Comments
Transcript
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WBGreat interview. wonderful they know each other which will lead to fun segments, BUT it still sounds to me like these guys (all 3) want ‘put protection ‘ from an uptick rule, trading halts, or FED ‘put’ so they can continue using leverage as they wish w/o lots of 6 sigma fear. Free markets would clear out HFT firms that over leverage (over time of course) and teach people that passive investing just provides the kindling the HFTs and algos feed on.
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JSGreat job to Tony! Really great connection and very sincere enthusiasm for the guests.
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JFEgo Management! How true. The best book I ever read on this phenomenon is, "The Ending of Time", by Jiddu Krishnumurti and David Bohm. Must read for any trader imho.
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TBMost of this interview is a just a reflection on recent market history and personal experiences of a couple of entertaining gentlemen, but the trading advice at 49 is excellent. The risk management advice in this segment reminds me of the advisories in Market Wizards I &II, with would have saved me from a costly trading decision in the past few months.
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WCthese guys are great. Very enjoyable.
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RGtotal garbage, what are you guys thinking putting these clowns on your site ?
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mbI'm surprised that Tony didn't dig a little deeper regarding the 9/11 airlines trade.
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AAThese guys made it as floor traders and kudos to them. But I can't believe that nowadays RV included these two CNBC collaborators. I say this with all respect. I'm an option trader and bought their book "follow the smart money" to see if there was an insight on discovering the "unusual option activity". It was a complete disappointment and almost laughable to the degree of plagiarism. The book was a copy paste of "options" theory and their method or system did not appeared anywhere in the book. I went even further just to see if this was a scam and bought one of their courses (as they are refundable) and it was even worse. Judge for yourself but RV has impressed me as a different level and thinking of finance and their guests should be at a higher level and bring these insights. They might have good intentions but to me their system is a marketing gimmick. In any case...they are famous and with lots of dough...
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GRI've never seen the 9/11 airline puts theory ever proved. Can someone print time and sales from Bloomberg from that week in history so we know once and for all please???
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LTLoved the interview, however I would amend one thing. The whole conception that MMs were there to step in with a bid, and make a market, when no one else was...was pretty roundly shown to be false. MMs like to say this old tired line to give their image some shine, but during most crashes they are selling into the hole with everyone else. MMs are not running a charity. Computers do it tighter, faster, and better. #unpopularopinion
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JHThis video seems to be listed with length 01.55 on the front page, not sure why. Otherwise great!
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PUNobody, . . . nobody from CNBC should be on Real Vision. Nothing against these guys, but Real Vision is the antithesis of what CNBC stands for! Shame Shame Shame.
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PGLove it. Always great to see personalities like these guys!!
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CS32:50... as a young person I wish they would've explored some of these opportunities for young professionals. If anyone has any thoughts on this subject I would love to hear it. Thanks.
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RAGreat job Tony and one of your best interviews yet, IMO. A great mix between the historical, some broad timeless trading chestnuts and a here and now opinion regarding the Fed and the Trade Deal dynamics for the next year. Nice balance and some good chemistry between the three of you. Nice work in both getting the N brothers and in keeping them focused on what we RVer’s would want out of the interview. Nice work RV.
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SBWell done Tony. I think RV does a great job in pulling out people’s true talent that is often talked over, steered, or dramatized in other other media outlets. Happy to learn more about the Najarian Brothers and their accomplishments.
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PBAbsolutely fantastic! Thanks a lot!
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DSThe Najarian brothers are great and the Fed and the trade war are important. They missed, however, the major market mover of 2019 - declining earnings. Do you think that the Samsung earnings projections of down 60% are a one off? Amazon is going into regular groceries stores to disrupt the profits even more. In the US margins are being squeezed by competitive pricing, wage increases and the strong dollar. There will be profitable companies which the Najarian brothers will find, but everyone should be very careful with volatility from earnings declines. Cash will be king in 2019 as we try to buy bargains resulting from volatility like Christmas Eve or even lower. The strong rebound is close to even. Do not expect to be so lucky again. DLS
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DHThe fact that they appear on CNBC is irrelevant to us. We like to think we can find value and learning from their experiences that CNBC can't...
