Bryan Cannon of Cannon Advisors On The 5 Essentials for Smart Investing

An Interview With Jason Hartman

To make sure these apply to “everyone,” I am going to give basic investment essentials that should be applied sequentially. The first is establishing a plan. Before just throwing money into the market, you first should ask yourself where you are financially, where you want to be, and how you will get there. Put all of that information into a solid plan and make adjustments along the way as your situation changes. List your goals and dreams. If you don’t have a road map of where you want to be, how can you expect to get there? Track your successes and learn from your mistakes.

As a part of my series about The 5 Essentials of Smart Investing, I had the pleasure of interviewing Bryan Cannon, CFP, LUTCF.

Bryan Cannon is the CEO and Chief Portfolio Strategist at Cannon Advisors. With over 25 years of investment and financial planning experience, Bryan is a seasoned stock market technical analyst closely following overall market trends, market conditions, and specific equities. His career covers a diverse range of investment and securities experience including financial and estate planning for high and ultra-high net worth families, as well as holding senior and partner roles with big Wall Street firms and smaller boutique outlets.

Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

When I was in the third grade, my father wanted to teach my brother and me a life lesson on how to manage our money. Because my father was an accountant, the lesson was not a simple one; it included creating a budget that factored cash flows and expenses. He calculated the average daily lunch expense ($0.10 for milk, $0.50 for a hotdog, etc.) and gave us each an envelope on Sunday nights with the total amount for the week, and had us manage the daily spend rate. If we spent it all on the first day, we would be left without money for the rest of the week and we knew better than to ask him for more. If we didn’t have enough money for lunch, we were forced to make and bring our own lunch with no help from mom. Let’s just say that my brother, who was three years my senior, was much better at it than I was, but I got really good at making peanut butter and jelly sandwiches! My father’s teaching did not stop there. As a boy, I was a hard worker. At the age of 12, I was mowing five neighbors yards per week, making between $10 and $25 per yard, and I had a paper route that had me delivering 200 papers per week, making $0.25 per paper folded, stuffed and delivered. I quickly had saved up over $1,000 and it was burning a hole in my pocket. Sensing the upcoming spending spree, my father seized the opportunity for another life lesson. He told me how proud he was of my hard work and my diligent saving. However, he then informed me that he and my mother would not be buying me a car when I turned 16. He suggested that whatever I was about to buy now would pale in comparison to the car I could purchase at 16 and the freedom it would provide. So, I began saving for a car at age 12 and, sure enough, paid cash for it on my sixteenth birthday. Essentially, my father groomed me to be in the finance business.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

There are only a few moments in your life that are so memorable that later you can close your eyes and rebuild the situation in your mind. You can vividly recall where you were sitting, what you were doing, and the feelings you had on that day . These moments might result from learning of the death of a loved one or the birth of a child. For many of us, one of those points may involve the circumstances of where we were and how we felt on 9/11. For me, one of those days was October 9, 2008. It was a time in my career when I had a lot of really great clients, many of whom I had very close and deep relationships with and truly viewed as extended family. Prior to that day, the stock market had already dropped by nearly 35 percent. I remember thinking that there is no possible way it could go any further. How can the stock market, which has been around for such a long time, lose half of its value? I did not think it was possible, but it was. On October 9 the market dropped by approximately another 9 percent in a single trading day. I recall seeing the other advisors on our team and in the office running around acting crazy and seeing the news anchors in complete shock. The market was in terrible turmoil, experiencing what seemed to be a never-ending freefall. The market’s peak to trough fall erased over 55 percent of market value before bottoming in 2009. It was on this day in October, while feeling overwhelmed with helplessness and anxiety, that I told myself, “Never Again!” I am supposed to get paid for having knowledge, skill, a steady hand, and the acumen to grow a client’s wealth, and on that day I realized that in order to grow I had to learn how to more strategically protect. On that day, I decided to begin a search to discover who survived or even thrived during this market turmoil and how they knew what to do and when to act. Over the next several years, I searched and searched, and discovered that even a very conservative “asset-allocated and diversified” portfolio made up of 60 percent stocks and 40 percent bonds still dropped over 33 percent as a result of the market drop. While that result would have beat the market, it would still mean that I would have to deliver the news to a client that a third of their assets have disappeared, which is completely unacceptable. Therefore, I continued searching until I discovered that the majority of the market’s losses could have been avoided if I had a good process and strategy built on a solid foundation of technical analysis. I made this my passion, studied relentlessly, and eventually made this the basis of our company’s entire investment philosophy. To me investing in fundamentally sound companies makes a lot of sense; however, during 2008, the “fundamentally sound” companies were not spared from significant losses. To me, investing in those sound companies and then using technical analysis to guide the timing of when to buy and sell felt like a game changer. It took a long time, many mistakes, and many lessons learned before we felt proficient enough to take our new strategies to market, but eventually we got there. Fortunately, during the Pandemic drop of 2020, when the market fell peak to trough 36 percent, our all-equity aggressive portfolio passed the test by holding up extremely well. It dropped far less than the conservative 60/40 blended benchmark, yet outperformed the S&P 500 for the year. We were 70 percent cash within the first 3 days of the drop and 90 percent cash by the fifth day, while it took the index 17 more days to eventually find the bottom.

