Latest / The Bob Lefsetz Podcast / Barry Ritholtz

Transcript

Barry Ritholtz · The Bob Lefsetz Podcast

• 0:08
  Speaker 1: Welcome, Welcome back to the Bob Left Starts podcasts. My
• 0:13
  Speaker 1: guest today is very Rich Books. You know him as
• 0:16
  Speaker 1: the host of Bloomberg's Master's in Business. You also know
• 0:20
  Speaker 1: them as a financial guru investor. He's got a new book,
• 0:24
  Speaker 1: How Not to Invest?
• 0:27
  Speaker 2: Barry? Why this book? Why now?
• 0:30
  Speaker 3: First of all, let me start out by saying I
• 0:33
  Speaker 3: hate the word guru. Bill Bernstein, who is a neurologist
• 0:38
  Speaker 3: I reference in the book and a money manager, says
• 0:42
  Speaker 3: we use the word guru because people don't know how
• 0:45
  Speaker 3: to spell the word charlatan. So let's start out. I
• 0:52
  Speaker 3: think I have some insights. Guru is not the first
• 0:54
  Speaker 3: word that leaps to mind. Why this book? Why now?
• 0:58
  Speaker 3: I had some friends in some public usures kind of
• 1:01
  Speaker 3: harangue me, Hey, it's been fifteen years since your last book.
• 1:04
  Speaker 3: How about another book? And I was kind of reluctant,
• 1:08
  Speaker 3: and when pressed why, I gave a really honest answer.
• 1:14
  Speaker 3: For the past century, there have been literally tens of
• 1:17
  Speaker 3: thousands of books telling people how to invest, and after
• 1:21
  Speaker 3: all that time, effort and wasted inc people are still
• 1:26
  Speaker 3: pretty mediocre investors. So do we really need yet another
• 1:31
  Speaker 3: tome saying buy this sell that do this, do that.
• 1:36
  Speaker 3: I kind of was very much on the fence. I
• 1:39
  Speaker 3: came back from vacation in the Caribbean. You ever get
• 1:43
  Speaker 3: home in between Christmas and New Year's you have a
• 1:45
  Speaker 3: few days before January twod when the world sort of
• 1:49
  Speaker 3: starts up again. And I just started thumbing through some
• 1:53
  Speaker 3: old research notes I had put together. I had been
• 1:56
  Speaker 3: a columnist for the Washington Post after the financial crisis,
• 2:00
  Speaker 3: and then for Bloomberg for the past decade, and I
• 2:04
  Speaker 3: just started sifting through my history. We do a I
• 2:08
  Speaker 3: do a quarterly call for clients. I started looking at
• 2:12
  Speaker 3: some of my notes from that, and goddamn if every
• 2:16
  Speaker 3: other thing I had written wasn't debunking some sort of
• 2:21
  Speaker 3: financial bullshit or another. And so one of the publishers,
• 2:26
  Speaker 3: Harriman House, I kind of reached out. I liked their
• 2:29
  Speaker 3: editor and their publisher, and I reached out and said,
• 2:31
  Speaker 3: how do you feel about a book debunking financial bullshit?
• 2:36
  Speaker 3: And their answer was, well, Harry Frankfurt wrote a book
• 2:40
  Speaker 3: called on Bullshit and that's sold well. And ever since then,
• 2:43
  Speaker 3: everybody who's used bullshit in a title hasn't done very well.
• 2:49
  Speaker 3: And besides, it's a little broad it's a little crude.
• 2:52
  Speaker 3: You know, the Brits are very proper, but they said
• 2:57
  Speaker 3: keep working so in my office and your listeners won't
• 3:01
  Speaker 3: be able to see this. But I have a giant
• 3:02
  Speaker 3: bulletin board, and I started going through all of the
• 3:07
  Speaker 3: ideas and that I was coming across and revisiting, and
• 3:12
  Speaker 3: I just started putting them on three by five index
• 3:14
  Speaker 3: cards and putting them up on the bulletin board. And
• 3:18
  Speaker 3: you know, I recently learned I wish I would have
• 3:21
  Speaker 3: known about this when I started it. There's a program
• 3:24
  Speaker 3: called Scrivener that allows you to do this virtually. I
• 3:28
  Speaker 3: was using a I was using MindMeister, which is like
• 3:32
  Speaker 3: an organizational chart sort of thing, but you know, more
• 3:37
  Speaker 3: or less did the same thing. And the book didn't
• 3:41
  Speaker 3: exactly self organize. But I started to recognize, well, this,
• 3:46
  Speaker 3: this is a whole bunch of bad ideas. Let me
• 3:48
  Speaker 3: put them together. Look these people are getting the math wrong,
• 3:51
  Speaker 3: they're not understanding this. Let me put that together. And oh,
• 3:54
  Speaker 3: look at this behavior. Really dumb things. And so those
• 3:58
  Speaker 3: three broad category ended up organizing themselves into ninety percent
• 4:04
  Speaker 3: of the book, each category with three subcategories. And you know,
• 4:10
  Speaker 3: the simplest way to break it down is we believe
• 4:14
  Speaker 3: things that are not true. We don't understand the math
• 4:18
  Speaker 3: that underlies so much stuff, but especially investing, and that
• 4:22
  Speaker 3: combination leads us to make bad decisions and engage in
• 4:26
  Speaker 3: bad behavior, and all the above lead to bad outcomes.
• 4:31
  Speaker 3: So I have been fortunate enough to have a gentleman
• 4:35
  Speaker 3: named Charlie Ellis on my podcast multiple times. Ellis is
• 4:40
  Speaker 3: a legend in the industry. He was the chairman of
• 4:44
  Speaker 3: the Yale Endowment, and for a long period of time,
• 4:47
  Speaker 3: the Yell Endowment just beat every other endowment out there.
• 4:51
  Speaker 3: He was on the board of directors of Vanguard Group,
• 4:54
  Speaker 3: now managing nine trillion dollars and the reason indexing has
• 4:58
  Speaker 3: become so popular. He ran Greenwich Associates. He's just a legend.
• 5:03
  Speaker 3: And he wrote a paper in the seventies I want
• 5:06
  Speaker 3: to say the Journal of Portfolio Management, but I can't
• 5:09
  Speaker 3: swear by it called winning the Losers Game, and he
• 5:15
  Speaker 3: likens investing to tennis. By the way, that later gets
• 5:19
  Speaker 3: expanded to a full buck like twenty years later. But
• 5:23
  Speaker 3: you know, tennis is two games and one It's a
• 5:26
  Speaker 3: winner's game and a loser's game. What does that mean, well,
• 5:31
  Speaker 3: if you're part of the zero point one percent who
• 5:35
  Speaker 3: are professional tennis players, you win by scoring points. You
• 5:39
  Speaker 3: hit with power, you hit with accuracy, you serve aces,
• 5:43
  Speaker 3: you hit the ball to where your opponent isn't, you
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  Speaker 3: kiss the line. You're able to do things because of
• 5:50
  Speaker 3: your skill set. That's the winners game, and very very
• 5:54
  Speaker 3: few people get to play that game. Most of us hackers,
• 5:58
  Speaker 3: myself included, I've been playing tennis since my fifties. We
• 6:03
  Speaker 3: play the losers game. We don't win by scoring points.
• 6:07
  Speaker 3: We lose through unforced errors. We double fault on a serve,
• 6:12
  Speaker 3: we hit it wide, we hit it into the net,
• 6:15
  Speaker 3: it goes long. We hit the ball right into our
• 6:17
  Speaker 3: opponent's sweet spot, and they're able to put it where
• 6:20
  Speaker 3: we aren't. And so Ellis, who in his brilliance, says,
• 6:27
  Speaker 3: if investors would be more like amateur tennis players and
• 6:31
  Speaker 3: stop having all these unforced errors, just stay within yourself,
• 6:36
  Speaker 3: return the ball, let the other guy beat himself. You're
• 6:41
  Speaker 3: ahead of ninety percent of your peers as investors. And
• 6:45
  Speaker 3: that was really the idea of to take that concept
• 6:49
  Speaker 3: even further than Charlie Ellis did and say, let's rather
• 6:53
  Speaker 3: than tell people what to do. If we could just
• 6:57
  Speaker 3: get them to stop shooting themselves in the foot, they're
• 7:00
  Speaker 3: so much better off than there would have been otherwise.
• 7:03
  Speaker 2: Okay, I'm reading the book and it reminds me of
• 7:07
  Speaker 2: my father's philosophy. My father used to say, you know,
• 7:11
  Speaker 2: when someone's driving expensive car or boasting about where they've been,
• 7:15
  Speaker 2: he goes, there's no miracles. What's the real story? Okay?
• 7:19
  Speaker 2: He had a skepticism, and I find that same skepticism
• 7:24
  Speaker 2: in your book. About two thirds of the book is
• 7:27
  Speaker 2: off a fucked up shit that people are telling people
• 7:30
  Speaker 2: to do, or falling prey before. Ultimately it says, really
• 7:34
  Speaker 2: kind of invest in index funds. To what degree is
• 7:39
  Speaker 2: this skeptical philosophy? You're known as a contrarian. I don't
• 7:43
  Speaker 2: want to go deep into people's perception of you, but
• 7:45
  Speaker 2: to what degree is that result of your upbringing?