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TMAlgorithmic trading and investing are going to murder the markets one of these days.
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KCTwo guys who have managed to continue to find success. Good interview, definitely a good background listen. And I don't really know who they are as I don't watch CNBC though I've seen them on commercials.
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DFThis is a gem.....truly one of my favorite spots on RealVision
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TRGreat Job by Real Vision. Getting the Najarian brothers demonstrates the clear objective on getting all points of view from credible sources. Agree or disagree with these guys - they are clearly accomplished, clearly entrepreneurial, and are credible. Before finding RV, I was a CNBC and Bloomberg watcher. I did and still like these guys - even if I don't agree with everything they may say. They are mainstream media and they play by those rules and play those roles quite well. It will be fascinating to see, in our life times and perhaps in the not too distant future, when Real Vision (in the age of where Netflix and Pod Casts, U-Tube, Blogs, Instagram, etc displace Networks ) becomes the new standard in the new main stream - and then, what does that look like?
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WBAs a former market maker at the CBOE, I appreciated this. I held on to my market making business until 2017 and there were actually some fantastic years after these guys sold theirs (2007-8 and 2011 were phenomenal), but in the end their take was spot on. Electronic trading eventually killed the market making firms who weren't able to commit 10's of millions to system development. The continued success of the Najarians I find surprising and is to their credit. They have pulled several rabbits out of their hats and are no longer just some dumb guys from the floor (like me).
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JSAwesome interview - lots of great little nuggets hidden everywhere.
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CBLittle known fact: Charlie Munger always does his best thinking while wearing a Kangol...
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NvGreat convo. Incorrect on US-China dynamic though. Chinese equities up a lot more than US equities YTD
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GPNice guys. They've done very well and good luck to them. Some nice nostalgia but little real insight for the here and now.
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MMReally silly objections below. I'm finding this fascinating and these guys are very likeable
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PUCan't even force my self to watch this. I'm out.
JON NAJARIAN: They're basically hitting you so fast that you can lose more money in half a second than you can make in a month.
And the good and bad of electronic trading is it makes the markets that much tighter. Which is great for the rest of the world, not so good for a guy who's in the industry of trying to take that money in between, right?
The XIV failed because it was built to fail. That was the dumbest product. The only way you can hedge that is with your ego, because there's no way you can stay up with.
TONY GREER: Hi, this is Tony Greer, and we're going to talk to two extra-large personalities from CNBC today, Pete and Jon Najarian. We're going to find out how they got their start on the floor in Chicago, and we're going to find out about how they founded their monster brand of financial platforms, and we're going to find out what they had planned for Investitute's future. Let's get started.
So, as a student of the market, this is an honor and a privilege for me to speak with you guys.
70 years of trading experience under your belts, accomplished authors, you're serial entrepreneurs, you've started a number of platforms and products, and sold them to relevant players in the markets.
I think I'd like to start where you guys started, and where I started, down on the floor of the exchanges, in open outcry. So if you would tell me a little bit about, number 1, what got you down to open outcry, and then what was your path throughout your open outcry experience that led you to start starting these products? You know-- where do you guys want to start talking about your floor life.
JON NAJARIAN: I was down first, so I'll start. Because everybody always asks, Tony, well, are you guys twins?
TONY GREER: Right.
JON NAJARIAN: And I always say, no, 6 years apart.
PETE NAJARIAN: I'm not sure if that's a flattering thing for me or not.
JON NAJARIAN: Flattering for me.
TONY GREER: Is it a volatile spread, or does that spread look pretty much tied to 6 years the whole time? It looks good. You guys look great. That looks right.
JON NAJARIAN: And I came out of playing football for the Bears-- played 4 games, 4, for the Chicago Bears, got cut. I don't know why I was so surprised when I got cut. I was surprised only because I played in the preseason, and Singletary held out on his contract. He was the guy they drafted in the second round. They drafted Van Horn in the first. Both these guys started and had long pro careers, and Singletary is in the Hall of Fame.