In summary, the key takeaway for me from this experience is to stay humble and keep learning. In order to grow and mature in your career, you have to fail but more importantly you have to pick yourself up, learn from your mistakes and find ways to continue growing both personally and professionally.

Are you working on any exciting new projects now? How do you think that will help people?

Yes! Working with our portfolio director, Damanick Dantes in New York, we have just wrapped up a new project involving an environmental, social, and governance investing (ESG) portfolio with a unique spin. Investors today want to be involved in environmentally sustainable investing, yet also want their personal assets to be sustainable throughout their own retirement. Unfortunately today, many of the actual investments that one finds in the “clean/green” space are newer technologies with companies that are not time-tested. Therefore, there can be a lot of additional risk associated with these types of investments. When discussing “carbon light” investing with a client, the subject of risk must play a big role in the conversation. Upon learning about the elevated risks associated with many forms of ESG investments, it is common for investors to reluctantly back off from their moral high ground. Our new ESG portfolio allows investors to go “carbon light” and “ESG friendly” while benefiting from a very protective technical strategy that could protect some of the gains during the next major market pull down. I expect it to have real appeal and ultimately give investors another avenue to satisfy their “dual” need for sustainable investing.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

We consult with a lot of physicians, who represent some of the most educated people in our society today. However, in my experience I find that many of them are not very good with money. They rack up large college debt from both undergrad and medical school, and then begin their career making very little during their fellowship and early years. Once settled into a practice, their financial picture changes. They then have more cash flowing in than they know what to do with. The wise ones will begin to sock it away and live below their means. Many of them, however, go on spending sprees, buying new houses, cars, vacation homes, and more. As a result of all of their spending, many of them have very little savings and some even live hand-to-mouth. The point of this story is to illustrate how some of the most educated folks in our country today have not had any financial training. If that is the case, how can we expect the low-to-average educated person to be any different. The root of the problem, in my opinion, is two fold. There is a lack of basic financial education taught in schools, where students are not taught how to balance a checkbook, establish a budget, and spend wisely. There is also a lack of teaching basic finances in the home.

If you had the power to make a change, what 3 things would you recommend to improve these numbers?

I believe it starts with revamping the classroom curriculum to include basic financial training for students. It should start as early as the fourth grade and continue throughout high school. I also believe our country should offer free online financial skills training geared toward young adults and parents. The Department of Education should start a national campaign to teach financial literacy, similar to the “Buckle up…it’s for your safety” campaign used to address safe driving. They could also provide resources to encourage and empower home training led by parents. Finally, I think libraries are an underutilized resource that could be used for teaching financial skills. Who uses the library these days? They just built a new one in my town and it is always empty. We could use libraries in every community to begin weekly seminars sponsored by local Certified Financial Planners around the country to begin the educational process. This should be a product free, educational only, workshop where resources are available to learn and teach. They could live stream these training sessions and begin to build an online library.

Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?

To make sure these apply to “everyone,” I am going to give basic investment essentials that should be applied sequentially. The first is establishing a plan. Before just throwing money into the market, you first should ask yourself where you are financially, where you want to be, and how you will get there. Put all of that information into a solid plan and make adjustments along the way as your situation changes. List your goals and dreams. If you don’t have a road map of where you want to be, how can you expect to get there? Track your successes and learn from your mistakes.

Secondly, stay focused on the specifics of your personal financial situation, which is unique and completely different from what others might be facing. Key questions to ask include:

• Have I paid down my high interest loans that might exceed what I would expect to earn in the market?
• Do I have an emergency fund, which should include three to six months of liquid and low-risk investments that can be used in an emergency to avoid running up credit card debt?
• What are the interest rates on my debt and is there an opportunity to reduce them?
• How much money do I have left over after meeting my expenses and is there room to trim unnecessary expenses to free up more to invest?
• How much am I saving and could I do more?

Thirdly, establish a “bucket approach” for managing your money, in which you have a short-term bucket, a mid-term bucket, and a long-term bucket. The short-term bucket should finance conservative investments keeping pace with inflation that can be used as emergency money to help cover unexpected expenses. The mid-term bucket is earmarked for upcoming expenses that will arise over the next three to five years, such as a new car, college expenses or a down payment on a beach house, and can include investments that have a bit more risk and could be expected to offer a slightly greater return, while still being fairly conservative in nature. The long-term bucket is composed of money that you do not plan on touching for six to eight plus years and therefore can be more aggressively invested. Start by filling the short-term bucket, then moving to the mid-term, and finally the long-term bucket.