• 7:51
  Speaker 3: That's a really interesting question. My dad was a small
• 7:55
  Speaker 3: business owner who became a small business owner because the
• 7:59
  Speaker 3: company he worked for when the founder unexpectedly dropped dead,
• 8:04
  Speaker 3: like right right out of Bill Burr's Dropped Dead Years.
• 8:10
  Speaker 3: The brother in law took over, the place went to hell.
• 8:13
  Speaker 3: He went out and launched his own business, and my
• 8:15
  Speaker 3: mom was a real estate agent, and so I sort
• 8:19
  Speaker 3: of short commerce at a you know, rough and tumble level,
• 8:25
  Speaker 3: and it always felt that you know, you trust would verify,
• 8:29
  Speaker 3: is what Reagan said. Here's the throughout the book, there's
• 8:34
  Speaker 3: all this reference to behavioral economics and academic research. I've
• 8:40
  Speaker 3: always been fascinated by the fact that, you know, early
• 8:44
  Speaker 3: in my career, I would listen to quarterly conference calls
• 8:47
  Speaker 3: and you know, CEOs would talk about how great everything was,
• 8:51
  Speaker 3: and then the stock would go on and get shell
• 8:54
  Speaker 3: act because everything wasn't great. So I think my natural
• 8:59
  Speaker 3: tension and how I was raised is on the one hand,
• 9:04
  Speaker 3: I'm an idiot. I tend to believe when someone looks
• 9:06
  Speaker 3: me in the eye or says to a group of
• 9:08
  Speaker 3: investors things are going great, couldn't be better, Like I
• 9:11
  Speaker 3: believe that shit on the one hand. On the other hands,
• 9:15
  Speaker 3: I've been around the block enough to kind of notice that, hey,
• 9:19
  Speaker 3: a lot of these people say stuff and it turns
• 9:22
  Speaker 3: out not to be true. So you know, the word
• 9:25
  Speaker 3: contrarian gets kicked around a lot. I think investors would
• 9:30
  Speaker 3: be well served if you don't want to just say
• 9:34
  Speaker 3: no to everything but you have to not be gullible.
• 9:38
  Speaker 3: You have to be a little skeptical and less naive.
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  Speaker 3: And you know, I peppered the book with lots of
• 9:47
  Speaker 3: quotes from some of my favorite authors, and one of
• 9:50
  Speaker 3: them is Theodore Sturgeon, who is a science fiction writer
• 9:54
  Speaker 3: in the forties and fifties, and he got tired of
• 9:57
  Speaker 3: defending sci fi to accusations that, hey, all the science
• 10:01
  Speaker 3: fiction writing, it's just cheap garbage. And Sturgeon's response now
• 10:06
  Speaker 3: known as Sturgeon's law. Sturgeon's rule is, hey, ninety percent
• 10:10
  Speaker 3: of everything is crap, literally what he said. And in
• 10:14
  Speaker 3: the fields of investing, that's really true. You look at
• 10:19
  Speaker 3: the most hedge funds, most mutual funds, you look at
• 10:23
  Speaker 3: most of the new products that come out, most of
• 10:25
  Speaker 3: the stocks that are out there. However, you want to
• 10:29
  Speaker 3: invest your dollars, you have to recognize that, hey, the
• 10:33
  Speaker 3: odds are I'm being generous one in ten, that you're
• 10:37
  Speaker 3: picking a winner. It's it's you know, it's really challenging
• 10:42
  Speaker 3: to find the needle in the haystack, gets really challenging
• 10:45
  Speaker 3: to identify. We all know who the legendary traders are
• 10:49
  Speaker 3: and who the great investors over time. But that's not
• 10:55
  Speaker 3: helpful knowing that. Hey, you know, if you were to
• 10:58
  Speaker 3: put money with one and Buffing in nineteen seventy, you
• 11:01
  Speaker 3: would have done great or Peter Lynch in nineteen eighty,
• 11:04
  Speaker 3: or will Donoff in eighteen. Like, these guys in the
• 11:07
  Speaker 3: world of finance are no names because there's a couple
• 11:12
  Speaker 3: of dozen of them out of hundreds of thousands, if
• 11:15
  Speaker 3: not millions, of investors, fund managers, traders, et cetera. So
• 11:19
  Speaker 3: they're really the uh, they're really the outlawers. And so
• 11:25
  Speaker 3: my background, my upbringing was having seen my mom go
• 11:30
  Speaker 3: through real estate transactions for decades. It was always like
• 11:36
  Speaker 3: she would tell me, no one, by the way, no
• 11:39
  Speaker 3: one's ever asked me this question. She would say to me,
• 11:43
  Speaker 3: my mom had no filter, and when she was young,
• 11:46
  Speaker 3: she had no filter. When she got older, it was
• 11:48
  Speaker 3: all bets are off. But she would say, everybody in
• 11:51
  Speaker 3: my industry is full of shit, Ma, what do you
• 11:53
  Speaker 3: mean by that. The clients who are looking to buy
• 11:56
  Speaker 3: the house are lying because they don't tell you how
• 11:58
  Speaker 3: much money they really have to spend. The agent on
• 12:02
  Speaker 3: the other side of the transaction is lying because they
• 12:04
  Speaker 3: want to keep the deal for themselves. They want to
• 12:06
  Speaker 3: get both sides of the commission as opposed to sharing
• 12:09
  Speaker 3: it with a buying and selling offer. The sellers are
• 12:12
  Speaker 3: full of crap because they're saying, we can't take a
• 12:14
  Speaker 3: penny less than this, and then you find out it
• 12:16
  Speaker 3: goes for way below it. So you kind of pick
• 12:20
  Speaker 3: up a little bit of all right, if someone's telling
• 12:23
  Speaker 3: you that, look at their motivations, look at what they
• 12:26
  Speaker 3: really want, And that kind of leads me to say.
• 12:31
  Speaker 3: That kind of leads me to say, what are they selling?
• 12:34
  Speaker 3: Find out what's in it for them, and then at
• 12:37
  Speaker 3: least you have a frame of reference to put context
• 12:41
  Speaker 3: for whatever they're saying to you. All Right, The agent
• 12:44
  Speaker 3: wants the bigger commission, the seller wants as much money
• 12:47
  Speaker 3: as they can get for the house, the buyer wants
• 12:50
  Speaker 3: to spend as little as they can, and everybody is
• 12:54
  Speaker 3: playing their cards close to the vest. So look past
• 12:57
  Speaker 3: what they're saying and figure out what are they really doing.
• 13:01
  Speaker 3: By the way, I think that's a Wadsworth quote. My
• 13:04
  Speaker 3: dad used to say to me all the time, I
• 13:07
  Speaker 3: can't hear what you're saying because what you're doing is
• 13:09
  Speaker 3: speaking so loudly. That really applies as well.
• 13:13
  Speaker 2: Okay, since we're this deep, what was your father's business?
• 13:17
  Speaker 3: So he worked initially as a placement hiring officer for
• 13:26
  Speaker 3: a personnel agency specializing in engineers and scientists. So, like
• 13:33
  Speaker 3: I was told from a young age, you're going to
• 13:35
  Speaker 3: be an engineer, I had no idea why. When the
• 13:39
  Speaker 3: business blew up, he ended up opening a local sneaker
• 13:44
  Speaker 3: shop and sporting good shop, and I occasionally worked in
• 13:47
  Speaker 3: there as a kid, and people I have a vivid
• 13:51
  Speaker 3: recollection of people bringing shoe boxes back to return and
• 13:56
  Speaker 3: I would open the box and say, we can't take
• 13:58
  Speaker 3: these back. There's a warrant. No, they're not one you'd
• 14:01
  Speaker 3: hold the bottom of the shoe. Ma'am, don't take this
• 14:03
  Speaker 3: the wrong way. But here's what a new shoe looks like.
• 14:06
  Speaker 3: Here's what your shoe looks like once you wear them outside.