But once they figure out his skill set, which was immense, they decided to cut me. And so like I say, I shouldn't have been so surprised, Tony, when I heard that--
--knock on the door, but I was, for whatever reason.
But my agent gave me an opportunity. He said, do you want to come down onto the trading floor? Because I said I didn't want to go up to Canada. I love Canada, I just didn't want to go up and try to play football up there. I know, number 1, they have a limited number of Americans on each team. Number 2, they don't cover you at all for any injuries that occur. Only the Canadians are covered. So in other words, you're going up there, you're a gladiator. You're thrown into it making no money, because I think I would've made, like, $5,000 a game or something like that. $5,000 is not nothing in 1981, but it's also not what I was going to be making in the NFL. And I figure if I'm going to risk getting hurt like that, I think I'll pass.
TONY GREER: So football was actually your connection to the exchange.
JON NAJARIAN: It was. Because my agent had 3 traders down on the floor that were basically running money for him, and they were all 3 former pro athletes. One was hockey, one was football, one was skiing. And he'd represented them in their various contracts. So when those careers ended, he said, hey, come on down because I'm looking for guys that have discipline. And that's one thing I think that athletes in general, pro or otherwise, have to have discipline. And it's Pete's number 1 thing, mine also, as far as you got to have discipline if you're going to make it in this game. Because a monkey can make money picking stocks. I used to have to go against a monkey every year.
TONY GREER: Really?
JON NAJARIAN: When I was at Fox--
PETE NAJARIAN: Back in the day.
JON NAJARIAN: Yeah. They would bring in a monkey every year. And the monkey from the zoo would get a dart. And he'd either throw it at the dart board, and they'd have stocks on the dart board, and so I'd have to beat that monkey. Or they'd have a monkey come in and he'd crap on a newspaper, and wherever the crap landed on the newspaper, that's the stock--
TONY GREER: Very technical approach they had.
JON NAJARIAN: Yeah.
TONY GREER: Got it, yeah.
JON NAJARIAN: So the monkey can obviously pick stocks. I'd like to say that I always beat the monkey, because I did. But the reason I beat the monkey, at least partially, is because, Tony, I know just like you, as a pro trader, I know when to cut my losses. You've got to have discipline.
TONY GREER: Risk management skills.
JON NAJARIAN: Yep. And if you can't cut your losses, you're not going to make it. Because even the monkey can pick a stock that goes up 12%. But can the monkey cut the losses, and/or does the monkey take the profits?
Anyway, so that's what got me onto the floor, was my agent was putting traders on the floor.
TONY GREER: Very interesting. What ring did you start in on what exchange.
JON NAJARIAN: I started on the Chicago Board Option Exchange as a runner. And so I literally-- it's a euphemism. They didn't let you run, but you walked fast, from the booths at the periphery of the floor to wherever an order needed to go-- in the middle of the floor, usually, to a broker.
I couldn't execute or anything like that. I was just basically going back and forth as a runner, bringing orders from the desks at the periphery-- remember, this was way before cell phone. And so all the guys have got the 2 phones to their ear, like in Wall Street--
TONY GREER: I remember.
JON NAJARIAN: --with Michael Douglas, and Charlie Sheen, and all that. Pretty similar, except that was, of course, upstairs, where you did a lot of what you did, Tony. And this was down on the trading floor, but same idea.
TONY GREER: Very interesting.
JON NAJARIAN: So that's what I did, was basically learned what was going on for about 3 months, and then I started taking tests and getting ready to become a trader.
TONY GREER: And then you got your badge, stepped into the ring, started trading options in open outcry.
JON NAJARIAN: Yes, sir.
TONY GREER: And when did your brother join you?
JON NAJARIAN: So then Pete joined about 6 years later. Because like I say, I'm 6 years older than Pete.
TONY GREER: You paved the way for him a little bit. You said come on down, little brother.
PETE NAJARIAN: Kick it through and everything.
JON NAJARIAN: And he'd been trading-- or he'd been investing, and he'd come through Chicago. I'll let him tell you about that. But on his way-- he was playing for Seattle, and the Vikings, and Tampa Bay.
TONY GREER: Very cool.
