at ICE with this idea about how they wanted to use a computer to help people be more creative. I kind of heard that pitch and just kind of laughed in their faces, like "Yeah, right. Like a computer knows more about cooking than me." I was very skeptical going in. But I thought "You know what? Let's give it a shot, let's see what happens. If anything, I can say that I beat the computer." I was feeling very cocky. We went through this kind of experiment really. No one really knew what was going to happen or how it was going to turn out. Where a computer was suggesting ingredients that we would then take into the kitchen and use the created dish really from scratch. No measurements, no quantities, no instructions on how to use ingredients, just Watson told us that you could use these ingredients to create a dish, and it's going to taste good if you do it right, basically. Immediately as I saw these combinations of ingredients were coming, I was like "Why? Why does it say that those ingredients would be good together?" Then, we'd started kind of working backwards through the system and finding some of the science, and some of the connections that Watson was making just using this incredibly dense data essentially about flavor. I was absolutely fascinated by the process, and really just kind of ignited me to want to go learn more about it. I realized, that information didn't really exist anywhere outside of the most powerful super computer in the world. That's what put me on the journey to start creating The Flavor Matrix.Suzy Chase: I'm going to read a passage from the book that blew my mind. "Strong pairings in a flavor matrix like citrus or olives indicated that there may be a greater connection between the ingredients. It shows that the ingredients have something in common, maybe they're native to the same area, or have a botanical relationship, or similar flavor profile." Was that something that Watson kind of came up with?James: It was something that, as I kept looking at the data and seeing these connections, and in research, I mean, just a massive amount of research that went into creating The Flavor Matrix that I started seeing and we saw these really strong pairing scores between different ingredients. There was a reason for them. We could often trace them back to something I think olive, olive is one of the most interesting examples. It also kind of sent us down this path ... there's the age old adage of what grows together goes together. There seems to be a lot of evidence through a lot of these pairing scores that we saw that a lot of flavor in ingredients is derived from the environment. Plants that are native to similar geographical areas tend to be good matches. Because there's things from that environment that are kind of imprinting certain parts of the flavor into that food, which to me was really fascinating. That thing can be a whole other rabbit hole to go down at some point, and spend another couple of years researching.Suzy Chase: Talk about the old and new model of combining flavors.James: For me, as a chef, I learned, it was just something you learn. You cooked a lot as a young chef, I was going to create a new dish, I was going to make something with oysters. If I didn't know immediately what the best ingredients to pair with oysters, or I just go to my massive collection of cookbooks and pull down every single one, or the ones that I like the best, and go to the index and look up oysters and start looking at the ingredients that other chefs use. You learned a lot from what you saw and tasted in other places and through your own experience. Building what we call taste memory, so that in my mind I know the flavor of an oyster now, and I know the flavor of a shallot, and I can kind of mentally combine those two without actually having to taste them. But it relies so much previous experience, or having some familiarity with an ingredient. I think nowadays we have such incredible access to ingredients. We can have ingredients from all over the world at our door in 24 hours if we just click a button and pay enough money for it. To me, I think it's helpful to have another tool in your arsenal, another way to think about flavor and analyze flavor to make decisions about what ingredients go together. That's The Flavor Matrix, which is, for sports fans, I liken it to the analytics of cooking. In Baseball, and other sports analytics are big, and you're looking at stats, and using data to kind of make evaluations. That's the same thing we do in The Flavor Matrix. In this case, the data is the chemical compounds in each ingredient that create the flavor in that ingredient. We're talking that we're down to the molecular level, talking about each one of these individual little compounds and in something like a strawberry, there are just over 400 different compounds that combine to make the flavor of the strawberry. Only a few of those are readily perceptible by nose. When you slice into a strawberry, you're going to be able to detect some of them. There are so many more that make up the flavor of the strawberry that we don't necessarily, wouldn’t necessarily detect on our own with the nose. But, when we're able to look at those ingredients, or look at those compounds in analysis, then we can start finding these hidden connections between ingredients because when two ingredients have a bunch of these compounds in common, we can very accurately predict that they're going to taste good together when we combine them in a dish. Just how we land at something like mushrooms and strawberries together in a dish. Where that doesn't make any sense, and I would never put those together on my own. But through the research, we see that connection and go on. That's kind of an interesting weird thing, but it actually tastes really great.Suzy Chase: God, it's so logical. No one has ever talked about this. That's crazy.James: We talk about it in the book, kind of the origin of this whole concept. It is quite new, especially if you look it at the scope of all cooking. It's less than 20 years ago, Heston Blumenthal and his research team at The Fat Duck kind of put this theory forward, the flavor pairing theory. Yeah, it's been kind of quiet in a few chef nerd circles just for a little bit. It hasn't moved much beyond that, and really it didn't kind of make its way into my radar until five, six years ago when we started working with chef Watson, who was using flavor pairing theory to make some of its decisions about ingredients.Suzy Chase: You mentioned taste memory earlier, and this book relies on chemistry rather than taste memory. Explain what taste memory is.James: I think it's important, with the book, and I think, often when we're dealing with anything new to kind of remembering with The Flavor Matrix I really love to encourage people to learn this, and use it as another tool in their arsenal, a way to make decisions about ingredients and think about the flavor pairing, so that you can add that to what you already have in what we call taste memory, which is basically, it's not like those memories you cherish from grandma's roast chicken, or whatever grandma used to make for you. But, you do remember the flavor of that. You also remember the flavor of a lot other things that you've tasted before. The more eat, the more you travel, you start to build taste memory. Chefs, it's some we kind of work in our careers. It's a bit of training your palate as well, it's kind of knowing flavors just inherently, and being able to kind of combine them in your minds to put two flavors together and sort of know what it's going to taste like without actually having to taste them together. But I think that really kind of elite level of taste memory to be able to do that, it's something that just professional chefs have. You kind of spend your whole life developing it. It's not easy.Suzy Chase: Talk about the difference between taste and flavor.James: Yeah. This is really one of the things we like to focus on in the book, and we talk a lot about. It's an important difference really. Because we tend to use those two words interchangeably, but in reality they come from different places. Taste comes from the tongue, flavor comes from your nose, it comes from all of your olfactory senses together, not just in your nose, but in the back of your throat, and sort of all around. Taste really only refers to six specific sensations, which is the tastes that we know, sour, sweet, salty, bitter, those are kind of the four classic ones, then two more that we've recently added with umami, and fat. These are things that are actually detected on the tongue, a chemical reaction happens on the tongue and relays that information to the brain about what's in the food that you're tasting. The tongue, I like to kind of describe the tongue's job as being a nutrient and toxin detector. It's just kind of the gatekeeper for your body. When your tongue recognizes sugar, it signals your brain, your brain is happy, it knows that things with sugar in them are things like ripe fruits, so they have good nutrition. Or it's just sugar, and it's something that your body can easily and quickly utilize for energy. Your body likes that, so it wants to take in more. With umami it means protein, it's amino acids coming in, and your body knows it needs that as building blocks. When it tastes something that's very sour, that's often a sign of under ripe, fruits or vegetables, they all tend to be sour. They don't offer much benefit to our body, so we tend to not like those quite as much. Things that are bitter are often a sign of toxin. When your tongue detects a toxin, it kind of makes you pause and be a little more cautious about what you're eating and wonder if you actually want to swallow it or not. This is really ... I think another great example is like when you're at the beach and you get hit in the face with a big wave, and you have that mouth full of sea water, you immediately start coughing and trying to spit it out because your tongue instantly recognizes that high concentration of salt is not good for your body and doesn't want to allow it in. That's really what our tongue is doing. Then, everything that we perceive as flavor is coming through our nose. It's coming through these chemical compounds that we've talked about that are in the food that actually create flavor. That part of the equation, when we talk about taste and flavor, is so much more complex and so much more nuanced. But often, when we describe food, it's just savory, or salty, or sweet. We don't get into talking about all these wonderful, rich, complex flavors that exist in food. Just like we do in wine, or coffee, or beer.Suzy Chase: Three factors help form a complete picture of flavor, you wrote in the book, taste, aroma and texture. But you said that aroma is far more influential. Talk a little bit about that.James: When we take a bite of food and there is so much ongoing research and kind of developing science around, there's a really understanding the physiology of taste and perception, and all of this very well, we're starting to understand it much better than we ever have before. We now know that about 80% of what we taste when we have a bite of food, that 80% is coming through the flavor receptors, through olfactory, through aroma. About 20% is relayed by the tongue. Things like texture, sound, actual sound can influence how we perceive food, lights. All of our senses really combine to change how we perceive a bite of food, but the heavy lifting is fairly being done by the nose and the tongue.Suzy Chase: I bought my very first durian in Chinatown a few weeks ago, and I can vouch for that in terms of aroma. It was so smelly.James: It is, it take a day or two to clear that out of the house.Suzy Chase: And out of your nose. You wrote this book with Brooke Parkhurst. Tell us about her.James: She is my wonderful wife. We live together here in the West Village in New York, but not for much longer, we're actually about to head down to Florida to open our first restaurant down on the Gulf Coast in Florida. That's super exciting. Brooke will be the Wine Director there, and I'll be the chef. It's a whole new adventure for our little family, but very exciting. Brooke has been, obviously, she has been my life partner for over 10 years now. But also my cooking partner and writing partner. She is a wonderful writer, and before we met she was finishing her first novel about a small town Southern girl moving to New York City, who stayed connected to home through the recipe she made. Our pairing of being chef and writer has been a really great one. This is our second book that we've written together. We're finding a way to take all of this complicated scientific jargon and put it in a form that really is accessible to anybody and everybody.Suzy Chase: I think one of the many special things about this cookbook is that it has 150 of the most commonly used ingredients that surprisingly work together. You're not out there searching for weird, oddball ingredients.James: Yeah. We really wanted to focus on ingredients that people are using every day, because I think, often, when you open a book, and you go through an ingredient list, and you see two ingredients ingredients "I don't even know what that is, I don't know where to find those." It can be a big turnoff. We've really wanted this to be a book that worked on different levels for different people. For professional chefs, and really big foodie home cooks, and just kind of the average, everyday cook, who has their dishes that they make all the time, and love, but was looking for a way to sort of change things up a little bit. Even if you just want to find one new ingredient to add to your favorite dish that you always make just to kind of change it up, or get a little different take on it, I find you can find that in The Flavor Matrix.Suzy Chase: Last week, I made your shrimp and lamb gumbo on page 89. The spices in this dish were so minimal, but the flavor was huge.James: Yeah. Thank you so much, I had a lot of fun following along on Instagram watching as you were making all these dishes, I think it looks like you did a fabulous job.Suzy Chase: Thank you, in my tiny West Village kitchen.James: I'm glad you were digging in there, and making these, they looked great. That to me was one of these just wonderfully, surprising combinations, was shrimp and lamb. Two things I would never think about putting together. But their flavors match up so well. Like you said, when you start with kind of flavor first in a recipe, you don't need as much to really bring it all together and to make it happen. That's a quick, simple recipe that I think really comes together so nicely because we start building on those common flavors from the beginning with the shrimp and the lamb.Suzy Chase: I also made the lemon curd with crunchy olives on page 181. I have no words for this. It was so good. Can you describe this heavenly dish?James: I think anyone who's eaten at any form of Mediterranean style restaurant, you've probably had a seafood dish that has lemon and olives in it, or a vegetable dish with lemon and olive. It's not a surprising combination, but as I looked at it, and saw just what a really, really strong combination it was, I thought [inaudible 00:19:49] thinking about "Why don't we use that more? What are other ways we can use that fantastic combination that are a little more interesting or a bit more surprising?" Naturally, I was like "Let's make a dessert out of them." That's exactly what we did. Starting with kind of ... it starts like a classic lemon curd with just egg yolks and sugar, and lemon juice, and lemon zest to really get the most intense flavor. But then, once the curd is cooked and is nice and thick on the stove, and it has just kind of that creamy, beautiful, smooth consistency, take it out and start whipping it. As it cools, emulsifying olive oil into it, instead of the classic butter. That olive oil gives it a smooth, beautiful shine and really gorgeous consistency and such a unique flavor. I finish it with a little bit of butter as well, just because it kind of needs it for the structure, it's too runny if it's made with just olive oil. Just to kind of give it a little bit of structure, we add that butter. But the flavor and shine that that olive oil gives to lemon curd is just so, so fantastic. Then, we top it off with these little dehydrated olives that we just coat with a little bit of honey and bake in a low oven until they're crunchy, and they're salty, and sweet. Just the perfect match to that lemon curd.Suzy Chase: I also made the crab, mango, dill and poblano salad on page 241. That was like perfect for summer. I wanted to talk to you about the cucumber in this recipe. I felt like the chopped poblano was enough crunch. What did the cucumber bring to this dish?James: The chopped poblano does give some nice crunch and a bit of spice. The cucumber has these really great kind of ... it's almost sort of a bridge in those ingredients, because the two most prominent aromas in cucumber are just green grassy and melon. They're kind of the link between the pepper and the herbs, which peppers tend to have whatever type of pepper we're talking about, in this case the poblano, tend to have a little bit of that kind of melon and fruity flavor. The dill, which I think is such a great herb that's just not nearly used enough, but [inaudible 00:22:31] match it back to the mango. That cucumber is sort of there as that bridge. I think it adds just another great layer of crunch to the dish.Suzy Chase: In your opinion, what was the most surprising flavor combination that you came across for this book?James: I think I tipped it earlier with the strawberry and mushrooms.Suzy Chase: Mine was the blueberry and horseradish jam.James: That is another great. The blueberry and horseradish really is a lot of fun. You, I think, would love this. We ran an event down in Florida that we did down in Ocala, Florida. We had a bunch of local chefs and they got together and they all had different pairings from The Flavor Matrix. We had this great, big kind of local chefs gala where they all made different dishes of their own design from pairings out of The Flavor Matrix. We had a mixologist there who made a blueberry and horseradish cocktail. Really, rally great, unique, just wonderful flavor. But yeah, blueberry and horseradish jam is such a great condiment. One of different ways you can use that ... blueberries on their own have just these little tiny hints of kind of pine, and almost, like [inaudible 00:24:01] like rosemary. These little hints of pine in them. That's a really prominent aroma in horseradish as well. It's one of those things that, again, you wouldn't necessarily perceive on your own, but when you start to see the flavors in those ingredients, and then you start to make those connections, it all makes sense, and kind of shows you the way. That's really with a lot of the recipes in The Flavor Matrix, they're more like the blueberry and horseradish jam. They're meant to be something wonderful that you can make and use in a bunch of different ways. That can be a great condiment on a cheese plate or charcuterie board. It's wonderful to spread on sandwiches, and there's lots of different ways you can use it.Suzy Chase: I saw The Flavor Matrix book cover on a Times Square billboard. Is this the first ever cookbook that's been featured in Times Square?James: Oh, boy. I don't know, I should hope so.Suzy Chase: I've never seen a cookbook in Times Square.James: That was very exciting. Once again, my wonderful wife knows all of the right people who were able to make that happen, but yes, you saw The Flavor Matrix up in the big, bright lights of Times Square. It was really a thrilling moment.Suzy Chase: Where can we find you on the web and social media?James: Brooke and I write together at The Couple's Kitchen, so thecoupleskitchen.com. Also The Couple's Kitchen on Instagram. On Twitter and Instagram you can also find me under James Briscione, just my name. Basically, if you just throw my name into Google Search, you'll probably find out more than you ever wanted to know about me.Suzy Chase: What a wonderful conversation. Thanks, James, for coming on Cookery By The Book Podcast.James: Thank you for having me, Suzy, it's been a lot of fun.Suzy Chase: Follow me on Instagram @CookeryByTheBook. Twitter is @IamSuzyChase. Download your Kitchen Mixtapes music to cook by on Spotify at Cookery By The Book. As always, subscribe in Apple Podcasts.

Michael: Hello everybody. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier. We are here for your monthly May video podcast from OptionSellers.com. James, welcome to the monthly show. James: Thank you, Michael. Can you believe we’re going into May already? Michael: It sure went fast. This last month here we saw some key developments in the markets. We have a lot of tensions between China and the U.S. over trade, and then we’re, lately, looking at 10-year treasuries going over 3%. A lot of people are wondering how this may affect commodities. What’s your take on that? James: Well, the trade wars that are supposedly about to take place, I think, are simply negotiation. President Trump mentioned many times going into the election that he was going to do “the art of the deal” and get us some more fair playing field, especially with China. Certainly the deficit that many goes out to China and doesn’t come back is something that he’s going to work on and, I believe, it’s more negotiating than it’s actually going to be major changes, as far as trade tariffs and such. Will some be put in place and some enacted? Probably so, but I know Mr. Mnuchin is going to China I believe in the next week or two, and he’s going to have probably the checkbook ready so he can basically get an olive branch going out. Needless to say, everybody wants a strong economic global growth and a trade war is not going to help that; however, getting a more fair and balanced trade, especially with China, I think is a really good idea and I think that’s what we’re going to get over the next month or two. All the discussion about it, I think, is going to be more of just that: just discussion. Michael: So, you don’t see any major changes in any commodities in the immediate term? Any immediate strategies people should be doing right now or as a result of that or, primarily, do you just see things leveling out here? James: Michael, the discussion of a trade war, like in soybeans or something that’s going to affect the demand for oil, I think a person or an investor should use that to look at the idea that it’s going to be settled. It’s not going to be a large disruption to production or demand in any of these commodities. When the price of a commodity is affected by discussion of it, I think you should take advantage of that. 3-6 months later, the fundamentals that we see now are going to be in place then, and basically it was hype that was going on and I think it’s going to offer opportunities. For markets that you’re following, if there’s trade discussion that’s going to move up or down the market that you were hoping to sell either puts or calls on, I think that’s going to be great picking in order to do that. Michael: Okay. Well, for those of you watching, we have an exciting show for you ahead this month. We’re going to be addressing a very common question we get. A lot of times, people sell an option, they get into the trade, the option moves a little bit against them, and then the question is “Well, what do I do now? Do I adjust the trade? Do I get out of it? If so, where do I get out of it?” What we’re going to do this month is we’re actually going to take you into some of our real trades we are doing in portfolios. Some of these, you’ve probably seen us talk about before. Pull back the curtain a little bit and show you a risk-parameter we might use and then recommend something you can use at home, as well, if you’re trading on your own or just get a little bit better insight into how we might do it professionally. A good analogy, and, James, I know you can comment on this, is we all saw the incident with Southwest Airlines this month where they had the problem with the engine. Certainly a tragedy for the people involved that it effected; however, one thing that really stuck out to me is the pilots that landed that plane and saved all those people. Have you heard the transcripts? They’re just cool as a cucumber. They knew exactly what to do, they had processes in place for every situation or condition, and you pilots out there that are clients, you know exactly what I’m talking about. When people are trading, and you know this more than anyone, James, you should have a contingency. Anything that happens, you should have a plan for that happening and have that type of control. That’s how you avoid that “what should I do” when you get into certain situations. When you’re trading, you deal with the same thing, James, am I right? James: I certainly do, nothing like that pilot was facing this past week, but in a similar note, you do have a plan. We are generally positioned in anywhere from 8-10 commodities and when one is causing the plane or the bow to veer right or veer left you simply need to make the adjustment. It shouldn’t be a huge deal to your portfolio. You should really be able to make a minor adjustment. If you’re in 10 commodities and 1 is going really in a direction you weren’t thinking, you should have a plan for that. It shouldn’t be a panic. It shouldn’t be large turns like this. You should just be turning the wheel like this and we’ve got an adjustment that needs to be made, the cocoa market or the coffee market or the silver market, and you just steer the plane and get it flying level again. Your portfolio, whether you’re having a portfolio with us or you’re investing with one on your own, you should never have a position that makes that much variance to your account. If you have 1 position in your account, name the commodity- it doesn’t really matter, and if it moves 5-10% in a short period of time, if that makes your account move larger than it really should be, it shouldn’t have a large variance because the market moved 5% or 10%. If it is doing that, you’re simply not positioned correctly. Always have in your portfolio 8-10 commodities and if 1 is making the plane go like this then you just pull it back like that. You should never have a position on your account that you can’t, in order to make the plane fly smoothly again, if you would. It happens all the time. We’re not right all the time. We’ll have 8-10 commodities in a portfolio and by-goodness, 1 is going to be causing this to happen and you just straighten the plane. Just like that brave pilot did, he knew exactly what to do. My goodness, 1 engine went out and he was able to do that. We have 10 engines on our plane. We should never have one commodity or another commodity make the plane go like this. It really shouldn’t happen. For your investors at home, if that’s happening to your portfolio you don’t have a diversified portfolio, and that is something that we at OptionSellers.com always strive to have so that when something happens that was unexpected, there’s a big headline in a certain commodity, you just straighten the plane and that’s what we do. Michael: That’s what we’re going to talk about today. If you’re trading at home or you’re checking out this strategy, one of the biggest advantages you have as an option seller is that flexibility James was talking about where if you’re trading, and say you are worried about a Chinese trade war or this or that, you have the ability to build out a strategy that can benefit from nearly any type of economic condition. It’s one you should use if you’re an option seller. We’re going to address and use a specific example this month from a market we talked about. We’ll show you how to adjust a trade if you do get into those type of situations where it’s not working exactly the way you hoped it would, and we’re going to give you a couple examples here of how to do just that. James, why don’t we move into the trading room and we’ll talk about our markets this month. James: Sounds good. Michael: Welcome to the markets segment of the OptionSellers.com May Podcast. We are going to talk about a market this month that we featured in last month’s podcast and that we’ve got a lot of questions on over the past month so we’re going to talk a little bit about it. This does go into the topic of this month’s podcast, which is how to turn a losing trade into a winning trade. So, first let’s talk about the market… this is the cocoa market. You saw us feature this market in last month’s podcast. Cocoa we talked about selling the 32 December call options. The markets rallied a little bit since then, did not threaten a strike, but it’s up a little bit. James, do you want to tell us what’s going on with this trade and this market? James: Michael, what’s going on with cocoa right now is the last several years we’ve had a production surplus worldwide. In 2018 and 2019, some of the largest cocoa analysis around the country is predicting the first deficit in quite some time for world production. Basically, high prices cure high prices and low prices cure low prices. The initial trade is that we’re going to have a production deficit this coming year and then the market must go much higher because we’re running out of cocoa, but in all actuality what happens when the price of something is rising that is dampening down demand. So, for example, when cocoa was trading around $2,000 and $2,100 a ton, chocolate manufacturers were purchasing cocoa. As it rallies, they purchase less and less and less, and the demand has already taken place. So, when we do get an announcement of a production deficit, that usually gets the last of the buyers, the headline traders, to get involved with the market. We saw a spike here recently in the last day or two where cocoa was threatening $2,900 a ton. Keep in mind that’s up almost 50% in price over the last few months. Basically what that does is commercial demand then starts to fall and then basically it’s a speculatively driven market. Usually a market that has moved 50%, we have just a couple percent difference in production, 2-3 years ago up until now, and yet we’ve had a 50% increase in price; thus, we think that’s a temporary move in the market. While we were suggesting selling the $3,200 calls last month, the market did not get anywhere near that level but, as some of the viewers and readers have mentioned, the price of those options are up slightly from, maybe, when we discussed selling them. Michael: Sure. I think that goes back to a good point is, we always say this, we don’t know where the top or bottom of a market’s going to be. That’s why we are selling options in the first place. We’re not trying to pick that anymore. You don’t have to pick that either as an option seller. It’s an important point to make as an option seller… you’re not trying to call the market, you’re just picking a window where you think prices should remain and then selling options outside that range. James: Exactly right. Fundamentally, the price of cocoa over the next 3-6 months should be at this level. The price of coffee or crude oil based on fundamentals will be at a certain level, as well. Basically, you’re selling option premium that puts you out-of-the-money sometimes 40-50-60%, and some 8 times out of 10, that leeway is all you’ll ever need. As a matter of fact, anyone listening to us right now and, of course, our clients are long-term investors. So, if you are, like we discussed just recently, you are flying a plane and you want it to have several engines, okay? Your portfolio should have several commodities; however, when one does exceed a level that you thought it would, you can roll up your position. For example, each day that cocoa gets more and more expensive, the likelihood of it staying above its fundamental value diminishes. So, if you did short cocoa prices at, for example, $3,200 a ton by selling the $3,200 call, you may choose to roll it up to the $3,400 or the $3,500 if in fact it’s something that if you want to stay with the market or you want to stay with your position, but speculatively the market is driven higher than we thought it would do. That is certainly one approach that we often take and someone who maybe has that position on right now might want to take that, as well. Michael: So, what you’ve just explained is how to turn a losing trade into a winning trade, the title of our podcast here today. Let’s go back and just explore that briefly. When we talked about selling the call here, we talked about selling it and we were right about here, now the market has rallied a little bit. As you said earlier, it really hasn’t threatened the original strike. In fact, I don’t even think the original premium has doubled yet. James: No, they hadn’t. Michael: Yet, we got a handful of people writing, “Ah, I sold a cocoa call. What do I do now?” Well, there’s 2 points to that. One, we’re not really an advisory service, we are managed fund here, so we can’t really instruct you all the way through the trade. The bigger point here is when we went back to the beginning of the podcast that James just referred to, we talk about the pilot steering the plane. If you’re putting a trade like this on, you better have a plan for what you’re going to do for when you go into that trade if it doesn’t move the way you think. Now, the movement in cocoa right now, it hasn’t really been extreme, it is pressuring the strike price a little bit. James feels it’s still fundamentally justified trade, but if you’re getting uncomfortable or it keeps rallying or starts pressuring that, he’s talking about rolling the positions up. James, do you want to explain the mechanics of that if you were, or if somebody was holding a 32 call what they would do to recapture that premium? James: Okay, so let’s say you sold 10 contracts of the 3,200 December call strike and the price is now exceeding your risk tolerance. Let’s say you sold them for $500 or $600. Let’s say you have the 100% rule for your portfolio, so the option has now doubled to approximately $1,000-$1,200. Now what I would do, if you were considering staying with a fundamental trade, which I think cocoa will probably be in the high 20’s at the end of the year and nowhere near 3,200; however, you buy back your $3,200 call and you can sell 20 now of the $3,400-$3,500 call. Eventually, the fundamental factors are going to slow this market down and we think that come November, when the December contracts expire, we’ll probably be in the high 20’s… like 2,800-2,900 at the most. So, if we do exceed 3,000 for a brief period, I would use that certainly as an option selling opportunity in cocoa calls. 3,400-3,500, I think, the market will not exceed that level in our opinion. We’ll have to wait and find out, but come November I think the market will be much below that. Michael: So, you’re doubling up on those strikes. So, you sold 10 and then when you roll you’re selling 20. That allows you to, one, get back your original premium, but it also allows you to recover the loss. James: That’s exactly right. Keep in mind as we discuss this, we always want to be in 8-10 commodities. We are selling options sometimes 40%, 50%, 60% out-of-the-money. You can’t, or you probably don’t want to, base your entire investment and the viability of this type of investment for you based on the idea that you sold 10 contracts of cocoa. Okay? We are selling commodity options in approximately 8-10 different sectors and, over the long-term, selling options 40%, 50%, 60% out-of-the-money is going to work out quite well, but, by all means, we stub our toe. We get kicked in the shin once in a while, but if you’re a long-term investor, and everyone should be, whether you’re long stocks or the real estate market or you’re selling options as an investment portfolio, you just know that 1 or 2 may not go your way and you definitely need to manage your portfolio. This is one way to do it. Another idea is, you know, taking a losing trade. If the investment idea wasn’t correct, we’ll take a look at it again. Let’s see if the market continues to rally, we’ll sell options on another day, or we’ll come and visit cocoa again next year. Have that ability to do that. Michael: That’s an excellent point. If you’re watching some of the things we do and you’re trying to trade just at home online saying “Oh I like that trade. I’ll sell this and see how it goes”, that’s really not how these are meant to go. When we are putting trades on a portfolio, we are putting them on as part of an overall portfolio of, as you said, 6, 8, 10 different positions. Sometimes they’re hedged on the other side of the market, sometimes they’re balanced by a long or short position somewhere else. So, these are incorporated into a much bigger scheme. If you’re just taking them and you’re really selling them out of context, so if something like this does move against you it’s a big deal for your portfolio, where for us is just like the captain of the plane. It’s a flip of a switch, just something different you need to do to adjust the position. James: Exactly, Michael. You should always be able to have both hands on the wheel and just make small adjustments. If you sold cocoa calls recently, your positioning should only be going like this and you shouldn’t be turning the wheel like this. If you’re doing that with your portfolio, you’re not doing it right. Michael: And as we talked about earlier for managed clients, we are going to be taking a closer look at this market this month. It is starting to get interesting and maybe look to see what we can do there in the coming weeks here. Let’s talk about another market here for our second part of the podcast this month. That will be the crude oil market. If you want a market that has been in the news lately, one that has been in the headlines has been the crude oil market. We’ve been closing in on the $70 mark for the first time in 2014. It’s been one of the strongest commodities on the board since last fall. James, you want to tell us what’s going on here? What’s behind this rally? What’s been pushing prices higher? James: Michael, Saudi Arabia has done just an incredible job leading the OPEC nations, as well as Russian production. Someone sat down with members of OPEC and said, “Listen. We cut production by 2-3%, we’re looking at the possibility of a 20%, 30%, or 40% gain in crude oil prices.” Lo and behold, that math sounded good to the OPEC producers, they did start cutting production, not a great deal, just a couple percent. Basically, we were looking at a 300-400 million barrel of surplus floating around the world, both in tankers and at storage facilities in some of the OPEC nations. After some 18 months of oil production cuts by OPEC and along with Russia, that 300-400 million barrel surplus is down to some 30 or 40 million barrels… just a huge gain for OPEC. Their ability to cut production has just paid off in spades. We have approximately 35-40% increase in oil prices. OPEC is very cohesive right now, something that a lot of analysts are quite surprised at and we are surprised at it, as well. The ability to keep that production offline when prices are going up, my hats off to OPEC, they’ve done a very nice job in order to do this. The market is now balanced. Basically, for every barrel that is being produced there is a consumer right now. We have a very balanced market and, as you can see, it’s up some $20-$25 from where we were just not that long ago. Michael: Yeah, compliance has been surprising, too. I read somewhere that they’re at like 138% compliance. Before, they used to have trouble even getting half the members to hit their quotas, now they’re above 100%. James: Someone did the math for the OPEC producers and said a small 2-3% cut can possibly increase the prices 20-30%. They nailed it. Here are the final results. Michael: As you mentioned, that’s taking quite a bit of oil off the market. OPEC production down 11.4% since these started in January 2017. So, that’s a pretty good drawdown. That’s really, what James is saying, is behind this rally right now. That and we have a pretty good seasonal in effect that’s helping drive prices now, as well. James: Basically, as we get into driving season in the U.S., the largest consumer of oil and gasoline in the world, you have a ramp-up of production where you’re cracking oil into gasoline and, generally, that happens between the months of March, April, and May getting ready for summer driving season. So, that cracking of oil takes oil production and supply off the market, turns it into gasoline, so you have, once again, a temporary shortage of oil as not only OPEC taking barrels off the market but also you have the largest refining season coming up going into driving times of June, July, and August here in the United States. This takes barrels of oil off the market, they are cracked into gasoline, and that’s why you usually have this seasonal rally going into May and June. Michael: Which seems to be following it very closely this year, the seasonal tendency. Now, one thing we’re seeing this year, and you and I were talking about this earlier, is refineries are operating at a torrid pace right now. They’re really hitting it pretty hard as far as production goes. Right now, gasoline production running about 4.2% ahead of pace for where it normally is. So, you’re thinking that they may hit those levels earlier this year and we may see a topping action in crude a little bit earlier this year? James: You know, consumption for gasoline in the United States peaks in June and July right around the 4th of July, or so it seems, but the price of crude oil will often top before then. Crude oil is clearly where gasoline comes from, and as those barrels come offline, in other words, they’re cracked into gasoline, the price of oil will often top before gasoline does. So, the demand is still there but it has already been produced. So, while the greatest demand in the United States is around the middle of the summer holidays, the demand for oil to produce that gasoline has already taken place and thus the seasonal comes down sooner than you would think. Michael: Sure, and this chart’s showing you can see a top in crude any time between mid-May to early-July, as you said; however, if refineries are hitting those levels where they deem supply adequate, they’re going to cut back production sooner and that will hurt demand for crude. James: And then the crude barrels start to accumulate more. Michael: Okay. So, we have that and then also, on the other side of the coin, what we have coming up or what’s even surprised OPEC is the level at which the United States has been able to ramp up production. They’re taking advantage of these higher prices and you referred to high prices carrying high prices earlier. We’re seeing U.S. production just blowing up, going up about 10.5 million barrels a day. Is this having an affect right now on the supply? James: Well, basically it’s balancing… the additional barrels coming from the United States is balancing what OPEC’s not producing. The fact that production in the United States is going to probably exceed 11 million barrels a day coming up in 2019 and 2020. We do see this plateauing and the excitement in oil right now is probably going to be rolling over. If the United States wasn’t the largest consumer, let’s say all these barrels were being produced on the opposite side of the globe, getting them to the United States would be difficult and then maybe the largest producer, now the United States, wouldn’t be such a big deal, but the fact that we’re producing it exactly where we need it, here in the United States, that will offset some of the global demand and price shock around the world. Everyone always talked about, “The United States is susceptible to what OPEC does”… well, we’re producing all the oil we need now, so the fact that oil is approaching $70 and here in the United States we can produce it for between $35-$45, how long is it going to stay above $70? It can only exceed it by a certain amount of dollars per barrel and for a certain period of time. If this level gets to 11 million barrels a day or 11.5 million barrels a day, oil will be coming back down into the low-mid 60’s at the very least, and probably setting up a sale here that’s looking like in May or June for option sellers. Michael: Okay. So, your outlook for the intermediate turn, obviously we talked earlier and we’re not trying to predict what prices are going to do, only what they’re not going to do, but do you see a little more strength coming in and then weakening, or what’s just the general outlook for that window? James: What’s so interesting right now is in some global economies, especially throughout Europe, they are going to feel this large gain in the price of oil. Japan is going to start feeling this large gain in the price of oil. Basically, they are 100% consumers and produce nothing, so oil going from $45 up to $70 will start slowing demand from these major consuming nations. At the same time, when the United States is now producing the most they ever have and now the largest producer in the world, we see oil kind of plateauing here this summer right around maybe June or July, but not falling a whole lot. The fact that we had a 400 million barrel world surplus and it’s not approximately 40 million barrels, the market’s extremely well balanced right now. So, we see some of the excitement that’s going on now in crude oil plateauing somewhat, maybe coming down some $3-$5, but not falling through the floor by any means. Oil production right now is down with OPEC. They have been rewarded for keeping barrels off the market, and I don’t think they’re going to forget that any time soon. I don’t see them going back and ramping up production. They’ve been rewarded so well, they’ve learned a great lesson by keeping, at first, some 3% oil barrels off the market, now it’s up to some 9%, 10%, or 11% of barrels off the market. They’ve learned a great lesson and they’re being rewarded for it, so we don’t see production swamping this market. We see oil possibly trading at about a $10 trading range from where it is now throughout the end of the year. Michael: All that media coverage and, of course, the price rally has increased the volatility, which is what we like to see as option sellers. Taking a look at a trading strategy, how to trade that exact scenario you just described, you’re looking at one of your favorite strategies, a strangle. James: It certainly is. You discussed, just now, headlines and OPEC and trade wars with China and the value of a dollar. All of this really has the volatility of petroleum, especially crude oil, at record levels that I haven’t seen almost since I’ve been investing in commodities, but right now you have put premium extremely high, even with a bullish fundamentals, and you have call premium through the roof right now. My favorite position in crude oil for the rest of the year is practically a $45-$50 strangle around the price of oil. So, in other words, we would be selling calls at the $90 level and selling puts at the $45 level. We think that the idea that strong fundamentals right now will keep the market from falling, but yet the fact that prices are high right now and that’s going to start curtailing demand. My prediction for the rest of the year is about a $10-$12 trade range for crude oil and here we have one of the best opportunities I’ve seen to position in crude oil in a long time. That’s putting a $45-$50 strangle around oil. We’re not right all the time and every once in a while we don’t get it right, but for oil to stay between 45 and 90 through the end of the year, I think, is an incredibly high probability position and that’s something that we’re taking advantage of, as you know, Michael, right now. Michael: You couldn’t do that a year ago. You didn’t get that wide of window, and now we have it, it’s on the table, and you want to take it. James: Michael, that volatility is your friend. I know when it first happens and you already have positions on, “Oh, it’s too volatile for us”… that’s what you like. A year ago, 2 years ago, 3 years ago, the widest strangle you would write on crude oil was approximately $15-$20 and now you’re writing a $45 strangle. We, as well, are going out slightly further in writing and $50 strangle around crude oil. We’re pretty confident it’s going to stay inside that window. We’ll have to wait and see. Michael: And again, watching this at home, this is an example. We are not recommending this to you personally as the perfect trade. In our portfolios, we are diversified over December, January, February, and March. Different strategies and different risk management techniques, but in going out to a month like February, a lot of people think that’s a long time out. We’re about 9 months out, but your plan isn’t to necessarily hold these until February or March or whatever you’re writing out there. Often times, with the right decay, you can be getting out of these a few months early. James: Michael, as we discuss with our clients when they first become clients, we will sell options 6 months, 9 months, 12 months out into the future, but not with the idea that we’re going to stay into that position until the very last day and try and collect the very last dollar. It’s really not important to do that. If we select options fairly well, for example, on the position that we’re looking at right here, after maybe let’s say you sell options 9 months out, if you selected them fairly well, 5-6 months later you should have collected about 85-90% of the potential premium. That is a great place to ring the register and lower your risk and be happy with the position and get out of the trade and buy it back early. Often, we look at February or March or April when we’re talking about selling options. Basically, you’re Tom Brady and you’re throwing it to where the market is not going to be. That is what we’re doing. So, when Michael discusses layering different months and different commodities that’s what we’re doing. To own a portfolio like that, it looks like a great deal of layering in the market and that is what it is and it allows you to have 10 engines on your plane so that when one goes a little bit awry you have other positions to make sure that 80% of your portfolio is going the right direction. This is a great example of doing that. Michael: Great advice. If you would like to read more about the crude oil market, what we’re recommending there this month, or going into our managed portfolios, you will want to read this month’s newsletter… that’s the May edition of the OptionSellers Newsletter. That comes out May 1st. It should be in your e-mail box or showing up in your hard copy mailbox a couple days after that. Of course, if you want to learn more about the strategies we discussed here or the rolling or strangle or some of the other concepts James mentioned, if you don’t have it yet, The Complete Guide to Option Selling: Third Edition, you can get it on our website at a discount, on Amazon, or the bookstore. The link to that is www.OptionSellers.com/book. Let’s move into our closing section for this month. Michael: Thank you for watching this month’s edition of OptionSellers TV. James, thank you for those insights on the cocoa and the oil markets. You have any predictions for the upcoming month? James: The month of May 2018, Michael, I think is going to be the realization that the U.S. dollar is not the weakest currency in the world. The U.S. is looking at probably 2 or 3 rate hikes this year. The U.S. economy is still doing quite well and its counterparts, especially in Europe, the economies in Germany, Italy, France, and England have been doing pretty well over the last 12-18 months, but the expansion in countries like Germany especially, the major driver of the European economy, is showing signs that it may be peaking already. Consumer Confidence in Germany is down, a lot of the sales in Germany is down right now, and not that it’s going into recession, if it does that would be the shortest-lived recovery ever, now don’t see that happening, but the U.S. economy still is on this footing and the European economy is fluttering already. That is going to make the U.S. dollar more buoyant than a lot of investors thought it would be and that is going to stabilize a lot of the commodities. So, getting into short options right now, whether it be puts or calls on precious metals, energies especially, and some of the foods, I think it will be a great calming effect in the 3rd or 4th quarter of this year. So, any discussion about the U.S. dollar isn’t doing so good, any discussion about inflation, I would fade those ideas and sell options on those ideas and, I think, later on this year you’ll be well rewarded. Michael: Sounds like a good outlook. We’ll have to keep an eye out for that. Also, May is a very active month in the grain markets. We have corn and soybean plantings going on here in the United States, so that can often create opportunities there, as well, for option sellers, sometimes on both sides of the market. James: Practically every year we have large influx of volatility in corn, wheat, and soybeans and we are ready and waiting for that to happen. Michael: Excellent. For those of you interested in finding out more about managed option selling portfolios with OptionSellers.com, you can call to request a consultation. At this point, we are booked out through July for our upcoming consultations; however, I believe we still have some spots left for consultations in June for those July account openings. I believe I misspoke there. The consultations are open in June, the account openings are for July. So, if you are interested in those upcoming openings, feel free to give our office a call here and speak with Rosemary. The number is 800-346-1949. If you’re calling from overseas, the number is 813-472-5760. James, again thank you for your insights this month. James: My pleasure, Michael. It’s always great to give our wisdoms and our insight. We’re not right all the time, but I do like the landscape for selling options here in May and June. Michael: Perfect. We’ll look forward to the month of May and we’ll talk to all of you again in 30 days. Thank you.