• 14:10
  Speaker 3: They're yours. And my dad, who had lots of repeat
• 14:13
  Speaker 3: customers and everybody loved him. My father would often take
• 14:19
  Speaker 3: stuff back that dad, what the hell you're doing. He's like,
• 14:23
  Speaker 3: she's bought a thousand pair of shoes from us. I'll
• 14:26
  Speaker 3: take this one back. I never understood. I couldn't wrap
• 14:30
  Speaker 3: my head around I was like so offended by the bullshit,
• 14:34
  Speaker 3: like no, you can't return this. So I think that
• 14:38
  Speaker 3: contributed a little bit to me. You know, I just
• 14:43
  Speaker 3: never would have the balls to walk into a store
• 14:46
  Speaker 3: with a pair of shoes that were obviously used and
• 14:50
  Speaker 3: return them. My sister worked in a dress shop in
• 14:54
  Speaker 3: high school. She would tell me, She's like, I know
• 14:57
  Speaker 3: the people coming in buying a dress on a fry
• 15:00
  Speaker 3: and returning it on a Monday. They were it over
• 15:03
  Speaker 3: the weekend. I'm like, what do they do with the
• 15:05
  Speaker 3: this is before the days of the you know, in
• 15:07
  Speaker 3: the magnetic tags and the like, what do they do
• 15:10
  Speaker 3: with the tags? She's like, they tuck it in under
• 15:13
  Speaker 3: the collar and no one sees like that seems to
• 15:16
  Speaker 3: be like really a form of minor theft and kind
• 15:21
  Speaker 3: of egregious. If you can't afford the dress, why are
• 15:24
  Speaker 3: you pretending that you can afford this dress? She's like,
• 15:27
  Speaker 3: that's just how some people are. Some people aren't honest,
• 15:31
  Speaker 3: don't have a good ethical background, and very often are
• 15:34
  Speaker 3: pretending to be something they're not. The related part in
• 15:40
  Speaker 3: finances most of finance, this doesn't exist as much as
• 15:45
  Speaker 3: it used to, but most of the big brokera shops
• 15:48
  Speaker 3: and warehouses had a training program. It was, you know,
• 15:53
  Speaker 3: ostensibly all about markets and inflation and interest rates and bonds,
• 15:58
  Speaker 3: but really it was about a week of modern portfolio
• 16:01
  Speaker 3: theory and fifty one weeks of sales training. And this
• 16:05
  Speaker 3: sort of cocky attitude, this fake it till you make
• 16:09
  Speaker 3: it permeated that sales culture and kind of led a
• 16:15
  Speaker 3: lot of people in the industry to be really full
• 16:17
  Speaker 3: of shit at least during their faked phase. Some of
• 16:22
  Speaker 3: them eventually grow out of it and become legit people,
• 16:27
  Speaker 3: and the industry has very much changed over the past
• 16:30
  Speaker 3: thirty forty years. But that whole thing, that whole attitude,
• 16:34
  Speaker 3: always kind of pissed me off. And so a lot
• 16:38
  Speaker 3: of this shows up in the book.
• 16:48
  Speaker 2: Okay, your father had an independent sporting good shoes store.
• 16:54
  Speaker 2: That business changed dramatically in that sporting good stores became
• 16:59
  Speaker 2: changed towards independence, either sold out or went out of business.
• 17:03
  Speaker 2: In addition, the shoe business became very competitive with Nike
• 17:08
  Speaker 2: and a million other brands. What happened to your father's store.
• 17:13
  Speaker 3: He passed away a long time ago. The the he
• 17:17
  Speaker 3: had partners, the insurance brought him out and it was
• 17:20
  Speaker 3: pretty standard succession planning. Although you know, the really funny
• 17:25
  Speaker 3: thing about to me, the funny thing about that store
• 17:29
  Speaker 3: is he would bring home. So he had Nike, he
• 17:31
  Speaker 3: had New Balance before anyone knew what the hell New
• 17:34
  Speaker 3: Balance was. He had Pony Sak, and he had all
• 17:37
  Speaker 3: these brands that eventually became really big. He said, hey,
• 17:42
  Speaker 3: I want you to try these new Nikes. They're kind
• 17:45
  Speaker 3: of crazy, and they were the Kobe Poison Dart Frog
• 17:51
  Speaker 3: and they're like incredibly collectible now and they go for
• 17:55
  Speaker 3: thousands of dollars. And you know I would. I would
• 17:59
  Speaker 3: occasionally get a new pair of shoes and wear them
• 18:01
  Speaker 3: and never think twice, never forget. It's got to be
• 18:04
  Speaker 3: like twenty years ago. I don't even know how long ago.
• 18:07
  Speaker 3: I'm on the subway and I'm a jeans and sneaker
• 18:11
  Speaker 3: kind of guy, and I'm wearing the Kobe's and I
• 18:16
  Speaker 3: see a young kid looking at my sneakers, and then
• 18:23
  Speaker 3: he looks up at me. He's like, dude, what are
• 18:26
  Speaker 3: you doing? Like just a young you know, a young
• 18:29
  Speaker 3: brother heading to wherever he's having Like, who is this
• 18:32
  Speaker 3: middle aged white guy in a pair of fucking, you know,
• 18:36
  Speaker 3: poison blue darts? Kobe's and I'm like, I go you
• 18:41
  Speaker 3: and shit, if you saw in my closet I had
• 18:44
  Speaker 3: Jordan Ones. I had this like that they were sneakers
• 18:48
  Speaker 3: and you're war them and it's like, I've had these
• 18:51
  Speaker 3: for I don't know since they came out. I never
• 18:54
  Speaker 3: thought twice about it. And he's just hand you know,
• 18:58
  Speaker 3: po facebomb. He was just like ugh, like you could
• 19:02
  Speaker 3: see him thinking what is wrong with these people? And
• 19:05
  Speaker 3: I'm like, you understand it was they were just around, like, Dad,
• 19:08
  Speaker 3: how about can I take a pair of these? Sure,
• 19:10
  Speaker 3: go ahead and knock yourself out. It wasn't like I'm
• 19:14
  Speaker 3: gonna take these and put them away for thirty years.
• 19:16
  Speaker 3: It's like I'm gonna take these and put them on
• 19:19
  Speaker 3: my feet and walk around town. And they were great
• 19:22
  Speaker 3: for that. They were like every now and then my
• 19:25
  Speaker 3: nephews are now big enough that I give them some
• 19:30
  Speaker 3: of my old sneakers and I'll pull something out and
• 19:33
  Speaker 3: I'll say, all right, here's a pair of Lebrons. They're
• 19:37
  Speaker 3: brand new in the box. I don't care if they're
• 19:39
  Speaker 3: worth anything. I'm gonna give these to you, but you
• 19:42
  Speaker 3: have to wear them. And like three days later, you
• 19:46
  Speaker 3: can't imagine the ruck as I caused the school wearing
• 19:49
  Speaker 3: the purple and yellow lebrons. It's just, you know, to me,
• 19:55
  Speaker 3: it's funny that a lot of stuff I've done throughout
• 19:58
  Speaker 3: my life when and suddenly rentiers middlemen jump in because oh,
• 20:04
  Speaker 3: there's money to be made speculating. It doesn't matter if
• 20:07
  Speaker 3: it's sneakers, if it's fixing up old cars, if it's
• 20:11
  Speaker 3: whatever it happens to be. It's really annoying when people
• 20:14
  Speaker 3: find my favorite hobbies and turn it into a money
• 20:19
  Speaker 3: producing enterprise. The sneakers are kind of laughable, Okay.
• 20:27
  Speaker 2: A great percentage of the book is calling out bullshit.
• 20:32
  Speaker 2: Don't trust the people on CNBC or Fox Business or
• 20:36
  Speaker 2: even the Wall Street Journal. And you have an amazing
• 20:39
  Speaker 2: number of quotes that turned out to be one hundred
• 20:41
  Speaker 2: percent wrong. There's a teen spirit in finance. There's a brotherhood.
• 20:47
  Speaker 2: As you said, a lot of these people started out
• 20:50
  Speaker 2: as salespeople. Of course, Michael Lewis, you know lifted the uh,
• 20:54
  Speaker 2: whatever your veil.
• 20:55
  Speaker 3: He lifted the veil with liars poker for sure.
• 20:58
  Speaker 2: Right, But how easy is it for you or difficult
• 21:04
  Speaker 2: for you to have an opinion or have a flow
• 21:08
  Speaker 2: that is different from the majority of the people.
• 21:13
  Speaker 3: It's been. It's so, first of all, I will admit
• 21:17
  Speaker 3: to being, you know, a little atypical. I never went
• 21:24
  Speaker 3: through the machinery that most people go through, meaning I
• 21:29
  Speaker 3: was never I didn't go to an ivy school. I
• 21:32
  Speaker 3: went to a state school. I didn't go to business school.
• 21:35
  Speaker 3: I went to law school. Did well in law school,
• 21:38
  Speaker 3: cumloudy law of you passed the bar first time out,
• 21:42
  Speaker 3: hated the practice of law, and was kind of.
• 21:45
  Speaker 2: Well, since you know, since I sort of followed the
• 21:48
  Speaker 2: same routine, maybe not for the same reasons. How long
• 21:51
  Speaker 2: did you actually practice law?
• 21:53
  Speaker 3: Graduated eighty nine, started in finance late ninety five, so
• 21:58
  Speaker 3: less than by the way, the rule of thumb that
• 22:00
  Speaker 3: I learned in law school seven years post bar exam.
• 22:04
  Speaker 3: Fifty percent of lawyers are not practicing law, so I
• 22:07
  Speaker 3: was a year or two early. So I just just
• 22:11
  Speaker 3: managed to miss that. And you know, the fascinating thing
• 22:15
  Speaker 3: is law school is fascinating. I mean, if you go,
• 22:19
  Speaker 3: if you're a rabbit hole type of guy, and I
• 22:22
  Speaker 3: am learning about the legal doctrine and structure of the
• 22:29
  Speaker 3: United States and what made it so unique and why
• 22:32
  Speaker 3: it was so special. And really just a fascinating all right,
• 22:37
  Speaker 3: does it really need to be three years? It could
• 22:39
  Speaker 3: have been two years. The third years kind of a
• 22:42
  Speaker 3: tuition grab waste of time. That said, it was just fascinating.