JON NAJARIAN: And on his way to and from some of those gigs, he'd come by the trading floor in Chicago.
TONY GREER: OK, so what struck you about the trading floor? Was it the activity level, excitement level, competitiveness? What turned you on?
PETE NAJARIAN: All of what you jut said, everything-- absolutely everything about it. I was intrigued early on. I was playing for the Vikings, Jon mentioned. And eventually I was down in Tampa. And whenever I'd do the trip back and forth, bring my car down for the year, I would stop in Chicago for a couple days, join him on the floor and watch, and be confused beyond words because it's the most confusing thing ever.
TONY GREER: It is.
PETE NAJARIAN: I think people that have never been on the floor or seen it in person, it's not only confusing, but you have to understand that people are called market makers, which I don't think very many people really get that. They think you go to the floor, and you buy a stock, or an option, or whatever. And that's really not the case. You're making the market. And that's what Jon had been doing, and I watched him. And it's the most confusing thing you'll ever see in your life to watch in person, as you know.
But it was intriguing. And I was lucky enough that I played and something called the World Football League. I actually did make a trip up to Canada as well. So I kind of played everywhere. I was asked-- not long after I came to Chicago, I was asked to be a player-coach in the Arena Football League, which would have been cool. And I didn't do it, but Gruden's younger brother, who's now the head coach of the Redskins, did it. But somewhere along the way, he and I had crossed paths earlier, too, as players.
But so while I was playing in the World Football League, the first year, we did well, and I was lucky enough to be an All-World linebacker-- which is much better than All-Pro, by the way.
JON NAJARIAN: Much better.
TONY GREER: I understand.
PETE NAJARIAN: I mean, this is the whole world.
TONY GREER: Yeah, the whole world, clearly.
PETE NAJARIAN: But then, the second year, we won the whole thing. And I had gotten injured. I got injured in the first year, I got injured again in the second year, and I just decided I was almost done. I was pushing 30 years old. I got to get a real job. And as much as I'd love to play in the NFL, there were guys coming out of college who didn't have any injuries, and I had a phone book version of injuries.
So I went to Chicago. I thought it was interesting with Jon, early on. But it was the most confusing thing. It took me a long, long time. And then once you get it-- and he said this from day 1. He goes, there will come a day where you're going to say, that makes sense. And that day finally came. And I did the same thing as Jon. I went from runner, to clerk, to assistant, to a trader, and then eventually became the risk manager of our firm.
TONY GREER: Right. So I've done a number of those jobs on the floor as well, on the commodities exchanges. And I will say that once the light bulb goes off and you learn that your liquidity is making eye contact and finding, physically, where the buyers and sellers are, and your other best friend is the board up there to look at, and now you're starting to get your sea legs on the floor, and you say, OK, I know what's going on, at least. Because when you first go down there, it's like literally being thrown into the center of a pinball machine, and there's things going on all around you that you don't understand, like you said.
So tell me what-- the exchanges were functioning down there, you guys had a functioning role, you were making markets, et cetera. What led you to this huge entrepreneurial run that you went on? OK, in 2004, you sold Mercury to Citadel. In 2016, after founding Options Monster and Trading Monster, you sold that to Citadel.
JON NAJARIAN: To E-Trade.
TONY GREER: Oh, excuse me, to E-trade. Excuse me, excuse me. I repeated the same name. I apologize. Sold that to E-Trade. 2 massively impressive feats. Congratulations, first of all. I'm in awe of that.
But more importantly, I want I want to know, from the places that you were sitting, what needs did you see in the market that the market was desperately calling for that you guys spotted and you looked at each other and said, hey, if we can provide this, we've got something on our hands? You know what I mean? Like what was the light bulb moment where you said, that's it, this isn't being done right, we're going our own way with our own product and our own idea? Can you speak to that?
JON NAJARIAN: Sure. I think what we are is very close to first movers in a lot of situations. We're sort of mercurial as well. Because we will change and go with whatever seems to be working best. And to your point about when we sold the DPM, the Designated Primary Market Maker, or Specialist, when we sold that business, we didn't really have much choice.
We knew the whole world was going towards high-frequency trading. It wasn't what