Michael: Hello everyone. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier. Welcome to your first OptionSellers.com Podcast of 2018. You’ll notice we are doing this in video format this year and we’re hoping we can use some video accompaniments to help you understand some of the concepts we’re talking about. We still will be doing some audios throughout the year, but we hope you’ll like the new format. Here we are in 2018. Stock markets are raging. Global economies are doing pretty well right now. So, we have a lot of global growth going on right now. We’re going to talk about, starting off, what that might mean for commodities. James, maybe you want to lead into that a little bit. What do you see for commodities going on this year? James: Michael, it’s interesting. Over the last several years, quantitative easing, here in the United States and across all of Europe, was thought to eventually make economies stronger. A lot of people were kind of not so hot on that idea, but certainly that has turned the corner. European economies are doing extremely well. China is bolstering once again. Here in the United States, along with some tax implications, the sky is the limit right now on economies worldwide. Of course, the stock market is doing great. Demand now for raw commodities look like it has finally turned the corner. There has always been too much supply. Needless to say, we had the Chinese economic boom of infrastructure spending several years ago. Basically, the market just came down from that and it has been waiting for real demand to finally develop and now we’re here. Copper prices, crude oil prices, some of the energies are making 2-3 year highs based on stronger economic growth throughout the globe right now. Chances for a weaker dollar look pretty special right now for 2018. All systems go right now for commodity prices, probably trending higher maybe throughout the year. Michael: Okay. So, you see this as, at least partially, a demand-led type strength possibly into commodities as a whole in possibly 2018. I know you’ve been talking recently about inflation creeping back in to the conversation here. Let’s talk a little bit about that. What role do you see that playing in 2018 and how might that affect commodities? James: Michael, 2% inflation has been the unachievable mark for several years now. Janet Yellen was trying to produce that. We’re finally there. A lot of some of the most brilliant people who do the bean counting for us for inflation are looking now at 2-½% inflation for 2018. The price of crude oil is such a dramatic input for different price costs throughout the world. A barrel of oil goes into grains and clothing and manufacturing. The price of crude oil has increased some 35-40% recently. That is going to start showing up in the inflation rate. We expect to see that probably the 1st and 2nd quarter of 2018, but investors are getting ahead of that right now. They’re not necessarily waiting for this 2.5, 2.75 inflation number to come out. They see it already and investors and traders want to get involved with it before the “white of their eyes”, they used to say. Michael: Okay. So, many of the people watching this show are interested in option selling or selling options on commodities. Obviously, inflation doesn’t necessarily mean every single commodity is going to be rising in price in 2018, the core fundamentals are really going to be the determinative of that, but it is a supportive factor and something to keep in mind. As an option seller, as somebody that sells commodity options, or you’re thinking about selling commodity options, how does inflation, the possibility of maybe the index as a whole being a little stronger, what affect does that have for commodities option sellers? James: Commodity option sellers can get into a market that has already taken off. For example, the price of oil was recently at 50 and it’s up at 65. A lot of investors are going to say, “Well, how do I get involved with oil? It has already made quite a move.” That’s the beauty of option selling. A person or an investor can still sell a $50 crude oil put just as though their break even was $50 where this bull market in oil started. That is one way an option seller can take advantage of a market that’s already moving… already left the station. With $50 oil right now, everyone would love to have that back. The writing was on the wall with OPEC production cuts… the more demand here in the United States and abroad. Basically, as an option seller, you can get in on that ground floor price that so many people missed out on. The price of gold recently has rallied $100. Do you want to buy gold here at $1,375 an ounce? Maybe, maybe not. We just rallied $100. By being involved with option selling, you can sell puts at the $1,100 mark, so you have nearly a $300 cushion for the market to do a variance. As the market goes higher, if in fact it does, option selling allows people to get in on what was the ground floor, but you get to wait to find out and see if it actually develops or not. The gold market has been trending higher, the crude oil market has been trending higher, a lot of the foods have, and some of these markets you can sell options 30-40% below the current price… A great way to still participate in inflation hedge for investors the rest of the year. Michael: Then you have the other side of the market, too, where often times when markets are rallying they get in the news crude. Perfect example. The general public wants to get in on it and what’s their favorite strategy? They want to buy the calls. So, all of a sudden demand for the calls goes up and people start rushing in and those premiums start going up, and there can be opportunities on both sides of the market. James: Exactly right. So often, the market will overshoot because of hedge funds that are pushing the market up. Then, of course, the public wants to get in and they don’t’ want to trade futures contracts so they want to buy call options. What that winds up doing is pushing call prices way about the fair value of where the market is likely going to reach. Basically, it sets up the perfect strangle, something that we’ve talked about often in our books and some of our material that our readers enjoy so much, I think. Michael: So, overall for 2018, what’s your take on commodities? Do you see this as a favorable environment for selling options? James: Michael, over the last 3 or 4 years, we’ve been involved with option selling on commodities without the volatility, without the public’s participation, without hedge funds participation, so the premiums on both the call and put sides have been slightly tight over the last 2-3 years. That’s about to change. We’re going to see inflated premiums on both sides. Explaining why put premiums inflated in a market heading higher is a little difficult for the laymen, but basically it is blowing up the volatility. It allows you to sell puts at a much greater value than normally you would, but the thing is, as the public comes into commodities, as investors come into commodities, often they want to be involved with the options, and often they want to be involved with the call options. So, while we do see an up market in oil this year and in gold and silver this year, the levels that the public and investors are willing to pay, we’d be happy to take the other side. We’re probably going to see options on commodities inflate to the tune of 30-40% this year, so not only are you picking levels that the market is likely not going to reach, but now we’re going to add just that much frosting to this cake as far as being able to sell options, I think. Michael: If any of you are interested in reading some of our research on some of the markets James is talking about, you’ll want to catch our upcoming edition of the Option Seller Newsletter. That will come out on February 1st. If you’re not already a subscriber, you can get a sample edition at OptionSellers.com/newsletter. James, we’re going to go ahead and move into our next section now and talk to you about some of the markets James is referring to right now and show you some strikes we are looking at. Michael: We are back with the markets segment of the podcast this month, and what we’re going to do is talk about a couple markets that you can follow at home. These are real markets we are looking at for our managed portfolios right now and we are going to talk about some things you can possibly do if you want to try some of these on your own or just maybe get an idea of how we do it when we’re looking at a possible trade. The first market we’re going to look at this month is the wheat market. This is really just a straight-ahead play here this month. It’s a bread and butter market. We’re looking at a market with clear cut fundamentals, discernable seasonal tendencies, we’re not looking for any big moves in the market, we’re just looking for the market to keep doing what it’s doing. Let’s take a look at the fundamentals first. When we look at it right now we are looking at World Wheat Ending Stocks. If you don’t know the importance of ending stocks or stocks to usage ratio in grains, I encourage you to go on our blog and look at our seminar on this… it is OptionSellers.com/agriculture. Ending stocks really measure the supply at the end of the crop year after all the demand has been taken out. It has a really big influence on price. 2017-2018 is expected to be an all-time high in World Wheat Ending Stocks. We’re also at a record level on stocks/usage ratio from a global basis. So, what this tells you is supplies for 2018 look to be very burdensome for wheat for the major part of the year, so that’s a key fundamental you need to keep in mind because what you want to look at is supply and demand and this is telling you that this is going to be weighing on the market all year long. James, you follow this quite a bit. What do you think about the supply this year? James: Michael, it really seems difficult to fathom a really large rally in the wheat market. What’s so interesting about different commodities is copper is produced in Chili, and oranges are produced in Florida, and coffee is produced in Vietnam. Wheat is produced in so many regions of the world and, generally speaking, when they’re all doing extremely well for production it’s very difficult for one crop in a certain country to really shape that idea. Wheat is grown practically in so many different nations around the world. Very large producers are Russia right now is just doing extremely well with their wheat production, here in the United States a lot of production here is winter wheat. Quite often, there’s a lot of grain movements in spring and summer with hot dry weather in Iowa or Illinois. Here in the United States, a big portion of the wheat is produced throughout the entire year. Basically, it is winter wheat. If you look at the other countries around the world that are big producers, another bumper crop again coming up chances are with World Ending Stocks at the level that they are, a little rally in wheat certainly could happen, but the 25-30% increase in prices does not look like it’s in the cards for this year. Michael: Especially with what we’re going to look at next here, which is the seasonal tendency for wheat prices. Now, anyone who follows us knows we do follow the seasonal tendencies closely. These are not guaranteed. What this really is is just a historical snapshot of what prices have tended to do over different parts of the year. It’s not guaranteed it’s going to do it this year; however, in looking at this, what this chart tells us is prices tend to start declining at the beginning of the year and decline through the fall. James, do you want to talk a little bit about why that has tended to happen historically? James: Generally speaking, Michael, the wheat market might have some favorable ideas. People might be looking at possible weather conditions or something like that. Generally, that’s in the winter of the year. It is winter wheat here in the United States, so based on how cold it might be or how much snow they might get, there’s worries about that. So, that does build in a slight premium in the months of January and February. As we go through the winter season where they’re not going to have an incredible amount of harsh cold, the conditions for winter wheat production starts abating. As we see how much wheat we’re going to produce, as we see us getting through this critical of time, the premium comes out for insurance buyers that are making sure that we’re going to have a big enough wheat crop will come March, April, and May. We know what the wheat crop is going to be. Here in the United States, we know that come March, April, and May the crop is basically made, there’s not going to be any weather conditions like there are with some of the other grains, like soybeans and corn. Come March, April, and May, we know how big the crop is and this year it’s probably going to be one of the record crops here in the United States, in addition to what we’re looking at as far as global supplies. As we get into the summer and fall of the year, basically wheat is looking for a home. It has a lot of competition around the world, and that’s generally when prices are at the low in the 3rd and 4th quarter of the year, and I think this chart on seasonalities diagrams it extremely well. The seasonality is extremely bearish as we go throughout the rest of the year. Michael: So, what you’re saying is a majority of the crop is coming in in the spring because it’s winter wheat and in the summer time when corn and soybeans sometimes rally, most of the wheat is already in the barn. James: Right. Whether it’s in the barn or whether we know it’s going to be harvested in a very large crop, we know that in April and May and at that time, then we’re looking for competition from many different areas. The bidders for wheat come July, August, and September few and far between because there is so much of it. In 2018, once again, we’re going to have much more wheat than the world needs and as we get later into the year, as harvest is full blown here in the United States, of course the prices are at their lowest when the crop is the biggest, and at harvest time is when it really has the pressure. It looks like we might get that again in 2018. Michael: Let’s take a look at a strategy here. We’re looking at December 2018 Wheat. James, these are strikes you’ve been looking at, but do you want to talk a little bit about this strike or why you like that strike? James: We do. The wheat market trading just north or south of $5 right now, we’re looking at a slight rally, possibly, in either February or March. If we get a small rally in wheat, we’re going to be looking at selling the $6 calls for December wheat. The chances of a 20-25% rally under these conditions seem quite slim to us. Of course, there’s a large variance. We’re not trying to pick these small moves in the market. Here’s where the current price is. If we do get a small rally, we like selling the calls at $6 and $6.20. It just gives us a huge variance of space for us to be right. Even if the market rallies a little bit, it’s just a far cry from the $6 call strike price. We’re looking at putting this on, possibly, in the month of February or March on a slight rally in the market. We always get gyrations in the market. As you can see, the $6 strike price is very attractive is we get an opportunity to sell those, and I think we will. Michael: If you’re at home and you’re trying to figure out this trade, you still have a $6 call. Prices can do a whole lot of things as long as they stay below that $6 mark. That option is going to expire and you keep the premium as the seller. That’s what we want. Prices don’t necessarily have to go down; in fact, we don’t necessarily think they will. We’re looking at fundamentals right now. We think prices are low and they’ll probably stay low. It can fluctuate a little bit either way, but we think they’ll probably stay low. The right strategy for that is selling deep out-of-the-money calls. A lot of people talk about volatility. Volatility in wheat isn’t extremely high right now, but, at the same time, if you can sell calls up there that’s a fundamentally based trade. You don’t need that volatility. You can still sell the call way above the last summer highs. That was kind of an aberration last year when we saw that rally, but it can still happen. Nonetheless, still below that strike, even in a weather scare. It’s something to keep in mind. Let’s go ahead and move on to our next market, which is the crude oil market. Our next market is one of our favorite markets: The crude oil market. It’s a great market for selling option premium. It’s one we like to trade all year long. The story this year, at least in 2017, was OPEC production cuts. James, those have been having quite an impact on the market here the last several months. James: Michael, it’s interesting… OPEC was really losing a lot of its great reputation that it had back in the 70’s and 80’s. When OPEC spoke, the market moved. When they cut production, the prices went up. They really lost that savvy in the early 2000’s. Here in 2017, this past year, and 2018, someone sat the group down, locked the door, and said, “Listen, guys. If we cut production 2-3%, we can have a 40% increase in prices.” Someone got their calculator out and said, “That makes sense.” We actually have a great deal of compliance right now with OPEC nations. The compliance is thought to be as high as 95-96% going into 2018. That has taken 2 million barrels out of the market recently. The fact that right now we have a great deal of demand for oil because of the stronger economies, that small decrease in production has really ramped up prices. A lot of people are looking at the domestic production here in the United States as likely going to keep up with and then balance the market and take care of those 2 million barrels that OPEC has stopped producing; however, that hasn’t taken hold yet. It does appear that the oil market is on very firm footing. It has increased some $15 a barrel recently for the spot price. It’s up practically $20 a barrel recently. That is setting up opportunities in selling options right now on crude oil, both puts and calls, as well as volatility, which has been missing in the crude oil market for years, is back and back in a big way right now. Michael: When you’re talking about the Sheikhs vs. Shale debate when it comes down to ebb and flow of the crude market, U.S. producers aren’t replacing all of that yet. As you said, they’re not quite there yet, but they are making a dent in it. When we look at U.S. crude oil experts, we had a big surge here at the end of the year, James. That has been a major new development in crude. James: The missing piece to oil rallying, especially here in the United States, has been the fact that the U.S. has not been an exporter of oil for years. Practically a half a century, the U.S. was allowed to sell 50,000 barrels a year and export them outside the country. In 2017, that was lifted. Now, the United States is able to export as much oil as they care to. With the $6 discount to world oil, or the Brent grade, everyone wants U.S. oil. They get a $6 discount, it costs about $1-$1.50 to ship it, that’s a $5 savings for a country that want to import U.S. oil. What always used to happen was the oil market in the United States would increase in summer. Fall and winter, as demand peak takes off to the downside in October, November, and December, this past year in 2017 and possibly again now in 2018, that’s no longer a problem. Driving season, big demand here in the United States. October, November, and December, when demand is less here in the United States, we just export the oil. The seasonality in other countries does not line up with the seasonality here in the United States. There’s a chance now, with oil supplies here in the United States at a 2-year low, we now have that balanced market that so many people have been talking about recently. Something OPEC has been trying to achieve for years, we’re now there. As long as oil doesn’t get too high over the next several months, right now we’re in the mid 60’s for the spot price, demand can keep up as long as prices don’t spike. We don’t’ see that happening mainly because the United States will be producing almost 11 million barrels a day coming up here in the United States. That should keep a lid on prices. Volatility coming in the market right now is tremendous, both on the puts and the calls. We see crude oil, probably, blending in to kind of a sideways market here with about a $5 trading range, probably in the low to mid 60’s. Volatility blowing out on both puts and calls, setting up a great opportunity for strangles, selling puts $20 below the market, selling calls $25 above the market. We’ll see how that plays out, but in March and April that looks like it’s going to be an extremely good position to take on. Michael: Yeah, you’re talking about the crude oil stocks. This is really starting to take a bite out of where we were just last year with the supplies at burdensome levels. Now, we have OPEC shutting the faucet, that’s taking supplies back down towards 5-year averages, which is what James is talking about… bringing that market back to equilibrium. We’re looking at U.S. production here. We’re up over 1 million barrels in just a year. We could be up another million barrels this year. Like you were saying, James, between possibly 10 and 11 million barrels a year. So, it’s not there yet, it’s starting to catch up, it is bringing he market back into some form of equilibrium, we think. James was talking about the seasonal and let’s go back just a second, James, because we were talking about that export ban being lifted. Do you think that may have altered the seasonal for crude oil? Do you want to talk about that? James: Michael, it definitely has. Prior to 2017, crude oil prices would often have a peek in June and July as we enter driving season. The market usually has this large fall-off as we get into shoulder season… November, December, January. That has changed the landscape of seasonality trading for oil for us and for anyone else watching the market. We’re going to now have more of a balanced market throughout the year as far as a seasonality goes. The large drop-off in the 4th quarter is probably going to be lessened now, but the fact that the United States is able to export oil, we probably still will have the highest prices in June and July, but the steep sell-off in the 4th quarter may be history for a while… at least for the next few years as far as we can see. Of course, we’ll look at fundamentals and how they shape up after that. Right now, the large decline in our prices for oil in the 4th quarter, that’s going to take a back seat to the fact that the U.S. is now able to export oil. As long as there’s a $5 discount to Brent, a lot of countries around the world are going to want our oil for sure. Michael: Let’s talk about a strategy here. James, we mentioned the strategy he was considering. James just kind of puts it into graphical format. Do you want to explain your thinking here and what the trader is going to be looking for in a trade like this? James: Certainly. Here has been the sideways pattern that oil has been in for quite some time. It’s about a $10 difference between summer demand and winter slacking in demand. That’s really changed as the U.S. has started exporting oil. The supply here in the United States isn’t that great. OPEC has bit off a big chunk of the additional barrels by reducing production, and that’s what this move is right here. We expect this trading channel to now develop here. With the U.S. now about to produce somewhere between 10.5-11 million barrels a day, why is that important that the U.S. produces that much? Well, we’re the 1st largest consumer in the world. We’re about to go 2nd to China, but regardless of that, the barrels are needed here, we’re going to have them here, and that should prevent oil from taking off to $75 or $80. Being short that level and being long from this level, we think, is going to be an ideal window for the market to stay in. Less oil out of OPEC, better demand. We’re basically going to take this sideways trading pattern and put it here, and then we really enjoy being long the market from this level, we’re really going to enjoy being short in this price. A strangle right now in crude oil looks ideal in 2018 going forward. We’ll have to wait and see. We’re going to adjust these strikes slightly going forward; however, a $35-40 strangle around oil, I think, is going to capture the majority of price swings over the next year or two. With the volatility just coming into the market, premiums are very large on both puts and calls. I think we’ll be able to take advantage of that for the next several months. Michael: So, it doesn’t really matter when you’re in a strangle which way prices are moving on a net basis, as long as they’re staying in that range. The balancing affect, too, of the strangle, where if it’s moving down, maybe your put is moving against you but your call is making up most of that in profits and vice versa if it’s moving up. Strangles are a very versatile strategy, and for a market you expect to be range bound, it is pretty much ideal. What kind of premiums are traders expecting if you sell something like that? James: Both puts and calls right now are trading around $600-$700 each. Prior to the spike in prices, a lot of the options were $400-$500. They’ve increased some 25% on this new volatility in the market. Volatility is kind of a 2-edge sword. You enjoy volatility when you’re selling options, that’s what we got recently, and I think the new 25%-30% increase in options is going to be a boom for us and anyone who is logically selling options on oil over the next probably 12-18 months. Michael: If you want more information on our managed portfolios where we are doing trades exactly like this, similar to this, and in a variety of markets, feel free to go on our website and request our free Discovery Kit. That’s OptionSellers.com/Discovery. You’ll get all the information about our accounts, how you can invest, and that sort of thing. Let’s go ahead and move into our final segment this month and that will be our Q and A with the trader. Michael: We’re going to do our Q and A section this month. This is where we take letters from you, our readers and viewers, if you’ve read our book we get a lot of emails and letters here in the office, so we’d like to take some time and answer them here. The first one starts, “Dear James, I’m looking 6 months out, as you suggest, but can’t find the premiums you are suggesting. What do you recommend when there are no commodities to trade? Jim Oakes, Bakersfield, California.” James, how would you answer Jim’s question? James: Well, Jim, basically there is so many parameters that we follow when trying to identify the best possible opportunities for selling options. Generally speaking, seasonalities will have a shorter duration. In other words, if it is coming up on a weather market in summer or cold conditions in the winter, generally that trade or that opportunity will last maybe from 3-6 months. The fact that it’s going to be a shorter duration means that something’s going on in the market, which causes premiums to build up dramatically because of possible weather in June and July for grains, something along those lines, and investors are willing to pay up large premiums for a relatively short period of time. So, generally speaking, a 3-6 month investment on opportunities in short options will develop from a weather market. For example, a seasonal opportunity is normally going to be about a 6 month sell in premium on options. Generally, when you’re strictly trading on fundamentals, in oil or gold or coffee or sugar, we’ll often go out as far as 9-12 months, which gives us much further out-of-the-money, if you will. We are willing to and more than happy to look at options much further out in time and much further out in price. The fundamentals of the market really don’t change very often. Sometimes they’ll change just slightly. The market will often get a 5% rally or a 5% fall in oil or gold or silver or coffee, and some of the experts will come on the talking shows in the financial community and say, “This market’s going to the moon. This market’s falling out of bed”, and generally they’re really not. That is the reason why we’re willing to go further out in time and further out in price. Usually that’s just noise, usually the market isn’t going to the moon and usually it’s not going to zero. Generally speaking, if you’re too short in time, the market will make a sharp abrupt move, knock you out of your position, and, of course, 30 days later the market is doing exactly what your fundamental analysis thought it would do, except now you don’t have your option and you don’t have your cash. We don’t mind going 9-12 months out. A lot of investors will say, “James, that gives you a long time for us to be wrong.” I look at it as it gives us a long time to be right. Fundamentally the markets move very slowly, technically they move very fast and we don’t want to be involved with those large technical moves up and down that investors get all excited about. Michael: I’m not sure if Jim’s question was that he can’t find options at all or he just can’t find the premiums he’s looking for. If he’s trading in the commodities that we’re talking about, the 10 or 12 we’ve mentioned, there’s tons of open interest. Maybe Jim wasn’t happy with the premium 6 months out, but what you’re saying is sometimes there’s 3-6 month premiums that only come about as a result of a weather market and that’s why we’re often going further out in time to get those bigger premiums. So, Jim, that’s one thing you could look to do if you’re not getting the premiums where if you’re looking 3-6 months out. The other thing is, that I would answer to this question, is it could be the platform you’re using, too, because I’ve heard a lot of complaints about, I don’t want to mention any by name because they’re all good platforms, Think or Swim, Interactive Brokers, they’re good platforms, but some of those, TD Ameritrade, I don’t even know if they do commodities, but some of them don’t go all the way. They only offer you a few months. So, if you really want to see where these things are trading and see the contract months that go all the way out, you should probably be working with a dedicated futures platform. We use CQG, which is outstanding. That’s something you may want to look into. James: Michael, great point. To follow up and expand on that slightly, the fact that we are selling options in so much large volume, we’re selling for hundreds of millions of dollars worth of equity that we manage, we are able to actually contact market makers. The market makers are going to give us bid-asks on options and strikes that might not be available on some of the platforms that you’re referring to. I think that’s the big difference. If you’re trying to sell 10 contracts of a particular strike, it may not appear to be available, but if you’re selling 10,000 contracts in that strike, banks around the world want to do business with us. That might be the difference, as well. We’ll have to see. Michael: That’s one benefit of going managed. If you don’t want to do it yourself anymore, you want someone else to handle it for you, it is one of the benefits you do get if you go with a managed program. We’re managing a large amount of money and some benefits come with that. Let’s move to our next question here. This comes from Paul McDonald of Hempstead, Texas. I believe that’s down in the Houston area. “Most of your examples, you base your trade on being held to expiration. With stock options, I can buy out of them early if they are showing profit. Can you do this with commodities?” James: That’s a great question. Often, we discuss options expire worthless this percentage of the time or that percentage of the time. As money managers, on selling option premium portfolios, we look at a 90% gain as a great time to buy back out of an option. We were just discussing selling option premium further out in time. The sweet spot of decay, after selling probably a million options on commodities, I have found to be further out in time than a lot of the books write about. So, if we’re targeting an option value of $600-$700 each, possibly as far as 12 months out, as we’ve been discussing, when that option has reached a 90% decay factor, in other words, it’s trading at 10% of the value that we originally sold it at, it doesn’t matter if there’s 3 months left on that option, 4 months left on that option, and so on… we will then buy it back. We think that’s a great strategy that you’re utilizing and we do the same thing when managing portfolios. We do buy back out early, we do close out, get rid of the risk, free up the margin, and move on to probably selling the same option and the same strike 6 months further out and do it all over again. Michael: The buy backs are just as easy in commodities as they are in stocks. In fact, that can be a favorable strategy, one James uses often and recommends. There’s no reason not to do that. It eliminates risk, and once you get to a certain point with an option there is very little to gain but you’re still holding that risk. You doing those early buy backs eliminates the risk, you re-deploy your capital, just an efficient way to manage your capital. Good question, Paul. I hope we gave you a good answer. If you’re looking for more answers on strategies and ways you can apply option selling, we do recommend our book, the latest edition of The Complete Guide to Option Selling. That is available on our website at OptionSellers.com/Book. You will get it at a discount there, than where you’ll get it at Amazon or bookstores. Michael: Everyone, we hope you enjoyed the podcast this month and hope you got some valuable tips out of it for making yourself either a better option seller or learning if managed option selling might be a right fit for you. Going into February, we have the Super Bowl coming up. James, do you have a pick for the Super Bowl? James: Michael, as a quarterback in high school, all I ever wanted to go up and down the side line and yell at my linemen for not blocking and not tackling. The fact that we were like 1 in 8, I really didn’t want to yell at them too much. Watching Tom Brady go up and down the sideline and yell at his players and get them pumped up, that just gets me excited about football. Next year, if they start selling options on football games, I’m going to sell puts on New England each time next year. So, I’m a Tom Brady fan. I’m from Green Bay, but I appreciate great football and he’s my guy for the Super Bowl game, so I’m rooting for definitely the New England Patriots. Michael: You better be careful. A lot of people out there aren’t big Patriots fans. I think if there’s any team out there that can give them a run for their money it’s Philadelphia Eagles. They surprised everyone. I’m sorry, if I have to make a pick I have to go with the past, too. We’ll see what happens. James: Michael, I’m a real football enthusiast and during the Super Bowl I just root for a great game and hopefully that’s what we’ll have. I hope the Eagles can bring that. Michael: Me too. I hope so. If you are considering talking to us about an account this month, the announcement this month is we are now booked out into March for consultations for new accounts. If you are interested in talking about a new account, you’ll want to call Rosemary here at the office. 800-346-1949. She will schedule you for our first available consultations that we have. If you’re calling from overseas, the number is 813-472-5760. Also, in this month’s newsletter, we have a major announcement regarding our new accounts. If you do get the newsletter, whether online or a hard copy, you’ll want to take a look at that. This will affect you if you are considering opening an account over the next several months. James, thanks for your great insights this month. James: My pleasure, Michael. It’s always great and fun to do. Michael: Everyone, we appreciate you watching our podcast. If you liked what you saw here, be sure to subscribe to us on YouTube or iTunes. We will see you again in 30 days. Thank you. James: Thank you.

Brock and crew gather on deck. We learn more about the Keldysh and laws of the sea.