Fourthly, before investing anything, look deep within yourself to determine what type of investor you are. Are you okay if the market drops 30 percent? Does this scare you or excite you? You must choose an investment strategy that coordinates with your propensity for risk. Many, many times over my career I have seen people have a bad initial experience with investing that left them too scared to ever invest again. How many times have you heard comments like: “I’m not putting anything in the market. I don’t trust it and it’s too risky. I’d rather own something I can touch, like land.” More than likely those folks entered the market without a plan or strategy that aligned with their tolerance for risk. If you cannot find a way to invest with which you are comfortable, you never will. Thus will you not experience the long-term benefits of investing in the stock market.

Finally, once the first four steps are complete, you can start investing your hard-earned money into the market. I recommend a plan that involves dollar cost averaging. By consistently adding to your investments over time, when the market drops you will be “buying low” and be able to pull yourself out of a down market much faster. Also, automated investing removes the temptation of spending your money rather than investing it. This is why investing in company sponsored retirement plans that withhold money from your paycheck are a very good idea. Because most investors do not have the time to research individual companies, I suggest simply investing in a low-cost index. For instance, an Exchange Traded Fund (ETF) that mirrors or closely correlates to an index, such as the S&P 500 or Nasdaq could be a good choice. To enhance diversification, you may consider an “equal weighted” index ETF, because the S&P 500, for example, is a cap-weighted index where the top 10 holdings (or 2%) account for nearly one third of the entire index’s performance.

What are your thoughts about investing in cryptocurrency? Can you explain what you mean?

The genie is definitely out of the bottle at this point, and there’s no going back. Realizing this, governments and companies around the world are quickly trying to understand what it means, how it will change things, and how they can position themselves to be a part of the growing cryptocurrency trend. To me, it’s like the early days of the internet. We know it will be big, we just don’t have a grip on how it will look and what coins will survive. If anyone told you that Amazon, an online book company, would be the largest company in the world in 15 years, you would have laughed. In my opinion, the real rise in popularity of cryptocurrency so far can be attributed to its peer-to-peer reliance supported by the security offered through the blockchain. It reduces the reliance on a government’s currency and provides an alternative asset class. However, the complexity of the current method of investing using the blockchain and private wallets prevents many investors from participating. As popularity continues to grow, companies will discover ways to make it easier for the average investor to participate. For instance, buying coins may eventually be transacted and held at your local bank.

Lastly, I think the “projects” associated with many of the coins goes far beyond just creating an alternative currency. They often provide unique and different ways to address and improve many of today’s problems or processes. For instance, I’ve researched a coin for a client that has developed a way to dramatically reduce the cost and time delays associated with international fund transfers, which greatly benefits people within poorer nations. These people do not have access to bank accounts and therefore are beholden to pay excessive fees of up to 14% to the large international money transfer firms and may have to wait up to a week or so before receiving their funds.

I find the whole Cryptocurrency space absolutely fascinating, and I think coins that also provide a unique utilitarian purpose have a greater chance of staying power.

What are your thoughts about daytrading, using apps like Robinhood? Can you explain what you mean?

Avoid trying to day trade unless you have experience. Robo traders today are designed to sink a stock below its support level in order to “stop out” the small investor, then buy the shares back at a discount on the same day. Essentially you need to understand that you do not have an edge when it comes to short term trading. In fact you could be operating at a severe disadvantage.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

As I mentioned earlier, I am grateful for my father and the many lessons that he has taught me throughout my life about finances. He shared his wisdom in a way that was inspiring and empowering and instilled in me a deep appreciation for learning and understanding basic budgeting and finance and using it effectively to navigate life. My goal in this business is to share that experience and knowledge in order to help others do the same.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.” — Albert Einstein. To me this almost sums it up. Being in the finance industry, I would exchange the word “hope” for “plan.” I think more folks would be happy if they knew and learned from their past, enjoyed and lived in their present, and properly planned for their future. The happiest clients we work with have a strong faith and live their lives using these simple principles.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. :-)

Participating in several mission trips to Chimbote, Peru, has changed my perspective on life, money, and happiness. It has become very clear to me that having lots of money is not the answer to happiness; however, nor is extreme poverty. The answer usually falls somewhere in between and often has a very wide spectrum. One of my wealthiest clients confided in me years ago that some of his happiest years were when he and his wife were young and broke. They had to work together on every decision and become a unified team in order to survive. This was an eye-opening moment for me and a lesson that I have never forgotten. He could basically afford to do anything at this point of his life, yet he most cherished the hard times. I think true happiness comes from having a strong faith and in helping others. It would be very interesting to inspire a movement in which we commit to helping others over accumulating wealth as a path to happiness. The mission would encourage others to give by not just cutting a check and going about their lives, rather by diving in and participating in a cause which helps others improve their lives. Seeing the faces of those whom you help and the impact that your actions have on their lives is far more rewarding than getting the year-end tax deduction. To inspire that type of movement on a massive scale would be great for everyone, both those giving and certainly those who are in need.

Thank you for the interview. We wish you continued success!