Following The Trend - Interview with Global Trends Investments President Tom Lydon - Zing Talk

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Today our guest is Tom Lydon, president of Global Trends Investments and the editor of ETFTrends.com. How ya doing today Tom?

Great Alex, thanks.

Great, glad to hear it. Could you start off by telling us a little bit about yourself and what sets Global Trends apart from the pack?

I started in the investor advisor business about 25 years ago, and during the 1990s, when there was a great boom in the market, and everyday there were more mutual funds available, you had a lot of choices. But as time went on, we found the best performing mutual funds closed their doors or put on big redemption fees to investors who like to be in mutual funds in a shorter term period of time.

So around that time there began to be more talk about exchange traded funds, or ETFs, and in the early 2000s we created a website as we began shifting money from mutual funds to ETFs because we had more flexibility, more liquidity, no redemption fees, and more choices. Today, we are proud to have one of the most popular websites pertaining to ETF dues, trends, and analysis.

And you also do quite a fair amount of writing for ETFTrends.com. Could you tell our listeners about your goal there?

Well the great thing is that because the market moves every day, there's an ETF that represents virtually every area of the market. So we're able to adapt current market news, economic news, tech news, as new ETFs come to market, and talk about them all on a daily basis as they pertain to ETF markets. There are always things to warn investors away from.

Now we've interviewed a lot of ETF guys on Zing Talk, ranging from Mitch Tuchman of MarketRiders to CEOs of companies that create ETFs like Global X Funds's Bruno Del Ama and AdvisorShares's Noah Hamman. The general consensus appears to be that mutual funds are a dying breed. What are your thoughts on that?

If you were a small-to-mid sized mutual fund company, and had average or higher expense ratios, and were underperforming your benchmarks, that's not a good business model these days. Investors are more savvy these days, and are rolling up their sleeves and spending more time with their portfolio. If mutual funds aren't in the head of the pack, they are making changes or considering making changes.

We're living in an era in which investors may find it difficult to achieve any significant degree of real capital appreciation. As a result, a lot of investors are looking for “income” plays to combat low interest rates. What are some ETFs that could fill that role?

It's a great point; you've got billions of dollars in bonds that are maturing every month. Investors are going back and trying to replicate those yields today, and you can't. We are in danger of having a bond bubble in the next 12 months as the economy recovers. So one area we've been looking at are corporate bond ETFs. One ETF we use, symbol OQT, has had a yield of about 4.5%, and that is up 9.5% year to date. It's been a good alternative to those who were treasury investors who don't want to go longer on the yield curve, and with corporate America having more cash on the balance sheets than ever, we're in a better position than ever to see corporate bonds continue to appreciate.

Any other ETFs you think are likely to outperform the markets over the next year?

A couple areas that people are talking about most recently are commodities. Not just gold, but base metals, agriculture, energy, solar and wind.

Are there any ETFs an investor should avoid in a time like this?

There are inverse and leverage ETFs, during periods of time when you're trying to hedge certain markets, there are 2x and 3x leverage ETFs, and if you're a savvy investor and keep a close eye on your portfolio, those do well, but those aren't the sort you just buy and forget over an extended period of time. One area that's fallen off lately has been natural gas, even though we're spending more on oil, we don't seem to have expanded into natural gas.

I want to talk to you a little bit about theidea of following trends. Is buy-and-hold even an option anymore? Or has making any amount of money off of investing become a full-time job requiring active trend-watching?

Buy and Hold over the past 10 years hasn't worked and investors know that. 10 years ago the average money manager had 80% of their clients' portfolio in buy and hold position, and now the number is closer to 30%. So people are more nimble now, more inclined to operate on current markets, and look for opportunities even overseas. I remember even five years ago it was difficult to invest in commodities. Today, all those are available in the form of ETFs.

Name the most interesting ETF you've ever come across.

One I like right now is Chile. I never imagined five years ago that I'd be able to, with one purchase, buy a whole cross section of publicly traded commodities in Chile. And as you dig into the country of Chile and how great it is, it has so many natural resources, it is a net exporter, and is the number one exporter of copper in the world. During a time when we're struggling here in the U.S, Chile is on fire today and performing well in ETFs.

Alright, now that we've got the hard questions out of the way we have a few more light-hearted ones. What was your first, and what was your worst job?

My first job was working as a barback at a restaurant at age 11. It was a great job, because I got to find out at a young age what a lot of adults did in their free time. The worst job I had was when I was in college and trying to put myself through school, I was looking for odd jobs, and I had a job cleaning houses after school. The wonderful homemakers had wonderful tools for me to scrub bathrooms and toilets. I swore I'd never do that again afterwards.

What do you like to do outside of work?

We've got three kids who are actively involved in sports and activities; boy scouts, ballet, golf, sports and stuff like that. So on weekends, my wife and I tend to divide and conquer. I played tennis when I was young, so I try to get out and do that still. I like golf, but things have been so busy. I enjoy traveling a lot, and going to cities across the country, seeing ETF fans.

This is our toughest question according to our guests – what is your favorite restaurant that you've ever been to?

I've gotta give a shout out to Mangia Mangia in Huntington Beach, and it's owned by a couple Italian brothers. It's nothing fancy, but my wife and I love it; Decent wine list, and official Italian food, so when we want to kick back, enjoy some good food and relax. It's always like coming home.

Tell us something about yourself that no one's asked you about in an interview.

Two years ago I had my tonsils out, and not only were my tonsils swelled up, but my uvula was too. The doctor said I had to have that taken out too. I had sleep apnea, which means I'd wake up in the middle of the night and never really slept well. But after going through that, I sleep pretty well these days.

Do you have a hero?

My folks, and I know a lot of people say that, but my mom and dad did a great job raising us as kids, and were always very supportive of us growing up.

Okay – this last one is Benzinga's trademark question: What was the best, and what was the worst investment decision you've ever made?

Most recently the worst decision I made: when I started my firm in 1996, one thing I learned is that if you have an investment discipline, stick to it, and number 2, if you don't do the same thing with your money that you do with a client's, you're always going to be conflicted. Those were my guiding principles that always worked, except for one occasion, when I saw this natural gas ETF go down 60-70%, figured it couldn't go down any lower, so I bought it. I still own it, and it's down 30% from my original position. I violated my own rule, and I'm paying for it. What's the best? I've had a few home run stock picks over the years, but when I'm out to dinner with friends, or at parties, I always give my wife credit, because the first house we bought 15 years ago was right after the real estate decline in the early 90s. We had a young son, and looked around for our price range. She liked these two homes going up around the corner, but I thought they were too high for us to afford. But we went for it, and it happened to be at the absolute low in the market, and if it weren't for her pushing, we would have never gotten it.

Thanks Tom. That'll do it for this episode of Zing Talk. Remember to check out the latest market moving information, commentary and trading ideas on www.benzinga.com.