Michael: Hello everyone. This is Michael Gross at OptionSellers.com here with your podcast for October 27, 2017. Well, we marked the thirtieth anniversary of the stock market crash of 1987 this month. With stocks hitting new highs every day, a lot of investors are asking that same question – can it happen again. Some people say no, some people say yes but, an interesting prospect comes into play here with the news on tax reform. Will tax reform get passed? How will that affect the stock market? [I’m] here with James Cordier our head trader. James, welcome to the show. James: Thank you every much, Michael. Good afternoon to you. Michael: James, what’s your take on this. Everybody’s building up to tax reform – how it could affect stocks, if it does or doesn’t go through. Do you have a viewpoint on this right now? James: Michael, the discussion about tax reform is certainly extremely business-friendly. Practically all facets of the U.S. economy would likely benefit from this and of course bringing overseas dollars back to the United States, allowing companies to generate more income through investment as well as the one-percenters that sometimes sit on their hands when taxation is too high, a great number of these things could be alleviated if tax reform goes through. Certainly, I think, that’s what a lot of the bullishness is with the stock market right now. It’ll be very interesting to see the next thirty days how that plays out and then what the stock performance is after that. Michael: I saw this month that Goldman-Sachs projected there’s a sixty-five percent chance tax reform gets passed in 2018 but, there’s also some dire warnings what could happen to stocks if it doesn’t get passed. Do you think there’s a built in assumption right now in equities that this does go through and if it doesn’t, there’s going to be some disappointed bulls out there? James: I think so. Certainly, the stock market is forward thinking and they are looking at tax reform in the very near future, probably the first half of 2018 like you mentioned. There is no question that the stock market is at precarious levels. If it continues to get positive forward thinking, no reason why it can’t go up but, sooner or later, it’s going to get a dose of medicine that it may not tolerate and tax reform not passing would certainly be one of those possible culprits. Michael: Alright. Certainly something to watch over the next several months. Let’s hope we can get it done. Topic for this month’s podcast is two markets for year-end positioning and, we’re going to talk about a couple markets here that probably don’t care much about what happens in stocks. They’re completely uncorrelated. As we know from anybody that’s listened to us or read our materials we trade commodities primarily because that non-correlated aspect to stocks and each other. Primarily answering to their own supply-demand fundamentals. Out first market this month we’re going to talk about is the natural gas market. James, this is a market you’ve talked about here previously – the last month or two. But now we’re coming into the time of year where a lot of small speculators, people that aren’t real familiar with commodities often think of kind of that pop analysis, ‘boy, I should buy natural gas heading into winter because it’ll probably go up.’ A good article you wrote this month about that says maybe you want to do just the opposite. Do you want to talk about that a little bit? James: Michael, it’s interesting natural gas just has incredible historic volatility. With hurricanes that came into the Gulf of Mexico several years ago and then some extreme winters that we’ve had a few years ago as well, and that has brought investors looking at things like natural gas going into the winter season. The last few fourth quarters in the United States have been relatively mild. That is one of the reasons why natural gas is down this year going into winter heating season. It appears to us that natural gas supplies however, will be quite ample. We do often with the first cold blast in either November or December you do have speculators, both large and small, run into that market. The bottom line is this: Natural gas is now produced in so many not only nations around the world, but also states here in America. The idea that we could run out of a certain amount of the supply, one mishap or another as far as production, or if there’s a big spike in demand, natural gas can go to the moon, and right now that criteria has really been taken out of this market. We have a great deal of new drilling, especially in Texas. We have natural gas basically being produced as a by-product. So, we think natural gas in the low 3’s is probably fair valued for the market right now. We are going to be very keen to selling calls above the market on again if we do get a bit of spike here in November or December but, we’ve had positions laid out for several months already as high as $7 in natural gas. I know that seems quite high above the market right now and it certainly is however, we probably get one more push up in probably late November, early December, and at that point we could probably be looking at selling calls practically double the price of natural gas. So, we’ll be watching very closely for that when some cold temperatures finally come down from Canada here over the next thirty days, or so. Michael: Yeah, and talking about supply, the latest supply figures showing natural gas supplies in the U.S. at 3.595 trillion cubic feet. That’s near a historic high for this time of year. So that’s really backing up what you’re saying there as far as supply goes. But we have another dynamic in natural gas as well. I know another thing we look at, especially this time of year, is we have a seasonal tendency and, that seasonal tendency do tend to get a little spike in the fall at some time leading up to winter, as you mentioned, and then natural gas prices historically have tended to decline sharply after that. Can you explain a little bit for our listeners why that tends to happen? James: Generally, we were building supplies here in the United States just for that reason, for a potential frigid winter, especially in the northeastern United States. If the winter turns out to be anything other than a historic low temperature winter, we have more than enough supplies and of course, natural gas is used to be heating homes and businesses and fueling factories and such. But it never quite seems to be such a demand driven market in the winter as it normally would be possibly several years ago when natural gas supplies weren’t as high as they are right now. The market does seem to make a little bit of a pop to the up side in November/December but, it’s interesting if you look at a fifteen or twenty year seasonal pattern for natural gas, it actually falls into January and February only to bottom out then. So, I basically think that you have bullish investors trying to game the market a little bit before winter. If we have anything other than an extreme historic winter season prices do fall on expectations of the demand not being as high and then, we actually go down in January and February and that often then is the seasonal low for a rally going into spring. Michael: Very good. So, it’s a combination of fundamental high supply-side factors and we also have a seasonal tendency. And remember, if you’re listening, we’re not trying to predict prices going to be lower. We’re simply trying to predict where they’re not going to go. At this point, James feels that the pressure is going to be on the bulls this season and the highest odds trades are going to be selling those calls high above the market with expectations that prices could be lower but they don’t necessarily have to do that for call sellers to make money. If you’d like to learn more about the natural gas in this trade, you want to check the blog. We have a full-length article there and we talk about different potential trading opportunities there. That’s OptionSellers.com/blog. James, let’s move into our second market this month. That is the coffee market and, this is another market we’ve talked about recently but we’ve had a significant development there during the month of October. We had the event of coffee flowering, which takes place in Brazil – a big time of year for coffee. Do you want to talk about that and what’s going on down there? James: Michael, the most important seasonal factor to influence coffee prices over the entire year is the weather in Brazil in the months of October and November. We have a record number of coffee trees in the largest producing country of Brazil and, they are waiting for precipitation and that normally takes place in October and November. If, in fact, precipitation does develop during these two months, you have the largest number of trees ever on record waiting to produce cherries, which of course turn into coffee beans later on. What’s so interesting about October is that leading up to October weather patterns in Brazil are normally moving from west to east. A situation develops where it starts moving from south to north and during this transformation, it’s often dry in Brazil and people start getting excited about the fact that we might have a smaller crop next year. Precipitation, as we can see it right now, looks like it’s going to be right on course for October and November. We think that we’re going to probably be looking at the largest production ever coming out of Brazil next year but we will be keen to watch is for some periods of time, maybe a week to ten days, where it’s not raining in Brazil. That’s when you get investors, once again, speculating that it’s too dry there. It’s seems to make the news quite well because that is an important timeframe. So, we will be looking for rallies in coffee in October and November to take a short position by selling call options far out of the market and, we do watch the weather closely and for October and November that’s what we’ll definitely have our eyes on. Michael: James, we also have a seasonal tendency in coffee, as well, and it’s associated exactly what you talked about – about the flowering season. It tends to be dry. Speculators come in and bid up the market. Then, when rains inevitably arrive, which the almost always do, that anxiety comes out of the market and you often see coffee prices fall. Now, we’ve had coffee – hasn’t really had a rally this year. Is that because of the higher expected supply this year? James: Michael, it is. Everyone knows that this is going to be the “on” cycle for Brazil. That is, when the tree has a smaller seasonal production, and then a larger seasonal production the following year. We are coming onto the “on” cycle in 2018. So, the idea that Brazil could produce sixty million bags of coffee this coming year, at a time when U.S. supplies are at all-time highs, the combination is really lethal for higher coffee prices, we think. You could get a seasonal weather rally. It could happen in October/November but longer term, the reason why coffee prices haven’t rallied this year is because they are looking down the barrel of extremely high supplies and the United States, of course, is the largest consumer of coffee in the world and, we’re sitting on the highest level of coffee beans in thirteen years. If Brazil does get the rain that they’re expected to in the next thirty to sixty days, we’re looking at a bearish coffee scenario for the next six to twelve months. – Would really enjoy seeing a little bit of weather premium built in in the next thirty days. That would be something that would really play into our hands, I think. Michael: Okay. So, you and I know there’s a lot of different things we’re doing in coffee right now for clients – different strategies we can use, whether it’s up or down but, the guy sitting at home, he’s listening to us and he wants to maybe try out some trades, look at the coffee market, does he wait for a rally into the end of the year? Or, does he go ahead and sell calls now with the expectation that if it does rally, it’s not going to go too far? James: I would start selling calls, just a small position, right now and then hope and wait for a rally. The coffee market is sitting right near twelve-month lows. I think it’s just a couple pennies off the lowest price of the year. There will be ideas of dry conditions. There’ll be talk about the weather is not just right and, this is the critical time of the year. It just simply takes a little bit of the news media to get a hold of weather that isn’t quite perfect and they will talk about it and, I would expect coffee will probably get a ten to fifteen cent rally this November, possibly December. That would be the time to really lay out coffee calls, in my opinion. Michael: Okay. For those of you who do want to read more about the coffee market and some suggested trades we have in there for option sellers, you’ll want to read this month’s OptionSellers newsletter. That is the November edition. It should be out at or around November 1st. If you’re currently not on our subscriber list, you can get a free trial copy of that at OptionSellers.com/newsletter and also read our other features we have in there this month - a good piece in there as well on how to use technical analysis in your option selling. Obviously, we focus a lot on fundamental supply/demand of the markets, which is probably your most important aspect but, there are some technical tricks you can use to really help boost your odds and we talk about that in this month’s issue. James, why don’t we go ahead and move into our lesson for this month. Probably a valuable lesson to people, especially new option sellers that haven’t sold a lot of options, and that is a concept we talk about in our book, which is staggering or layering options through different expiration months. James, I know this is a strategy that, I don’t know if you invented it but, you certainly in my opinion came close to perfecting it. Do you want to talk a little bit about what staggering is? James: Michael, it’s interesting when we have new clients join our firm, I from time to time I’ll get a new client say, “James, how many trades do you do in a month?” Or, “How many trades will we be doing in a year, as far as positioning the portfolio goes?” Basically, we trade, of course and identify opportunities based on fundamentals. So, what we might do is sell a six to twelve month option in coffee or, natural gas or, gold and, if we see the type of decay that we project, often three months later the option will have lost already maybe 50% of its value. The fact that we trade based on fundamentals, we will now look at that exact same positioning three to six later and, if the fundamentals are the same, we will start doing what we call layering. In other words, right now we’re in the month of October, we might possibly be selling June options for natural gas, or for coffee, or for gold, and as we turn into 2018 we get into say January or February – if those options are behaving like they normally should, they’ve lost probably over half of their value - at that point, we lake a look at the price of the same commodity. If the fundamentals are the same, we will then sell six months out and use the exact same strike price, or very close to it, collecting the same amount of premium, or very close to it, and basically just positioning on fundamentals. So, after the pipeline is filled, if you will – after you have five or six selections in commodities that are working for you – that is what we call layering. Three months later the original options are now 10% of what we sold them for, we might buy them back. The options that we sold on the second round, they may have decayed 50% and, what are we doing now? We’re selling the next six months out. And that is what we call layering. Basically, a brand new portfolio is just basically filling the pipeline. As you go forward, three months, six months, nine months out, you start having options decaying and then coming off every three to six months. Michael: You make a good point there. You have expirations expiring every couple months and some cases, every month. It’s really smoothing out that equity curve, if you’re the investor that has your portfolio structured this way but it’s also spreading the risk around so you don’t have all your risk concentrated in certain expiration months or even certain markets and ultimately, I think that the reason you adopted it James, it’s really helped produce more consistent results. Would you say that’s the case? James: It is. You certainly don’t want to…you’re not scouring different commodities and different options and make one big bet on what you like that particular month or period of time. Being in a basket of commodities, selling options sometimes 50% out of the money, granted you’re selling a lot of time when you’re doing that but, generally speaking, the price of coffee has little to do with the price of gold, and gold has little to do with price of Apple stock. It’s a great way to diversify. Michael: Alright and if you’re listening and you’d like to learn more about the concept of layering or staggering your options, you will want to consult The Complete Guide to Option Selling, Third Edition. You can get that on our website at a discount to Amazon or bookstores. That link is OptionSellers.com/book. We thank you all for listening this month. We do have an announcement here as far as final openings for new accounts for 2017. We are currently filling our final new account interviews. They’re taking place during the month of November. If you are interested in potentially opening an account in 2017, you’ll want to contact Rosemary Veasey, our office manager, at 1-800-346-1949. I believe there are still a few openings in November for those final interviews. James, I really want to thank you this month for your insights. James: My pleasure, Michael. Always enjoy bringing information to our listeners and showing them maybe a smarter way to invest. Michael: Great! For all you listening out there, have a great month of option selling and we will talk to you next month.

Michael: Hello, everyone. This is Michael Gross at OptionSellers.com. We are here with your monthly podcast for August 25th, 2017. I’m here with James Cordier. James, welcome to the show. James: Thank you, Michael. I’m always glad to be here and share our knowledge and wisdom. Michael: Excellent. Well, we are here in the last week of August and we are heading into Labor Day weekend and right around the corner is, of course, September. A lot of people come back from vacation, a lot of traders come back into the fold, and often times we find out where we really stand in a lot of markets that may have drifted one way or the other during the summer. Right now, as we look at stocks, kind of off a little bit. From the beginning of August we’re down, although up a little bit early in the week here at time of recording. We’ve had a little push downwards and, James, I know you addressed this in your bi-monthly address to clients on video, but do you want to talk a little bit about what might be going on right now in equities? James: Yes, Michael. The equities market, as everyone knows, has been hitting all-time highs throughout the first 6 months or so of the year; however, just recently, a bit of a speed bump with just absolute chaotic times right now in Washington D.C. A lot of the Trump ideas that helped get him elected, which propelled the stock market recently, are in question. Tax relief and de-regulation and 0% interest rates all might be influx right now, and, certainly, a lot of the reasons why people were buying stocks over the last several months were these very business-friendly ideas. I wouldn’t say that they’re gone and out for sure, but certainly they’ve taken a back seat to just simply getting Washington squared away. Hopefully these ideas will come back because they definitely are business friendly. While we’re not in the stock market, we certainly do root it on, because I’m sure a lot of our listeners and a lot of our clients do have stock holdings, so we’re always rooting for it. It has taken a little pause here for certain reasons, and a lot of them are some of the goings-on right now in Washington D.C. Hopefully it’ll get straightened out before too long. Michael: Yes, obviously this market is still in a bull market. There has been no bottom falling out and there may still be some reasons to buy the stock market. Just some interesting stats I saw was that as of earlier in the week here, on the whole year the S&P was up about 9%- not too bad, but certainly off the highs. Interesting note, James, the Russell was even on the year- no gain at all. James: Right. I noticed that, and a lot of the ideas of deregulation and, you know, lower taxation, that should be helping the small caps. The Russell being basically even on the year really does bring into the question is “How broad is this rally?” Certainly, the Dow Jones, basically we cherry-pick 30 stocks and the ones we like we put in there and the ones we don’t like we take out. Certainly, the Dow Jones has done extremely well, but some of the larger gauges of the stock market, like you said, are unchanged or up a percent for the year, and I think that was an eye opener to a lot of investors that saw that in the news here recently. I know it was to me, as well. Michael: Well, I’m just glad, James, that you and I don’t have to forecast the stock market because that’s certainly too many moving parts there for me. I know you feel the same way. James: Likewise. I really enjoy investing our client’s money and talking to our listeners today based on fundamentals of 10 commodities that have been around here forever and will likely be consumed for years and years to come. Michael: On that note, why don’t we talk about something we do know quite a bit about and that would be autumn seasonals, which is the topic of our podcast this month. We’re going to talk about a couple commodities here that we do study very closely and maybe do have some insights into. As far as talking about seasonals to begin with, if you’re a listener or have been listening to us for a long time or you read our book, you’re certainly aware of seasonal price tendencies in commodities. It is something that we follow very closely. They are not the buy-all and end-all of price forecasting, but they can certainly be a very big factor and something that can help you tremendously as an option seller. James, I know we were talking quite a bit about grain seasonals this summer and how they often sell off into the fall. Lo and behold, that seems to be exactly what happened across the board. James: Boy, it really is. Grain stockpiles around the world are at extremely ample levels. We did have quite a weather rally in the month of July and, Michael, it always seems to be too hot or too wet or too cold or something, then the market rallies. Come fall season, generally, some of the greatest producers of the world of grains are here in the United States and, lo and behold, we’re going to have quite a bit of a bumper crop in corn, wheat, and soybeans. When you add that to carry-overs from all the other production in the world, lo and behold, prices come back down to earth and they’re doing again this year. We’re not even through August yet and we’re making quite a push to seasonal lows here probably over the next 30 days. We have corn, wheat, and soybeans testing 12-month lows. It wasn’t that long ago, just a month ago, they were testing 12-month highs. Certainly, there’s a bit of a whipsaw action this year, like most years, and as we get into September and October we think prices will probably be quite heavy because of seasonal factors. Michael: Yeah, the seasonal tendency is not always perfect, as you and I know. At the same time, grains this year seem to follow it to a tee. They start declining oftentimes into harvest, the market starts anticipating that harvest, starts anticipating that excess supply coming on the market, and prices tend to start going. That’s exactly what they’ve done this year, especially now that we’re past the pivotal parts of potting and pollination in corn and soybeans. So, it’s just an example. If you’re listening at home and following grains, this is an example of what seasonals can do and how they can help. It’s not always perfect, but it certainly can help. That’s what we’re going to talk about now as we come into autumn. It’s a key time of year for a lot of commodity seasonals. The seasons are changing, there’s a lot of things going on fundamentally, and the first market we’re going to talk about of course, James, is one of your favorite markets, which is the crude oil market. This is the key time of year for crude oil, as well. Maybe you want to talk a little bit about the seasonal there and what tends to happen this time of year? James: You know, Michael, you mentioned something really interesting. The seasonals aren’t the end-all to commodity trading; however, it certainly is a tool that we enjoy using. It’s not spot on every year, but what we like to do, as you know, is we gauge the fundamentals going into a seasonal time frame. If they coincide with the seasonal factors, that is certainly something we like getting involved with. The energy market coming up again is one of these. As you know, Libya, Nigeria, and west Texas are producing some 20-30% above what they were expected to produce as far as reference to oil production. If you take west Texas, Libyan and Nigerian extra barrels that they are now producing in excess of what people were expecting, it is going to come extremely close to what the OPEC production cuts were. So, Michael, if you look at it that way, the production cuts that were creating quite a bull stare in the market this summer, that seems to be coming to an end based on the fact that production is going to equal out with the extra barrels coming from those other locations. Michael: The media really hit that hard and talked about the OPEC cuts and the bulls came out of the woodwork. It didn’t seem to have much of an effect, and now you’re saying that it may have no effect on supply whatsoever, being made up elsewhere. So, as we head into fall, we’ve already taken away one of those big bullish bullets, so to speak, is what they were hanging their hat on. If we look at a seasonal chart, which if you are getting the upcoming newsletter we do have this featured prominently in there, but James, we see crude oil going into the 5-year seasonal average here, and it tends to start falling pretty dramatically in September. Now, we talked about fundamentals and underlying fundamentals driving the seasonal, but what are the fundamentals that tend to happen this year that tend to cause that price decline? James: Michael, that’s a really good question, and a lot of our listeners and clients probably have the same question. It’s basically we are looking at a balanced to over-balanced oil market; however, in the months in June, July, and August, the United States, which is the largest consumer of energy in the world, heads out for driving. It is driving season and if you think that that’s just a saying, it truly does matter. When you have some 300 million people that have vacation ideas versus stay-home ideas, that makes an enormous difference to the consumption of gasoline in the United States. In July and the first half of August, the United States set all-time records for consumption of gasoline. That is what has propelled the market here for the last 4-8 weeks that got us out of the 40’s. It got us up to $50 a barrel in crude oil. However, the magic is, starting in September and then October, all those driving ideas and all those vacations are now pictures in albums, or should I say pictures in people’s Apple iPhones. People are sitting at home and they’re digging in for school and fall, and that makes a huge difference. We think that seasonal is setting up practically perfectly again this year. Michael: So, you’re somewhat bearish as we head into fall, here. I know you’re going to be doing an interview with Bloomberg in New York next week in-studio, and you’ll probably be talking about at least partially about the crude oil market, so this is something that our listeners want to hear now is to not only what we think it’s going to do but why we think it’s going to do it. You’ve already covered a couple aspects of that. Let’s just talk about supply here briefly. We’ve talked about the seasonal, we’ve talked about OPEC, which is kind of a non-factor right now in your opinion. What about U.S. supply? What are we looking at there? James: The U.S. supply usually comes down during these large driving season months, and it has done that. We are some 3-4% below all-time record levels that we had earlier this year and late in 2016. So, the supplies have come down. Generally, that’s a very seasonal pattern. We’re not producing any extra oil or gasoline during the summer months. It basically stays pretty constant throughout the year. The seasonal factor then is the less driving that happens in September, October, and November – they call it the shoulder season. Basically, it’s after driving season and before winter hits. That is when the U.S. supplies will start increasing again and whether they hit a new time record this fall, or not, we’re going to be pushing at levels that is way more than what the U.S. needs. Of course, you have OPEC nations that will likely be scrambling and probably fudging a bit on the compliance with their production cuts that a lot of people talked about. What’s so important to know about oil is a lot of these countries, OPEC nations in particular, they have a specific amount of income that they need from their oil production. When oil is sitting at $50, it is pretty constant; however, if we start getting in down to 42, 40, possibly below 40 later this fall, they’re still needing the same amount of income from oil production. That is where it could get a little bit of a slippery slope for oil prices this fall when countries like Iran, Nigeria, Libya, and Saudi Arabia need to produce a certain income for their country and for their needs, and yet oil might be at 10-15% below the price. Then, the barrels start to flow and that’s what’s going to get probably interesting here on the downside here in the months of October and November. Michael: James, that’s a great point. You talked about OPEC and addressed it earlier that OPEC’s potentially cheating. A figure I know that we discussed a few weeks back was although OPEC is still “supposedly” under the restraints of the cuts, exports of oil out of OPEC nations hit a record in July- 26.11 million barrels a day. So, maybe they’re pumping a little bit less, but they certainly haven’t stopped selling it any more slowly, have they? James: Well, Michael, that’s the exact thing. Certainly their storage facilities and producing nations, as well, not just here in the United States, and that’s basically a way to get around the quota. They’re keeping oil flowing through export channels and, yes, lightly reducing production; however, what does that mean? That means the world is supplied, in some cases over-supplied, with oil. It’s interesting, later this fall and early this winter we could have millions of barrels more than what the world needs. Yet, if the world is producing just one extra barrel the price goes down. So, we do have some interesting times coming up in oil. We really like the idea of selling calls above this market for the next 6-month time frame. As you know, there are never any sure things, but we really like the idea of selling oil calls some 20-30% above the peak that they hit in summer as we go into the fall low-demand season. Michael: Okay. Yeah, a lot of people that listen to this or maybe watch some of our things think that to sell this we have to have oil prices go down to make money. While we think that possibly could happen, that doesn’t necessarily have to happen for an option selling strategy to be successful. James, just one more thing I wanted to throw out here, you were talking about supply levels and I pulled up some stats here while we were talking. You made a good point that supplies you’re down this year over last year, about 5.3% below where they were last year at this time, but we were at record levels last year. Even at current supply, we’re still 22% above the 5-year average. We’re certainly still in a burdensome supply situation as far as that goes. As we head into the winter months here, you’re talking about particular strategies, do you like selling naked here? When you look at it, is there a strategy that you could put together for a spread? I know we do a number of different things in our managed accounts, but maybe just for the individual investor listening… any advice for those guys? James: You know, Michael, I think some of our listeners actually take positions on our discussion, and other listeners are probably learning about selling options possibly on their own for the first time. Just as a pure speculative position for a listener is to simply take a look at selling calls, and I would say naked calls yes. Certainly we do have spread analysis we do as well in positions that we take that are covered. With oil trading around 48 and, in my opinion, probably going down to the low 40’s over the next 2-3 months, I would sell calls in the $64, $65, $66 level going out, say, 6-9 months or so. The conversation about selling naked options, I think they use that word for a reason to scare people away from doing it, but people who take a short position on oil at 48, they may have to sit with that position for a while and it may jostle around above and below their entry level. Selling calls at $65 is some 30-35% above the summer highs that we’re hitting. We’re doing it using timing, using seasonal factors, when oil will likely get down to the low 40’s, and think of how far out-of-the-money you are at that point. I would simply sell mid-60 crude oil calls and put a stop-loss on it that you’re comfortable with. Something tells me that somewhere between Thanksgiving and the holiday season that option is going to be worth about 10% of what you sold it for. We’ll have to wait and see, that’s what makes a market. That’s how we would invest in crude oil going through the rest of the year. Michael: Okay. That naked term, I think, scares a lot of stock options sellers, too, because they’re used to selling 1 and 2 strikes out-of-the-money. Of course, in commodities, we can sell much deeper out-of-the-money. We’re going to talk a little bit deeper about that later. What you’re talking about is we’re taking a position above where the price was at the highest demand point in the year and we’re taking that position heading into the lowest demand point of the year. So, those are certainly the type of odds you look for and, hopefully, if you’re listening you picked up on what James was saying and how you might go about that. If you would like to learn more and get a little bit more analysis of the crude oil market, we will be featuring in our upcoming September Option Seller Newsletter. That comes out on or around September 1st. You’ll get that in your e-mail box and, of course, a hard copy as well if you’re on our subscriber list. If you’re not a subscriber and you’re a high net-worth investor, you can subscribe on our website – optionsellers.com/newsletter. James, why don’t’ we go ahead and move into our second market here. Something you featured earlier in the month but it’s an ongoing opportunity, we feel, and that’s the coffee market. We’re rapping up the Brazilian harvest. Of course, Brazil, the largest producer of coffee in the world, and thus events in that country can have a major impact on prices. I know you’ve been following this pretty closely, James. Do you want to give kind of a summary of what’s going on in the ground of Brazil? James: Michael, some of the most ideal growing and weather conditions are happening right now in the southern hemisphere. Brazil, of course, was basically one large forest. Whether some people like it or not, the forest was cut down and coffee, sugar, cocoa, and soybeans were all planted in their place. That rainforest is just one incredible farm that feeds the world. What’s happening right now in Brazil is practically ideal conditions for productions of, especially, coffee. Coffee acreage is absolutely giant in Brazil. It’s a very large portion, especially of their mountainous regions. We have 2 cycles in coffee. One is an off-cycle and one is an on. The off-cycle obviously produces slightly less coffee than does the on-cycle. It’s basically the tree taking a rest for 12 months and then it produces the large amount again. Basically, the world is absolutely full of coffee at this point, both in Vietnam and Brazil and here in the United States. The U.S. has the largest green coffee stocks ever since they’ve been counting coffee stocks here in the United States. Also at a time when weather conditions in Brazil are absolutely ideal, we’re looking at practically perfect growing conditions for coffee in Brazil. We’re going into flowering season, which is going to start in September and go through November. If, in fact, the precipitation that has been going extremely well in Brazil is expected to continue through the rest of the year, we’re probably going to be seeing record crop production for coffee beans in Brazil next year. Basically, that entails all the fundamentals that we need to know for the entire year. Consumption stays the same- it’s always up about 1% a year. Production the next year is going to be a large surplus. It’s setting up absolutely ideal in selling options for coffee. Michael: Yeah, I saw some of the estimates. The market looks forward here- we are in 2017 but these are the futures markets. Futures look into the future. These markets are now starting to price the new crop, the crop that beans will be on the market in 2018. For 2018, as you mentioned, James, it’s a potentially record harvest. I know we had discussed there are some estimates- 58-62 million bags of coffee, which would just be gigantic. That would be an all-time record. As the market prices that, we could be in for some lower prices. I know you’re certainly looking for some prices to mitigate here as we head into our winter. Let’s talk a little bit about the seasonal since we are talking about seasonals this month. We’re pretty much at the end of the Brazilian harvest for 2017 the crop. I think as of August 1st we were about 80% done. I’m sure we’re closer to that now. What tends to happen with the seasonal price? I see we go down a little bit into the fall, then there’s a little rally in October, and after October it seems to just really fall off. What happens then? James: Michael, I think what seems to happen is investors, both speculating in coffee and users, otherwise known as commercials, they will take long positions going into flowering season. So, basically it’s not exactly a tree that coffee grows on, it’s more of a very large bush. What happens starting in October is the bush is expecting rain to develop, and then it flowers, and each flower, of course, turns into a cherry. If we have steady rainfall starting in September, a bush will flower some 3-4 times, which makes a huge difference during this time frame as opposed to if we have very small amounts of rain and then the bush only flowers possibly 2 times. Simply doing the math, you can see how important this time frame is. That is why the coffee market will start rallying in October as investors and end users want to guarantee themselves coffee prices at a certain level. Should precipitation then be ample through October, November, and the beginning of December, basically the fundamental analysis for the entire year at that point is over. So unlike waiting for monthly reports or quarterly reports out of a company that sells widgets, the production of coffee is then set in gear for the next 9 months, waiting for harvest to begin again. So, we have a rally that starts in September, it goes on through flowering season, as the weather cooperates, and all models right now are showing me that it will again this year, the price goes back down. The seasonal factors are the market falls in September. As we have harvest pressure, then we start getting a rally in September, October, and November, and then we look to sell probably very expensive call options in coffee, once again. We are bearish on the price of coffee, we are record supplies in the United States, we are going to have record supplies in Brazil, and anyone who is wondering what 60 million bags means, 6 times what is produced in the country of Columbia is what 60 million bags turns out to be. Certainly there’s no shortage of coffee over the next year or two. Michael: That’ll be good news for those of our listeners that enjoy a cup in the morning. James: Absolutely. Michael: Now James, you’ve been a proponent of selling calls in coffee most of the year now. We’ve made no secret of that. You’ve had several articles, you’ve talked to Reuters, and the whole time you’ve been moderate to bearish, but just thinking it’s continuing to sell calls is a great way to pull income out of this market, and that’s because it simply has some strong fundamentals. We don’t know if it’s going up or down tomorrow, but overall we feel there should be a price cap on prices that keeps it under certain levels. As a call seller, that’s all you really need. Now, I know you’ve been selling these and have been talking about selling them in your articles. Do you think that we’re at a point right now where you sell them or do you think since we’re heading into flowering season the better opportunity may be a few weeks or months down the road? James: Michael, as they say on TV, “That’s an excellent question”. We’ve been selling coffee calls practically all year. The coffee market has recently fallen some 15-20 cents over the last week or two, which has basically cut our calls in half in a very short period of time. I would hold off on any additional sales. We’re going to look at taking profits on our positions over the next 4 weeks or so. As listeners and people who follow along, one of the best things that could possibly happen is have a bit of a dry weather concern in the month of October. That could get prices back up another 10-20 cents that they had given back recently. I would then look to lay out coffee calls with both hands. The really interesting part about dry conditions in Brazil, if it’s just slightly drier than the farmers there would like, it’s going to likely make a difference of 1-2 million bags. When you’re talking about a 60 or 62 million bag crop that is just a drop in the bucket. Hopefully we have a little bit of weather concerns at the beginning of flowering season, get about a 15-20 cent rally on coffee, and I would be back to putting on my tuxedo and jumping back in on the short side. Michael: For those of you that would like to read more about how you can use seasonals or apply them in commodity option selling, I do recommend out book The Complete Guide to Option Selling: Third Edition. That will really lay it out for you and give you some of the key markets and key seasonals you can use in these markets. If you don’t have a copy yet, you can get it at a discount on our website – that’s optionsellers.com/book. James, we’re going to go into our lesson right now and I’m sure this is probably something anyone who has been reading or listening to us for any period of time is familiar with, but it never gets old. It’s something that bears repeating over and over. It’s something we call going deep, which is really a reference to selling deep, deep out-of-the-money calls. It’s done with a little more time on them and it’s a strategy that you’ve adhered to for some time. The common wisdom is when you’re selling options you sell them for 30 days out because you get the fastest decay, but you subscribe to the opposite theory. I think we’ve both found that when you’re trading fundamentally or seasonally, as we’ve discussed now, it’s almost optimally designed for that. Can you talk a little bit about the benefits of selling that far out and what we have to do to get there? James: Michael, it is so interesting. When you and I first discovered writing premium as an investment for clients, we were subscribing to the same ideas… 30, 60, 90 days out- that’s where the large decay is, that’s where the large curve is. Certainly, we had success doing that; however, in this day and age of computer driven buying and computer driven selling, against what the fundamentals might dictate that prices should do, we do sell options in commodities 6, 9, and even 12 months out. People who have sold options on their own would say to themselves or write the question to us, “That certainly gives you a lot of time for the market to be wrong”. My really easy answer is that it gives us a lot of time for our prediction to be right. Basically, technical factors can move the market for 30 or 60 days, whether the fundamentals had changed in that favor or not. What fundamentals won’t allow the market to do is make a 40, 50, or 60% move. So, the investors that are trading, selling options on a 30-60 day idea, and certainly they might be very successful in doing that, what we don’t want to have happen is have a technical move in a market with no fundamental market change and us get stopped out. We are paid to wait. Most investors have a very difficult time doing that. When you know what the fundamentals are, waiting is quite easy and, as a matter of fact, waiting is fun because you’ll see technical buying or selling in gold, coffee, or oil all the time. Yet, it’s not reaching ever a 50% move; however, it does make the news and it makes options expensive. That’s just the way we like it. Michael: That’s some really good points you brought up there. It reminds me of a story of why we started doing this in the first place. For investors listening that have sold close-to-the-money options, you know it requires a lot of effort and babysitting. What James is talking about, going further out in time, allowing you to sell much deeper out-of-the-money, not as concerned about those short-term random swings, higher odds. Probably one of the most overlooked benefits is lower stress, both to the investor and the trader. James, I know many people might not know that you and I, when we first started out, were retail brokers. So, about 20 years ago when we first started working together, we were brokers and we were making these trade recommendation to people and we were trading options 30, 60, 90 days out. A lot of the time, they did very well and they were very successful, but it was a high maintenance type of trading. You and I would be on the phone all day because people would be calling in and we’d be changing orders and changing positions and writing new because the market was moving and the options were always moving. When we switched to the strategy of selling deep out-of-the-money options, once that conversion was done, it was crickets. There was nobody on the phone and there was no reason to call. So, it was a lower stress for the trader, but as an investor, I don’t want to say you never have to watch it if you’re managing your own account, but certainly it’s a lot less maintenance than it is if you’re trading those short-term options. It’s almost like day trading, wouldn’t you think? James: Michael, I remember making that switch to much further out dated options. It’s so funny you bring this up. We did get one or two phone calls, and I remember one, it was from one of our favorite clients. He said, “James, I just love selling options this way because I’m such a bad trader.” Once you get that mindset, that you’re no longer gambling, you’re no longer betting on the spin of the wheel or the roll of the dice, when you’re actually taking fundamental analysis, if you possess it, and turning that into an investment, this is just a great alternative to what some mainstream investments are. Taking long-term views, treating this as an investment, once you made that switch, I know how it was for us, I would never trade a futures contract again. Selling options on commodities this far out based on fundamentals does give you the patience to wait. Let’s face it, that’s what the big money does and, U.S. listeners, that’s where you want to be, too. Michael: It’s hard to put a price on sleeping at night. I think that’s a good place to wrap it up this month. Obviously, these days, James and I offer fully managed portfolios. If you’re interested in a new account with us, I’m just looking at the sheet here, it looks like we are fully booked for September; however, Rosemary is currently booking interviews now for October openings. So, if you are interested in exploring the possibility of a managed account, you can certainly call her at the main number. That’s 800-346-1949. If you’re calling from outside the United States, the number is 813-472-5760. You can also contact her via e-mail. That is office@optionsellers.com. She will schedule you with a free consultation interview to find out more about our accounts. Obviously our recommended opening account is U.S. 1 million. Rosemary can certainly provide you with other details on the accounts, as well. James, thank you for your insights this month. James: Michael, always my pleasure. I just love chatting about what we do. Michael: Great. For all you listeners, have a great month of option selling. We will talk to you again in September. Thank you.