• 22:47
  Speaker 3: And then you start practicing and you quickly find out
• 22:51
  Speaker 3: talk about bullshit. You quickly find out everybody's full of
• 22:54
  Speaker 3: shit if you're doing criminal stuff. The person who swears
• 22:58
  Speaker 3: up and down, I don't know where those drugs came from.
• 23:00
  Speaker 3: I didn't have any drugs on me. How do you
• 23:02
  Speaker 3: have fourteen prior arrest? The prosecutors they don't care. They're
• 23:06
  Speaker 3: just looking at their batting average. They want to have
• 23:08
  Speaker 3: a good number. The rest of the defense bar, it's
• 23:11
  Speaker 3: like they're just especially if you're looking at public defenders
• 23:14
  Speaker 3: that wildly overworked, they don't have the time to put
• 23:16
  Speaker 3: into this. I will never forget doing a criminal appeal.
• 23:21
  Speaker 3: And it's on bank. There are five judges, and you know,
• 23:25
  Speaker 3: ninety seconds in, one of the judges, who obviously had
• 23:27
  Speaker 3: already decided, just spins his chair round like it's like
• 23:32
  Speaker 3: it's you know, America's Got Talent or one of those shows.
• 23:35
  Speaker 3: They just turned the chair round and I'm like, hey,
• 23:38
  Speaker 3: this son of a bitch is going to jail over here,
• 23:42
  Speaker 3: And like it became really clear. So long before the
• 23:48
  Speaker 3: current environment came along, I knew the legal system was broken.
• 23:52
  Speaker 3: The Supreme Court was corrupt. Everybody was partisan, even though
• 23:57
  Speaker 3: they take an oath swearing to faithfully up hold the
• 23:59
  Speaker 3: Constitution and not be partisan. And it was like, I
• 24:03
  Speaker 3: can't be in the system because because of my own pathologies,
• 24:09
  Speaker 3: I will lose my mind with this. I have a
• 24:11
  Speaker 3: very heightened awareness of unfairness. And the whole system was just.
• 24:19
  Speaker 3: And then once you if you go into the civil side,
• 24:22
  Speaker 3: that's even worse because litigation is a cudgel that we
• 24:26
  Speaker 3: could use to beat up people with less money than ourselves,
• 24:30
  Speaker 3: and we could torture them and basically get what we
• 24:34
  Speaker 3: want because we can outlet we're a big company. We
• 24:37
  Speaker 3: can you know, we are theoretically perpetual and infinite. They
• 24:41
  Speaker 3: have a fire, at the very least, we'll outlast them,
• 24:45
  Speaker 3: we'll certainly outspend them, and we'll get what we want.
• 24:48
  Speaker 3: And so you come to realize, you know, I once
• 24:51
  Speaker 3: had a judge, I once had a senior attorney say
• 24:54
  Speaker 3: something very insightful to me, which is I was talking
• 24:58
  Speaker 3: about a contract, And he says, Hey, the question isn't
• 25:02
  Speaker 3: what's in the contract. The question is do you want
• 25:04
  Speaker 3: to do business with that guy? What do you mean, Well,
• 25:09
  Speaker 3: a contract is only what a judge will enforce if
• 25:13
  Speaker 3: you make everybody stand up and pay attention to the contract.
• 25:17
  Speaker 3: After a lot of time and a lot of costs,
• 25:20
  Speaker 3: he goes, so that's not that what's in the contract
• 25:23
  Speaker 3: isn't the question? The question is do you want to
• 25:26
  Speaker 3: get into bed with this person? Do you want to
• 25:28
  Speaker 3: have a very significant relationship where if it works out,
• 25:33
  Speaker 3: it's great, but if it doesn't work out, you're going
• 25:35
  Speaker 3: to spend a long time untying this. And are they
• 25:39
  Speaker 3: going to be graceful in saying it didn't work out,
• 25:42
  Speaker 3: Let's figure out an exbra way to cut our losses
• 25:46
  Speaker 3: and move on, or are they going to make you
• 25:49
  Speaker 3: take them to court? Like it's not what you can enforce,
• 25:53
  Speaker 3: it's is the other person going to make you enforce it? All?
• 25:58
  Speaker 2: Right?
• 25:58
  Speaker 1: Like?
• 25:58
  Speaker 3: Really, the turn he was saying to me, is that
• 26:01
  Speaker 3: a decent person? Are you getting into bed with someone
• 26:04
  Speaker 3: who you know? The old joke about the two partners
• 26:07
  Speaker 3: are out to lunch and one says, oh my god,
• 26:10
  Speaker 3: I left the safe open, and the other one says,
• 26:11
  Speaker 3: what do you care? We're both here, like very funny.
• 26:14
  Speaker 3: My dad told me that joke, very funny joke about
• 26:17
  Speaker 3: partners stealing from each other. So the question is, and
• 26:21
  Speaker 3: again it's there was a lot of cynicism, but always
• 26:26
  Speaker 3: with a sense of humor. That's the household I grew
• 26:30
  Speaker 3: up in, So a little skepticism. Try not to be
• 26:34
  Speaker 3: so gullible and naive, and make sure you know what
• 26:38
  Speaker 3: the other guy is selling, because it seems like everybody
• 26:42
  Speaker 3: is selling something.
• 26:44
  Speaker 2: Just to wrap this up again, yes, your philosophy in
• 26:49
  Speaker 2: your book is atypical in this field. To what degree
• 26:53
  Speaker 2: do you get blown back that you're not one of them?
• 26:56
  Speaker 2: And how do you cope with that?
• 27:00
  Speaker 3: So I'm sure I get blowback. I don't really notice it.
• 27:05
  Speaker 3: I kinda don't really give a fuck what other people think.
• 27:09
  Speaker 3: I know, you're not supposed to say that, so that's
• 27:12
  Speaker 3: only half true. Everybody wants likes. Everybody wants people to
• 27:16
  Speaker 3: buy their product. I disclose in the book what I'm selling,
• 27:22
  Speaker 3: but you know, so here's the fascinating thing. I have
• 27:26
  Speaker 3: this conversation with the younger guys in my office. I've
• 27:31
  Speaker 3: been like you, I've been writing in public for Jesus,
• 27:35
  Speaker 3: it's almost thirty years. I started on GeoCities in the nineties,
• 27:40
  Speaker 3: so in ninety eight, so we're three years away from
• 27:43
  Speaker 3: thirty years. Then I moved to WordPress because in two
• 27:48
  Speaker 3: thousand and one my office was headquartered in two World Trade.
• 27:51
  Speaker 3: During nine to eleven, I got my head trader on
• 27:54
  Speaker 3: the phone and he just gave me a running that
• 27:57
  Speaker 3: ration of everything was going on until the tower collapsed
• 28:00
  Speaker 3: and the cell connection dropped, and I wrote it up,
• 28:04
  Speaker 3: sent it to him and said, what do you think
• 28:06
  Speaker 3: You're okay if I just throw this up on the
• 28:08
  Speaker 3: side to let all our clients know we're okay. He's like, yeah, sure,
• 28:12
  Speaker 3: do it, and I wake up the next morning there's
• 28:14
  Speaker 3: one thousand emails from people. It was one of the
• 28:20
  Speaker 3: earlier first hand reports. I'm convinced that is why typead
• 28:25
  Speaker 3: offered me a beta test with their newfangled Wizzywig blogging software.
• 28:30
  Speaker 3: From there, I eventually ended up at WordPress. But I've
• 28:34
  Speaker 3: been writing publicly for let's call it twenty five years,
• 28:37
  Speaker 3: twenty seven years. And one of the things you learn
• 28:40
  Speaker 3: when we were younger is if somebody is kind of
• 28:45
  Speaker 3: upset at your writing. Well, they have to take a
• 28:48
  Speaker 3: sheet of paper and a pen and they have to
• 28:50
  Speaker 3: scribble a note and type it up and send it
• 28:52
  Speaker 3: into the editor. Then the editors review all these mail
• 28:55
  Speaker 3: that comes in, and three weeks later, on page c seventeen,
• 28:59
  Speaker 3: Deer ad that Ridoltz is a schmuck and here's why,
• 29:02
  Speaker 3: and blah blah blah. There were gatekeepers, There were guardrails.
• 29:06
  Speaker 3: It wasn't just hey, I have an Internet connection and
• 29:11
  Speaker 3: therefore I'm entitled to shit all over whatever you did.
• 29:16
  Speaker 3: And I'll give you. I'll give you example. You mentioned
• 29:19
  Speaker 3: Michael Lewis. One of Michael Lewis's books came out. I
• 29:23
  Speaker 3: don't remember if it was Flash Boys. I was just
• 29:26
  Speaker 3: talking to him Friday. He has a new book out
• 29:29
  Speaker 3: now also, so one of his books come out and
• 29:35
  Speaker 3: for whatever reason, not controlled by him. This is strictly
• 29:40
  Speaker 3: between the publisher and Amazon. The Kindle version doesn't come
• 29:46
  Speaker 3: out for thirty days, and a whole bunch of people
• 29:50
  Speaker 3: are giving the book one star reviews because the Kindle
• 29:55
  Speaker 3: and I just want to slap these people upside their heads.
