Steve McDonald: Hi, everybody. I'm Steve McDonald. This is your Market Wake-Up Call. Our guest this week is Alexander Green, the best money mind I know. He's here to talk about how to take advantage of this incredible market and how to not get burned by it. Welcome, Alex.

Alex Green: Hey, Steve. Thanks for having me.

Steve McDonald: It's my pleasure. Okay, as unbelievable as it seems, the S&P 500 has gone 248 trading days without trading more than 3% below its record high. That's the longest streak ever for this index.

Alex Green: Right.

Steve McDonald: And it hasn't had a 10% decline or more since February of 2016. And that was a manipulated sell-off by the Saudis when they started playing with the oil market. How long can this last?

Alex Green: Well, unfortunately my crystal ball is in the shop, Steve, but I'll give you my thoughts on it. You know, when the Fed took interest rates to near zero almost nine years ago now, people imagined that this was going to be a short-term phenomenon, and rates would normalize. And interest rates in the form of cash and bonds generally offer an alternative to stocks.

Steve McDonald: Right.

Alex Green: But this far into this very low interest rate environment, more and more investors are realizing that low interest rates may be here for a very long time. There's tons of cash sitting on the sidelines. A lot of people got out of the market during the sell-off eight or nine years ago and never got back in.

And what's happening is that any sort of pullback at all - 1%, 2%, 3% - is viewed as some sort of buying opportunity because people are getting left on the dock. They're feeling that this huge bull market has taken off. For years, I went around talking about the most unloved bull market in history. And people thought it just couldn't last, because they thought it was all Fed-manufactured.

But now people are starting to realize. They look at the economy - we have low inflation, we have cheap energy, we have an improving economy and two consecutive quarters of 3%-plus economic growth. Corporate profits are coming in better than expected. Consumer sentiment, investor sentiment and business sentiment are all on the upswing. And people are saying, "I'm afraid of getting left behind." As a result, stocks just keep moving higher.

Steve McDonald: All right, a lot of people didn't listen to your advice. There are still a lot of people on the sidelines. They're guesstimating somewhere in the area of $50 trillion in cash.

Alex Green: Right.

Steve McDonald: These people are asking the questions "How do I take advantage of this market?" and, more importantly, "How do you not get burned by the inevitable reversal that has to come?"

Alex Green: Yeah. Well, my suggestion is right now you should be hunting with a rifle, not a shotgun. The time to buy an S&P 500 index fund is probably behind us, because you really want to pick those companies to own that really have exceptional potential that isn't recognized by the market. And of course that leads to the question “What companies are those?”

It's an old theme, but it's never been truer. And that is the insiders, the corporate executives and directors who oversee a company, have a huge unfair advantage when they go into the market to trade, because they have access to all kinds of material and non-public information about the future prospects of the business.

They know the directions of sales since the last quarterly report. They know about new products and services that are in development. They know about litigation that's about to be resolved. They know about new customers that are being gained, and all sorts of positive things that are happening in the company.

And when they go in the market to trade, they have a huge advantage over the rest of us. So the compromise that the government came up with many years ago is that these individuals have to file what's known as a Form 4 with the SEC, detailing how many shares they bought on what date and at what price. And that alerts the rest of us, not to what they know, but at least to what they're doing.

So one of the best ways to take advantage of a rising stock price when the market has reached the level it has now is to be buying the very same companies that the top executives are buying for themselves, with their own money, at current market prices.

Steve McDonald: Now are there any industries or sectors that are still within your buy range? What you would call your buy range? Are there any buys left?

Alex Green: Yeah, there are. You know, there's always an opportunity somewhere. And I think that the thing to do is, again, rather than take a broad-brush approach of buying into the market or buying into a particular sector or industry, is to just single out those particular companies.

Maybe in the homebuilding industry - it's gotten pricey - but if at one particular homebuilder, the CEO, the chairman, the chief legal counsel and the president are all buying shares for themselves, maybe you should be buying some shares too.

And the same holds true for other industries, whether it's banking, retail or manufacturing. In every industry, you have individuals who are stepping up to buy not just hundreds of thousands, but millions of dollars' worth of their own company's stock with their own money at current market prices. And in my view, you just can't get a better heads-up than that - than to be riding the coattails of these knowledgeable insiders.

Steve McDonald: You know, between you and me, Alex, I don't see the unreasonable optimism or the crazy buying that normally accompanies a market top. And in fact, most of the people I talk to are still pretty cautious.

Alex Green: Well, they are. It's when people have thrown caution to the wind, and they're thinking that stocks have nowhere to go but up.

If you think back to the real estate bubble we had a decade ago, even though housing prices had crept higher at a 2% or 3% rate for decades, all of a sudden they doubled and tripled in value. And people were saying, "Oh, they're not making any more real estate," and, "Home prices always go up," and “Blah, blah, blah.” And that was the beginning of the end.

Right now people are very cautious and skeptical about stocks, and that's actually a positive indicator. Because it's when people are euphoric about the outlook for stocks that you really have to be nervous, and, as Warren Buffett famously says, you want to be very greedy when people are fearful and very fearful when people are greedy. So that's why this negative sentiment is actually a plus for the market.

Steve McDonald: Great advice, as always, Alex. Thank you so much for taking the time to be with us.

Alex Green: Thanks a lot, Steve, glad to be here.

Steve McDonald: It's my pleasure. And for everybody here at Market Wake-Up Call, I'm Steve McDonald. Thank you for being a part of us. We'll see you next week.

[End of Audio]