Michael: Hello, everybody. This is Michael Gross of OptionSellers.com here with your monthly podcast for September 22nd, 2017. I’m here with head trader, James Cordier. James, welcome to the show. James: Thank you very much, Michael. Always looking forward to them. Michael: Boy, we had kind of a quiet summer and then, all of a sudden, in September a lot of news stories breaking and we saw a lot of volatility start to come into the commodities markets, at least in some commodities, not so much in stocks. James, do you want to talk a little bit about that? Tell us what’s going on. James: Michael, that’s a really good point you make. Often, they call them the dog days of summer just for that reason. A lot of investors and traders alike are kind of taking off June, July, and August. As we went from August to September, a whole lot has been hitting the wire. We have Kim Jong Un lighting off his rockets, yet again. We have interesting things happening in Washington D.C. lately, and there’s always a lot of talk about the value of the stock market, how high it is, and, of course, interest rates in the value of the dollar. Practically hitting on all cylinders here as we start getting ready for the 4th quarter of the year. Michael: Obviously, as commodities options sellers, that is a good thing. If you’re listening, you certainly want volatility. That’s what makes those deep out-of-the-money premiums fatten up a little bit. In addition to what you talked about, James, I know we had a couple hurricanes blow through here, too. It did some things with energy prices, orange juice, and I know you were on CNBC this month talking about that and also Fox Business. A couple commodities there were affected by the storms. James: You know, Michael, you really have to stay informed being a commodities investor or trader. 12 years ago, when we had these hurricanes hit New Orleans, just amazing havoc on oil production and natural gas production. A decade later, practically the same regions are getting hit and people racing to the options screen to buy calls in natural gas and buy calls in crude oil. The storm that hit Houston did absolutely nothing to commodity prices, such as natural gas and crude oil. It did pump up the price of gasoline, as you can imagine with the refiners going down. Boy, was that a great opportunity to sell options as people were watching the news and the weather channel that weekend. Michael: James, that’s a good teaching lesson, too, because I know something you talk about is the people that trade by following the news, and what you always talk about is if you know the real underlying fundamentals, those can be opportunities to go in and sell premium on people selling off the news that aren’t really familiar with the real story and how that could likely really affect prices. James: Well, it’s interesting, Michael, we just go through our day to day business and we’re familiar with the new production areas of natural gas and crude oil. Basically, the Gulf of Mexico 10 years ago was everything, and now they’re producing oil in the Dakota’s, Pennsylvania, Oklahoma, Kansas, and Arizona now for a huge find. You know, you definitely want to be on top of that when the normal investor comes in racing to buy energy calls. We’re more than happy to sell them based on the fact that we probably felt very little impact from the storm this year, and certainly that’s kind of the way that played out. Michael: Well, great. If you’re listening and you’d like to watch James’ interviews on both Fox and CNBC on those commodities, they are available on the media page of our website – that’s OptionSellers.com/media. James, let’s go ahead and move into our first market this month. The gold market: a market that even a lot of non-commodity traders follow. We’ve seen some pretty good strength in the gold market through, not just this year, 2017. Gold prices have been pretty strong, but especially through the months of July and August. We’re off a little bit now in September, but what’s going on there? What’s driving this rally right now? James: Well, Michael, as we often talk about, a lot of investors want to be diversified from the stock market. I think a lot of investors have a particular amount of money in, of course, securities; however, when they are watching all the situations around the world happening and playing out on TV, they see a falling U.S. dollar. The dollar is down some 12% or 13% this year, if you can believe that. Basically, the gold market will mirror to the opposite direction whatever the dollar is doing. You throw in Kim Jong Un and you’re really causing some jitters. It really wasn’t a big surprise that the gold market did rally some $100 over the last month or two. It has been putting on a pretty decent show. It has actually outpaced the stock market for the first time in several years. Michael: James, I know gold is one of your favorite markets to trade, especially given the current levels of volatility. We’re going to give listeners a view into some of our privately managed portfolios with this trade, but that’s fine… we think it’s a good teaching example. I know you had written strangles on there, we had talked about it this summer, it was on our website, you had talked about writing gold strangles. We had some of those on the market that started to rally, and you said, “No, we’re going to let it go. We’re not going to close out those positions on the call side just because we’re getting a little strength here.” Do you want to explain that position and your rationale behind that decision? James: Michael, a strangle on some of the commodities that we follow really gives the client an incredible amount of staying power. If you’re long gold from $950 by selling puts at that strike price and you’re short gold, for example at $1,800 an ounce by selling calls at that strike price, it really gives an extremely large window for the market to stay inside. Generally, gold over the last year or two has been kind of meandering up $25 and down $25. With the recent weakness in the dollar, and the geopolitical concerns that we’ve had, especially with North Korea, the gold market rallied real rapidly- practically $100. It went from $1,260 to basically $1,360 an ounce almost overnight. Our short positions did pressure us a little bit. Basically, I really had a strong feeling that the 3rd leg of pricing gold is inflation. Yes, you can have a weak dollar- that’s bullish for gold. Yes, you can have geopolitical concerns- that’s bullish for gold. The missing piece to the gold market rally is inflation. Basically, gold is a hedge against inflation and, as we all know, Japan tried creating inflation with 0% interest rates. Here in the United States we’ve done the same, and there simply isn’t any. We thought that the rally in gold would be short lived and we’re not exactly sure, day to day, where it’s going to travel to, but we backed off a quick $60 or $70 over the last couple of days and we’re very glad we stayed with our short positions in gold. It’s not getting to $1,800, at least it doesn’t look like from my desk, and any time it rallies we’re going to be likely selling it over the next 6-12 months based on the same idea- no inflation. Michael: Boy, that’s some great lessons in there if you’re listening and you’re just learning how to sell options. James is talking about selling calls deep out-of-the-money, high above the market. We had strikes on both sides, puts and calls, so when gold market rallied, if you’re short futures you’re probably getting stopped out there, or even ETFs you’re taking a beating, whereas our strategy with selling both sides of the market, even though those calls got a little bit of pressure, the puts were making up for some of that on the backside. When gold inevitably starting coming back down, the premium comes out of those in a hurry, doesn’t it James? James: It really did. A lot of the calls that we were short were double the value that we put them on at. We are now profitable our short gold calls in less than a week. It’s just a great lesson for people listening in and following us and for ourselves, as well. We learn on every single trade we make. Using our compasses, we thought staying short was the right idea and we continue to think that probably through the end of the year, as well. Michael: Good. Something else you bring up there… the option doubled, we held them, and a lot of people that read the book or read some of our materials say, “Well, I thought you were supposed to get out when it doubled.” That’s an excellent point and we’re going to be talking about that a little bit later today and today’s lesson. One of the reasons is we had a strangle on so we had a lot more leeway, but we’re going to talk about risk management here and some more advanced strategies later in the podcast here. For now, James, I know I said I wouldn’t put you on the spot, but the title of today’s podcast is Will gold’s rally continue? What are your thoughts here through the end of 2017? I know our job isn’t to pick what the market’s going to do, we only have to pick what it’s not going to do, but for people listening, maybe they don’t do this yet, maybe they’re thinking about selling options, but what’s your gut feel here? Do you think a rally continues through the end of the year or do you think we may be reaching some value levels here? James: Michael, that is a great question. The gold market is something near and dear to many investors. You can talk to clients about the price of cocoa, they might not be familiar with where that’s trading at, or soybeans, but a lot of investors know what the price of gold is trading at for one reason or another. They probably have some stashed away or it’s something they might be interested in purchasing. The gold market has a personality. It’s not necessarily all supply and demand, like soybeans or crude oil or coffee, a lot of it is perception. One week ago, the North Koreans were slapped with the harshest situations as far as deterring trade, you know, going to that country. The sanctions that were levied on them were thought to be the strongest ever. Two days later, Kim Jong Un is lighting off missiles. That seemed to really ratchet up the rhetoric and the tensions that day. The gold market traded up $7 that night. The following day after the day traders were able to get a hold of the price of gold and trade it, it closed lower the day after Kim Jong Un was lighting off missiles. That tells you that that market had topped out. Certainly, hindsight is 20/20, but it did fall some 7 days in a row since then. That tells us that a very important top was made in gold for the remainder of the year. I think fair value for the beautiful shiny yellow metal is probably $1,275 to $1,300 and we have a decent economy, we have no inflation, we have interest rates about to rise, and that is going to take a lot of the steam off of the bulls, as far as the gold market’s concerned. If you read the Wall Street Journal just 2 weeks ago, it went on and on about small investors are long, ETFs are long, large investors are long. If you follow along with that, investors listening to us today, that basically means anyone who wanted to buy the market was already in, and you’re going to see large investors pull out and take profits when that’s the case. I think that’s what we just saw and we just made an important top in gold that will probably last at least the next 3-6 months. Michael: All right, that makes a lot of sense. As far as investors maybe looking to trade gold or maybe use some of our strategies, obviously a rally like this helps us because it pumps premium into those call options. Even after the sell-off, do you think there’s still an opportunity there for investors to go in and still take premium on the calls side of this market? James: I think so. We have a couple of important announcements by the FED over the next day or two. We have some very large decisions made by the EU coming up over the next week or two. You can basically play the middle of gold right now if you just can’t fathom being short the gold market and you can’t fathom having a short gold call in your portfolio. We really like selling the 1050 gold puts, in other words the $1,050 gold put strike. We think that’s a great idea, but we are neutral to negative gold. We don’t see it going that low. That’s some $200-$250 lower than where we are right now. That’s a great window for gold bugs to participate in being in the shiny metal. Being neutral to negative I would sell the $1750-$1800 gold calls. I think that is a very low hanging fruit and I think the beginning of next year those would start being very profitable for anyone selling those. Michael: So, that’s for gold. That’s about a $700-$800 profit window that gold prices can move around and still those options would expire worthless. That’s a pretty wide range. James: You know, trying to get gold’s next $25 move is difficult. Can you imagine how many small investors and large investors alike poured into gold here the last 30 days? They’re probably going to be waiting maybe a year or two to see the market come back to that level or get slightly above it. Positioning yourself $500 above and $200 below, I know that’s not the typical investment in gold, but if you take a look at it, it might be for more investors than what they might think. Michael: Good. James, I know you’ve been tweaking some strategies here. Some of our strategies we’re going to be using for our privately managed clients as far as option selling goes, but if you heard James’ commentary here, for anyone listening, he’s just giving you a sample strategy you can possibly even use at home of a gold strangle. If you’d like to read more about strangles and other option strategies we recommend, I do suggest our book The Complete Guide to Option Selling: Third Edition. If you’d like to get a copy of it for a lower price than you’ll get at Amazon or at the book store, you can get it at our website, OptionSellers.com/book. James, let’s move into our second market this month. We’re going to move over to the grain markets, in particular the soybean market. For those of you that have listened to our commentary over the last 4-8 weeks, we’ve talked a lot about the upcoming harvest, and seasonally in soybeans, harvest time is when supplies will be at their highest. Typically, when supplies are at their highest, Economics 101 dictates that’s often when prices will fall to their lowest level. That’s why you see the seasonal chart tends to decline right into the fall and October is when harvest tends to get in full swing and then wrap up at the end of October and early November. So, often times you’ll see prices make a low around that time of year, but then something different happens. We kind of reversed that. James, do you want to talk a little bit about that? We have a change going on possibly this month in the seasonal pattern of soybeans. James: Yes, Michael, that’s exactly how it follows out. I’ve been looking at soybean seasonal charts here quite a bit. I have one very near to me right now. June and July we have weather scares and the soybean market rallies. It falls off as the scares seem to be not as defined as previously thought. The soybean market and the corn market have fallen steadily since the 4th of July. This is truly the seasonal bottom coming up practically every year at the end of September and beginning of October. Looking for a possibly different trading approach might be up on us here in the next 4-6 weeks. Michael: Yeah, and looking at soybean prices we had a pretty good nosedive into August. Sometimes that could have been a seasonal low there, I don’t know. We’ve rallied a little bit since then. We’re going to see a secondary low in October; possibly, it’s hard to say at this point. We may get the low in October or we may have already seen it in August, but the fact of the matter is after October and November prices have historically tended to start strengthening. That’s when a lot of those forward sales and those orders start to get filled and it starts to draw down inventories again and, often times, you can see soybean prices firm. Now, if you’re listening you would think, “Well, then we would want to sell puts”, but that’s not necessarily the case. James, you made a case for this in our upcoming newsletter this month. Maybe it’s the better strategy to employ the think strategy we just talked about here in gold. James: Michael, I really think it is. Seasonally, we’re going to have very good support under soybeans. At the same time, we have carryover from this year’s production practically as high as we’re ever going to see it in the past 10 years. That will likely keep a cap on soybeans. Once again, when finding a fairly valued market, that is just a great deployment of selling calls way above the market and selling put strikes way below the market. This fall and this winter for soybeans, it may be ideal for that. We have large supplies likely to hold the market down and we have a very strong seasonal tendency for the market to rally that might be the perfect equation for probably a sideways market at a time when both puts and calls are quite expensive. It might be setting up extremely well and something we’re going to be paying very close attention to as we speak. Michael: It really makes a lot of sense, because that seasonal does carry a lot of weight. At the same time, soybean stock is 475 million bushels. Not only is that going to be the highest in over a decade, but it’s the second highest in over 25 years. So, the supply levels here in the United States are pretty sizeable, yeah we could still get an adjustment in the October report, but for the most part it looks like we’re going to have a pretty sizable crop. I see what you’re saying- that could tamper that seasonal a little bit and keep prices in a nice defined range. Good thing about strangles is you’re getting double premiums. You’re getting premiums on both sides of the market. Those can be big income earners to pad an account. James: Michael, absolutely. So often, people are trying to define the next bull market or the next bear market, but when you’re able to identify a sideways or fairly priced commodity, that can be the best of both worlds. As you’re short one side of the strangle, it’s basically taking care of the other one while you’re waiting for decay. As option sellers, patience is the name of the game, and having a strangle on as your key position can really help, not only a portfolio, but help the manager taking part in deciding what to do as you have the trade on. Michael: All right… pretty good stuff. For those of you that would like to read more about the soybean market, we are featuring it in the upcoming October Newsletter. You can see the seasonal we’re talking about and also take a look at the fundamentals we’re looking at, get James’ analysis and possibly strikes you can look at if you’re trading at home. Obviously, if you’re interested in a managed portfolio, you can request our information pack on that, as well. As far as our lesson this month, James, we’re going to address something this month that we probably get more question on than anything else. It’s because it’s a very important topic and that is kind of a broad question, but it is “How do I manage risk on my short options?” We do have a whole chapter dedicated to this in The Complete Guide to Option Selling. We talk about it a lot in our videos and seminars, but I think we should cover it here because there’s a little bit of confusion as to what’s the best way, what’s the right way, etc. What we’ve put forth in our book is what we recommend to beginners, people either new to commodities or new to option selling, is the 200% rule. It’s a good basic rule; it keeps you out of trouble, if the option doubles then you end it, end of story. We still think that’s a good rule and I know you think that’s a good rule, as well. When we’re managing a portfolio with $100 million in it, we have the ability to have a little bit more leeway, we can use a little bit more advanced techniques to bump our odds up a little bit. I know there’s a couple you use and I thought maybe this month we’d pull back the curtain a little bit and let people see some of the more advanced techniques that we may use in managing our portfolios. Do you want to talk about that a little bit, James? James: You know, Michael, we make a great deal about fundamental trading simply using the 200% rule and, if you’re trading along with the fundamentals, I think a portfolio would do very well over a 1, 2, 3 year period. As far as making a more sophisticated exit level and risk parameters, we do utilize more parameters than just the 200% rule. Basically, we’re going to sell options on what the fundamentals dictate. If there’s too much cocoa in the world then we’re going to look to sell calls. 9 times out of 10, the fundamentals in cocoa that brought us to get into that position won’t change over the next 6 months. Generally speaking, a rally against the fundamentals is technical in nature and we can watch open interest, we can see who’s actually doing the buying and who’s doing the selling, and if it’s technical in nature and possibly the option did reach a double level or even more so, I’m going to look at the landscape of the cocoa market or the gold market, whatever the case may be, and if the fundamentals remain the same we will give that trade more leeway. If, for example, we were talking about gold earlier, and all of a sudden we are getting inflation and inflation is at 2, then 2.2 and 2.4 and 2.6, that is a change in fundamentals and you would definitely want to use the 200% rule. As a matter of fact, in a case like that you may not wait for it to reach that level. Being nimble selling options, there’s nothing wrong with that. If you simply want to use the 200% rule, I think, over a 3-5 year period you’ll do extremely well. We follow the fundamentals in commodities so closely that often it’s a technical rally or a technical decline in the market and, for that reason, we’ll stay with a position longer than just a simply percentage rule. Michael: So, you’re saying that’s why you sell options so far out-of-the-money. You give it so much space to move and you have a little bit more leeway because you may have a little bit more insight into what’s actually going on with prices. For the guy out there on the street that’s saying, “I like this 200% rule, but what if I want to employ something else? What if I am looking at some other things?” I know you’ve used a couple of things, but one of them is at times if the fundamentals stay the same you may roll part of that position. Can you talk a little bit about that? James: Absolutely. If you’re selling puts because you’re bullish the market and it’s falling, you might want to scale back a half of your position that you have in the puts and then just roll down to the next 1 or 2 strikes below that. Generally, the selling or the buying based on technicalities will be short-lived. You don’t necessarily just want to leave your position because of something a headline that was in the Wall Street Journal or one of the business channels. Rolling your position allows you to stay with your initial fundamental analysis. Michael: That makes a lot of sense, too, James, because I know when you get into rolling and, another strategy you mentioned is gradually scaling out a position rather than just closing out the whole thing, that gets into a little bit more art than science. It gets into kind of a feel for the market kind of to know what’s moving it. For the person that has just joined us on their own, they may not have the skills to employ that art, whereas the 200% rule is very scientific, it’s very numerical, it’s very definite. Yeah, you’re probably going to get out of a few trades that at the end of the day they’ll still expire, but it’s the only way to keep you out of the ones that are going to cause you trouble down the road. That’s a great point to make and for those of you listening, if you would like to learn some of our more advanced risk techniques, we mention a couple in The Complete Guide to Option Selling, as well. We also talk about them in some of our upcoming videos that you’re going to see this fall. So, if you watch our videos on our blog, we’re going to be talking a little bit more about the risk management, as well. Just a little housekeeping here before we go this month. For those of you interested in discussing a potential new option selling account for the 4th quarter, we are fully booked for October. Rosemary is currently scheduling consultations for our available openings in November. We do have a few of those left. If you would like to schedule a consultation, feel free to call her at the main number… 800-346-1949. If you’re calling from outside the United States, you can reach her at 813-472-5760. You can also inquire on availability by e-mail… that is Office@OptionSellers.com. James, thank you for your insights this month. James: My pleasure, Michael. Always enjoy being part of the show. Michael: We will talk to you all next month. In the meantime, have a great month of option selling. Thank you.

Michael: Hello, everyone. This is Michael Gross from OptionSellers.com here with your August edition of the Option Seller Podcast and Radio Show. James, welcome to the show this month. James: Hello, Michael. Glad to be here and always fun to do. Michael: We find ourselves here in the middle of summer and, of course, summer weather often times can take headlines in the agricultural commodities. That’s what we’re going to talk about this month. We have several things going on in some of our favorite agricultural markets. In the Northern Hemisphere, of course, we have growing seasons for crops, such as corn, soybeans, and wheat. Down in the Southern Hemisphere, we have winter time, which is actually an active time for some of the crops they grow down there because you have crops like coffee and some of the other countries, cocoa, that aren’t planted every year. There’s trees or bushes that tend to bloom every year, so winter can often be a time to keep an eye on those, as well. James, maybe to start off here, we can talk a little bit about weather markets themselves, what they entail, and why they can be important for option writers. James: Well, Michael, many, many years ago, my introduction to commodities investing/trading came along in the summer. There was an incredible hot spell and dry conditions in the Midwest in the United States right during pollination time. That was my introduction to commodities and commodities trading. Weather markets, especially in sensitive times like July and August for the Northern Hemisphere, certainly does bring a great deal of volatility to prices and great opportunity for a weather market to grab hold of particular prices, and that was my introduction into the commodities trading. I’m quite sure that, as summer heats up, of course, here in the United States, so does trading and certain commodities and it looks like we’ve hit that start up again in 2017. Michael: Okay. Being in these markets as long as you and I have, we’ve seen our share of weather markets. After a while, most of them tend to follow a typical pattern. You see a weather scare, you see prices rise in some commodities, and prices tend to immediately price-in a worse case scenario and then you get the real report or then it rains or whatever happens, and then prices tend to force the back-pedal… not always, but most of the time that tends to be the case. If there is a price adjustment upwards necessary, prices will often do that, but often times that spike often comes in that initial wave of buying, and that tends to have an affect on some of the option prices. Would you agree? James: Well, certainly a lot of investors who trade seasonally, or perhaps had taken advantage of weather rallies years before, they will look at the option market. Generally, they are not futures traders, so what they might do is they’ll say, “Well, if the price of cotton or the price of corn or soybeans might be going higher because of dry conditions, lets see what options are out there for me to buy.” I would say that the biggest spike, not only in prices, but in prices for call options, particularly, often happen during these weather phenomenons, and so be it. The call buying that comes into the market during these weather patterns. Usually, as you mentioned or alluded a moment ago, it usually winds up being the high as the public pours into the market. It has happened many times in the past and seems to repeat itself time and time again. Michael: Yeah, that’s a great point, too. You’re talking about that you have a lot of the general public who love to buy options, the media loves to pick up on weather stories and the public reads it, and it tends to feed on itself, and you have public speculators coming in that are buying up options, often times deep out-of-the-money options. These are often times that people who know the fundamentals want to take a look at that and say, “We could take a pretty good premium here with pretty reasonable risks”, and that’s obviously what we are trying to do and what people listening to us are trying to do. So, why don’t we go ahead and move into our first market because we do have a few other markets to talk about this month. First market we’re going to talk about is, actually a couple markets, is the grain markets as a whole, corn, soybeans, wheat, all being affected to some degree by some of the weather. These aren’t raging weather markets, it’s not on the national news, but they’re enough to get those option values up and certainly enough for people listening, or our clients, to take advantage of. When we talk about these, I think we’ll probably focus on soybeans and wheat for this session. As we talked about in our newsletter and in our blog, there has been some drier weather, especially in some of the northern growing regions up in the Dakotas. Recently, I read a little bit about it possibly moving down into Illinois and further into Nebraska. So, they’ve had some dry weather and this has had a particular affect on wheat, but also on soybean prices. Maybe you can just explain how that worked and what transpired there to push those prices higher. James: Michael, it seems that a weather market can come in just practically any portion of the United States. Years ago, Illinois, Indiana, and Iowa, that was the extent of the corn-belt, with fringes of Wisconsin and Minnesota. With high prices in commodities over the last several years, some of the other areas of the United States, people started planting corn, soybeans, and wheat, as you mentioned. This year, the extreme heat and dryness is in the Dakotas, usually not an area that moves the market as much, but this year it did. I know the media really got a hold of the dry conditions and discussed North Dakota and South Dakota, some of the hottest, driest conditions in over half a century. I know I had CNBC calling practically every day to talk about the weather. That is what gets these markets moving, and it usually happens this time of the year. You alluded, once again, to something that happens often is you’ll have these headlines really create havoc with some of the markets and pushing them higher, but, lo and behold, some 95% of the crop is really untouched as it is in decent growing areas as far as the weather goes. As you get into harvest time, a lot of that talk is now behind them and people forgot about the weather in North Dakota and South Dakota 6 months later. That seems to be developing again this year. We’ll have to wait and see how that plays out. Michael: That’s a great point. Probably we should point out here the backdrop of what this weather market is operating in. Exactly what you described is happening, of course, you have speculators buying soybeans off of the dryer weather, buying call options off the dryer weather. As of the last USDA report, 2017-2018 ending stocks are pegged at 460 million bushels, which is going to be the highest level since 2006-2007. So, we’re going into this with a pretty burdensome supply level. Now, if there is some reduction in yield, yes, that could come down a little bit - something to keep an eye on. You also have global ending stocks 93.53 million tons. That’s pretty substantial, as well. You’re operating on it being a pretty hefty supply environment. At the end of the day, when we go into harvest, prices tend to decline, regardless of what the actual supply is because that’s when the actual supplies are going to be the highest regardless. We’re fighting that big picture of, “We already have hefty supply and we have a seasonal working against the prices here.” So, two reasons why people listening may want to consider selling calls when you do get weather rallies like this because the bigger picture is not that bullish. Secondly, one thing to point out here is we’ve had problems with dryness up in North and South Dakota, possibly coming a little bit further south, latest weekly crop condition report is a 4% decline in good-excellent rating. They’re starting to reflect some of that damage, but one thing to remember is this happens often. It happened last year. It happened a couple years before that where it was dry in July and everybody was talking about weather. Then, they’re talking about pushing yields back a bushel or two an acre and then it rains in August, then all the sudden we have above average yields. So, you have prices right now that can, you can get a little pop or you can also see them roll over. I know you have a favorite strategy for playing markets like that. James: Well, Michael, we wait for volatility to come into the different markets that we follow. Certainly, a weather market in summer is one of those. Probably the best way to approach selling options, whether it be calls or puts in a weather market, is to do it with a covered position. Basically, a strategy that we cover in Chapter 10 in The Complete Guide to Option Selling: Third Edition, it’s really an ideal positioning for weather markets. Basically, what you’re doing is you’re selling a credit spread where as you are selling whatever item you think that the market can’t reach, for example, soybeans this year trading around $10 a bushel based on supply and demand probably won’t be reaching $12.50 or $13 a bushel. What you might look to do is do a credit spread where you buy one call closer to the money and sell 3, 4, or 5 calls further out. The one long position is basically insurance on your shorts so that while the weather is still in the news and while there is still quite a bit of jitters as to how much crop potential we might lose this year, that holds you in the position. You’re basically short with just a little bit of protection and that really does a great job in riding the investor through weather markets and if you are fundamentally sound on your picture of what the market will likely be, as you mention, we have some of the largest ending stocks in some 10 years, you do want to be short this market at harvest time. By applying a credit spread in July and August is a great way to get involved with the market and protect yourself while you’re waiting for the market to eventually settle down. Michael: When you’re talking about and referring to the ratio credit spread, that really eliminates the need to have perfect timing. Of course, all option selling you don’t really need perfect timing, but that really helps out. If you do get a rally, those can be opportunities for writing spreads just like that. If you’re already in it and the market rallies, you have that protection, a lot of staying power there, and when the market eventually does turn around there is a number of different ways you can make money with a ratio spread. Of course, at the end of the day, we want them all to expire. Talking about soybeans right now, this does not look like any type of catastrophic yield loss or anything like that. This looks, at the most, if we get something, they might get a few bushel break or reduction prices may need to adjust a little bit higher, but in that case sometimes a ratio spread can work out even better. Is that correct? James: Well, Michael, it’s interesting. Your long position, for example, in soybean calls or corn calls or wheat calls, there’s a chance that that thing goes in-the-money and your short options stay out-of-the-money. That certainly is an ideal situation for the ratio credit spread, where, basically, the market winds up being between your long options and your short options. That happens rarely, but, boy oh boy, is that a great payday when it does happen. That’s not why we apply the ratio credit spread, but every once in a while you get quite a bonus. That describes one extremely well. Michael: All right. Let’s talk about wheat just a little bit. A lot of the same things going on in wheat, but wheat is affected a little bit differently than the beans, primarily because we have a lot more wheat grown up in those regions where they’re having the trouble. In fact, I read here, as far as the drought goes, North and South Dakota, I don’t have the stat here in front of me, but it’s somewhere between 72-73% of the acreage up there is considered in drought right now. So, a lot of wheat is grown up there. At the same time, that’s one of those markets that may have priced in a worse case scenario and now backing off. What do you think? James: You know, the wheat market probably, it does have different fundamentals than corn and soybeans, clearly, it has rallied over $1 a bushel, which would have been about practically 25% when a lot of the discussion about the Dakotas was taking place. The wheat market looks like it’s priced, you know, the heat and dryness already in. Of course, one thing about the wheat is it’s grown in so many locations around the world that if you do have a loss in production in the Dakotas in the United States, there are many places around the world ready to fill in for any loss in production. All around the world wheat is grown in probably near 100 countries… certainly different than corn and soybeans. Michael: You made a great case for that in the upcoming newsletter, too, the piece about wheat, where all this talk about loss of yield to the spring wheat crop, but that only represents about 25% of the overall U.S. crop. Most of the crop grown here is winter wheat, which wasn’t as heavily affected. The bigger point is the one you made just now. This thing is grown all over the world. The United States only produces about 9% of the wheat grown in the whole world. Right now, world wheat ending stocks are going to hit a record level in 2017-2018. So, again, you’re looking at a little news story here, but when you look at the bigger picture we are going to have record world supply of wheat this year. Again, these can be opportunities for writing calls for when those bigger picture fundamentals start to take hold. It can certainly help your position. James: Exactly. This year, I think, was another great example of that. Ending stocks possibly being records. It’s almost an ideal situation when weather problems arise because later on that year, lo and behold, we have more wheat than we need and the price goes back down. Weather rallies, whether it’s the Southern Hemisphere or Northern Hemisphere, really often plays into the hands of option sellers because the buyers come out of the woodwork and normally, you know, holding the short end of the stick come harvest time. Michael: We should find out where everything plays out in the next USDA supply/demand report. I believe that is on or around August 10th. That’s really going to reflect what the real picture is, if there was yield loss, and how much of it was. If it’s less than traders thought, prices probably roll over and we’re probably done because you have soybean podding in August and markets typically start declining after that anyway. If we do get a little bullish surprise, we’re not saying the market can’t rally if you’re listening at home and saying, “I need to go hands-in short right now”. The market can rally, especially on or around this report if you get a bullish surprise. What we are saying is those can be opportune times to write options, because that’s when that volatility will jump and, overall, the bigger picture fundamentals remain bearish. James, we’re going to talk here a little bit about our next market, but before we do that, anybody listening to our conversation here about the grain markets this summer, you’ll want to read our August issue of the Option Seller Newsletter. That comes out August 1st. It will be received electronically and it will also be available on hard copy newsletter in your mailbox if you’re on our subscriber list. We have a feature article in there on wheat. We talk about credit spreads, some of the things James and I just discussed here, and how you can apply them. It is a great strategy for this time of year and you can read all about it in the August newsletter. If you aren’t a subscriber yet and you’d like to subscribe, you can subscribe at OptionSellers.com/newsletter and read all about it. James, we’re going to move into our next market here this month, which is one of your favorite markets to trade, that is, of course, the coffee market. I know you’ve been doing work with Reuters World News this month back and forth on the coffee market and what’s going on there. Maybe give us an overview of what’s happening in the coffee market right now. James: Michael, it’s interesting. As all of our intelligent readers and watchers already now, as temperatures heat up in the United States, they are definitely cooling off in the Southern Hemisphere, Australia and Brazil for example. What so often happens for traders in the coffee market, they look at winter approach in the Brazilian growing regions and they remember back to when coffee supplies were really cut based on a freeze that developed in Southern Brazil. During those periods, some 1/3 the coffee crop that Brazil makes each year was grown in very southern areas of Brazil, which are prone to cold weather. Chances are freezes don’t develop in the coffee regions of Brazil, but just like the dry weather in the United States a lot of investors and traders want to trade that idea of it happening. That’s what’s going on recently as we approach the coldest times of the season in the Southern Hemisphere. Traders and investors are bidding up the price of coffee and, likewise, buying calls in the coffee market, planning on maybe some adverse weather taking place. I think we all hear about El Niño and La Niña and what that can do to temperatures, both north as well as south, and a lot of investors, if something like that takes place, they want to be in on it. Often, how they do get involved with that is by buying calls in coffee, cocoa, and sugar, and it looks like that’s what’s pushing up some of those soft commodities today. Michael: Okay. So, they’re buying it primarily on freeze-type thing… same type of thing going on here in reverse. Instead of hot weather, they’re betting on cold weather. Talk a little bit about the bigger picture there as far as what supplies are like, what they are buying here. James: Well, Michael, it’s kind of interesting. It’s almost like a carbon copy of what we just discussed on the grain and grain fundamentals. Coffee supplies in the United States, which, of course, is the largest consumer of coffee in the world, are counted each month. Here in the United States, we have something called green coffee stocks. Obviously, that is the coffee that is then sent to roasters. Roasters roast the bean and then turn it into everyone’s favorite morning brew. Green coffee stocks in the United States are at all-time record highs. That fundamental is something that just is very discernable and is not going to go away no matter how many coffee shops spring up in your city or your town. We have record supplies in the United States. As far as the fundamental of new production, especially in Brazil, last year we had a rally in coffee prices because it was dry conditions during some of the cherry season in Brazil, and this year is just the opposite. We’ve had extremely favorable weather conditions. We have an excellent coffee crop that’s being harvested right now in many parts of Brazil and Columbia, and coffee supplies that will be coming in from the producing nations will be more than plentiful as we get into August, September, and October when those harvests wrap up. So, we have practically record supplies around the world, we have excellent growing conditions in the largest producer in the world, being Brazil. This year is what’s called an off-cycle year. A coffee bush, if you will, produces more cherries on one year and then slightly less the following year. This being an off-cycle year, still we are expected to have a record production figure in Brazil for an off-cycle year. There are already estimates for next year’s crop being in excess of 62 million bags, which would be an all-time record. For those of you who are unfamiliar with what 62 million bags of coffee might represent, Columbia, always thought to be the largest coffee producer in the world, they only grow approximately 10-12 million bags each year. So, all of the extra demand for coffee recently over the last several years from all the coffee shops springing up, Brazil has taken care of that and then some, just basically blanketing the world with extra coffee beans. That is what has kept coffee prices, really, trading near-low levels. Many commodities have increased with Chinese demand that everyone is familiar with over the last several years, but coffee is not the case. Record supplies here in the United States and record production down there from our friends in Brazil. Michael: Yeah. I saw that, too. Brazilian Ag-Minister was 62 million bags. That’s a huge crop. Another thing I should probably mention there is that coffee has a seasonal, as well. It tends to start coming off into when harvest starts and our springtime as they head into fall, which is March-May period. Is that correct? James: It is. Generally, the coffee crop is so large and so widespread there the harvest lasts practically 4-5 months. Basically, what you’ll see them do is often sell coffee twice a year in great strides. One is as the end of harvest approaches and then when we’re looking at next year’s crop, May and June, when they can get a handle on how large that crop is going to be, they will then start forward selling that year’s production. So, really there’s two waves of selling from coffee producers in Brazil. Usually it’s August-September for the current harvest and then May-June for the upcoming harvest. Really two large swaths of sales from Brazil, something we’re expecting to happen probably for at least the next 2 years and then we’ll have to take a look at how the conditions look after that. The next 24 months, we’re going to see a lot of coffee hit the market twice a year, those 2 times especially. Michael: I did notice, this year the coffee market does appear to be following seasonal tendency. You know, we started seeing this last round of weakness right about March and it has dropped, so far, into June. We get a little bouncier now maybe just because prices were just so oversold and then we had the weather issue that you spoke about, as well. I know, right now, with prices in the position they are similar to what we talked about in wheat and soybeans, where you had a little bit of a weather issue at the same time big picture fundamentals still looking pretty bearish. What type of strategy are you looking at in coffee right now? James: Well, Michael, we have coffee prices in the mid 1.30’s, approximately $1.35 per pound. Chances are we are going to be rallying maybe 5-10 cents as we go further into the winter season in Brazil, as some investors take a chance on coffee price rally. We could see coffee prices in the mid $1.40 going into August and September. We are targeting contracts 6 months out- 9 months out to take advantage of the long-term bearishness. We never want to play a market on a short-term basis, we don’t want to predict where coffee’s going to go the next 2-4 weeks. What we want to do is take our long-term fundamental analysis of the coffee market, the production and supply that we’re looking at here the next 24 months, we’re going to take a long-term view of coffee… a long-term bearish view. We are able to now sell coffee calls at $2 a pound if you go out a little bit further, another 30-60 days, you can sell coffee options at $2.20 a pound. If we do get a decent rally here in the next 30 days, which is possible, we’ll be looking at selling coffee calls at $2.40 and $2.50 a pound. Later this year, we do expect coffee prices to be around $1.20-$1.25, and there’s a pretty good chance the options we sell are going to be double that level, certainly something we’re extremely comfortable with and we think is going to work out quite well. We’ll have to wait and see. There’s no guarantee in this market or any other, but we do like our chances at selling coffee at that level, for sure. Michael: That far out-of-the-money is exactly the target options that we talk about in The Complete Guide to Option Selling. It’s our third edition of our flagship book. If you would like to get a copy of that, you can get it at OptionSellers.com/book. You’ll get it at a discount to Amazon or bookstore prices. James, for our lesson today, I’d like to directly address a question that we get periodically from newsletter readers and listeners to this show and some of our other videos. I know a lot of people listening to this, they’re watching what we talk about and then they are taking our trade and trying to do it on their own. That’s certainly fine and there’s nothing wrong with that. That’s part of the reason we’re here, is to help people learn what this is and how to do it. A question we get is, “I saw your video/read your article and you talk about selling a strike, and I went and looked at that strike and it’s not the same premium you said,” or, “ I went and looked at it and there’s no open interest there”, or “That platform doesn’t have it. I can’t see it. How are you selling these things?” There’s a couple different answers to that. I’m going to give one and I know you probably have a better one, but one of the first reasons is a lot of the platforms they’re on they don’t carry options that far out. I know some people have mentioned Thinkorswim platform or TD Ameritrade where they only go a few months out with the commodities options. So, first and foremost, you need to get yourself a better platform so you can get further out strikes, and secondly, James, the one thing you pointed out clearly in this month’s newsletter is a lot of times when you’re talking about these things, whether here or on your bi-monthly videos is, you’re giving examples of how this could work, how it should work, what might happen if prices rally, these are the areas we target. We’re not here to give specific trade recommendations for people to take and trade tomorrow. These are examples for people to learn either if they want to invest their money this way or if they want to take the information and think and reason it on their own what to do. So, when we talk about a strike, that could be a trade we’ve already done, could be that it’s passed now, or it could be a trade we’re hoping to do if the right situation sets up. So, you just gave some pretty good examples right now and you probably agree with me there, but there’s another reason that we can target those type of strikes that other people might not be able to do, and maybe you want to talk about that. James: Michael, that is a great point that you bring up. When I’m speaking to new clients, when they first open their account, the one question that seems to come up very often is, “James, I understand how this works, I’ve read your book, I’ve read your material, but who in the world is buying these options?” That is certainly a question we often get. By no means do I claim to experience the very best way in selling commodities options. I’m not sure what the very best way is. I just know what works for us and really being the option selling leader, I certainly believe we are, we are selling options in quantities that practically no one else in the world is. We have the luxury of selling gold options to banks in London and New York, we have the luxury of selling options in the crude oil market to energy companies, and it’s quite possible that when we’re selling options distant strikes coffee, we are likely selling them to coffee companies, like Starbucks and the such, a lot of popular names that a lot of people now. When you’re selling to contracts for your particular own personal account, you’re probably not going to get a chance to deal with London banks or other large coffee companies, but when you’re selling options in very large gross volume, these companies do want to work with you and they do want to listen to you. That opens up these strikes to us. Michael: That’s a great point. Maybe for just some of our listeners that may not be familiar with how that is, it’s not like James is getting on the phone and calling somebody in London and Citi Bank and asking them if they want to buy our options. These are still going through registered exchanges, it’s just a different path we are taking through them where we are working through specialized order desk. These people have relationships with other brokers for these organizations, but the trades are still done on the registered exchange, correct? James: Yes, they definitely are. It’s just relationships that our clearing firm has established and it’s something that, I feel, just the pinnacle of option selling… having those relationships in place and when you need and want to sell options that are further out in time, as maybe some of our listeners or readers have asked about, that’s something we have the luxury to do and we certainly want to take full advantage of that by selling to some of the largest banks or some of the largest companies that are maybe end users in coffee or in sugar or in soybeans. It’s quite a luxury we have working with those relationships that our clearing firm has already built for us. Michael: Something our listeners might want to consider, as well, we are usually here to help people learn how to do this. Whether you want to do it on your own or whether you are considering having it managed, one aspect of managed option selling, and excuse my little advertisement here, but it’s true that if you’re in a managed portfolio, such as this, you do get the advantage of economy of scale, where if you’re trying to sell 2-3 options on your own you could have them sitting out there all month and nobody ever looks at them. When you’re with an organization or a managed situation like this where you could be selling thousands at a time, those not only can get filled but often times at better fill prices than you’re going to get electronically. I know that’s something you have experienced first hand. James: Michael, there is no question that we’re not market timers. We don’t know the exact time to get short soybeans, coffee, or get long some of the precious metals, but what we do want to have is just the best absolute liquidity available, the tightest bid-ask on these markets, and if that can change your entry by, say, 10%, which it often does, once again, it takes the need to be perfect timing entering these markets, which no one has, nor do we, but when you can get a fill 10% better getting in and then possibly getting out, that makes a world of difference. Michael: All right. We’ve covered a lot of ground this month. I think we’ll hold up there for the month. We will be updating the coffee market and some of the other things we’ve talked about here over the next month and on our bi-monthly videos and also on our blog, so you’ll want to stay posted to that. If you are interested in learning more about managed accounts with OptionSellers.com, you can request our free Discovery Pack at OptionSellers.com/Discovery. As far as new account waiting lists, we are well into September right now as far as the waiting list goes for openings, so if you’re interested in taking one of those remaining openings for September you can contact Rosemary at the main number to schedule a perspective client interview. Those will be taking place during the month of August. You can reach her at 800-346-1949. If you’re calling from outside the United States, you can call 813-472-5760. James, thank you for a very insightful commentary this month. James: As always, Michael, all 12 months of the year are interesting, but July and August certainly are one of our favorites. Michael: Excellent. Everyone, thanks for listening and we will be back here with our podcast again in 30 days. Thank you. James: Thank you very much.