• 29:59
  Speaker 3: And it's like, first of all, most of you are
• 30:02
  Speaker 3: not qualified to write reviews. Let's just start there. Most
• 30:05
  Speaker 3: of you are bad writers. You're terrible readers, like I'm
• 30:09
  Speaker 3: amazed at reading comprehension, a broad indictment of the American
• 30:13
  Speaker 3: education system. But then you're winding me up. I'm going
• 30:18
  Speaker 3: on a rant. But then it's like, what do you
• 30:22
  Speaker 3: have any idea? How much this is my second book,
• 30:25
  Speaker 3: like the last one was fifteen years ago. That's how
• 30:28
  Speaker 3: much work goes into it. Look look to the sequel
• 30:30
  Speaker 3: for this coming in twenty forty. It's a pain in
• 30:33
  Speaker 3: the ass to write a book. It's a lot of time,
• 30:36
  Speaker 3: it's a lot of effort. It's a lot of work.
• 30:37
  Speaker 3: You submit the manuscript and then the editing process starts coming,
• 30:41
  Speaker 3: and then you're back. And then once the book has published,
• 30:43
  Speaker 3: the promotion and someone some I'm going to curse again.
• 30:48
  Speaker 3: Some asshole says I have to wait four weeks for
• 30:52
  Speaker 3: the kindle version. Ooh, I'm gonna give it one star.
• 30:56
  Speaker 3: It's like I had I had comments on my blog
• 30:59
  Speaker 3: during the Golden Age of blogging. At a certain point,
• 31:03
  Speaker 3: I just kind of got to reach it. So here's
• 31:05
  Speaker 3: the answer to the contrarianism, long winded way. At a
• 31:09
  Speaker 3: certain point, I'm like, yeah, this is no longer worth it.
• 31:12
  Speaker 3: It's trolls, It's people trying to promote their own bullshit.
• 31:17
  Speaker 3: It's spam. It's before we knew what bots were, it
• 31:20
  Speaker 3: was bots. I'm like, hey, and I wrote like a
• 31:23
  Speaker 3: two thousand word missive here's why I'm shutting the comments down.
• 31:28
  Speaker 3: It's a shame, but it's the tragedy of the commons.
• 31:31
  Speaker 3: Anytime you have a public space. Most of most people,
• 31:35
  Speaker 3: this is the funny takeaway. Most people are kind, decent
• 31:39
  Speaker 3: human beings. So if only one percent of the world
• 31:44
  Speaker 3: are assholes, hey, there's eight billion people in the world.
• 31:48
  Speaker 3: Guess what you know, eight billion people, that's still eighty
• 31:52
  Speaker 3: million assholes. That's a lot of assholes. And because they're assholes,
• 31:58
  Speaker 3: they spend a lot of time online. And it's you know,
• 32:01
  Speaker 3: you saw it happen with Twitter. Twitter. This is long
• 32:04
  Speaker 3: before Elmo bought it. Twitter started circling the drain a
• 32:08
  Speaker 3: while ago. It just got worse and worse and worse.
• 32:10
  Speaker 2: I gotta stop here for one second. You referred to
• 32:14
  Speaker 2: mis Elmo.
• 32:16
  Speaker 3: Yeah, because I don't like to use his name, because
• 32:20
  Speaker 3: I'm convinced somewhere on Twitter, if you mentioned Elon he
• 32:25
  Speaker 3: seems to be insecure and vindictive enough that it'll pull
• 32:29
  Speaker 3: up something. And I've had a bunch of friends suddenly
• 32:33
  Speaker 3: their entire account is downgraded. They could do one post
• 32:38
  Speaker 3: to day. Everything is is the free speech talk about
• 32:43
  Speaker 3: selling bullshit, free speech absolutist unless you disagree with me,
• 32:47
  Speaker 3: and then you're screwed. So it just I used to
• 32:50
  Speaker 3: type it, and it's just become. And you know, he's
• 32:54
  Speaker 3: kind of like a sesame Street muppet. You know, if
• 32:57
  Speaker 3: you know his history, if you know that he didn't
• 33:01
  Speaker 3: found PayPal, he didn't found Tesla. He's really good at
• 33:05
  Speaker 3: finding a parade and hopping in the front of it.
• 33:08
  Speaker 3: He didn't find found Twitter. I'm trying to remember if
• 33:11
  Speaker 3: he even found its space sex. He may have been
• 33:14
  Speaker 3: there at the beginning. I don't really remember, but you know,
• 33:19
  Speaker 3: he And this is to get back to the question
• 33:24
  Speaker 3: how you deal with the slings and arrows of other
• 33:27
  Speaker 3: people in the industry. The reality is that back in
• 33:33
  Speaker 3: the day, listen, when we were growing up, every library
• 33:36
  Speaker 3: had that crazy guy outside, whether he had the aluminum
• 33:39
  Speaker 3: on his head or not. What the Internet has allowed
• 33:42
  Speaker 3: is all the crazies to link up and actually form
• 33:46
  Speaker 3: a movement solo kind of wacky people who believed in
• 33:52
  Speaker 3: things that weren't true. You know, they they've found each
• 33:58
  Speaker 3: other through the Internet. So I've kinda I've kind of
• 34:02
  Speaker 3: become quick to dismiss nonsense. I got into a Twitter
• 34:07
  Speaker 3: spat with the founder of Chewy who said something very
• 34:11
  Speaker 3: ignorant about short sellers. There have been a lot of fraud,
• 34:14
  Speaker 3: and his shop is perfectly legitimate, but there have been
• 34:18
  Speaker 3: like Overstock and all these companies that had accounting fraud.
• 34:23
  Speaker 3: And why is it that everywhere there's fraud. You know,
• 34:26
  Speaker 3: short sellers ferret out fraud and identify a mispricing. Hey,
• 34:31
  Speaker 3: the market hasn't figured this out. This shouldn't be one hundred,
• 34:33
  Speaker 3: this should be twenty. And why is it that every
• 34:36
  Speaker 3: time someone complains about short sellers you find out that
• 34:41
  Speaker 3: there's some sort of terrible garbage going on in the company.
• 34:44
  Speaker 3: So I just think he didn't know better and said something,
• 34:48
  Speaker 3: and I kind of mocked it, and he sicked his
• 34:51
  Speaker 3: three million, you know, followers on me, and so I
• 34:56
  Speaker 3: don't know if I don't think he didn't intentionally. It's
• 35:00
  Speaker 3: just that you know, young dumb on the internet. Hey,
• 35:04
  Speaker 3: they're entitled to slag me because they paid twenty seven
• 35:08
  Speaker 3: dollars a month for an Internet connection. They're experts now,
• 35:12
  Speaker 3: and like some of the younger guys, it's like, dude,
• 35:15
  Speaker 3: what's going on. I'm like, oh yeah, let me just
• 35:17
  Speaker 3: mute that conversation. All right, it doesn't exist guys like us.
• 35:21
  Speaker 3: The internet is a room in the house. We go
• 35:24
  Speaker 3: into the younger generation. The Internet in real life are
• 35:28
  Speaker 3: the same thing. So like you could you could be
• 35:33
  Speaker 3: very online, or you could be two online. So I
• 35:37
  Speaker 3: think that something happened. Oh so I've been doing a
• 35:41
  Speaker 3: bunch of pods and videos and I started going through
• 35:44
  Speaker 3: the comments on one of the YouTube videos and I
• 35:47
  Speaker 3: started laughing out loud. It's like, this is why I
• 35:51
  Speaker 3: think it's like twelve years ago, I turned off comments
• 35:55
  Speaker 3: and I had comments off on my Bloomberg and my
• 35:57
  Speaker 3: Washington Post column. Not because I don't want to engage
• 36:01
  Speaker 3: in spirited debate, but there are rules for debate, and
• 36:06
  Speaker 3: there's got to be like a basic fundamental understanding of
• 36:12
  Speaker 3: here's what the topic is, here's how you can debate it.
• 36:16
  Speaker 3: My I love mixing it up with people now. Moot
• 36:19
  Speaker 3: court was my favorite part of law school. I'm very
• 36:23
  Speaker 3: happy to debate anything in the book, anything, But then,
• 36:27
  Speaker 3: you know, as a friend once said, you know, when
• 36:31
  Speaker 3: people are wrapped in a glass and steel vehicle and
• 36:36
  Speaker 3: they're protected by five thousand pounds of you know, a
• 36:40
  Speaker 3: vehicle moving fifty miles an hour, they'll flip you off,
• 36:43
  Speaker 3: they'll give you the finger, they'll tell you to go
• 36:45
  Speaker 3: fuck yourself, they'll yell whatever they want out the car.
• 36:48
  Speaker 3: You would never do that as a pedestrian or in
• 36:51
  Speaker 3: an elevator, probably because you get your ass kicked, but
• 36:56
  Speaker 3: also because that sort of screen of safety disappears. The Internet, unfortunately,
• 37:03
  Speaker 3: has a tendency to encourage people's very worst behavior. And
• 37:09
  Speaker 3: you know, it's not social media. Everybody complains about social media.
• 37:13
  Speaker 3: It's algorithmic social media that is designed to reward attention
• 37:19
  Speaker 3: and outrage, and they do it by tickling your emotions
• 37:23
  Speaker 3: and getting you frustrated and getting you angry. John Stewart
• 37:27
  Speaker 3: calls Fox News bullshit Mountain. Algorithmic social media is the
• 37:33
  Speaker 3: same way, and the fascinating thing you mentioned Fox News
• 37:38
  Speaker 3: and CNBC. It's not all of them. You just have
• 37:42
  Speaker 3: to pick what's worthwhile and useful and ignore the rest.