Michael: Hello everyone. This is Michael Gross and James Cordier of OptionSellers.com. We are here with your July OptionSeller TV Show. James, welcome to the show this month. James: Thank you, Michael. Always glad to be here. Michael: We have a pretty full slate this month, so we’re going to jump right into things. First thing to talk about this month, obviously, is the FED rate hike coming down. It hiked another quarter point in June. So, that’s going to have a different type of effect on commodities. James, I know you talked about it in your weekly video, but maybe just cover that a little bit right now for our viewers and what that might mean for commodities markets. James: Okay. Most recently, interest rates have been, here in the United States, pegged at zero. With this latest quarterly rise we are slightly off of zero- somewhere between half and one percent. The quarter point rise really wasn’t a big surprise, certainly, but what Janet Yellen specified was the rollback of the incredible amount of cash and bonds that the government is holding. This rollback of the size of what the government is holding is just incredible – it’s some 3.5 trillion dollars and we’re going to see them start to sell that back into the market. Michael: So, how would that affect say… the first thing you think about when you think of interest rates is probably the U.S. dollar. How is that going to play out, do you see, as far as its affect on commodities? James: Well, as we effectively went into quantitative easing, as you know, some 8 or 9 years ago, the talk of the town was “We’re going to have an incredible amount of inflation, we’re going to have inflation, and we’re going to have infrastructure spending creating inflation”. A lot of people weren’t familiar with quantitative easing or what that meant to interest rates. Basically, a lot of people would put commodities into their portfolio. Someone who has never traded commodities before, thought that having gold or oil or something like this as an investment because of quantitative easing thought that would be the way to go because, certainly, interest rates at zero was going to spur a great growth worldwide and inflation. It simply didn’t pan out that way. Now, rolling back the balance sheet of the federal government from 3.5 trillion dollars to 3, then 2.5, then 2, then 1.5 is going to reverse this thinking for the majority of the people who are looking for inflation hedges. The inflation hedge is probably going to be not so popular going forward. As a matter of fact, not only not having an inflation hedge in your account or in your portfolio, but the fundamental factors that create inflation aren’t with us anymore. So, we don’t have 0% interest rates, we don’t have quantitative easing, we have that rolling back, and a time where inflation never really actually took place, clearly everyone is very familiar with what happened to China the last 7 or 8 years with the infrastructure spending. That’s done. That’s complete. Without quantitative easing and without 0% interest rates, the need for investors to put gold or oil in their account just haphazardly just to own it as an inflation hedge, we think that that time has come. So, gold and silver and crude oil will rally on its own accord, but as far as simply people buying it, hedge funds, private investors, we think that’s in the 9th inning and that’s likely wrapping up. Michael: Of course, we have better ways to take advantage of commodities prices other than buying them outright, as most of our viewers know. What we’re going to point out to those of you watching and listening, we talk often about how commodities are diversified and they are uncorrelated to equities and interest rates and that type of thing, especially the way we approach them or you would approach them as an options sellers, because, yes, when James is talking now about interest rates and it’s affect on inflation, that’s a bigger macro-type issue. That doesn’t mean that the individual fundamentals of these commodities aren’t still important and aren’t still a driving force in what’s moving them. If you’re trading commodities you want to be familiar with these macro factors, as well, because they can put a head wind or a tail wind depending on what side of the market you’re on. That’s why we talk quite a bit about them. We’re going to switch things up a little bit this month. We’re going to do our lesson portion first because we have a couple markets here that the lesson applies to. We want to review the strategy first so you understand it and then we’re going to talk a little bit about a couple of markets that we think are excellent opportunities for applying it. That strategy, of course, is the strangle, the option strangle, which is selling a call on one side of the market and a put on the other side of the market - one of our favorite strategies here. James, maybe you just want to briefly cover that for our viewers for how a strangle actually works. James: Certainly. I think most of us who are following along and have been trading or investing in commodities or stocks for a period of time, we’re dating ourselves here slightly, but of course the great thing I like talking about, I know I’ve heard you say it as well, Michael, but it’s The Price is Right. The person guessing the window that the car or the showcase or something is going to be inside, basically, we are playing The Price is Right. When suggesting a strangle, we are identifying fair valued markets. From time to time, the idea that crude oil is about to make a large rally or a great fall, usually oil and gold are generally trading exactly at their fair value. Basically, what we’re doing is we are identifying where the market might be over the next 6-12 months. If we see the gold market, per say, trading around $1,250 right now, and we think it’s fairly valued, what we are going to do is put a strangle around that market. How you do that is by selling a call option way above the market, selling a put option at extremely low levels below the market, and expecting it to stay inside that parameter. For example, the gold market, there’s still gold bulls out there. Whether quantitative easing is over or not, there’s still gold bulls out there. You might sell an $1,800 or $1,900 call above the market, at the same time you would be selling a put. That would be the lower end of the bracket that you’re putting around the option strangle and possibly selling a $900 or $950 put under gold. Basically what you’re doing is you’re saying gold is going to stay inside of a $900 price range for the next 6-12 months. Now, that sounds like an extremely wide window, and that’s because it is. We’re talking about selling puts and calls some 40-50% above and below the market, and all we have to do is see gold stay inside that band and 6-9 months later these options are worthless and we’ve collected money on both sides. Michael: James, something too I think our viewers would be interested to know about is we have a lot of stock options sellers, maybe you’re selling index options, and you’re thinking, “Well, I do that but it has to stay in a fairly narrow range for me to make money”, whereas if you’ve never traded futures before, you talk about sideways market but you use that term loosely because the range we can sell these options the market can do a whole lot of things. It can go up for a long time or it can go down for a long time and trade at a fairly wide range, and you and I call it sideways because we’re so used to those big ranges, but to somebody unfamiliar with futures they may say, “Oh the thing is screaming up”… Yes, but it’s still far away from our strike, so that’s probably a bigger difference they would have to get used to. Do you agree with that? James: These $25 and $50 moves in gold, or these $2-$3 moves in crude oil, they make great TV., especially when they’re talking to someone on the floor and they’re hearing pandemonium going on. “What’s going on down there, John?” “Well, gold’s up $25 because of this or that”, and people are thinking “Oh my goodness, I need to get into this” or “Thank goodness that I did puts instead of calls, or what have you”. $800 or $900 trading range in gold, these parameters are likely not going to be seen tested, much less touched. Quantitative easing rallied gold up to $1,900 an ounce. That was an all-time high. These levels, in my opinion, won’t be seen for years. On the downside, being long gold from $900 or $950 is a very great value and we don’t see the market falling down to levels like that with the stock market trading at all-time highs and people talking about diversification. Part of that will be buying gold, because when the stock market does finally take a dip, and certainly it’s not a matter of when, but when it does take a dip gold is probably going to come back into flavor, but without inflation it’s not coming up too high. Michael: Obviously a good article on the blog James wrote this month about that exact strategy, some of the bullish and bearish factors affecting gold and why we feel it should remain in those ranges. Obviously, if you haven’t guessed, our first market this month is gold, so James is already kind of explained the strategy at what we’re looking at there. With the current hike in rates, the current strength in gold, James thinks, is going to mitigate/stay in those ranges. Another thing we should probably talk about, James, is a lot of people when they hear us talking about strangles, and you write about them a lot or talk about them a lot because it is one of our core strategies here, is do you put the thing all on at once or do you wait until it rallies and sell the call or wait until it falls and sell the put? How do you know when to do that? That’s a strategy called legging-in. It’s a little more advanced for more advanced traders, but I know it’s something you like to do at times. Can you maybe just talk briefly about that or how you approach that? James: That’s interesting, Michael. Approximately 2-3 weeks ago, just as the month of June was beginning, gold did have a rally. It tested up towards $1,300. We really saw a lot of resistance at $1,300 and we did start legging on gold strangles at that time. We were able to sell gold calls even higher than you can now because gold was on a bit of a rally. As long as you’re legging on a position, if you feel that if you don’t get the other side of a strangle on and you’re still good with the investment, legging on is a great idea. When gold rallied up to $1,300 recently, we were selling gold calls with both hands. Not that I knew the market was going to fall $50, which it seems like it has over the last week or two, but we’re quite confident it wasn’t going to the levels that we saw. Now with gold back and down about $40-$50 recently, we are applying our puts to our strangles, so we did successfully leg in to this gold strangle that we’re most recently involved with. As long as you are able to live with one side or the other, if you don’t get the other side on and you’re comfortable with that, legging on is a great idea. When we were putting on our calls here recently, the lowest a put we could sell was $1,000 and now we can sell the $900-$950’s, so we were rewarded in legging on this position. Generally, commodities will trade. Technically, gold is doing extremely well right now, and that gave us a window to make our strangle some $50 wider than it would have been had we just put the position on. Michael: A lot of people watching are used to hearing us talk about bushels of soybeans or bags of coffee. It switched to macro here this month and it may seem a little bit different, but when you’re trading gold that is really what it is. It’s kind of a different animal than a lot of these other commodities. You have a lot of public interest in gold, everybody has an opinion on gold, but as an option seller that helps because the public interest comes in and they usually like to buy options. Would you agree? James: Michael, so many investors right now are looking at diversifying away from the stock market, and that is not a call on what the stock market might do, it’s just that a lot of investors, I know you talk to perspective clients all the time and I speak to clients myself, and that is the keyword everyone is talking about right now: diversification. People delving into commodities often want to buy options. That’s their best way to get involved with it. A lot of them are newbies, of course, we have a special relationship with our clearing firm and we actually sell a lot of our options to banks, who have extremely deep pockets. Often when we are making a sale of a particular commodity available, a bank might hear about it and they might want to purchase a lot of these options from us, so we both get the excitement of the public to buy our options, as well as large banks. We mainly deal with banks in New York and London. They’re taking the other sides of our market lately, and it really gives us a great deal of liquidity as long as the conversation about things going on in the administration and things going on globally, the debt in China, constant demand for commodities, and lot of these are option buyers. Certainly, we are very happy to have them. Michael: That’s a question we get often is “who is on the other side buying these options?” That’s a long list of people, but a lot of times it is banks and I doubt they’re buying them as an outright long strategy. Often times, these are part of complex spreads or hedges they might be putting on, but they’ve certainly got a lot of liquidity. We have a special guest that’s going to be on the show here later that’s going to talk a little bit about that with us; however, in the meantime, let’s finish our discussion here about strangles. If you would like to learn more about strangling the market, you can go to the blog. We do have our seminar videos there. Also, don’t miss James’ article last month on the gold market, The Golden Brackets. It’s exactly what we were talking about here. That’s also available on the blog. If you’d like to learn more about the strangles strategy, I do recommend our book, The Complete Guide to Option Selling: Third Edition. You can get that at OptionSellers.com/book. James, let’s move in to our second market this month. This is a market we’ve been talking about now for a couple months. Last month, crude oil was trading in the low 50’s. The media was ablaze with the story of how OPEC’s cuts and how high oil would go, and you were saying “It’s going down. It’s going into the low 40’s”, and here we are today at $43 a barrel. The market has come down and now we’re thinking of a different type of option strategy again. Maybe you want to talk a little bit about that. James: Michael, very interesting point that you make. We were bearish crude oil when it was trading around 50-52 recently. It is headed to the low 40’s right now, or certainly it seems that way. You mentioned something very interesting a moment ago. What we do is we count barrels of oil and we count pounds of coffee and we count pounds of cocoa. Just laying out a fundamental analysis and a fundamental reason for getting into the market. When OPEC announced cuts, what people didn’t talk about then was the fact that they amped up production the weeks prior to this taking place. What that inevitably did was it locked in production at all-time record highs at a time when demand for oil right now is slipping slightly, basically because cars around the world no longer get 15 miles to the gallon, they get 30 miles to the gallon. The demand from China seems to be slowing just slightly. The main player in oil right now is the Permian Basin in the United States. Rate counts have doubled in the past year, and we’re going to be awash in oil, we think, in the 3rd and 4th quarter of this year. We are looking at crude oil starting to trade seasonally again. We mentioned this a couple of TV shows ago that the crude oil market, the seasonal trade this year, got hijacked by the production cut announcement in OPEC. We see crude oil returning to the seasonalities that we’re so accustomed to, and that is selling oil in June and July and selling it in December and January. We will likely be doing that again this year. The crude oil market is probably going to base out near 40, it’s going to rally near 50, and this window and this bracket around oil is likely going to be staying with us for quite some time. We know that, at least we feel we do, by counting barrels of oil and understanding the market. So many investors were piling into crude oil recently and the production cuts. Simply knowing what the fundamentals are and not watching headlines allows us to be a little bit ahead of the market. If you have option selling to produce a position for you, some 50% out-of-the-market sets up a nice scenario for us. Michael: That’s pulling out, too. We talked last month about oil returning to its seasonality. Here we are at the beginning of July and all through June and crude oil did nothing but come down. I mean, it’s almost aligning with the seasonal chart again. Just like we discussed last week, the energy markets are some of the most seasonal markets on the board. Nothing guaranteed, of course, but just because of the cyclical nature of demand, it seems to match up- it’s definitely a factor you want to look at if you’re trading energy markets. James, we talked about the media’s effect on crude oil. Last month, they were all about OPEC and talking about potential rallies in the market and they are ignoring things like seasonals. I don’t know if they actually don’t know about them or they are looking for a story, but here we are and now the crude is falling. I’m watching CNBC this morning and Cramer’s on there talking about oil in the 30’s. Now they are bearish and they can’t get bearish enough. You’re talking about, really, looking at a strategy similar to what we talked about in gold, where we may be looking to trade both sides of a possibly range-bound market. Is that correct? James: It is correct. Herd mentality in stocks, even more so in commodities, just takes place like you wouldn’t believe. The same absolute experts, the talking heads on TV, so bullish in oil when it was at 55 and 60, and it’s certainly going to go to 65 and 70. These exact same experts are now talking about oil going into the low 30’s. I think, sometimes, you could just watch CNBC, especially CNBC, and just do the opposite of what everyone’s doing, because when everybody is bullish, you can get one analyst and one expert all saying the same thing, “My gosh- oil is certainly going up. How high is it going to go? I’m not sure.” You can close your eyes and sell calls when that happens. Now, when the market is falling possibly into the 30’s this fall, that will be the time to get bullish for next summer. I think last TV show we did, I talked about passing not to where the market is but where it’s expected to be. This winter, when we have extremely low prices, we’re going to want to sell puts to the June and July time frame. Michael: Do you like the strategy of strangling the market right now? James: We strangled the market some 6 months ago when OPEC had made its announcement. We went long from 33 and short from 76. We love that position. Those positions are basically retired now. We’ve collected some 75%-80% on both of those positions. What we’re going to look at doing is that the fall has already begun. We just dropped practically $10 here in the last 2 months for oil. Our next position will be strangling the oil. We will be looking at legging on this position, and we will probably be putting our puts on as the first leg and then waiting for the market to rally some later on and putting on a call position. We will be strangling oil. We’ll be strangling oil probably for the next 2-3 years. We think we can see that far out. We think we know what the band is going to be. Right now, we’ve had a $9 decline on oil real rapidly. We could probably see it fall another $3-$4 and we’re going to start getting our calculators and pens out and starting writing some puts. Michael: So, you think to a point there, and it’s a good point that we should probably make, because the point you’re talking about is a longer-term investment based approach. Some of the viewers watching today are probably traders, and there is a difference there between trader and investor. You’re talking about, “Well, we will leg this position on in the fall and then we’ll add another leg to it in the spring.” Those are long-term type projections, where some people used to trading options are thinking, “Well, what can I do today? What can I do today to make a profit by the end of the month?” That’s not really how we approach it. You can gear option selling to be that way if you want, but it’s really not an investment based approach that you have really shifted to and had a lot of success with. James: You know, we don’t consider ourselves traders. We take a fundamental view on about 8 different commodities and we make positions as investments. The market does have gyrations, the stock market does, the commodities market will certainly gyrate from time to time, and we need those to pump up premiums on both puts and calls. The key to the fact is, if you’re a fundamental trader, you are able to stay with your position when the market has a small move against your position. We sell options, both in time and in price, much further out than probably most anyone does. We want to be invested in our positions and not simply be trading them. When you are selling options in commodities some 40%-50% out-of-the-money, granted it might be 6-12 months out, much further than most people would every consider selling options, especially in commodities, people say to us, “James, that leaves a long time in the market for you to be wrong.” We look at it as that gives us a lot of time to be right. So often, when you sell a short-dated option, the market will make a short move against you and knock you out of your position. Lo and behold, 30 days later, the market was doing exactly what you thought it would do, except you’re not holding your short option anymore. We get paid to wait. If you know what the fundamentals are and if you’re applying them in long-dated options, being paid to wait is much easier and it gives you the ability to be patient. Michael: Great point to make. You talk about that a little bit in this month’s newsletter. We got questions about timeframe and what’s a good timeframe to sell options. That’s addressed in this month’s newsletter. The July Option Sellers will be out on July 1st. You can look for that in your e-mail box as well as your hard copy mailbox if you’re a subscriber. We’re going to take a little bit of a detour off of our usual schedule for our show this month. We brought in a very special guest for you. He’s going to bring you some different trading insights, and we will be back in just a moment with him. All right, everyone, we are back. We have a very special guest with us today. With us is Mr. Dave Show. Dave is one of the floor traders that actually has been a tremendous help to OptionSellers.com. He gets our orders filled up to Chicago board to trade with a lot of our orders up there in the agricultural markets. Dave, welcome to the show. Dave: Thank you very much. It’s nice to be here. Michael: One of the things we’re going to talk about is, as a floor trader, Dave has some unique insight in option trading, getting fills, and how orders are actually getting through the system. One of the things we’ve talked about, a big topic, is electronic trading. Is it going to make floor traders go the way of box TV sets? We don’t necessarily feel that’s the case. There are still some benefits, substantial in our case, we feel, of still trading through the floor. Dave, maybe you can talk a little bit about that and what do you see happening with that? Dave: I’d be happy to, Michael. The floor trading still exists because there is a marketplace and a need for it. Electronic trading certainly has its place. It’s used substantially in our markets, but especially in the options markets, which there are so many permutations and different strategies to ploy. It sounds very difficult to get that expressed on a screen and to get a response, a bid or offer, on that. Whereas in the pit, we have several hundred people on the floor that are participating and have instant access to whatever quote you’d like to get. It’s usually a best bid invest offer. It’s not a feeler kind of bid or offer. We have huge backing down there with these traders, different banks and different huge trading companies, and they keep their traders there to make the best market. As a trader and investor, you may wish to ask for a market at a strangle, spread, call, or whatever. You put down the screen and you wait for your RFQ to come back. You call the floor, you call your broker, and he can get you, in 3 or 4 seconds, a market that is tight and is deep and is transparent. So, if you have size to do, to move many hundreds or thousands sometimes of transactions, it’s much more efficient to do it that way in the pit where you get it all done at a specified price and at one time and the trade is completed. James: That’s an interesting point. Quite often, we will be selling some strangles and some outright positions on the screen and it doesn’t seem like there’s that much volume on the floor until the screen trade actually takes place. I know, from time to time, we will bait the market, it seems. We will have a certain market to trade on the screen, maybe 100 lots, and then I will be speaking to you and I’ll ask you, “Does the floor see this trade? What do they think about it and can they help us move some size?” Can you speak to that? Dave: James, that is very much often the case. We’ll have customers that when they need to move a large amount, they will tickle the screen with a bid or offer. They will also simultaneously put it in the pit. The screen has a much larger audience, granted, and there will be someone out there starting to lift the bid or take the offer and get your order filled. Once our pit community sees that, they will generally, as a mass feeding, come out and take on whatever we have to match the screen so that it stays with us instead of going on the screen. Michael: Dave, one of the things we talk about and investors ask us there at home is, they’re trading 2 or 3 lot options on the screen and we talk about an economy of scale where instead of doing that they say, “well, I can’t get a fill.” Yet, if you want to sell a thousand it is easier to get a fill. Can you kind of speak to that or how that affects it with you? Dave: Absolutely. There is a bid and offer for every market out there. Generally, it’s a certain range depending on how liquid the market is. We all see the parameters that the world is putting out on a screen. We, as traders in our pit, will generally, as a rule, be able to get inside that current bid or offer you see on the screen to make a tighter more liquid market, because if people in our pit are not trading 2’s or 3’s, they are equipped to trade 2 or 3 thousand. They are very well capitalized and they have management teams upstairs in the offices handling what they are doing in the pit. Any trade that is done in the pit, we’ll generally admittedly go up to the office and they’ll take it from there, and they’ll spread and hedge that off somewhere in the outside markets. Michael: Dave, just in closing, in your professional opinion, you’ve been on the floor since 1980? So, you’ve been on the floor a long time. Do you think there will remain a place for floor traders in the next 10-20 years or do you see it going electronic? Dave: That’s a long time, Michael. Let’s talk near-term. I think near-term there is certainly a place for us. The exchange has never stated they intend on doing anything but stay open. We provide a service, especially for the larger markets, and we expect to be there for many years to come. Michael: That’s good. James, I know you and I, we still rely on those floor traders and really think they can still give us an advantage. Wouldn’t you agree with that? James: It’s interesting, Michael, there are people probably trying to trade 2 and 3 lots. Like Dave mentioned a moment ago, we’re trying to trade 2 and 3 thousand lots. Wherever we can increase the volume and increase the liquidity, that’s something we’re always going to try and take advantage of. I know that when we’re selling options in the grains, Dave has probably brought more liquidity to the ability for us to do that than any other way to do it. We hope the floor stays around for a little bit longer, hopefully a lot longer, and we’ll transition if we have to, but right now we are glad to have you on the floor. Dave: Thank you. I’m glad to be there. Michael: Let’s hope he stays there. Well, everybody, thank you for tuning in to this month’s show. Just a reminder, if you’re interested in opening an account with us, we are fully booked for July and we are into our waiting list for August. If you are interested, feel free to call Rosemary. It’s 800-346-1949. She can get you schedule for our remaining consultations, which are still taking place in July. If you’re interested in learning more about our accounts first, you can request a discovery pack online at www.OptionSellers.com/Discovery. Have a great month of option selling. We will talk to you in 30 days. Thank you.

Michael: Hello, everyone. This is Michael Gross, Director of Research here at OptionSellers.com. I’m here with Head Trader, James Cordier, with your monthly Option Sellers Audio/Video Podcast. James, welcome to the show. James: Thank you, Michael. As always, it’s a pleasure. Michael: we are going to talk a little bit about what’s going on in the world right now and we are going to get into some of our key markets for this month. James, obviously anybody watching the news this month has had quite a bit to look at. We have North Korean missile test, we have Russian bombers flying over the Alaskan Coast, so there’s a lot of geo-political things going on in the world right now. It’s bringing a lot of instability into a lot of people’s thoughts about what may be going on over the next several months in the markets. The VIX and the S&P is up 24% in one week here in April as a result of a lot of this. So, just overall, what’s your take on the month of April as far as the markets go? James: It’s interesting, Michael. Over the last 6-8 years we’ve had very little of the news that we’re looking at recently. There’s a lot of muscle flexing going on by both Russia and the United States, and maybe China coming up soon. It does have Wall Street a little bit jittery. As you said, the VIX is up some 24% recently and, actually, I think the VIX was testing multi-year lows. So, it always seems that something comes down the pipe to give everyone jitters and I saw the stock markets sold off here recently on some of the concerns going on around the Middle East and throughout Syria and North Korea. I think that’s a necessity to keep traders on their toes and to make sure the stock market and other markets aren’t always on a one-way street. A lot of the traders like the hustle and bustle of the markets going up and down and I guess we do, too. Michael: Well, we’ll see what happens. I know there’s been a lot of articles as of late. Ron Insana of CNBC, they recently had an article on their website talking about the two things that most often start bear markets and one of them was rising interest rates and the other one was the onset of war. So, let’s hope we don’t have anything like that, but something to keep in mind as you’re planning your stock portfolio or stock option portfolio for the spring and summer months here. Over on this side, we’re going to get into some of the commodities that we feel may be offering some opportunity this month. First on our list is we’re going to talk about the natural gas market. Obviously energy markets is some of the most seasonal markets in commodities. Natural gas, during the month of May, can be a very seasonal commodity. James, you want to give your take on that right now and what you see happening there? James: Michael, thank you. It’s very interesting throughout the year of the 12 commodities we follow. There will be certain times, sometimes the 1st quarter and sometimes the 2nd quarter of the year, that a certain commodity has the propensity to go up or down based on seasonality. Natural gas is certainly one of those. Generally, natural gas prices will rally during the months of March, April, and May, and then we start building supplies for summer cooling needs. What a lot of people are not familiar with is the fact that to cool vs. to hear requires only 10% of the natural gas that it does during the winter months. So, quite often, natural gas has a rally going into spring and summer thinking, “Well, it might be a hot summer” and it turns out that natural gas usage to cool homes and businesses in the winter is like 10% of what it takes to heat homes and businesses in the winter. Subsequently, the rallies in spring and summer do falter. Supplies of natural gas coincide this year with the seasonality of the market falling. We’re approximately 16% here in the United States over the 5-year average. What’s so interesting right now, Michael, is areas like the Permian Basin, which has new drilling for oil, new production for oil, and a lot of people talk about energy that way. The Permian Basin has supplied new production records for the first 5 months of this year. That’s expected to continue. Natural gas production in the United States to pull a million BTUs cost approximately $1. We have natural gas prices trading around $3-$3.50 per million BTUs. That’s a whole lot of anchor pulling this market down when you can produce something for 1/3rd of what you can sell it for. That’s a lot of downward pressure. We think that natural gas at around $3.50 right now per million BTUs is probably fair value for this time of the year. Going on to summer and fall, we probably expect natural gas to tweak down to around $3, and for seasonality traders and for what we’re doing for our clients right now is we’re positioning for weaker natural gas prices for the fall and winter of this year. We are selling natural gas options, right now, double the price of the current value. This is one of our favorite seasonal plays for 2017. We just started walking into it recently and, I think, later this fall and winter, a lot of these natural gas calls that we’re selling will likely be worthless and should definitely add to one’s portfolio this year. Michael: James, that’s a good point. You’re talking about those contract months that are going a little bit further out and you’re already looking at winter 2017-2018. When we’re looking at the supplies right now, as you talked about, we are 14-16% above the 5 year average for natural gas supplies, and when you’re talking about the seasonal and you have a situation right now where this winter is over, supply is starting to build again. As the supplies start to build, obviously that means you have higher supply in storage that also coincides with lower prices because as supply rises price often goes down. So, what you’re saying is we’ll go to the back contract months and take advantage of what we expect to be lower summer prices. That doesn’t mean we’re going to be getting those options all the way to December or January. If we do get to that decline, we could get out of these quite a bit sooner. James: Exactly, Michael. A lot of our clients, and some of the people following us today, are very familiar with what we call the early buy-back. Generally speaking, if you are writing options in a portfolio, of course, if you have a portfolio with us you’re familiar with this, if you’re selling options for $700-$800 per contract and you see them trading 6 months later at $70-$80 per contract, that’s a perfect candidate for an early buy-back. We will very unlikely hold these options until they mature this December and January. Of course, they mature or expire, should I say, a month before they’re named. Odds probably in October or November, a lot of the options that we’re selling now will probably be worth 10% of their initial price-- very good candidates for early buy-backs. A lot of investors who sell options in their portfolio, they are talking about selling 60-90 day options. We feel that the sweet spot for selling options if further out than that. The small movements that happen in the market, technical buying, technical selling, if you sell too short period of time, these small moves can knock you out of your position. We don’t want a headline to knock us out of our position, and that’s why we sell further out in time and price. If the sweet spot for selling options was a tighter amount of days, like 30 or 60 days, that’s what we would do. We feel that the opportunities for very high probability option selling is further out in time. We’re paid to wait and that’s what we do. Patience is the name of the game. When you’re selling based on fundamentals, it gives you the patience to stay into a market. When you’re selling an option simply because, “Well, the decay is supposed to be the quickest between 60 and 90 days” and the market goes against you, you don’t know why you’re in that position and that makes it very difficult to have patience and the wherewithal to stay with a market. If you’re selling options based on fundamentals like this position would be, when the market goes against you a little bit, it allows you to hang onto the position. Quite often, they’re going to expire worthless. You need to be patient. As long as the fundamental is on your side, you don’t mind waiting. Michael: Okay. Let’s talk a little bit more about that buy-back. We were going to do this at the end, but since you got into it now let’s go ahead and talk about it now. It’s an important point a lot of people, when they’re first getting into selling options, especially commodity options, they’re thinking that same point you brought up—“Oh, I need to sell 30-60 days.” Obviously, we prefer to sell longer than that because, often times, you’ll get a primarily portion of that decay long before those options are every scheduled to expire. So, a question I often get is, “Well, how do you know when to buy it back? What level do you wait for before you buy it back?” That’s probably a good question for you to answer. What do you look for? James: Sure. Once an option has decayed 85-90%, the majority of that premium is pure risk. When you’re collecting $700, the option is trading at $70, you really need to do very little homework after that. You’ve collected 90% of the potential premium. Buying back an option with 90 or 100 days still remaining on it, we do this, as you know, quite often. If the option is trading at 60 or 70 and there’s 100 days left on it, that option’s going to sit at that price for a long time. At that point, you’re really not getting paid to keep that risk involved in your account by holding that position. 9 times out of 10 that option is going to go to zero. 9 times out of 10 it would have been an okay idea to hang onto it. When managing portfolios, the risk/reward is always what you base all of your ideas on. You’ve collected 90% of the premium, you no longer have to watch the weather, you don’t have to watch the supplies, you don’t have to look at the calendar, you just need to place the order and buy the option back. Michael: Yeah, that’s a good question. Before the show here today we actually had a client visit. One of the things he was asking was, he was looking at his account saying, “Boy, I see we have a lot of expirations scheduled for September, October, November. Will it be then I can expect to realize the profits on these options?” That was the exact point I was explaining to him- no, not necessarily. You could be taking profits on these things in June, July, August if everything is going well. That was a point, especially if you’re new to commodities option selling or option selling in general, it’s a big point to realize- we’re not always holding these things to expiration. In fact, most of the time, you probably can buy them back early and cut that risk and put that capital into a different investment. If you’d like to learn more about the early buy-backs and looking at the fundamentals in some of these markets, the best resource we can recommend is our book, The Complete Guide to Option Selling: Third Edition. You can get it on our website at a little bit less than you’re going to pay at a bookstore or on Amazon. The link is www.optionsellers.com/book if you’d like to get your copy there. James, let’s move into our second market for this month. One of your all-time favorite markets: the coffee market. Right now, we’re at a key point in time where we’re right ahead of the Brazilian harvest. That can bring a very interesting seasonal into play, one that option sellers can use to their advantage. James, you want to give the overall synopsis of that market right now? James: Certainly, Michael. In 2016, parts of Brazilian’s coffee belt did experience extremely dry conditions and here’s where you need to do your homework just a little bit. Brazil is basically just a ginormous farm, whether it’s cocoa or soybeans or coffee or sugar, basically that’s what the Brazilian nation is made of. The coffee belt is enormous. In 2016, there were dry conditions in a lot of the coffee growing regions. It was primarily in the Robusta region of Brazil. We trade primarily Arabica coffee. The Arabica crop was doing extremely well last year, but all you heard about was the driest conditions in 15 years in Brazil. It primarily was hurting the Robusta crop. The Arabica crop did receive plenty of rain. That volatility and that news headlines that coffee was getting last year pumped up, especially coffee calls, giving it historic volatility that will now create extremely expensive coffee options this year, next year, and probably 3-4 years out. Believe it or not, it does hang on that long. This year, 2017-2018 crop, is the off-cycle year; however, Brazil is expected to produce nearly 50 million bags of coffee this year. Next year, the on-cycle for production would be approximately 60 million bags. This type of production doesn’t mean that coffee will never rise in price. Sometimes it will fall and sometimes it will go up. This prevents the really large move in a certain direction. When you’re able to make coffee beans to that extent, to kind of give you a focus idea, not that long ago Columbia was the largest producer of coffee, producing 10 or 20 million bags of coffee. Everyone counted on Columbian beans to supply the world. Brazil is now making 50 and 60 million bags of coffee. This year’s expected to be an off-cycle crop record year. Next year will likely be a record production year in Brazilian coffee. That is production that we see coming down the pike. How are supplies now? In the United States, it was just broadcast this past Monday that coffee supplies in the United States are at the largest level since they’ve been counting coffee beans starting in 2002. So, supplies here in the United States are at all-time highs. Production in the next 2-3 years is expected to be a record. Seasonality for coffee, as it normally rallies in April or May, the Brazilian starts in earnest in June, July, and August, these coffee beans then are looking for a home. That’s when prices tend to fall. Coffee recently has rallied up to 140-145 level. Selling coffee calls for late this year, beginning of next year, is just a sweet spot and an ideal candidate for option selling going forward for this year. The natural gas looks like a very good opportunity. Coffee is just a great way to diversify your account. We really love the aspects for coffee to be having probably an overabundance supply over the next year or two. We’ll be looking at selling coffee calls this year and next. Generally, you sell them in March and April and the market starts to fall as Brazilian products come in June and July. This year looks like it’s a good setup, as well. Michael: James, we’ve already had a pretty good downward move in coffee and I know you’ve been selling these most of the month. One thing I noticed is even with that downward move in prices, that volatility that we got from the drought you talked about back in the fall, that’s still in the market. So, you can see, even though you’ve had a downward move in prices, you can still sell coffee calls so much further above the market. That’s just the added value of that volatility that’s still working in there. James: The volatility is something, as we were discussing earlier, the VIX on Wall Street rallied some 24%. Volatility allows someone who maybe has missed a position or I missed a buy or I missed a sell on options, or basically anything else. On commodity options, that volatility allows the person who did get in on the low and the market’s rallying, you still have time to sell puts. A market that’s falling and you didn’t get in on the sell on gold calls or coffee calls or whatever it happened to be, that volatility allows you to not have to be in on the high or low day. The volatility still stays there and really gives the person the ability to take their fundamental analysis, put the position on even though you didn’t catch the low, you didn’t catch the high. The coffee market did weaken recently, just like we expected it to. We think that selling calls in coffee on subsequent rallies is still going to be a very good idea. Michael: So, the market’s over sold right now and we get a little bump, that might be an opportunity for some people that are watching this that might want to look to enter. That might be a good opportunity for doing that. James: We’ve been selling coffee calls with both hands here recently and it did just slide over the last week or so. The months of May usually has some up-turns in coffee, so we’re not expecting that coffee is going to be down and out for the rest of the year. We would expect some higher priced days in the coming month of May. We will be looking at that to add into our short position in coffee, yes. Michael: So, much like in the grain market, as the harvest begins supply start to rise and as supply rises that often contributes to an overall lower gravitational pull of prices. That’s what James is talking about taking advantage of here. If you would like to learn more about this trade and the coffee market, you can look at our blog post on coffee that was posted earlier this month. That is available on the blog. If you’re interested in learning more about the natural gas market, that is going to be the feature in our upcoming May Newsletter. You can certainly take a look at that. That should be in your mailbox and e-mail box somewhere on or around May 1st. Keep a look out for that. We also have a good feature in there this month on proper diversification and some of the best ways high-net-worth investors can use to diversify into alternative investments. Keep an eye out for that. James, I believe we’ve covered the topics we wanted to cover this month. For those of you who are interested in a potential managed portfolio with our firm, we do have no openings left available in May. We do have a handful still remaining for June, so if you’re interested in one of those remaining openings in June feel free to call the office this month. You can call Rosemary at 800-346-1949. She will schedule you a free consultation. Those will take place during the month of May for June openings, so if you’re interested in that please feel free to give her a call. James, any last words on the markets this month? James: Diversification really seems to be the word of the year right now. So many investors that seek our guidance and seek accounts with us, that is the word that everyone is using. No one is really quite sure what’s going to happen with the stock market or the economy, for that matter, and diversifying away from stocks is something, I think, a lot of investors are doing. We’re not sure if this economy is a 4% economy or a 1% economy. Lately, it’s going to be the latter, and it’s interesting to see how the stock market’s going to continue its ascent while that’s the case if the economy is slowing. Maybe demand for stocks and certain real estate and such might be waning. This is certainly a sweet spot for us and we certainly enjoy what a lot of investors are seeking right now. Michael: Well, it should be an interesting summer for stocks. Here in commodities, though, I think it’s business as usual and I think we’ll just keep doing what we are doing. Well, everybody, we’ve appreciated you watching this month and we will be back in 30 days. Have a great month of premium collection. We will talk to you in June.

Michael: Hello everyone. Welcome to the April edition of the OptionSellers.com Podcast. This podcast will be both video and audio podcast. This is our first video podcast. James, welcome to the podcast. James: Thank you, Michael. Very excited about doing both video and audio – get our mugs out there! Michael: I think first on the agenda this month is what we have going on in the stock market right now. Is this going to be the long awaited correction everybody’s been awaiting or is this just a little blip? What do you think? James: It’s interesting, Michael, the stock market has just been on a historic tear here ever since the election – and with good reason. If we have deregulation and we have a lot of pro-business ideas coming out of Washington along with a U.S. economy that’s doing fairly well right now, a lot of investors have been pouring into the stock market. We had the first shot across the bow, of course, with the healthcare issue being quite a bit of a swing and a miss for Mr. Trump this past week. A lot of investors right now are thinking, “Well, if we can’t get that passed maybe the deregulation and lower taxes and interest rate help may not be as much of a slam dunk as a lot of investors thought.” This could finally be the catalyst for the long-awaited 5-10% correction in the stock market. Everyone was absolutely factoring in the best-case scenario. Now, Washington D.C. quite isn’t as put together as people thought. The whole idea of a strong U.S. economy along with a very business-friendly administration, some of that’s being taken off the table right now. I wouldn’t be surprised that a lot of investors do take some chips off the table. Some of the largest investors in the world right now have thought about that and Goldman Sachs and large banks like that are talking about making their position smaller. That tells me maybe the long awaited correction probably in the 2nd quarter this year might not be such a big surprise after all. Michael: Yeah, I’ve noticed a lot of the news channels are still bullish, they’re still cheering it on, but you can’t underestimate that public sentiment. If it starts to go, everybody’s pricing in this big economic boom. If that doesn’t happen, you can’t underestimate what that can do to prices, as we’ve seen in commodities, as well. James: Absolutely. We start getting just a little more selling than buying. We keep buying the dips, buying the dips, buying the dips, and one of these times we’re going to cross a certain moving average that’s going to cause the computer to do some selling. Then all of a sudden, everyone’s racing for the door. The stock market’s not going to collapse. We’re not going to have an epic fall of 20-30%, but this long awaited correction that gets people to re-think their investment, that’s overdue. I think we could see that happen in maybe April or May. Michael: All right, well, lets talk about some ways people can get diversified, obviously what we specialize in. This month we’re going to talk about the cotton market. Some things are starting to take place there. It’s been on a pretty good bull market here for the last year or so. We’ve had lower supplies and cotton has just been gradually trending up. You and I have been talking about this over the last several weeks about we could be seeing a shift here, we think there’s some opportunities for selling premium. Talk a little bit about it. What do you see happening here? James: Generally, the ten commodities that we follow will have a spurt of buying from an importing nation and then will have a spurt of selling from producers that have an abundance of whatever the commodity is. What’s happened this past 12 months is we’ve seen Chinese imports have gone up dramatically over the 5-year average. That, of course, rallies the market. Cotton right now is at practically a 1-2 year highs. What’s so interesting, Michael, is that a lot of investors will hear that the Chinese consumption last year was up like it was and they’re going to pile in on this long position. I know we were talking a little while ago about the SPEC position in cotton. It’s at near all-time highs. It’s basically the herd driving into a market that sounds like it has bullish fundamentals, only to have the Chinese buying. Watch this- all of the sudden it will turn off the beginning of 2017. This timing coincides with plantings in the United States. They’re expected to be up some 10% this year. So, you have all this bullishness, you have all the speculators piling in. China is one of the greatest traders of commodities in the world. Obviously, they have the largest population and they need to feed them, clothe them, and provide energy. They seem to be some of the best traders, so they were buying cotton last year when cotton prices were low. Now, they’re at multi-year highs. Speculators pour in and now the U.S. farmer plants 10% more cotton than they did last year and now you watch the market turn back down. It’s a seasonal trade and it lines up with the fundamentals. Doing the opposite of what everyone else is doing right now in commodities has been quite a great trade over the last 12-24 months. Speculators race into the cotton market. All of the sudden, the fundamentals turn and all of the sudden you have them heading for the door probably this 2nd or 3rd quarter of this year, as well. Michael: Yeah, that’s an interesting point. You’re talking about prices going up on SPEC buying and demand. We were looking at the ending stocks for cotton and they are low by maybe historic standards but relatively over the last 4-5 years they are fairly high. I’m going to check my stat over here- I know I don’t want to get the figure wrong. Ending stocks for cotton this year at 4.5 million bales, that’s still the highest in 8 years. Now, what you’re talking about is you have farmers because prices are so high they are planting in 9-10% more cotton this year. We’ll know for sure here in our report at the end of the month. We’ll get planting intentions reports, but early estimates – if we’re planting 9-10% more cotton, plus we have that seasonal tendency for prices to start declining this time of year, those call premiums have really escalated up above the markets. You’re thinking this might be a good time to start picking some of those off? James: We do. It’s a great way to diversify a portfolio. Cotton right now is overpriced. The supplies worldwide are high enough to not cause any type of shortages over the next year or two. The Chinese buying is probably going to slow down and the United States is probably going to produce quite a bit more cotton than the last several years. It almost turns out to be a perfect seasonal play. We’ll wait and see if that’s the way it turns out. Michael: All right. Now, in our piece, we did write a piece on this earlier in the month, you can see it on the blog if you haven’t seen it yet, you were looking at the Dec 90 calls. Is that still a strike that you like right now? James: The Dec. 90 is like our dream call right now. We’re hoping that the market can edge up a little higher to reach that level. Selling cotton in the high 80’s is probably what we’re going to wind up doing. If we can walk into the 90 calls a little bit later in maybe April or May certainly we’d put our tuxedos on and jump into that trade. That one looks like a good one. Michael: That’s one we put out there for when we write our public articles. Obviously, when you and I are trading we’re doing this, often times a series of strikes, a series of months, sometimes even a series of strategies all in the same market for our clients. I think you kind of picked that one as a good example for people that may not be clients and are just reading this and seeing a typical type of strike we would look at. James: That’s how we would play it, both for our clients and anyone trading and taking advantage of short options or riding out there. That’s why I would steer them that way, yes. Michael: Obviously, for any of you listening to this that are interested in how we put these fundamentals together and select this type of trade, like in cotton, you’ll want to get a copy of our book, The Complete Guide to Option Selling: Third Edition. That is available on our website at www.optionsellers.com/book. You’ll get it at a better price there than you will at Amazon or your local bookstore. All right, so let’s move on and talk about one of your favorite markets, the crude oil market. We have been addressing this market over the last month or two, but we’ve come to a point now in crude oil where you think there’s some major fundamental shift going on and I think that’s presenting some pretty good opportunities for option writers. Do you want to give your overview of crude oil right now and what’s happening there? James: Michael, one of the markets that we follow most closely is because it has the most trading volume and open interest. We were earlier talking about speculative buying or selling and different commodities. Often, it’s based on headlines. We noticed that when OPEC announced production cuts earlier this year speculators raced in to the long side of crude oil. Headlines The Wall Street Journal: First OPEC Production Cuts in over a Dozen Years. Clearly, the market is going to rally, clearly it’s a great buy, it’s just a matter of how much money you’re going to make buying crude oil. That’s what speculators did. They accumulated the largest SPEC position in history right after the production cut announcement. What’s so interesting is that this herd mentality so often is wrong. Needing to peel back the onion just a little bit just prior to the production cuts, especially from OPEC, non-OPEC nations cut production as well, that’s not as important, with the exception of Russia, of course, which is the second largest producer in the world. The 3 months prior to the production cut announcement, OPEC ramped up levels of new supplies to the largest level ever. As a matter of fact, the production cut that was announced was basically equal to the increase in production the previous 30 days to 60 days just prior to the cut. Nobody hears about that. All people talk about is production cut from OPEC and the market’s going to go to the moon. Investors start buying calls and buying crude oil futures and crude oil companies, for those of you who are investing in stocks, at an all-time record pace. This past week, we’re now starting to count barrels and we’re looking for the supply cuts. Certainly, with all these production cuts by OPEC announced, we’re going to have smaller amounts of crude oil worldwide, right? Didn’t work out that way. Here in the United States, of course, the Permian Basin, the Dakotas, different parts of Oklahoma and Texas are ramping up oil production to all-time, all-time highs. The investors and speculators that push prices up to north of $60 a barrel for far-out contracts built in the greatest hedge that the people in Texas have ever believed that could absolutely happen. Texas production is approximately $16-$18 per barrel to pull it out of the ground. They were just allowed to hedge their production over the next 2-3 years at approximately $60 a barrel, a.k.a. printing money. So, the old adage of low prices curing low prices may not take place this year. Production in the United States is expected to make all-time highs at a time where OPEC is going to start probably becoming slightly fragile. OPEC production cuts, everyone is doing a fairly good job of following along with the cuts that they talked about and oil prices start to fall. OPEC nations then start to cheat and at that point we have a snowball effect. It’s probably too early for that to happen. June and July are very strong demand months here in the United States. We don’t expect to see prices really crater this summer, but this fall if we have a slight tick up in prices in June and July of this year then we’re going to be looking at call selling opportunities for December, January, February, March, the weakest time frames of the year, at the same time when supplies will probably be at their all-time greatest. We are watching with both eyes very closely for a small tick up in energy prices this June and July. Clearly, they’ve fallen off dramatically. We were talking about selling a crude oil when we did not believe production cuts to be so bullish, crude oil fell $7 shortly after that. I remember talking to clients and other people that are in the industry that don’t trade with us. I said, “Watch out! Don’t listen to this OPEC production business. It’s not bullish, the market’s going to likely fall.” We had a couple of colleagues that said, “James, why are you telling me this?” I said, “I’m just warning you because we think that the market’s going to fail here”, and he was basically saying, “Well, the whole world is bullish. We’re going to have less production.” It didn’t turn out that way. Oil fell some $6-$7 a barrel. We’re hoping for a slight up tick with strong demand for driving season this year in the United States. If we get that, we think call selling in crude oil could be good for 6-12 months out. Oil this fall and winter could be in the low 40’s, it could actually have a 3-handle on it, and we’re going to be taking advantage of that when that happens. Michael: Yeah, I just put together out summary. We sent our summary to CNBC this week on the oil market. Hopefully, they’ll want to have us on and talk about it, but if you’re listening, CNBC, we’re ready for you with our quarterly oil analysis. Feel free to give us a call. I know you, James, talking about the cuts, have not affected supply. In fact, right now, all-time record highs in the United States- 528 million barrels. That’s 27% over the 5-year average. So, I would think that still qualifies as a glut. Would you? James: Michael, that’s definitely a glut. If we have one more barrel in the world than we need, prices go down. We have just a dramatic over-supply in the United States. Ever since we’ve been counting barrels of oil in the United States, we have never had a higher supply than we do right now. At a time where production in the United States is now going to ramp up, it is a bearish scenario. Am I saying that oil is going to fall every day and it’s going to go down to zero? We’re not saying that, but as far as the investors that like the herd mentality, this June and July we’re probably going to have more ramblings out of OPEC. They’re going to say, “We’re going to extend the cuts. We’re happy with the way it’s working but we’re going to proceed to extend these cuts further.” We’ll probably get another pop from that on the bullish news, and that’s the one we’re going to use to probably lay out some calls out 6-12 months and I think that’s going to work out pretty well. Michael: For those of your listening that may not be that familiar with option selling, what James is really saying is we don’t need prices to fall, although we think that’s a distinct possibility, we just don’t need them to go skyrocketing up in this environment. With this type of supply we don’t think that’s likely, that’s why we go high above the market and sell calls. As long as the market doesn’t get there, those calls expire and investors keep the premium. Did you have your eye on any strikes you want to share right now or do you want to save that for another podcast? James: We’re going to be selling crude oils calls with a 7 on them, and I don’t mean 7 or 17, I mean 70. If they’re producing oil in Texas at 17, we’ll go short at 70. We’ll take our chances on that and I think it’ll turn out pretty well. Michael: All right. For those of you who want to read our full forecast and analysis of the crude oil market, along with some potential trades you can look at, that is coming up in our April newsletter. It’s going to be coming out within the next couple of days. Look for it in your mailbox. If you’re not a subscriber yet, you can subscribe at our website. If you come to our website and order anything you’ll be on our subscription list. We do have a special crude oil feature this month because this is the trade we’re going to be looking at now for the next several months. One thing about option selling is if you’re taking premium out of a market, you don’t just have to sell it once and take it, you can often keep mining premium into that market for months at a time. Am I right? James: That’s how we do it. Michael: Okay. In addition, in your upcoming April newsletter there’s also a special feature this month on some of the top mistakes high-net-worth investors make, particularly 1 percenters... people that are in that higher-net-worth strata, that even though we tend to be sophisticated investors, at the same time there are some blind spots there. We did a lot of research here, a lot of different reports we found, and I think you’re really going to be fascinated to see some of these things. A lot of them, James, you wouldn’t even think of as high-net-worth investors making these type of mistakes, and they do. We really put that in perspective and I think a lot of our readers will enjoy it. James: You know, money doesn’t come with instructions. So often, you hear about investors that are making their money in whatever line of work their business or company that they had, and when they go to invest on their own they don’t quite have the success. A lot of our investors, the clients of ours, made their fortunes being experts at what they do and hiring someone to do it for you is probably a pretty good idea. Michael: Well, the first hint is don’t keep it all in the stock market. I’m sure most of you probably know that. So, we’re going to move on to our lesson portion of the podcast this month. James, this month we’re going to talk about an aspect of risk management. We did a piece on some more advanced ways to manage risk this week on the blog and we got a lot of feedback and a lot of questions. Thank you, all you viewers, for that. One of the things and questions we got there was, “Well, that’s great for naked options, but what about if I’m doing a strangle? How do I manage my risk on a strangle? I’ve sold a put and I’ve sold a call on the same market- how are you managing risk on those?” I think that’s something we want to talk about and address some of our readers who maybe want to learn how we do that. James: One of our most attractive commodity options sale that I find when I’m scouring the 10 markets that we’re closely watching, and that is identifying fairly valued markets. Quite often, you will have CNBC or Bloomberg go to the pit and the gold market is down $20 or it’s up $20 and people are talking, “Oh, the gold market got hammered today. The gold market’s soaring today.” A $20 move in gold makes a headline. It makes a headline on T.V. and they go to the pits and they’re talking to the traders and what have you. A $20 move in gold doesn’t move the needle for the options that we sell. When we sell options on crude oil or coffee or gold, often they are 50-60% out-of-the-money. So, these 1-2% blimps in commodity prices for the underlining contract makes a lot of headlines, but as an option seller, whether it’s yourselves doing it for your own account or we’re doing it for you, it very rarely even moves the needle. When selling a put and a call in gold or silver or crude oil, often the distance between the put and the call is the same value as the underlining contract itself. In other words, gold is trading around $1,200. We have option sales where we strangle gold and the strangle is $1,000 wide. So, identifying fairly valued markets, gold happens to be one of them right now, we think it’s pretty close to fairly valued, the put and the call they babysit each other while you’re waiting is basically the best way I can look at it. For example, if you’re short a gold strangle, your call is $500 above the market, your put is $400 below the market, this one is offsetting the other one at the same time. So, in other words, if the gold market moves $20-$30, your call position might go against your slightly, but your put is now taking care of the differential between from where you put the initial position on. If you use the 200% rule, and we do that ourselves, it is a very, not necessarily strategic, but it’s a very easy management tool that you can use. If you have 12 positions on in the year and 2 of them double in price, do the math. That still can be a very, very great return and it does hold your risk parameters in check. If you are selling a strangle in gold, you might take in $600 on the call, $600 on the put, you have $1,200 worth of premium. Not only will a naked call or put often double, unless the fundamentals change, but that $1,200 in premium that you take in on a strangle, that will almost rarely, practically never, double in value. So, if you have a $1,200 premium in strangle, the $1,200 level for it to double to $1,400, rather $2,400, just happens so rarely. The strangle is our best approach to markets that we find that are fair valued. If you do have your put or your call pinching you just a little bit you’ll notice that the opposite direction option is doing extremely well for your account. Needless to say, you have to have risk control parameters when you first enter a position. You can put in a 100% rule on your short put or your short call. I would put 100% rule on the entire premium itself. It gives your position a great deal of time and room to work. The strangle, I think, is the very best option sale going. If you want to keep a very close reign on your put or your call you can do that. If you wind up stopping yourself out of a strangle on most commodities, in my opinion, you’re not selling enough time. A lot of investors and a lot of books talk about writing options, they talk about a 30 day, 60 day, 90 day option. If you’re getting stopped out of your short position, those are probably the options that you’re selling. I would go further out in time and in price. Commodity options you are paid to wait, and patience is the name of the game. If you’re able to put on a strangle and you’re able to wait, more times than not you’re going to have very good results. You’re not hitting homeruns selling a strangle that far out, but for those of your who want to win the game and are okay with hitting singles all year round I think that’s a great way to do it. I think our investors certainly know about that and our viewers could find that out for themselves if they wanted to. Michael: One way of looking at that, you’re talking about risking the whole premium of the strangle. In other words, you’re saying if you take in $1,200 you can risk up to $1,200 on either side. So, actually, you can be a little more aggressive on your risk management on both sides because you have that balancing affect on the opposite side. Correct? James: Exactly right. Michael: So, instead of risking your call to double value, you can almost risk it to triple value and still get away with it because you have some extra risk management with the strangle if you’re following that. James: The stay ability in a strangle, and that is the key to option selling, is being able to ride out the small blips in the market that change the premiums. Patience and the ability to wait is the key and a properly placed strangle will give practically anyone the ability to stay with that market. That is something that we find at our office for our clients that we do a great deal. The proof is in the pudding. The strangle is a great way to go. You need to identify a fair value market. If you’re able to do that, the strangle is going to be very fruitful. Michael: One of the things we talked about this week in our risk management lesson is the purpose of the risk management tactics often is just to slow the market down long enough to let them expire because time is always working in your favor. So, if you’re using a strategy like the strangle where you’re risking premium to a certain value, you can also incorporate things like a roll. You can use a roll in a strangle where you’re rolling up or if fundamentals change then maybe you just roll it into a one-sided trade instead of just a strangle. Getting a little more creative there, but all of those strategies that we talked about can also be applied to spread, even to a strangle, to get a little more advanced. James, when you’re talking about that, the 200% rule is a good basic rule that can be used either with naked or with a strangle you just described. James: Correct. For all the times you put a strangle on, there’s a chance your put or your call will double in value. As long as the fundamentals in that market didn’t change, feel free to roll down the put or roll up the call. 9 times out of 10 that will not double again and you will be collecting 75% of the premium that you originally sold for instead of 100%, but that’s a very great investment. Michael: Excellent. Well, I hope everyone’s enjoyed our first audio and video podcast this month. For those of you that are writing in asking questions and sending them, please keep those coming. We love to address those on our shows, such as this. For those of you interested in our accounts, unfortunately we are fully booked for April. We are working into our May availability now. We still have some availability for new accounts in May. If you’re interested in learning more about this, please call Rosemary at the office. It’s (800) 346-1949. She’s scheduling consultations, which will take place in April. So, if you’re interested in one of those, give her a call. She can get your scheduled. James, I appreciate your input this month. We’ll be back next month and we’ll update some of these trades and see what’s going on then. Thank you, James, for everything this month. James: My pleasure. Always happy to do this. Michael: For all of you out there, we will talk to you in 30 days. Thank you.