• 37:47
  Speaker 3: By the way, CNN MSNBC, Bloomberg TV, Forbes, The Wall
• 37:54
  Speaker 3: Street Journal, The New York Times, The Atlantic, go through
• 37:56
  Speaker 3: all of them. Some writers are better than others, some
• 38:00
  Speaker 3: ideas they're better than others. It would be really, really
• 38:03
  Speaker 3: helpful to us as individuals to be better critical thinking
• 38:10
  Speaker 3: thinkers have an ability to understand framing and context. The
• 38:16
  Speaker 3: world is complicated and filled with shades of gray. Anybody
• 38:21
  Speaker 3: who reduces these things to a black and white thumbs
• 38:25
  Speaker 3: up or thumbs down binary outcome, they're doing a great
• 38:29
  Speaker 3: disservice to themselves and to everybody else. And so why
• 38:33
  Speaker 3: why don't I care what other people say? Either they
• 38:36
  Speaker 3: don't understand the whole framework, they don't understand the math inside.
• 38:44
  Speaker 3: They're not picking up the nuance. More often than not,
• 38:48
  Speaker 3: they read the headline and that's what they form their
• 38:52
  Speaker 3: opinion on.
• 39:01
  Speaker 2: Okay to great Greek except for one company you mentioned, Chewy.
• 39:04
  Speaker 2: That's the public. Yeah. I don't know enough about the finance,
• 39:09
  Speaker 2: not really my world, but you know there are certain events, Robinhood,
• 39:13
  Speaker 2: I don't really know where everybody shows up. Are you
• 39:16
  Speaker 2: a pariah? Are you not a member of the group?
• 39:21
  Speaker 2: Where do you fit in?
• 39:25
  Speaker 3: So I know I'm definitely not a pariah. And you
• 39:30
  Speaker 3: could tell by the blurbs in the beginning of the
• 39:33
  Speaker 3: book that there are a lot of big hitters who
• 39:36
  Speaker 3: seem to put up with me and gave me a nice,
• 39:39
  Speaker 3: a nice blurb. I will say the two real, two
• 39:46
  Speaker 3: or three things that I did that kind of allowed
• 39:49
  Speaker 3: me to throw them out of cocktails but still get
• 39:52
  Speaker 3: invited to the parties is first heading into the financial crisis.
• 39:59
  Speaker 3: Not a lot of peopleeople were jumping up and down
• 40:01
  Speaker 3: and saying, hey, guys, this is a Remember the three
• 40:05
  Speaker 3: D posters. You look at them out of focus and
• 40:08
  Speaker 3: the dolphin jumps out. That's what was going on in
• 40:11
  Speaker 3: the mid two thousands. If you looked at what was
• 40:13
  Speaker 3: going on in the economy and the market correctly, it
• 40:17
  Speaker 3: was pretty clear shit's about to hit the fan, right
• 40:21
  Speaker 3: and it's at the time I was very public about this.
• 40:26
  Speaker 3: I went on Cudlow's show after the I don't believe
• 40:30
  Speaker 3: in forecasts, but I got into a debate with the
• 40:33
  Speaker 3: editor way back then of BusinessWeek, Hey, you're doing your
• 40:37
  Speaker 3: big annual forecast issue. Why don't we run a little
• 40:40
  Speaker 3: counter programming and talk about how no one's won this
• 40:43
  Speaker 3: two years in a row. The outcome is random. You
• 40:45
  Speaker 3: move the end date forward or back twenty four hours
• 40:49
  Speaker 3: the whole number, order show the whole thing is and
• 40:52
  Speaker 3: that the editor says, it's a double issue. We sell
• 40:56
  Speaker 3: a shit ton of advertising. Do you want to participate
• 40:59
  Speaker 3: or not? So I put in I had written rein
• 41:05
  Speaker 3: Hart and Rogoff wrote a piece to academics that Harvard
• 41:08
  Speaker 3: and I don't remember whether they're married. I don't remember where.
• 41:11
  Speaker 3: Maybe it's Harvard, MIT or Harvard and Boston College, but
• 41:15
  Speaker 3: they're married. And they write this piece that looks at
• 41:17
  Speaker 3: five financial crises. It's Helsinki, Mexico, the US, Japan. I
• 41:25
  Speaker 3: always forget the fifth one, whatever it is. And it
• 41:28
  Speaker 3: turns out that if you have a leveraged base financial crisis,
• 41:34
  Speaker 3: too much debt and it blows up, real estate has
• 41:39
  Speaker 3: a tendency to drop twenty five to thirty five percent.
• 41:41
  Speaker 3: By the way, that later that that paper later gets
• 41:46
  Speaker 3: expanded into this time is different. Eight hundred years of
• 41:49
  Speaker 3: financial folly by them. So I take that, let's take
• 41:53
  Speaker 3: thirty percent as the average. What would happen to the
• 41:57
  Speaker 3: dow if real estate fell thirty So I write up
• 42:01
  Speaker 3: the series Forthstreet dot Com I did it with the
• 42:05
  Speaker 3: Dow because the S and P five hundreds, five hundred companies,
• 42:07
  Speaker 3: it would have taken forever to do. Hey, I could
• 42:09
  Speaker 3: kind of spit all my way through thirty companies. Long
• 42:12
  Speaker 3: story short, I come up with a number at the
• 42:15
  Speaker 3: time when the Dow is like thirteen thousand and change
• 42:18
  Speaker 3: of sixty eight hundred, like down fifty percent or so,
• 42:23
  Speaker 3: and so I dutifully. After I hang up the phone,
• 42:27
  Speaker 3: I go back to that piece. I pull out those numbers.
• 42:30
  Speaker 3: I put it into the Business Week forecast, and Dow
• 42:34
  Speaker 3: sixty eight hundred. I don't remember. The SMP was like
• 42:37
  Speaker 3: six eighty or six ninety something like that. The NASDAK,
• 42:41
  Speaker 3: I can't even remember the numbers. They were so low.
• 42:43
  Speaker 3: Cudlow brings me on, and I've been doing his show
• 42:46
  Speaker 3: pretty regularly, and he brings me on and basically mocks
• 42:50
  Speaker 3: me for twenty minutes, and I'm like, Larry, this is
• 42:53
  Speaker 3: a thought experiment, and here's here's what nobody is thinking about.
• 42:58
  Speaker 3: This has been a backward real estate driven economy. Normally,
• 43:02
  Speaker 3: people get jobs, they get raises, they go buy houses.
• 43:06
  Speaker 3: Not Hey, we're cunning rates to zero. Everybody borrow money.
• 43:10
  Speaker 3: Anybody who could fog a mier borrow money go buy
• 43:12
  Speaker 3: houses and then that stimulates that's backwards. That's not how
• 43:16
  Speaker 3: this is supposed to work. And look over here at
• 43:18
  Speaker 3: we're selling all these subprime mortgages and collateralizing them. That's
• 43:22
  Speaker 3: the poison, that's the toxin getting into the bloodstream. All
• 43:25
  Speaker 3: of this ends badly. And he's like, but look, everybody
• 43:28
  Speaker 3: else is up here and you're all the way down here.
• 43:31
  Speaker 3: I'm like, so for about a year I looked like
• 43:34
  Speaker 3: a fucking idiot. And I remember going on CNBC with
• 43:39
  Speaker 3: my friend Peter Buchfar, He's a market strategist. Elsewhere I'm
• 43:43
  Speaker 3: talking about housing and the impact on markets. He's talking
• 43:46
  Speaker 3: about rates and the impact on profits, and the anchors literally,
• 43:50
  Speaker 3: I want to say. This was like late seven. Our
• 43:54
  Speaker 3: offices were downtown forty fourth Street and forty sixth Street.
• 43:58
  Speaker 3: We were near each other and Madison and like fifty
• 44:00
  Speaker 3: something was the remote CNBC studios, and the anchors laughed
• 44:05
  Speaker 3: at us on the air. Peter bookvar please reach out
• 44:08
  Speaker 3: to Bob and confirm this, and we kind of we
• 44:11
  Speaker 3: were walking back to our offices down Madison and just
• 44:14
  Speaker 3: kind of hey, either we're really right or we're really wrong,
• 44:19
  Speaker 3: because they just laughed us off the air, like we
• 44:24
  Speaker 3: really look like idiots. And I'm like, I don't know
• 44:26
  Speaker 3: how much longer this goes. And you kind of see
• 44:29
  Speaker 3: it in the movie The Big Short, even though Michael
• 44:32
  Speaker 3: Burry makes his clients hundreds of millions of dollars, like,
• 44:37
  Speaker 3: the two years heading into the collapse is just torturous
• 44:40
  Speaker 3: for him. So I had nothing like that experience, but
• 44:44
  Speaker 3: I understood, gee, you know this doesn't make sense. I
• 44:47
  Speaker 3: know markets go longer and higher than anyone could expect.
• 44:51
  Speaker 3: So the funny part about that was, as soon as
• 44:54
  Speaker 3: the shit starts hitting the fan, Larry starts having me
• 44:56
  Speaker 3: on every week twice a week, I'm getting called constantly.