Michael: Hello everybody. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier of OptionSellers.com with your February Option Seller Radio Show. James, welcome to the show this month. James: Thank you, Michael. As always, enjoy doing these and brining more and more information and educating investors out there to what we do. Michael: Excellent. We’re going to start off this month, to all of you listening, we’re going to answer some common questions we get through the blog or online. One of the most common questions people ask us is “I really like your stuff. Is there a way I can sign up for your course? Do you offer seminars I can attend? If I pay you, can you coach me how to do this?” … or various forms of that question. We get so many of those and we wanted to answer that question today and maybe shed some light on that for you as a listener. James, do you want to go ahead and maybe take a stab at answering that? James: You know, what’s interesting, Michael, we definitely enjoy getting feedback from everyone listening to this podcast each month. Please continue asking questions and any feedback is always accepted and we enjoy receiving that. Primarily, we don’t mind and enjoy educating the public. So often, investors are looking for alternative ways to take care of their nest egg or try and build the one that they’re trying to create. Basically, there’s a few investments out there. There’s being long in the stock market, there’s buying real estate, and as long as both of those are going up I think they’re very sound, great investments. But for people looking out 5, 10, and 15 years to expect everything to keep rallying indefinitely certainly is not the way. Educating yourself as to how to help manage your own portfolio, I think, is a great idea. We continue to give information and help teach people how to sell options and take in premium and, hopefully, make really good returns each year whether we’re in a bull or bear market. However, the majority of our clients and the most of the work that we enjoy doing is taking and investing with high-net-worth capitalized investors. That is our niche. That is what we do. The fact that we are a relatively small company and we don’t have thousands of clients, we’re able to be more nimble getting in and out of the market for some of these high-net-worth investors. As far as anyone wanting to follow along with what we do, educate themselves to selling options and taking in premium as we do, we’re going to continue educating people and allow them to do that on their own, if they wish. For the investors who are more apt to hire a manager to do it, certainly, that is our bread and butter and that’s what we’re doing here. Michael: It’s a good point, James. To shorten what James said a little bit and maybe sum it up a little bit is yeah, we do appreciate those offers and we do appreciate your questions, but we’re not in the education business here. We are money managers. That is the service we provide. We do provide a lot of educational material to anyone, the general public. We like to make it as high quality as we can. I think some of the things you’ll find on our website or that we send out to prospective investors is comparable to what you might pay thousands for in a course somewhere. That is something we provide for free. We enjoy that, we enjoy brining that message to the public and helping people understand this investment, because there really isn’t a lot of information out there on selling options in general but, especially, selling options in commodities. We’re simply out to help people understand that better and get more people involved in this because it can be a great investment if you understand how to do it. James, let’s move on a little into our main discussion here this month. We’re going to address what’s going on in the stock market because all investor’s eyes are on stocks now. They’ve been soaring. Some people are calling it still a post-Trump surge, but we’ve got some grayer clouds on the horizon. We’ve got North Korea and Iran shooting missiles off, we’ve got a lot of discord here in the United States. What’s your take on what’s going on right now in stocks? How do you feel about the market? James: Michael, I think that a lot of investors have just been waiting for the greatest country in the world to be run like a company and not like a politically correct viewpoint. Lowering corporate taxes, bringing money back to the United States, lowering personal income taxes, de-regulation, making it easier for companies to hire and re-invest, and it’s simply a near perfect platform right now for economic growth here in the United States. If you look at some of the European countries, they are starting to finally lift off. PMI numbers today out of Europe was some of the best in over a handful of years. We are certainly the boat that everyone follows. As the tide comes up, it comes up for everybody. People are extremely optimistic about the U.S. economy right now. Usually, the stock market is 6-12 months ahead and right now the stock market is telling us that the U.S. economy is about to start improving more than a 2% GDP… maybe a 3-4% GDP. So many people have been waiting for an economically friendly environment. Right now we have one and people are voting with their pocketbook. Michael: So, are you concerned at all about the lofty levels that we’re at? On Barron’s last week, Kopin Tan was talking about 76% of world stock markets are now over-bought. Does that concern you at all? James: You know, it’s interesting, Michael, overbought doesn’t mean over. I could see this exuberance probably lasting for a period of time. Right now, investors, I think, are so excited about getting into the market. Will profits match the soaring stock prices? That remains to be seen. There definitely needs to be some catch up. The market is either ahead of itself or very close to that; however, I think investors have been waiting for this for a long time. I could see 2017 probably being a decent return on the stock market, but there is no question that second or third quarter of this year a few people start taking profits and then all of the sudden there’s no one left to buy. For us to get a 5-10% correction on the stock market at some point this year is probably quite likely. Michael: Thus the need for sound diversification and that’s what we’re going to be talking about next here. James, we’re going to talk about one of your favorite markets next which is the gold market. You have a nice commentary this month on your bi-weekly videos where you’re talking about gold and a strategy investors can use right now in that market. Let’s talk a little bit about gold, what you like about it right now, and why you think that’s such a cash cow for investors. James: It really is. We have been following the gold market for a couple decades. It seems to be such a mystery as to what the value of gold should be. Sometimes it trades like a currency, sometimes it’s flocking to gold because of inflation or because of political concerns. It is absolutely, in our opinion, trading right now at fair value and yet there are so many questions about gold. “What will higher interest rates in the United States do? Will that push gold back down? I heard that there might be some inflation”, an investor might say. “That’s usually bullish for gold.” Talk about a goldilocks environment right now for gold. We have a stronger U.S. economy, which should provide some inflation, and yet we are definitely, in the United States, looking straight at at least 2, if not 3, interest rate hikes. That should keep the dollar firm. So we have people just absolutely wondering how high gold might go and you have an equal number of people saying, “With higher interest rates, gold is going to go down.” That uncertainty is the bread and butter of selling options. Gold right now, trading around $12.50 an ounce, there are people very interested in buying calls 50% above the market right now. Similar interest in people buying puts, believe it or not, 30-40% below the market. If you add up those two percentages, you’re talking about practically 100% strangle around the value of gold and, in my mind, trading gold now for some 25 years, that is about the best trade on the board. We think that’s going to probably carry on into 2018, as well. We’re just really happy about the enthusiasm that people have buying options on both sides and we’re going to take advantage of that. Michael: So, a lot of this political turmoil in the news right now is really helping that trade is what you’re saying, because that’s really bringing the public in. Gold is a great market to speculate in for the general public. When you get news of things that make people uneasy, when you see Iran shooting off missiles, when you get the daily news, people don’t agree with what Donald Trump’s doing sometimes, those are the type of things that can bring a lot of investor interest into a market like gold, and that’s why you get these wide strikes. That’s what James is explaining. If you’d like to learn more about the strategy of strangling the market, The Complete Guide to Option Selling gives a thorough explanation. That is the Third Edition. You can get that on our website- www.optionsellers.com/book. You’ll get it at a little bit of a discount there than if you get it at the bookstore or at amazon. James, let’s move on here to our next market this month, that’s the natural gas market. As most of you listeners know, we due follow seasonals very closely here. If you’re trading options in commodities, seasonals are a prime thing you want to look at first, especially in cyclical markets like natural gas. James, you want to take us through where we are with natural gas here in late February 2017 and what tends to happen there cyclically in that market over the next 30-60 days? James: Michael, natural gas is probably the most interesting of all the seasonals, I think, that we follow. Generally speaking, the investor public comes into natural gas to buy it for possible cold winter, they buy natural gas and natural gas calls in November and December. For those who are our clients or listen to some of the recommendations we made, generally speaking, you do the exact opposite. You fade what the public is doing. They’re buying calls, they’re buying natural gas going into winter season. We did that again this year. We saw about a 1 cent spike in natural gas prices. Natural gas generally tops out in December with cold temperatures going through the Northeast and the Midwest, only to come back down in February and March as the winter never seems to be quite as severe as they thought. Then, investors will think, “Well, if the market didn’t rally in this winter then it’s probably going to go down some more in the spring.” That’s just the opposite of what the seasonality is. Generally speaking, supplies of natural gas are their smallest as we come out of the winter heating season, then they start to build supplies and purchases need to be made and natural gas prices normally start heading up in March, April, and May. That is what we’re going to take advantage of the next week or two, is we will be selling put premium below the natural gas levels that we’re hitting right now. We’ve had an extremely mild February, probably March as well. We’re looking at very low prices right now for natural gas and we see the chance for 10, 15, 20% rally in prices starting in March and April. We’re going to be positioning in the coming weeks getting long this market. Seasonally it goes up in spring and we’re going to try and take advantage of just that. Michael: What’s the volatility like there now? Can you sell spreads there or is it primarily naked positions that you’re looking at? James: Well, natural gas used to trade at $10, $12, and $15 per million BTU’s. Now it’s trading around $2.50. It’s so interesting that this is probably the fuel of the future and right now it’s practically being given away. We would be selling naked natural gas puts primarily because the market is so low right now. If the volatility continues, and it has just recently, we’ll be looking at doing credit spreads on the put side, as well. So, basically taking a slightly conservative position and a slightly aggressive position because the market is so weak and so low right now. We’re looking at China’s involvement in natural gas imports for the first time since anyone can recall. At the same time, the U.S. is going to be exporting natural gas for the first time in decades. All of these items are going to be slightly bullish or very bullish for natural gas later this year. We think that’s probably the best seasonal to be getting involved with right now. Michael: Right now, in talking about natural gas, James, about 48% of all U.S. homes use natural gas for heating in the wintertime. Another 37% use electric, which usually comes from power pants fueled by natural gas. So, you do have your peak demand season in the wintertime and what James was just describing is, and we’re going to put a chart up here for you to look at, but gas storage levels tend to hit their lowest levels of the year in March and April. That’s the reason for this. When supplies are lowest, prices tend to get the strongest and they continue to get strong as they rebuild inventory. James, what you were talking about though, selling naked, some people that sell options, some in stock options, they shy away from that; but, in commodities we’re able to sell them so far out-of-the-money that you get a pretty big cushion there and you don’t really have to pick the bottom in the market. You simply sell and even if your timing isn’t right you can still get it. Do you see, if you’re looking at selling naked, what’s your cushion like? Do you still have a pretty good cushion there to give you some leeway if you’re a little early or a little late on the trade? James: Yeah, I think there’s a really good cushion and natural gas is probably one of the more historically volatile markets. When it was trading at $10 and $15, that volatility is still in the market, now it’s trading at $2.50-$2.75. For the spot contracts, we would be looking out September, October, possibly that far out. Those markets are well above $3.00 right now. Might be teetering on that in the week or so to come; however, some 20-25% below the market there’s excellent premium right now. That’s what we’d be looking at taking advantage of. If the market heads a little bit lower, probably selling premium 25-30% below the market. We think that’s an ideal way to get long the market. Natural gas, if you were to buy it at a certain level and fall slightly, that’s one thing. Selling puts some 25% below the market, I think, is an ideal way-- Actually, in my opinion, a conservative way to get into the market. Natural gas over the next several years is going to be in an up-turn based on Chinese demand, Chinese importation, and finally the U.S. getting to export natural gas for the first time in quite some time. Michael: That and even supply right now looking somewhat bullish in natural gas. Supplies this month are 9% below last year at this time… almost 9% below at 8.9%. So, you have a strong seasonal tendency, you have a bullish supply setup, and what you’re saying, James, is you’re able to go 25-30% underneath the market. For an option seller/a put seller to win here, he can take in a premium of what, $500.. $600.. $700? Is that the range you’re typically looking at? Correct? James: Yes. With the recent weakness in natural gas because of some very warm temperatures in the Northeast, yes a lot of options are trading right now between $600-$700 and that is certainly the sweet spot for where we like to write puts, especially in natural gas. Michael: So, what that investor would be saying is that as long as natural gas doesn’t fall another 25-30% at its most bullish time of year with a bullish supply setup, the option is going to expire and he’s going to keep that premium? James: Exactly. In addition, a lot of investors who are familiar with stock options selling and the high margin requirement, natural gas you’re looking at just 2-3 times the premium that you take in for margins. Your ROI looks really good, as well. Needless to say, we don’t know what natural gas is going to do the next 30 days, but we do know what the fundamentals are and the chance for natural gas to get a small or large rally this summer look quite strong to us. Michael: Sounds good, James. For you listeners, I know a lot of you listening have heard us for a while and you know what we’re talking about, you know the strategy, but we are making an attempt to over-simplify things a little bit for our new listeners out there that may be unfamiliar with how commodities options work. So, we want to make sure we hit all the bases for everyone listening. We’re going to take just a minute here and give you a little preview of the upcoming March newsletter. If you are on our mailing list, you can expect this next week first couple days of March. You should also be getting an e-version of that in your e-mail box. We have a pretty full issue coming up. We have a lesson coming up on how to use leverage in commodities. We have a lot of stock options sellers that have never sold commodities options. This is a lesson in the newsletter that’s really going to bring you up to speed on how the leverage works and how to use it to your advantage the correct way. We also have a strategy, it’s another little bit more advanced strategy this month- we’re talking about an options spread. It’s entitled The Crack Squeeze. It is in the energy markets. We’ll have to wait for the newsletter to read that and see one of the strategies we’re employing right now in those markets. Look for that in your mailbox or e-mailbox first week in March. James, talking about energies, let’s move over to the crude market. We have a really interesting situation setting up there between the seasonal and existing fundamentals that often times you don’t see, kind of conflicting things going on there right now. Do you want to talk about that a little bit for our listeners? James: Definitely. Crude oil is certainly one of the most liquid of all commodities as far as volume, open interest, and participation by investors all around. Not everyone is trading pork bellies and potatoes, but a lot of people know what the price of crude oil is. A lot of people bet with their pocketbooks what they think it’s going to do. Generally speaking, crude oil supplies are at their greatest in January and the market starts to rally as we approach driving season. As I think we all know, this year was different. OPEC together, along with non-OPEC nations, put together the first production cuts in over a dozen years and voila, we had a $15 rally. Crude oil is now sitting in the low 50’s to mid 50’s for the later months. I think right now is fully priced. Crude oil supplies in the United States are at all-time record highs. While the OPEC cut took a lot of people by surprise, and there are a lot of bullish factors right now from that, or at least a lot of analysts think so, it really is offering lots of opportunities now and coming up probably in April and May. Generally speaking, there’s a lot of interplay when you talk about energies. Generally speaking, what crude oil supplies and fundamentals might be might be different for heating oil or for gasoline or for natural gas. Probably the next 30-60 days we see crude oil prices very well supported by the idea that a lot of investors are pouring into that market because of OPEC production cuts. Some of the markets like heating oil generally are going to start heading lower after the winter season. So, often you’re going to see March, April, and May crude oil prices inching up while heating oil actually is falling. There is definitely an opportunity involved with that. For our clients, we manage that for them. For the novices, it can be a little bit much, but that’s another reason why you follow seasonality and why you keep well tuned into the market. We think that over the next 60-90 days we’re going to have really long lasting opportunities in energy. I would say in April and May is going to be the biggest one for the year, and that’s in the crude oil market. We’ll wait and see and talk about that when the time comes. Michael: As far as the energy seasonal goes, that is a major seasonal tendency. What James is explaining is being counter-balanced this year by fundamentals. As you mentioned, James, crude stocks at record highs… over 508 million barrels. That’s an all-time high for crude oil stocks, not for this time of year, but forever. That’s the highest it’s ever been. Also, interesting article in the Wall Street Journal today talking about bullish long positions in crude oil. 10 to 1 – is that what we were talking about earlier, James? James: Michael, every morning I have my favorite cup of Joe and I read the Wall Street Journal. This morning I read, and it has been well published recently, but today almost hit a crescendo, that fund traders in the world have amassed the largest long position ever in crude oil. It trumps their short position 10 to 1. That, in my opinion, is the most lop-sided position I’ve ever seen, especially in something as liquid as crude oil. While these speculators have time on their side right now, the months of March, April, and May are generally good demand for oil and smaller inter-production coming out of OPEC. That is definitely a wall that could come crumbling down. I would not want to be the last person to buy in that market and be holding on the last day because for crude oil to trade around $55 a barrel when in the United States, for example Texas, we can produce crude oil for around $15. You know that in many CEO offices right now and on napkins having a cocktail late at night in a bar there are business positions being put together where we’re going to produce oil at $15 and we’re going to sell it on the board of $55. There’s going to be an opportunity probably in April or May to take advantage of what the speculators have pushed up to probably over-valued heights right now. Michael: So, that big long position like that, sooner or later, that’s going to have to be unwound. We’ll see how that plays out. For the time being, you still have that strong seasonal in place that has to be respected, so you may have a little bit of balance there in the near term. That being the case, we have outlined a strategy in the upcoming newsletter called The Crack Squeeze. We’ll show you how you can take advantage of that. The premium available in that market right now, that’s a trade for now and the coming 30-60 days we have one of your favorite trades coming up, James, but we’ll save that for next month. For those of you that are interested in learning more about working directly with us through an account for high-net-worth investors, you can request our investor information discovery pack. You can get that at OptionSellers.com/Discovery. We do have a recommended $1 million account size. If you are interested in something like that, feel free to request our information package. It does come with a DVD. James, let’s move into our final portion of the podcast this month. This is our lesson for investors. We’re going to talk about diversification of asset class this month. In our videos, we talk about two important types of diversification. One is diversification of strategy, which some investors are not familiar with. Then, there’s diversification of asset class, which some investors are familiar with; however, our commodities often are overlooked when it comes to that diversification. We’re going to talk about this month some of the advantages, especially for stock options sellers, who are used to writing options in stocks, you understand how that strategy works, some of the big advantages you have by applying that strategy to commodities. James, maybe you want to cover this first. There’s plenty, there’s a couple right at the top though of most interest. What would you consider the top advantage of a commodities option writer over a stock option writer? James: Well, you know, stock option writers are a lot of our current clients. They eventually were introduced to short options through their stock account writing covered calls and such. A lot of investors started thinking, “Well, why don’t I sell options on stocks? That seems to be my best portfolio gains.” Generally speaking, selling options on stocks you’re selling approximately 5%, sometimes 10%, out-of-the-money, where in commodities when you educate the different ideas of applying short options to different asset classes, investors are absolutely amazed by the fact that you can sell premium 50%, 60%, 70% out-of-the-money. In some of the markets that we sell premiums it’s as high as 100% out-of-the-money with relatively low margin requirements to do so. A lot of investors that study for themselves what to do with their investment and what to do with their nest egg who discover short options, when they stumble across selling options on commodities certainly that is when our phone starts ringing. I think for the fact that we put ourselves out as the premier stock options sellers, rather commodity option sellers, it’s certainly an eye-opener to a lot of people who want to be diversified. Diversification is always the number one goal for a sound investment portfolio. The fact that the stock market right now is in a bull market, it’s at all time highs. At any moment, it can start a 5 year bear market and selling options on commodities allows you to be profitable in bull or bear markets. That’s what’s the real beauty of what we do. Michael: These don’t just come from us. A lot of these come from our readers/prospective clients that repeat this and these are the reasons we hear the most. That’s why we’re repeating them here. As James was saying, the biggest advantages here is, one, you can sell deep, deep out-of-the-money strikes. Two, you get a potentially high RI because the margins are so much lower than they are for stock options. I know the margins, most of the time, we pay are sometimes 100-150% of the premium. So, you sell an option for $700 and maybe you only put up $700 or $1,000 in margin to hold that. Is that what you’re seeing right now, James, in this condition? James: That’s exactly what we have right now. We have some of the lowest margins to hold short options on commodities that I’ve seen since I’ve been doing this. Not all of them are that way, but some of the most lucrative ones like the gold option strangle that we’re doing and the crude oil trade position that’s coming up. I’m looking at that already trying to get our ducks in a row for that. You’re looking at about 150% of the premium that you take in is what’s required for margin. That is really not tying up a lot of money to hopefully have very good results at the end of the year. Michael: We’re talking about selling deep out-of-the-money. That natural gas trade you described earlier, we’re talking about selling 25-30% out-of-the-money. That’s probably about the closest we’ll be to the money when selling options. Would you say that’s a fair assessment? James: Generally so. Any time someone is selling options on commodities on their own or with us, you’ll notice that the calls are always or most often can be further out-of-the-money for a simple reason. A market can only go to zero, it can’t go below that. When natural gas, which used to trade at $10, $15 per million BTU’s, is trading with a two-handle it can only go so low. The fact that we’re 25% below this market currently, I think, that’s way out-of-the-money. If the market inches a little bit lower, we’ll just continue to sell puts on that market. Often, we’re looking at puts some 40-50% below the money. The fact that natural gas is so cheap right now and the fundamentals look anywhere from friendly to bullish later this year, we think that’s selling them quite a bit out-of-the-money. We think that’s going to be a great position for later this year. Michael: Of course, one more thing I want to point out… you mentioned a diversification aspect. Commodities in general tend to be uncorrelated to stocks as a whole, but when you introduce the option selling aspect to it it’s a portfolio that’s completely uncorrelated to anything. It’s not going to correlate to equity, it’s not going to correlate to interest rates, the positions aren’t even going to correlate to each other because a market like silver’s going to have nothing to do with the price of corn and the price of corn will have nothing to do with the price of coffee. So, it’s a completely diversified portfolio that isn’t even going to correlate to the commodities indexes. That’s simply because you have the ability to sell options on either side of it. Those would be the three big benefits for you stock option sellers listening. You’re thinking about giving it a try, giving it a look. Those are the three biggest draws to this type of investment. Of course, they’re described in depth in our book or any of our materials on our website. James, I think we’ve had a pretty full session this month and I do thank you for your insights and your sharing of some of your thoughts on the markets this month. James: My pleasure. Talking about commodities and, not only that, but the approach of selling options on commodities is definitely an eye-opener to many investors and we look forward to doing more so in the future. Michael: Just an announcement here at the end of our podcast, for those of you considering applying for new accounts, we are closed for March. We are fully booked for March. If you are interested in one of our remaining April openings, please contact Rosemary. You can call her at the 800 number… 800-346-1949. You can also, if you’re an international caller, 813-472-5760. You can also e-mail her at office@optionsellers.com. That is to schedule a phone consultation. We do have a few of those left for March and they would be for April openings. Feel free to give her a call if you are interested in discussing one of those remaining openings in April. Everybody have a great month of option selling. We’ll be back here in March and we’ll talk to you then. Thank you.

Welcome to Option Seller Radio, the podcast for high net-worth option writers. Here, you’ll learn option selling strategies you can use right now in diversified commodities markets, such as crude oil, gold, coffee, and soybeans. So, listen in and start putting decades of knowledge from the OptionSellers.com team to work for you. To learn more about OptionSellers.com, and their managed portfolios for high net-worth investors, visit www.optionsellers.com. Michael: Hello everyone, this is Michael Gross at OptionSellers.com here with your November issue of OptionSellers.com podcast. This is a special Thanksgiving edition and, boy, the world has turned upside down since our last radio show. The title of this month’s show is Trump, the Fed, and 2 BIG Markets for Taking Premium Now. I’m here with James Cordier, head trader here at OptionSellers.com. James, welcome to this month’s radio show. James: Thank you, Michael. It’s always a pleasure and, boy, have things changed since we met last. Michael: Well, if you’re listening to this before or after you’ve had your turkey-day, we hope to bring you some good insights here for selling options and understanding the commodities markets over the next 30 days. As we all know, on November 8th Donald Trump won the presidency and that has certainly presented a list of pitfalls and opportunities for the markets. We’re going to touch on some of those today. Also, have big Fed announcement coming up in December that will have a big impact on the markets, and we are going to discuss those today. James, why don’t we start out by just you giving your general comments on the election, what you think this means for commodities markets. James: What’s interesting, Michael, the pollsters both in England for the Brexit and here in the United States for the presidential election really did not get it. They weren’t even close. Hillary Clinton had a 5% lead going into election night and we all know what happened there. So interesting was the initial response to Donald Trump apparently winning the election. First thing was to sell stocks with both hands and buy gold, with the idea that is just so much uncertainty and how can this gentleman out of nowhere come in and run the greatest and largest economy in the world and, lo and behold, everyone said, “You know, maybe he can. He’s a great businessman, he has been very successful, and he doesn’t mind borrowing money and building things.” Certainly, that’s something that could definitely propel the U.S. economy to levels that it hasn’t seen in quite some time. I think, personally, that both the economy and inflation, something we haven’t had grow at any marketable levels in a long time, is going to really open some eyeballs here the next 12-24 months. Michael: We also have the other big news on the horizon here is the Fed is expected to raise interest rates in December. That could also bring some changes to the market, potential opportunities. Do you have any thoughts on that at this point? James: Michael, the topic of discussion, I think, going forward will be U.S. growth no longer at 1%, no longer at 1.5%. We think it’s going to have a crooked number for years to come, in other words, 2%, 3%, and 4% growth. What the Federal Reserve does in order to rein in potential inflation, I think, is going to be headlines constantly with the Federal Reserve talking about raising interest rates to fight inflation, but, lo and behold, I think that’s something that the Federal Reserve has just been waiting so long for and I think we’ll, behind closed doors, do everything they can just to stoke it a little bit and let it run hot. Michael: James, that’s a point you’ve been making in a lot of our articles recently, and recently, also on CNBC here this past Friday, you had a pretty informative interview on the gold market. Your big theme and our big theme here at OptionSellers.com is that we see inflation picking up in 2017 for a variety of reasons, which you, by the way, did outline very well in our gold piece earlier this month. It is on the blog. As far as your outlook on gold, you had a pretty good interview here Friday where I thought you made your case on CNBC. What do you see happening there over the next 90-120 days? How do option sellers who are looking at that possibly take advantage of that? James: Well, Michael, with what could be a stronger economy in the United States, what will likely be slightly higher interest rates, of course, we’re going to have ¼ point rise here in December – that’s already said and done, it’s like a 99% chance of a rate rise in December. This is what’s been pressuring the gold and silver market here the last 2-3 weeks, was the idea of higher U.S. interest rates. Initially, that is causing a very strong U.S. dollar and when the dollar is strong a lot of investors will dump their gold holdings in order to get possibly into securities. The timing on that is going to be really interesting. When will investors start looking at a slightly higher interest rate with the idea that that’s not going to slow inflation? The timing on this is going to be a little bit tricky this year. Whether inflation starts coming back and the Federal Reserve does little to stop it, that might not be determined until January or February of 2017, but what will get put in place and I think what will be released coming up very soon is the idea of a much stronger U.S. economy, 2.5-3%, and I a lot of people on the inside are going to think the Federal Reserve is not going to stand in the way of letting it run hot. That will be the ignition for gold and silver to start rallying next year is that January, February, we’re not sure, but going forward right now put premium is ginormous for June, October, December of next year. We are really wringing our hands right now with exactly how to position going forward. Gold puts are extremely overpriced and we really like what we see for getting bullish on gold for next year. Michael: You had some great points and you bring up a good point about the put premium- it’s higher. There are a lot of people bearish right now on gold and, from my perspective, your perspective probably as well, it’s hard to see what they’re looking at. If you do see a growing economy next year, Wall Street Journal had a recent survey showing GDP is expected to jump to 2.2% next year, possibly higher in 2018. They’re looking at inflation jumping 2.2% in 2017, 2.4% in 2018, which may not sound like a lot but, considering it may end up this year about 1.8%, that’s fairly significant as far as the ripple effect it can have. I think you made that case pretty well. As far as people looking at gold and saying, “Should I buy the thing here? Is it underpriced”, what are some of these bears looking at? Why are they bearish gold right now? Why this big premium in the puts? James: Michael, all anyone can see right now is a strong U.S. dollar. I think the dollar this past week hit a 13-year high. There is much less uncertainty about health of banking and the banking system around the world right now. Over the last 24 months, there was Greece, Italy, and the Brexit and it was negative interest rates in Germany and just certainly things in the market that no one has considered before, so a lot of investors had the idea that, “maybe I should own some gold” with a brighter picture for the U.S. economy and other economies around the world right now. People feel less need to own gold right now. It hasn’t been a hedge against inflation for several years, and that, I think, is the canary in the coal mine where for the first time, I think, in 2017 we will finally be hedging against inflation – something we haven’t seen in practically a decade. People are selling gold right now because of a stronger U.S. dollar, inflation has not been a worry for several years, and that is what we think is about to change and why someone should look at selling puts and going long on gold. Michael: Of course, put selling strategy where you don’t really have to pick the bottom, you simply go far underneath the market, that’s a little bit of confusion that mainstream investors don’t get. I think, for instance, to go back to your CNBC interview, James, you’re talking about bullish influence for gold in 2017 and one of the commentators there, I believe it was Evan Newmark, was just an all-out bear. Didn’t like gold at all, told a story about how he bought gold index and it went down and he lost 80% and that the market’s no good. Just to dismiss it like that, he has probably never heard of selling options. When people think, “We think gold’s at a value, you should buy gold here”- we’re not necessarily saying that. We’re saying it’s at a level where you can go far underneath it, collect put premium, the longer-term fundamentals support price, and you can really afford to just wait it out and wait for prices to go up. That’s the whole concept of selling options. It’s the same approach you’re taking in the portfolios now, is that correct, James? James: It is, Michael. So often, its herd mentality that drives prices too high and too low. When gold is rallying, everyone seems to be jumping on board. You have gold bugs coming out of the woodwork, buying gold coins and buying bars that you see on TV all the time. Basically, all we’re doing right now is saying that the value of gold right now is at fair value. That’s without any inflation. The gold market is down from $1,900 all the way down to $1,200 now. We really see extremely strong values selling puts at $9.50 and $9.25 for several months out in 2017. We don’t have a crystal ball, we don’t know when the gold market’s about to start rallying on any given day; however, if we do have strong growth in 2017, if we still have a relative easy fed, the gold market is going to look extremely strong as inflation numbers start coming out. Does gold bottom right here at $1,210? We’re not exactly sure, but would we go long by selling strikes at $9.50 and $9.25? We absolutely would. We think that in the 2nd and 3rd quarter of next year, gold will likely be $50-$100 higher than where it is right now. Certainly, that would put these gold options that we’re referring to $300-$350 below the market at that level. Of course, the premiums would be basically cut into maybe 90% from where the current position from where they are right now. We think the timing’s pretty good on it. When does gold start rallying? We’re not exactly sure, but the premiums are extremely large right now because of the down drafts since after the election. Michael: All right, and of course the title of this podcast is 2 Big Markets. A lot of times we’re talking about, well, last month we talked about soft markets, markets like coffee, cocoa, or we’ll talk about grain market. When you talk about major markets, for instance, like gold and silver where there’s a lot of liquidity, there’s just tons and tons of open interest there, open contracts, a lot of participation there. This is where you can really get creative with a lot of your option selling, and we’re going to talk about second big market today, which is one of our favorites. James, I know it’s one of your seasonal favorites… the crude oil market. This is a big time of year for crude oil. Would you maybe want to explain to our listeners why that’s the case? James: Crude oil certainly is one of the largest commodities traded worldwide. Energy prices seem to do quite well in the western hemisphere in June and July, as driving season and demand is as its greatest and often a time when supplies are at their least. Going into the 4th quarter of each year, we have something called shoulder season where we’re no longer heating homes in the northeast and we’re certainly not driving as far as long vacations. This is truly the smallest demand season of the year going into December and January. This year, we’ve had oil trading around $40-$45 recently, we have some discussion from OPEC that they’re going to try and reduce production, but each year we want to go long crude oil in December and January for the June and July time frame. That appears to be setting up quite well. Demand is at its least in December and at its most in June. December is when you would sell puts below the June contract with the upcoming driving season. Normally, you can sell puts $15-$20 below the current value in December and January, and you normally see a $10-$15 rise into driving season. Once again, our favorite seasonal play in all of commodities is possibly taking place in the next 30 days going long crude oil for next spring and summer’s driving season. Michael: Very detailed piece included in the upcoming December newsletter on crude oil that really talks about the seasonal and flushes it out, gives you some background info to trade this writing premium on it, how to get the biggest premium out of this market. James, you make this point well… as far as the seasonal for people listening that may not be familiar with what seasonal tendencies are, seasonal tendencies and commodities are the tendency, not the guarantee, but the tendency that prices tend to move a different direction at a certain time of year. Crude oil, for instance, as refineries start ramping up gasoline production to meet summer driving needs, they start doing it in December and January, and that’s when they start using more crude oil. Demand at the wholesale level rises. That is often coincided with the corresponding rise in price. So, these are the type of things that we look at while we’re analyzing a commodity that they don’t talk about on the news. They want to talk about what’s in the headlines but they don’t talk about these kind of invisible hands that are really pushing supply and demand. When you’re looking at commodities, that’s the kind of thing we look at here- the real underlying forces that are moving price, not necessarily what’s in the headline. James, that lead up to driving season, it appears, from looking at a seasonal chart, that that strength lasts all the way into May or June. Is that how you’ve tended to play it? James: That is how we see it, Michael. Here in Florida, and we probably have similar prices across the nation right now, we’ve seen gasoline prices dip below $2.00. Once again, you’re looking at gasoline at $1.90-$1.95 per gallon. Next May, June, and July you’re going to see gasoline around $2.50, $2.60, $2.70. I know that sounds like really making a simplistic argument to going long crude oil in December for the June and July timeframe, but it is as simple as that. The idea that prices are near their low around the holidays because demand is at its least. It’s not your imagination. Michael: As we discussed before, that is the feature piece in your December newsletter. You’ll see the seasonal chart we talked about. Also, one final thing to bring up about seasonals that we are going to talk about in this piece is these seasonal price moves, while they’re not guaranteed, past performance is not indicative of future results, of course, they tend to occur regardless of where the absolute supply of the commodity is… or the demand or the absolute price. They tend to operate independently of that. For instance, this year, gasoline stocks tend to dwindle. They hit a high in the spring and they tend to just fall off right into December. Even though gasoline stocks are higher than they typically are this year, they have followed that exact pattern straight down. This time of year they start to build them again. We have no reason to believe they won’t start building them again this year, and that’s typically what can cause that seasonal move. Going onto the December newsletter for those of you expecting it, you should look for that around December 1st or 2nd if you are on our newsletter mailing list. In addition to the feature oil piece, James, we put together a great piece this month called How to Make Your Portfolio Great Again. Obviously, a little play on the election there, but some really good pieces of advice in there you gave, especially for the upcoming year. I think anyone that’s interested in building a portfolio will gain something from that. Also, you’ll find a nice piece in this month’s letter about using premium ladders, something we haven’t talked a whole lot about on the show, and something we probably should. It is included in the book, The Complete Guide to Option Selling. It really gives you a blueprint for building a consistent income stream, if that’s what you’re looking to get out of this type of investing. James, lets move on to our trading lesson of the month now. We’re going to talk about a strategy that I know is one of your personal favorites. It’s one that we employ often in our portfolios. It’s the strategy of writing covered options. A lot of people that trade stocks think that means owning the stock and selling the option, but that’s not necessarily how you approach it. Lets talk a little bit about writing covered options and commodities and how you like to go about doing that. James: Michael, during times of low volatility, we don’t always have the luxury of doing a credit-ratio spread, in other words, a one-by-three, which is outlined in The Complete Guide to Option Selling chapter 10. Basically, what we’re doing during times of high volatility, something we just received now after the election, is the luxury of selling a ratio spread. In other words, for example, using our crude oil scenario…. We’re looking to sell the $30 crude oil puts. In order to babysit that position while we’re holding onto it we would buy 1 possibly $33 put. So, in other words, what we’re doing is we’re taking in a great deal of money selling the puts and we’re going to buy 1 contract to protect it while we’re holding it for 30-60 days to make sure that trade is exactly the way we though it would be. What it basically does is it controls the risk on your position and as you no longer need the insurance of buying that option, we can sell it off. In other words, we are taking in anywhere from $600-$700 per contract on our short puts. We’ll spend a little bit of money to hold that position as far as insurance using a long put option. It is basically, in our opinion, the very best way to take in premiums selling options and having a controlled risk parameter while you’re doing it. Michael: James, a lot of people when we talk about volatility and increasing volatility, mainstream investors that don’t sell options tend to run from volatility and they think, “Oh, I better get out of the market.” What they don’t understand and what option sellers do understand is that can be the time to really make hay as an option seller because it opens up these types of strategies. When volatility increases, that makes the premiums bigger. That means you can actually put on spreads like this and you can actually get a higher probability trade that goes a long way toward smoothing out the equity curve. You can get in a not only higher quality trade, but sometimes a, for lack of a better word, safer trade than you would otherwise. Would you agree with that statement? James: You know, volatility is certainly the low-hanging fruit for what we do. Any time we have the luxury of selling puts or calls 50-60% out-of-the-money in an area that we’re able to buy a long option to protect that position for just a short period of time, that is just the most low-hanging fruit landscape that we can ask for and we just received that since the election. Michael: If you’re listening to this discussion, and James and I have had this conversation in private over the last couple of weeks in regard to spreading the markets, and it has been a little bit more difficult to do in 2016. We’ve gone more to writing naked, which is certainly a viable strategy, certainly a good strategy to take premium out of the market, but when you can spread the markets when you get this type of volatility like we just got it opens up a whole new ball game for selling premium. We think that’s open now, we do think 2017 is going to be a much friendlier year to spreading options and certainly looking forward to that. James, I think one final point to make on this topic is you and I both know we get a lot of feedback from people that read our newsletter, maybe see us on TV, where we’ll write an article about something and recommend a possible trade – here’s a way you can take advantage of this – and there’s people out there that aren’t our clients that look at that and may take the trade. They go trade it themselves, and there’s certainly nothing wrong with that, but a lot of those people might not understand is that when we’re trading these markets we are trading them as part of an overall portfolio, as part of an overall strategy and not trading them in a vacuum, like I think some people take and trade on their own. So, when you put a portfolio together, you may be using a combination of different strategies, different strikes, different months, all designed to balance each other. I think that’s one thing that people just take a trade here and there don’t really understand. Would you agree with that? James: A balanced portfolio is certainly the key to success for any portfolio, whether it’s in stocks, or whether it’s real estate, or whether it’s selling options and commodities. We simply will have a blended cocktail almost, if you will, of our favorite positions that we see. Sometimes, it is a naked short position in coffee, sometimes it’s going long crude oil for the driving season, other times we see extremely large premiums on both the put and call side and in that case we would strangle the market. So, we utilize probably 4 or 5 different strategies and approaches to selling options on commodities and using a blending of all 4 or 5 is usually what a portfolio looks like. I know that’s what is going to be achieved here in the last part of 2016 and the beginning of 2017. Right now, premiums are extremely large and it gives us the ability to blend, what we think, is a very balanced portfolio using different strategies in applying short options. We’re really excited about 2017 and making exactly portfolios look just like that. Michael: All right, well I think that’s a pretty good analysis of spreading options and the strategy of the ratio-credit spread. As James mentioned, if you want to read more about that we have a whole chapter about it in our book, The Complete Guide to Option Selling: Third Edition. In closing, just a few announcements. As you may know or find out here in the newsletter, we unfortunately have no new accounts left available during 2016. All of our accounts are booked. The good news is, if you’re hoping to take advantage of some of these strategies we talked about in the gold or crude oil market, these should spill into January time frame. Would you agree with that, James? James: Especially what’s happening right now in gold and silver, it looks like an opportunity that even our listeners can take advantage of in January. Of course, if the oil market stays relatively low going into the new year, that is something we would certainly encourage our listeners to take advantage of. We only trade energies twice a year and one of those two times is coming up in the next 30 days. I would definitely encourage people to take a look at that. Michael: So, if you hear this and you say, “Aw, well I can’t really open the account” these things aren’t here and then they’re gone. They’re opportunities that could probably be available in January. We do have a few openings left in January if you’re looking to possibly have an account then. Consultations for those openings are still being scheduled in December. If you are interested in reserving one of those consultations, they will be taking place before the 15th of the month in December. So, if you’re interested in one of those, give Rosemary a call at our main number… 800-346-1949 to reserve one of those remaining openings. We wish everybody here a very happy Thanksgiving and, James, thanks for your insights this month. James: My pleasure, Michael. I hope everyone listening has a happy Thanksgiving. Very interesting times we’re going into. Sometimes, people feel that it’s a slow portion to the season coming up, but actually we find it quite exciting as investors are taking advantage of options and we’re going to take the other side. Michael: We will be back with you for a special New Years edition of the Option Seller Radio Show. Until then, everybody have a happy Thanksgiving, happy holidays, and a great month of option selling. To learn more about OptionSellers.com and their managed portfolios for high net-worth investors, visit www.optionsellers.com.