• 45:00
  Speaker 3: So the fact that I more or less got that right,
• 45:04
  Speaker 3: and then on by dumb luck, Henry Blodgett of Business
• 45:09
  Speaker 3: Insider and Yahoo invites me on on I had I
• 45:12
  Speaker 3: had said to a friend, Hey, the sixty eight hundred
• 45:15
  Speaker 3: thing is, you know, a little embarrassing but starting to turn.
• 45:19
  Speaker 3: If please, if we get anywhere near that, don't let
• 45:22
  Speaker 3: me be that jerk that doubles down and says thirty
• 45:24
  Speaker 3: four hundred. So I'm on vacation when we cross sixty
• 45:27
  Speaker 3: eight hundred and I get a phone call, So what
• 45:31
  Speaker 3: are you doing. I'm like, I'm literally writing the note
• 45:34
  Speaker 3: right now. I send it out Henry Blodgett immediately, Hey
• 45:38
  Speaker 3: you want to come on Yahoo TV? Sure? So the
• 45:43
  Speaker 3: biggest baron Wall Street, the guy who warned you about
• 45:45
  Speaker 3: sixty eight hundred, seven thousand points ago. What are you
• 45:48
  Speaker 3: seeing now? Hey? Everything we're looking at is this pinned
• 45:51
  Speaker 3: negative as it gets. Cover your shorts and go along.
• 45:54
  Speaker 2: Here.
• 45:54
  Speaker 3: It's it. And this is not how I run money.
• 45:58
  Speaker 3: I was at an institutional I had planted a flag
• 46:02
  Speaker 3: and it's like, all right, we're down fifty percent. Maybe
• 46:05
  Speaker 3: we fall more. I don't know. I'm just going to
• 46:07
  Speaker 3: take the win and go home. And by the dumbest
• 46:10
  Speaker 3: of dumb luck, the next morning was the bottom and
• 46:14
  Speaker 3: markets took off. So I think people in the industry,
• 46:18
  Speaker 3: all right, he got that one right, So he's not
• 46:21
  Speaker 3: a total idiot. Will will tolerate some of his nonsense
• 46:25
  Speaker 3: because anyone who listened to him saved a bunch of money.
• 46:28
  Speaker 3: And then, not only had I been blogging for forever,
• 46:32
  Speaker 3: but when I moved over to Bloomberg, I told them
• 46:36
  Speaker 3: I wanted to fool around with this new fangled podcast thing.
• 46:41
  Speaker 3: They're like, what do you mean, Well, I want to
• 46:43
  Speaker 3: speak to intelligent, accomplished people and have long form conversations.
• 46:47
  Speaker 3: What do you mean long form like ten minutes? No,
• 46:50
  Speaker 3: like two hours? And everybody laughed at the time. The
• 46:54
  Speaker 3: way I the way I pitched it was Mark Maren's
• 46:57
  Speaker 3: WTF meets Charlie Rose And then a few years later
• 47:01
  Speaker 3: I had to amend that, but with pants on. So
• 47:06
  Speaker 3: Bloomberg came back to me and said, tell you what
• 47:08
  Speaker 3: if you get us thirty two minutes, thirty two minutes
• 47:11
  Speaker 3: of your content traffic, news, sports, weather, commercials, that's an
• 47:15
  Speaker 3: hour of radio. Have at it. Whatever is longer than
• 47:18
  Speaker 3: thirty two minutes will put online. No one's going to listen.
• 47:21
  Speaker 3: But what the hell? And that was eleven years ago,
• 47:24
  Speaker 3: five hundred and fifty episodes ago. And I've kind of
• 47:30
  Speaker 3: gotten to meet everybody in the industry. And I'll never
• 47:35
  Speaker 3: make someone who's terrible look good. I will give somebody
• 47:39
  Speaker 3: an opportunity to say, who are you, how did you
• 47:42
  Speaker 3: get that way? What's your investment philosophy? What can we
• 47:46
  Speaker 3: learn from you? And so I think I've kind of
• 47:51
  Speaker 3: earned my way into a pass, even though I kind
• 47:54
  Speaker 3: of you know, let's be honest. For most of its history,
• 47:58
  Speaker 3: Wall Street was not Mom and Pop's friends. Wall Street
• 48:03
  Speaker 3: existed for the wealthy, by the wealthy. I grew up
• 48:06
  Speaker 3: a really middle class kid. I mean, when I was younger,
• 48:10
  Speaker 3: my dad was the business he was working for imploded.
• 48:15
  Speaker 3: By the time my younger brother was in high school.
• 48:18
  Speaker 3: Well by then he had switched careers, launched the store,
• 48:23
  Speaker 3: and they were doing well. But I grew up very,
• 48:27
  Speaker 3: very middle class. Went to a state school, paid for
• 48:29
  Speaker 3: it myself, went to a local law school, paid for
• 48:32
  Speaker 3: it myself, working my way through both, and so I
• 48:37
  Speaker 3: never intended to go into finance. It was never like,
• 48:41
  Speaker 3: there was never a plan here other than that kind
• 48:45
  Speaker 3: of looks interesting. I got a tour of my buddy's
• 48:48
  Speaker 3: trading room. He's like, why don't you do this? You're
• 48:52
  Speaker 3: good with computers, you're good with numbers. You would be
• 48:54
  Speaker 3: a natural at this. I'm like, really, do you like
• 48:57
  Speaker 3: being a lawyer. No, I hate being a lawyer. Well,
• 48:59
  Speaker 3: then try this, and I did, and you know, thirty
• 49:03
  Speaker 3: years later, here we are.
• 49:05
  Speaker 2: Okay. You mentioned short sellers Hindenburgh, which got the most
• 49:10
  Speaker 2: ink and was right shut down. So you say in
• 49:14
  Speaker 2: the book there should be word short sellers, even though
• 49:17
  Speaker 2: the trend is the Dow and the S and P
• 49:20
  Speaker 2: continue to go up, So tell me more about that.
• 49:23
  Speaker 3: So you know, we come out of the financial crisis
• 49:27
  Speaker 3: in nine and a good rule of thumb, anytime markets
• 49:31
  Speaker 3: are cut in half by equities like it's it's you
• 49:35
  Speaker 3: shouldn't be market timing, you shouldn't be jumping in and out.
• 49:39
  Speaker 3: But down fifty percent on US equities has turned out
• 49:42
  Speaker 3: to be a pretty good entry point, all right. If
• 49:44
  Speaker 3: you bought in twenty nine down fifty percent, there was
• 49:47
  Speaker 3: still another down thirty percent to go. But five years
• 49:51
  Speaker 3: later you'll find and ever since then, you won't rarely
• 49:56
  Speaker 3: get down fifty percent. We've had we've had the financial
• 49:59
  Speaker 3: crime sis, even the dot com implosion where the Nasdaq
• 50:03
  Speaker 3: was down where all the technology companies were listed, was
• 50:06
  Speaker 3: down eighty one percent, But I want to say the
• 50:09
  Speaker 3: S and P five hundred was down something like thirty
• 50:11
  Speaker 3: eight or forty per didn't quite get that low. So
• 50:13
  Speaker 3: it's really really rare. And yet coming out of the
• 50:17
  Speaker 3: financial crisis, all I heard for a long time was
• 50:24
  Speaker 3: the FED is repressing assets they've the manipulating markets. They've
• 50:28
  Speaker 3: cut rates to zero, they're forcing people into the market.
• 50:33
  Speaker 3: And I frequently found myself speaking to people saying, you know,
• 50:39
  Speaker 3: over at NYU Start School of Business, around the corner
• 50:41
  Speaker 3: on McDougal is Cafe Reggio, and if you're a grad student,
• 50:46
  Speaker 3: you can go get some cappuccino, smoke clothes, cigarettes, stroke
• 50:50
  Speaker 3: your beard or your goatee, and philosophically debate the propriety
• 50:56
  Speaker 3: of what the Fed's doing. But you're an asset manager.
• 51:00
  Speaker 3: Your job is to manage your client's assets. If you
• 51:03
  Speaker 3: want to fight the FED, well knock yourself out. But
• 51:07
  Speaker 3: that's a different job than the one you were hired for.
• 51:10
  Speaker 3: And people don't like hearing that, and they especially don't
• 51:14
  Speaker 3: like hearing how come everybody who's anti FED has wildly
• 51:19
  Speaker 3: underperformed their benchmark for the past fill in a blank one, three, five,
• 51:23
  Speaker 3: seven years. It's almost as if whining against the central
• 51:28
  Speaker 3: bank is an excuse for poor performance. So stuff like
• 51:33
  Speaker 3: that doesn't really win you friends, but it's, you know,
• 51:36
  Speaker 3: more or less true. It's uh. I know people who
• 51:40
  Speaker 3: are former bank regulators and former Federal Reserve researchers, and
• 51:45
  Speaker 3: they've gone into academia. Those are the right people that
• 51:49
  Speaker 3: should be debating FED policy, and you know they have
• 51:54
  Speaker 3: because that's what they were hired to do. But if
• 51:56
  Speaker 3: you're hired to manage someone's bond portfolio, well then shut
• 52:01
  Speaker 3: the fuck up and manage the bond portfolio. Whining about
• 52:04
  Speaker 3: the FED isn't gonna help your your numbers. So I
• 52:09
  Speaker 3: am occasionally a fly in the ointment. I am occasionally
• 52:13
  Speaker 3: somebody that can piss people off, But for the most part,
• 52:17
  Speaker 3: I have tried to make finance smarter, make it fairer,
• 52:24
  Speaker 3: focus people on what matters, Debunk a lot of nonsense,
• 52:29
  Speaker 3: and just keep mom and pop investors focused on, you know,
• 52:33
  Speaker 3: purposeful investing. What are you saving for and why? Right?