Michael: Hello, everybody. This is Michael Gross from OptionSellers.com, here with your August Option Seller Radio Show. I’m here with founder and head trader James Cordier and we’re going to talk a little bit about the markets here and things going on as we start September, back to school month, or, for a lot of investors and financial professionals, it’s back to work month. A lot of people go on vacation in August and when we get back in September it’s back to business. A lot of people start focusing on some of the stories they may have overlooked over the last month or two. James, welcome to the show – a lot to talk about this month. James: Thank you, Michael, there certainly is. Both markets moving, instruments happening, as well as the stock market, of course, the Federal Reserve is always interesting, and new highs in the stock market. We were talking recently about a couple articles that have some of the largest, most well known investors in the world saying that not only is the stock market going to pause but go into a bear market, then it continues to rally. Its just really interesting times right now with both the Federal Reserve and what a lot of people are considering with the stock market what it might do over the next year or so. Michael: You know, we’re going to talk about oil here in a little bit, but some of the stories coming out of OPEC talking maybe about a production freeze, and some people think maybe that’s helping the stock market, too, a little bump in oil here. James: It really is. This is so interesting how the oil market, especially, is a great example of a market that has extremely soft fundamentals. In the United States, we have all-time record supplies. We have Iran and Iraq and Saudi Arabia who are going to just duke it out for market share starting in October and November. What is OPEC come up with going into the soft demand season? Well, we are going to talk. We’re going to come up with some ideas and we’re going to try and freeze production. The part that is so interesting about freezing production, as we all know, is that productions are at record highs right now, so the market really is trying to grasp onto anything it can to try and get insight on what the market might make the next move. What’s so interesting is, as all OPEC discussions over the last few years, each country needs a specific amount of money to run their economy and if oil goes down to 40 or 38, they’re going to need to pump that much oil and everyone really knows it. This buying the market because of OPEC discussions coming up, that’s going to be a feudal end. I’ve seen it before the last several years and when the market rallies up because Iran is now going to join into the talks, they know that all they’re doing is jawboning. When push comes to shove and demand is low in winter, they’re going to be pumping oil like never before. Michael: Yeah, that’s a great point and we are going to talk about that in a second, too, because we have a big seasonal coming up in crude. I know you’re eager to point it out as well. September, as we discussed earlier, is a big month for seasonal tendencies. If you’re listening and you’re unfamiliar with seasonal tendencies, these are the type of things that happen at different times of the year - fundamentals in these underlying markets that can have an outside impact on price. So, being aware of what the seasonals are can really have an impact on your trading, really give you some direction when you’re starting to identify trading opportunities. It’s certainly where James and I start when we’re looking at markets and being aware of that underlying seasonal. September is a huge month for seasonals and one of those markets, in particular, is one of your specialties, James. That is the coffee market. As we end the Brazilian growing season here, we are at the end of harvest, some certain things happen when that harvest is done. Do you want to talk about that a little bit, James? James: Well, what’s interesting is a lot of investors were pointing to whether that wasn’t exactly perfect in many growing areas of the world for cocoa or sugar or coffee. But, in Brazil, we have a record harvest that just took place for Arabica beans. Those are the sought after variety that we drink here in the United States and through most of the western world. We have a record supply coming in. Harvest right now is about 95% complete and you’re going to see co-ops in Brazil wanting to turn those beans into cash. They’re going to try and hold back and they are going to make all kinds of discussion about how we’re going to have a retention plan and we’re going to wait for higher prices, but the bottom line is that they only have so much room for that coffee and it has got to go. As they say, bills have to be paid. If you’re in a third-world nation like Brazil and your cash crop is coffee, you need to turn that into the market. We expect those supplies to start hitting market channels in September and October as the harvest wraps up. Lo and behold, the United States, the largest consumer of coffee, we are currently sitting on the highest coffee supplies of green coffee stocks in the United States for the last 13 years. We don’t really need to bid up coffee prices to get the beans to get here. Coffee roasters can be very picky because we’re sitting on so much coffee here in the United States. With Brazil trying to find a home for their coffee, the United States has all the coffee they need. This seasonal for a downward move in java prices looks quite certain for September, October, and November, so we will be looking at selling coffee calls with both hands here in the next 30 days. Michael: James, that’s a great point. You’re talking about records Arabica production. Total crop out of Brazil, the latest estimate I saw, correct me if I’m wrong, but I believe they’re looking around 56 million bags, which isn’t a record but it is near a record. What you brought up, and maybe just a way of restating it to help some of our investors listening grasp it, is as these supplies hit the market, that excess supply is Economics 101. As supplies go up, price tends to come down. What tends to happen in the fall, if you look at a seasonal chart for December coffee, you hit the first of September and prices typically start declining. That doesn’t mean it is going to happen every year, but over the years that tends to be the cycle. It is something that we are expecting this year. An investor listening to this, you know, it sounds probably Chinese to somebody who just traded stocks and doesn’t know a lot about commodities… you’re talking about how we’re going to be selling options with both fists. How does an investor sitting at home grasp that? How does he take advantage of this? He sees coffee prices where it is right now and he’s looking at a chart. Maybe just kind of walk them through what he would do. James: Certainly. For anyone listening to our commentary today who have read our books on The Complete Guide to Option Selling and have read chapters that concern, for example, historic volatility, namely in the coffee market, years and years ago we had a large rally in the coffee prices because of a freeze that took place in southern Brazil, which caused coffee prices to jump dramatically. In southern Brazil, coffee plantations have migrated north. The chances of freezes that have caused prices to go up in the past are negligible. They no longer exist. However, the historic volatility that is still in coffee options will still be there and it does exist. We actually have the ability to go short coffee at double the price of its current level. In other words, we have a seasonal factor that should cause prices to go down in October, November, and December. The strikes and the coffee calls that we will be selling for clients, or someone listening to us today can do it themself, you are looking at selling coffee calls double the current price. As you mentioned a moment ago, will coffee prices slide 10 or 20 cents a pound this fall? It is really not that important. What we are positioning ourselves and our clients to do, is that we are wagering the fact that coffee won’t double during this price. Historic volatility gives us the ability to sell coffee calls at a very high price and at strikes that are almost double the current price. Michael: Yeah, coffee currently trading just above $1.50 per pound in that range. Good explanation there, James, of why you’re able to sell so deep out-of-the-money. I think that’s a big question a lot of investors have, is why can you sell so far our in commodities and not in stocks. A lot of it has to do with the leverage and the way commodities are priced, but it also has to do with fundamentals that may have changed over the years but that volatility is still in the market. Great, great example there. Selling calls into a harvest in a lot of markets can be a good strategy to pursue. That’s going to take us into another market that we are watching here in September. The grain markets are all big markets that have seasonals in the fall. In the United States, we harvest soybeans, corn, and wheat in the fall. As those supplies come in from harvest, historically speaking, that has tended to pressure prices because as that supply builds, it’s going back to that Economics 101. Higher supply tends to pressure price. That tends to happen in the fall as the new harvest comes in. Not always, nothing is guaranteed, but historical tendencies, however, have tended to drift that way. James, soybeans are another market we’ve been watching lately, we’ve already had kind of a drop-off there, but heading into a harvest now, talk a little bit about the crop there and what you see happening. James: Well, in corn and soybeans in the United States, it seems as though farming just continues to get more and more improved. Not only is Brazil able to produce more coffee beans, but here in the United States and places like Argentina and Brazil, growing more soybeans on the same number of acres here in the United States. We are looking at a huge crop in soybeans and corn that the Unites States is going to be harvesting starting in September and October. Once again, as you mentioned, too much supply and not enough demand certainly sets up ideas for shorter prices and going into this fall. Any rallies that we would have in corn and soybeans over the next 30 days, we would certainly be very interesting in selling call options on those, as well. I know that there is a lot to be made about something that’s called stocks to usage, which actually compiles how much demand there is worldwide versus how much supply there is. I know next year, Michael, you might want to refer to this a little bit, but from what I’ve been hearing, next year’s supply versus demand is going to be gigantic. Selling calls in that environment, I think, is a great addition to someone’s portfolio, as well. Michael: Yeah, you know, we talked about that this spring. We were looking at pretty big acreage this year. We did get a pretty big rally in June because we had some weather concerns, but once that crop was made, prices, especially corn, the corn prices just fell off the cliff since June. One of the reasons we are talking about soybeans right now is that they’ve fallen, but not quite as far as corn. The seasonal tends to kick in at the beginning of September, so we have some pretty good timing. In talking about the soybean crop, we are looking at the largest U.S. harvest ever. We are looking at a projected yield or crop size of 4.1 billion bushels. That’s an all-time high. If this comes to pass, our 2016-2017 U.S. soybean ending stocks are going to be at 330 million bushels, stocks to usage at 8.2%. Both of those will be the highest in a decade. When we talk about bearish fundamentals, that’s bearish fundamentals. That is a pretty big weight on the market. It doesn’t mean that market can’t rally, as you always talk about, but it certainly hinders rallies and certainly casts a bearish shadow, often a great setup for call sellers. It’s one of the reasons we’re watching beans right now – looking for those types of opportunities. James: Well, it’s interesting Michael, something that you and I referred to quite often – we may not know where the price of soybeans is going to go next week or two weeks later, but what we’re calculating and what we’re betting on is where it’s not going to go. That’s all we have to do is get that part right. Michael: Exactly. That is a good segway to talk about the crude market here. You started off talking about crude. You got a lot of media coverage lately… a couple of appearances on CNBC, you’ve had a lot of calls from the media on your call on crude oil because back at the beginning of summer everyone was bullish, you were bearish – you’re still bearish, and you’re still looking at that as a great option selling opportunity. So, maybe share with some of our listeners what you see setting up there and why you like it so much. James: Anyone listening to this right now who is thinking the idea that crude oil is going to continue rallying because of OPEC discussion or slightly smaller production here in the United States, I think you would be really well served to do a little research and find out how much supply is actually out there. In the United States we have record supplies. We have cars that now get 40 miles to the gallon instead of 20 miles to the gallon. We have Iraq, Iran, and Saudi Arabia that are producing record amounts of oil all at a time when we’re going into the weakest demand season of the year. September, October, and November, demand in the United States, the largest consumer, it falls off the table. We really like the idea of crude oil prices heading to softer levels, possibly in the 30’s and then bottoming out around November and December. This is one of the greatest seasonal plays there is, is being short oil going into late summer and early fall. Lo and behold, when the holidays come around, we get into December, we’re going to have some very low oil prices, at least that’s the way it looks from my desk. Then, the other seasonal kicks in and that is to go long when everyone is so fearful that the market is going to go down. So, we have two of our greatest plays as far as building a core position in crude oil, that come up now and then come up again in the 4th quarter of the year. It’s certainly something that has been a great addition to our portfolios over the last several years and we think it’s going to be again this coming year. Michael: James, you bring up a great point there on supply. When you’re talking about crude supplies here in the United States, the last report we are at 521 million barrels. That’s an all-time record for this time of year, as you said. 37% higher than the 5-year average for this same time of year. A key point here, it’s 14% higher than last year at this time. As you know, last year, we saw crude prices dip below 30 down into the high 20’s. We are headed into a seasonal time of year now with supplies 14% above where they were last year and if anybody listening to James talk about the seasonal tendency, you’ll be able to see a chart of that seasonal tendency in the September newsletter. It should be in your mailbox next week by the 1st of the month. You’ll see a crude oil seasonal chart there. I want you to take a look closer at what tends to happen to crude prices at the beginning of September. James hit on it pretty good there – this is why we look to build positions in markets like this that have strong fundamentals that don’t tend to change quickly. They tend to take a while to change why you build things called a core position, James, and I think a lot of our listeners might be interested to hear what that is. You talk about something like a core position and building a portfolio. That’s not something that people read about in books. That’s something that often comes from experience. Do you want to share that with some of our listeners? James: Michael, it is interesting because, for those of us that watch CNBC, Bloomberg, and Fox, you would think that there’s a bull market and a bear market in these different commodities and different stocks every 30 days, but there really isn’t. When the market moves 2 or 3% it gets so much fanfare if it’s going up and it gets so much depressed looks on TV if it’s going down. The options that we sell when we are building core positions, as we like to refer to them, they are 50 and 75% out-of-the-money when we sell calls and puts on these positions. So, when gold or silver or crude oil, in this instance, moves 2 or 3%, it gets so much fanfare. With the OPEC talks recently, they are going to bring one oil analyst or oil company CEO onto the set daily talking about oil getting to 55-60 this year and 65-70 next year based on nothing. You mentioned a really important point, and this is something we discuss often when we’re building core positions, crude oil supplies in the United States is 14% greater than last year. Last year’s low in oil was $27 a barrel. Fundamentals is the key to price projections in commodities. We like to project out 6-12 months and that is what we talk about when building a core position. The fundamentals in a market that is over-supplied won’t change in 30 days or 60 days or 90 days, so what we will do is when we get out of the high-demand season, which ends in May and June, we will sell calls for several months out. As we get into December and January, which is normally the low price-point for crude oil, we will then sell puts 6-12 months out based on the idea that the market will then bottom. Core positioning is basically the meat and potatoes of someone’s portfolio. I know we are not into the holidays yet, but commodities like gold and oil and coffee, these are core-building positions because the fundamentals don’t change and they have huge volatilities from the past. What we then like to blend in with them, it’s almost like Thanksgiving meal. You have the meat and potatoes, which will be things like gold and oil, and the cranberries, the gravy, and the dressing will be soybeans and cocoa and sugar. It’s interesting. Being diversified like that gives a portfolio a lot of staying power and the ability to withstand small movements in the market. So many people, Michael, as you know, look at commodities as a highly speculative, incredible form of gambling, and that may be true for investors who are trying to time the market. As we discussed earlier, we are building core positions at levels that the market cannot reach or very likely will not reach. Like options do, they expire worthless some 80% of the time, building core positions that last the entire year. Basically, that’s hitting singles for 12 months. Michael: Yeah, you talk about that quite a bit in the upcoming newsletter – that concept is a recipe for building a portfolio, structuring a portfolio, and if you’re listening and interested in that type of concept, you’ll get a pretty good dose of it in the September newsletter. While we’re on that subject, I wanted to mention that some of these markets we talked about today, such as the seasonal tendencies and soybeans, seasonal tendencies and coffee. If you missed those articles they are on our blog. You can go back and see those seasonal charts and see how some of these prices tend to perform different times of the year. If you’ve never traded commodities before, it’s a real eye opener to try and get a feel for maybe what some consider an invisible hand behind prices and getting kind of a peek at some of the things really affecting price in different commodities. While we’re on the subject of the upcoming newsletter, James, I want to talk about this for our listeners and readers. We have coming up, as I said – you’ll probably get this at the end of next week, we have an article called 3 Reasons to Love Commodities Now and we kind of go into why commodities are such an attractive investment at this point in time. We talk about some of the warning signs we’re seeing for stock prices right now. As you mentioned at the top of the show, a lot of big names getting pretty bearish on stocks, a lot of big investors thinking the prices are getting a little scary now with what’s going on in the world, so they’re looking for alternatives. We really dig into that a little more this month. Something we also have is a crude oil piece that you talked about here briefly, but we outline a little more detail in the newsletter. We also have a guest column this month by former commodity hedge consultant Don Singletary. James, I know we talked about Don and looking for ways to maybe work with him a little more. Don spent 25 years advising a lot of these big commercial hedgers on hedging hundreds, millions, and even billions of dollars worth of product, whether they are harvesting corn or hedging their oil or gasoline. He kind of came to the same conclusion we did as far as option selling – he came at it from a different angle, though. He came at it as he played, pretty much, to these individual investors. It is tough to compete with these pros, but here’s how they did it. He kind of came to the same conclusion we did and he talks a lot about the same philosophies that we do about selling options. Great piece in our newsletter this month - You don’t want to miss it if you have an interest in that. Let’s talk a little bit about our lesson this month, James. I know we talk a lot about fundamentals in this month’s lesson. We want to talk a little bit about technicals because that’s not something we discuss a lot when selling options, but we still use them and I think some of our listeners might be interested to hear how you use them when you are looking for a trade. James: You know, Michael, when we have very discernable bearish fundamentals, we are watching for a market to rally and reach over-bought conditions. Watching technical indicators, like Stochastic Bollinger Bands and RSI, basically that’s going to help us with timing. It is certainly not necessary, but when we see the oil market rally on short covering, for example, if you were to look at open interest in crude oil you can see that this entire rally was based on investors that were short and were forced to cover. That is an extremely important tool to have in your toolbox is watching open interest in a market that’s trending against its fundamentals. You can almost see by watching open interest when the market is rallying against its fundamentals or its falling against its bullish fundamentals, you can almost see when the last bear got out of his position. It’s not splitting atoms, it’s nothing that the average investors can’t do for himself, but it’s something to be cognoscente about. When open interest balloons to all-time highs in crude oil on the short side, you know what’s coming. Everyone who wanted to be short is already sold the market and the least amount of bullish factors that hits the market will cause the beginning of a rally. By watching open interest, you can see when the last guy got out of his short position. That just happened in crude oil here over the last few weeks. Watching fundamentals gives you the idea of which position you want to take and sometimes, being very cognoscente of the technicals, it can tell you when to get in. We’re not trying to be market timers, but when technicals and the fundamentals line up that is when we put our tuxedo on and jump in. Michael: You know, that’s a great point you bring up because a lot of people watch technicals and maybe they can time a little blip in the market or time a little turn around in the market for a short term, but the big point you make, and it’s one we make often in a lot of our writing, is that knowing the fundamentals is what tells you if that blip in the market is the start of a change in trend or is it a buying or selling opportunity on a correction. That’s what the importance of the fundamentals is knowing that big fundamental picture. I know that’s something you stress a lot. James: Well, Michael, these 8-10 markets that we often discuss have been my friends for the last couple decades. They have personalities and they have seasonal tendencies. You can tell when they get a lot of hype on TV and you can tell the difference between hype and fact. The more you trade these the more you get used to them. They are kind of like friends you keep in your back pocket, and when they are over-bought or over-sold against the fundamentals that is when you add to your core position and making building portfolios so much fun. Michael: As a trader, James, portfolio manager, I know a lot of people have their technical indicators. Maybe talk a little bit about the top 1 or 2 we like to watch in our office. You and I know what they are, but maybe our listeners would be anxious to hear just out of curiosity what we like to watch. James: As far as technical indicators, Bollinger Bands is one of my favorites. Putting a Bollinger Band calculation on a weekly chart, and it really helps you understand what the exact outer limits on what a market can reach simply on short covering or news item or headlines that often push the market because that generates computer buying and computer selling. I would suggest to anyone listening to us today who wants to get more averse with technicals, I would look at weekly charts instead of daily charts. I would look at things like Bollinger Bands instead of simply Relative Strength Index. We look at weekly charts because during the time that we are in a trade or in a position, it’s going to get several buys and sells and the fundamentals never budged. The name of the game is patience. The name of the game is fundamentals. We get paid to wait, and following weekly charts allows you to do just that and the noise in the market doesn’t affect you because you’re looking at the big picture. Michael: Well, what a great synopsis there. This has been quite an information-packed radio show, don’t you think, James? We’ve covered a lot of ground here! James: Michael, you started out by saying September is one our favorite months, and you and I talk about that because we’ve experienced so many Septembers selling options on commodities and we expect this September to be quite a lot the same. Michael: I agree. Well, everyone, I believe that is going to wrap up our show this month. For those listening, our September account slots are closed for this month, they are all filled, there’s no availability this month. We still do have a few slots remaining for October. If you’re interested in pre-qualifying interview for one of those slots, you can contact Rosemary at the office at 800-346-1949. For the rest of you, have a great month. We’ll be updating you on portfolio progress in the bi-weekly videos if you’re a client. Have a great month of premium collection. James, thanks for all of your great information this month. James: My pleasure, Michael. I enjoy doing these and look forward to doing them again many, many times. Michael: Great! Everyone have a great month, and we will talk to you at the end of September. Thank you.

  Speaker 1: Welcome to Circulation on the Run, your weekly podcast summary and backstage pass to the journal and its editors. I'm Dr. Carolyn Lam, Associate Editor from the National Heart Center and Duke National University of Singapore. Joining me in just a moment are Dr. James Gammie and Dr. Timothy Gardner to discuss our feature paper this week describing the first-in-human clinical experience with a novel transapical beating heart mitral valve repair.     First, here are the highlights of this week's journal. The first paper is from co-primary authors doctors Yoon, [Tsue 00:00:49], and [Cha 00:00:50] as well as corresponding authors Dr. [Che 00:00:55]  and Dr. Kim from the Seoul National University College of Medicine. These authors examine mechanisms underlying diabetes-induced microvasculopathy, testing the hypothesis that Notch signaling in endothelial cells may play an important role in this condition.     The authors tested this hypothesis by inducing diabetes in eight-week-old adult mice using intravenous streptozotocin. They then modulated endothelial Notch signaling using chemical inhibitors in both wild type and transgenic mice. Results showed that the Notch ligand called Jagged-1 was markedly increased in endothelial cells of diabetic mice. Using endothelial specific Jagged-1 knocked down mice, they found that blocking Jagged-1 prevented diabetic microvaculopathy. Furthermore, using the induceable endothelium-specific Jagged-1 knocked down mice, blocking Jagged-1 even at four weeks after the establishment of diabetic microvaculopathy could reverse the condition.     In summary, these findings show that diabetes induces Jagged-1 over expression and suppresses Notch signalling in endothelial cells leading to diabetic microvaculopathy in adult mice. The clinical implications are that dysregulated intercellular Notch signalling may therefore represent a novel molecular target in the treatment of diabetic retinopathy.     The next study by Dr. Smith and colleagues at the Leiden University Medical Center in the Netherlands evaluated the association between LDL cholesterol variability and four cognitive domains at 30 months in the 4428 participants of the prosper study.     Results showed that a higher LDL cholesterol variability was associated with lower cognitive test performance for intermediate and delayed memory-related tasks, selective attention, and processing speed. Higher LDL cholesterol variability was also associated with lower cerebral blood flow and greater white matter hyperintensity load in an MRI substudy of 535 patients.     In addition to being independent of the mean LDL cholesterol levels and of clinically overt cardiovascular diseases, these associations were present both in the placebo and pravastatin treatment [inaudible 00:03:43] of the prosper trial suggesting that the findings did not mearly reflect pleiotropic effects of statins or of nonadherence.     The study importantly provides the first observational evidence that lipid variability, not just absolute or mean values, but the variability, maybe of importance to neurocognitive function and thus contributes while understanding potential pathways of neurocogniticve decline.     The next study is by first author, Dr. [Huh 00:04:19], and corresponding author, Dr. Ralph, from the Menzies School of Health Research Charles Darwin University in Australia. These authors aimed to investigate the long term outcomes from acute rheumatic fever and rheumatic heart disease.     They achieved this aim by using linked data between the rheumatic heart disease register, hospital data, and death register for residents of the northern territory of Australia, and examined 1248 patients with rheumatic heart disease as well as 572 patients with acute rheumatic fever in the period 1997 to 2013.     The main findings were that in the first year after an acute rheumatic fever episode, the incidents of progression to rheumatic heart disease was 10 times higher than acute rheumatic fever recurrence; 10% of rheumatic heart disease patients had severe disease at diagnosis. The presence of comorbidities was associated with higher incidence of rheumatic heart disease complications and mortality. In particular, comorbid renal failure and hazardous alcohol use accounted for 28% of the access indigenous mortality.     These findings have global relevance for settings with high acute rheumatic fever, rheumatic heart disease rates and really emphasized the need for integrated chronic disease management strategies for these patients.     The final paper is by first author Dr Bettencourt, corresponding author Dr. Blankstein, and colleagues from Brigman and Women's Hospital in Boston, Massachusetts. These authors sought to answer the question what is the most appropriate score for evaluating the pretest probability of obstructive coronary artery disease?     To answer the question, the authors compared the Diamond-Forrester score with the two CAD consortium scores recently recommended by the European Society of Cardiology, and they did this in 2274 consecutive patients without prior CAD referred for coronary CT angiography. CT angiography findings were used to determine the presence or absence of obstructive CAD defined as 50% or more stenosis.     Here's a refresher of the different probability scores. The Diamond-Forrester score is calculated based on chest pain type such as non-anginal, atypical or typical angina, gender, and age. The first CAD consortium model score called CAD consortium basic is also based on these factors, but was developed using more advanced statistical modeling strategies which were not available when the Diamond-Forrester model was derived. Additionally, the population had a lower prevalence of disease than the original Diamond-Forrester derivation cohort.     The second CAD consortium score called CAD consortium clinical included the same characteristics as CAD basic, but also included the following clinical risk factors; diabetes, smoking status, hypertension, and dyslipidemia. Moreover, the presence of typical chest pain was weighted less in diabetics compared to nondiabetics in the CAD clinical score.  Results showed that among symptomatic individuals referred for coronary CT angiography, the CAD consortium clinical pretest probability score demonstrated improved calibration and discrimination for the prediction of obstructive CAD compared to the Diamond-Forrester classification.     Driving home the clinical implications of this, the authors applied these observed differences in pretest probability of obstructive CAD to guidelines-based patient management algorithms and projected that the use of the newest score could decrease the proportion of individuals in whom testing would be recommended and increase the yield of diagnosing obstructive CAD.     Those were the highlights of these weeks issue. Now, for our feature paper. Our feature paper today is about the first-in-human clinical experience with the transapical beating heart mitral valve repair using a expanded polytetrafluoroethylene chordal insertion device. We're really lucky today to have the first and corresponding author, Dr. James Gammie from the University of Maryland Medical Center as well as Dr. Timothy Gardner, associate editor from Christiana Care Health System to discuss this exciting paper. Welcome, both of you.   Tim: Thank you.   James: Thank you.   Speaker 1: James, may I start with you? What an exciting title, a first-in-human experience, and this is really sounding very reminiscent of our experience with TAVR and aortic stenosis valves. Could I ask you, with so many exciting things, what is it about the results that excited you most?   James: This is an exciting project in that we believe it affords a new treatment option for patients with degenerative mitral regurgitation. We believe that this is a less invasive way of achieving surgical grade reduction of mitral regurgitation. This is a project which has involved a great number of people on our team both within the university and then within Harpoon Medical, as well as our colleagues in Europe to bring this device from an idea which was asked more than a decade ago into a clinical experience.     It really rose out of our recognition in particularly my own practice that virtually, every patient with degenerative mitral regurgitation could be fixed with ePTFE or Gore-Tex neo-chords, and the question became how can we place neo chords on a prolapsed mitral leaflets without doing open heart surgery?     We begin working on that in the laboratory a number of years ago and went through a variety of prototypes, and ultimately, came up with this idea where we could use a 3 millimeter shafted instrument with a specially designed wrap of Gore-Tex on a 21-gauge needle such that we could land on the underside of the mitral leaflet, deploy device, and create a specially designed knot on the atrial surface of the leaflet, and that would anchor the ePTFE on the leaflet. We could repeat that a few times transapically and then adjust the length of those chords in real time using transesophageal echo guidance.     We got this to work in the laboratory and we had hoped that we would have some modest success in humans, but we've been quite pleasantly surprised that it has just worked and we've outlines this initial clinical experience in the manuscript.   Speaker 1: First of all, I'd just like to pick up on the point that this is degenerative mitral regurgitation, so this is limited to the primary mitral regurgitation, not secondary?   James: That's correct and we know that right now, at least in North America, that two-thirds of mitral valve operations are done for degenerative disease. That's correct.   Speaker 1: I think a lot of the audience out there is going to be wondering how this new technique compares to the MitraClip. Could you tell us a little bit more about that?   James: I do MitraClip as well, so I think I'm well positioned to comment on the differences. The Harpoon device right now is still in operation. It does require a small one or two-inch incision. We anticipate it's going to be a thoracoscopic approach in the very near future and then, beyond that, we would hope to extend it to a transcatheter approach. That's one difference.     The MitraClip now is certainly across the world. It's used predominantly for functional mitral regurgitation. In our own experience, it seems to work best for functional mitral regurgitation and as you know, there are anatomic limitations for MitraClip in degenerative disease. The MiraClip replicates the LCRA surgical approach and I think what we've learned from all the less invasive approaches to treat mitral valve disease is that we have to respect what we've learned from our surgical experience, and we know that the LCRA approach works best when it's combined with an annuplasty ring, and certainly, the MitraClip, again, is mostly this perfunctional MR.     Another point I'd bring up is that the experience with MitraClip has been that when you place a MitraClip, you get a fairly strong fibrous reaction and in most of the series, it's not been possible to then go back and surgical repair the valve, but you have to do a replacement because you've compromised the leaflets. Our own approach were simply putting Gore-Tex sutures in the leaflets and we believe that one advantage is that we're not burning any bridges, and that you can go back and do an open repair of you had to.     In our experience, you asked about our results, we had great results in 10 out of 11 of our patients. One patient did require a reoperation. Actually, one of the chords had come untied on the surface in that patient. We were able to go ahead and do a repair and we saw as we had anticipated it based on our animal experience, there was not much compromised to the leaflets.     One of the advantages of our approach is that we can titrate the length to the Gore-Tex chords to optimize the amount of coaptation and maximize the quality of the repair, and that's something that we can't do an open cardiac surgery, and one of the challenges of mitral valve repair is that you have to figure out how long to make those chords while the heart is arrested and placid, and that's one of the challenges in why mitral valve repair is certainly some degree of an art to doing that.     What we've found is that the imager is incredibly important, and so we've teamed up with our echocardiography colleagues, and they really provide essential input into the procedure, and it's done not looking directly at the valve, but looking up at the screens. I think as surgeons, with this procedure, we're moving more into almost becoming interventionalists.   Speaker 1: Thank you, James. That was so exciting. Tim, I have to bring you into this now. Now that James has said they're becoming like the interventionalist. Back to my original comment of TAVR and aortic stenosis, are we witnessing history in the making now? You invited an editorial by Dr. Michael Mack and his title was very provocative, Transcatheter Treatment of Mitral Valve Disease. Is it deja vu all over again? What are your thoughts?   Tim: I think this is an exciting report and I think that this is the wave of the future. I agree completely with Michael Mack that we are beginning to see interventions for mitral valve disease that are effective, less invasive, in some instances catheter based, but this is just the beginning. In fact, mitral valve disease is somewhat more complex even than aortic stenosis, but this type of experience and the ingenuity and the technical prowess, and the ability to do this minimally, invasively, and so on really portend a whole new era.     I agree with Jim. This is sort of the common ground between the interventional structural cardiologist and the surgeon, and we're becoming even more entwined, more collaborative, and more mutually supportive. We are in a new era and I think over those next decade or so, we're going to see this and similar, and even different procedures tried and proven to be useful for the variety of mitral valve disorders that we encounter. Perhaps the era of the full sternotomy for fairly straightforward, single, focused operations will become something of a thing of the past.   Speaker 1: That's beautifully put. James, with that comment, what are the next steps?   James: As we said in the manuscript, this isn't barely experience and we're continuing to learn as we move [inaudible 00:17:07] to the clinical arena. We are currently in the midst of a CE Mark trial in Europe. We rolled it out to eight separate centers. As we approve clinical experience, we will learn more about precisely which patients work best with this approach and we will accrue longer term data. We now have a number of patient out to a year with stable results and so, as the numbers go up, we'll do that, and then we anticipate a randomized trial in the United States in the early to mid portion of 2017 where we'll compare this approach to conventional open cardiac surgery.   Speaker 1: That's fantastic. Thank you so much to both of you, gentlemen, for joining me on our podcast today.   Tim: Thank you.   James: Thank you.   Speaker 1: You've been listening to Circulation on the Run. Thank you for joining us this week and don't forget to tune in next week.