• 52:37
  Speaker 3: What's the like money money, more money for money, More
• 52:41
  Speaker 3: money's sake doesn't really get you anywhere. But if you're
• 52:45
  Speaker 3: saving for a purpose, it could be five point twenty
• 52:48
  Speaker 3: nine for kids college, for one K for retirement. Maybe
• 52:52
  Speaker 3: you have enough money you're saving for philanthropy or generational
• 52:56
  Speaker 3: wealth trener, whatever it is. Once you figure out the
• 52:59
  Speaker 3: purpose that you're aiming your investments towards, well then you
• 53:03
  Speaker 3: can figure out the best route there. With the least
• 53:05
  Speaker 3: taking you know, returns or a function of risk. You
• 53:09
  Speaker 3: have to assume some level of risk risk free returns
• 53:13
  Speaker 3: or what you get from the ten year treasury because
• 53:15
  Speaker 3: you're guaranteed to get your money back now. Yielding four
• 53:19
  Speaker 3: percent not a great return when inflation's two and a
• 53:22
  Speaker 3: half three percent. Stocks tend to be eight ten percent
• 53:25
  Speaker 3: of a long term better return. But as we saw
• 53:28
  Speaker 3: last month, they don't just go up. They go up
• 53:30
  Speaker 3: and down, and so you have to be prepared for that.
• 53:33
  Speaker 3: So if you, you know, if I can get people
• 53:36
  Speaker 3: focused on here's how to do this, here's how to
• 53:40
  Speaker 3: not shoot yourself in the foot, and here's how to
• 53:43
  Speaker 3: manage towards a goal. You know, more for more's sake,
• 53:47
  Speaker 3: is not a goal more because I want to leave
• 53:50
  Speaker 3: all my money to the Humane Society because I don't
• 53:55
  Speaker 3: like how we're treating cats and dogs. Hey, now you
• 53:58
  Speaker 3: have a goal, you know how to we know how
• 54:00
  Speaker 3: to map a path to that, and you can assume
• 54:05
  Speaker 3: the right amount of risk relative to that purpose. And
• 54:09
  Speaker 3: so I think I'm sincere about that. Maybe that buys
• 54:13
  Speaker 3: me a little bit of goodwill. I've had enough people
• 54:16
  Speaker 3: call me an asshole, so I'm clearly pissing some people off.
• 54:21
  Speaker 3: And I think as you read the book, you could
• 54:23
  Speaker 3: tell so my wife got me this. She's like, now
• 54:29
  Speaker 3: you have some fucks to give, because previously I had
• 54:33
  Speaker 3: no fucks to give. Oh, you don't, dude, this was
• 54:36
  Speaker 3: the cover story you wrote on the cover of Fortune magazine.
• 54:41
  Speaker 3: Here's why Cisco is the one stock to own. You
• 54:44
  Speaker 3: have to own this. Don't own Microsoft, they say in
• 54:47
  Speaker 3: the magazine. Own this one. Don't own Ge they say.
• 54:51
  Speaker 3: They turn out to be right about that, but Microsoft,
• 54:53
  Speaker 3: they were wildly wrong. And ever since that cover came
• 54:57
  Speaker 3: out in May of two thousand, we're twenty five years
• 55:01
  Speaker 3: later and that trade is still a loser. It's still
• 55:05
  Speaker 3: below where they recommended it. I feel someone should be
• 55:10
  Speaker 3: calling out people that put bad ideas out into the ether,
• 55:15
  Speaker 3: and people will, unfortunately put money to work based on
• 55:21
  Speaker 3: what they're reading, what they're seeing, what they're hearing. And
• 55:24
  Speaker 3: so I admittedly cherry picked the most egregious examples, and
• 55:30
  Speaker 3: some of the examples in the book are just really
• 55:34
  Speaker 3: horrifyingly egregious, But the lesson within the each is still
• 55:39
  Speaker 3: the same. Whether it's the idiots who paid their asset
• 55:44
  Speaker 3: managers a billion dollars. Two asset managers manage a family
• 55:49
  Speaker 3: office for one family and managed to squeeze a billion
• 55:54
  Speaker 3: each in fees out. That's egregious. Recip's a locutor. The
• 55:58
  Speaker 3: thing speaks for itself. I'm sorry, but I don't care
• 56:02
  Speaker 3: how good you are. You shouldn't be getting a billion
• 56:05
  Speaker 3: dollars for giving anyone advice, and so I thought that
• 56:10
  Speaker 3: was worth calling out. The best selling personal finance book
• 56:16
  Speaker 3: of all time is Rich Dad, Poor Dad. Robert Koyasaki
• 56:21
  Speaker 3: always mispronounced his name. Thirty two million copies of that
• 56:24
  Speaker 3: book sold. I haven't read it, but I've seen him
• 56:28
  Speaker 3: on Twitter. In every week he's four care or every
• 56:31
  Speaker 3: year he's forecasting an economic crisis and a market crash.
• 56:37
  Speaker 3: Literally since two thousand and nine. Somebody else on Twitter
• 56:41
  Speaker 3: found all of his tweets stacked him together, and it's like,
• 56:45
  Speaker 3: oh my god, this guy has just never recovered from
• 56:48
  Speaker 3: eight oh nine. He's been negative and bearish and has
• 56:52
  Speaker 3: like two million Twitter followers, which is unfortunate because those
• 56:56
  Speaker 3: poor bastards, if they listened to him, they missed what
• 57:00
  Speaker 3: was one of the greatest decades in market history. Every
• 57:04
  Speaker 3: year he forecasted a crash My favorite forecast of his
• 57:07
  Speaker 3: was twenty eighteen, sell residential real estate in the US,
• 57:11
  Speaker 3: big housing crash coming. I'm hard pressed to find a
• 57:15
  Speaker 3: better time to buy residential real estate in the United
• 57:19
  Speaker 3: States than twenty eighteen, even with the dumb luck of
• 57:22
  Speaker 3: the pandemic. But here we are. Housing topped out in
• 57:27
  Speaker 3: five oh six, we underbuilt single family homes for a decade,
• 57:31
  Speaker 3: and by twenty eighteen, forget the pandemic, we were Depending
• 57:35
  Speaker 3: on who you listen to, the Architects Association, National Association,
• 57:40
  Speaker 3: and Realtors National Builders wear two three four million homes
• 57:44
  Speaker 3: short as of twenty eighteen. Because we underbuilt homes for
• 57:48
  Speaker 3: a decade. And this guy is telling people sell the
• 57:52
  Speaker 3: US real estate. So nobody calls these people out. I
• 57:55
  Speaker 3: kind of feel somewhat obligate. That's my neuropathy, is that
• 58:00
  Speaker 3: I just can't let the shit go. I have to
• 58:03
  Speaker 3: call it out.
• 58:13
  Speaker 2: Okay, just to go back what should be happening with
• 58:17
  Speaker 2: short selling.
• 58:20
  Speaker 3: I'm tough to wrestle into submission, aren't I. So short
• 58:23
  Speaker 3: sellers serve a really important purpose. They identify fraud that
• 58:27
  Speaker 3: the SEC misses. They're the first ones to buy in
• 58:30
  Speaker 3: a market crash because they sold up here the market crashes,
• 58:35
  Speaker 3: they're a buyer. Hey, free money. And it's become really
• 58:40
  Speaker 3: challenging to do, in part because the modern world has
• 58:45
  Speaker 3: become so much more efficient markets are. They used to
• 58:48
  Speaker 3: be kind of sort of eventually efficient. Now they're pretty efficient,
• 58:53
  Speaker 3: meaning that if there's fraud out there, if there's something
• 58:56
  Speaker 3: wrong with a company, forget fraud. If a business model
• 59:01
  Speaker 3: is crapping out, short sellers are usually the first ones
• 59:06
  Speaker 3: to figure that out. They tend to be negative because
• 59:10
  Speaker 3: they're betting on things going down. They tend to see
• 59:14
  Speaker 3: the glasses half full. But they serve a useful purpose.
• 59:18
  Speaker 3: They are the eyes and ears you know. Short Sellers
• 59:21
  Speaker 3: are the one who identified and run as a fraud.
• 59:24
  Speaker 3: Short Sellers are the one who identified world com overstuck.
• 59:28
  Speaker 3: Go through the list of all the big frauds of
• 59:30
  Speaker 3: the past ten twenty thirty years, It wasn't the SEC
• 59:34
  Speaker 3: that uncovered most of these. It was typically short sellers.
• 59:40
  Speaker 3: In fact, as much as you want to believe the
• 59:43
  Speaker 3: SEC is the one who found out about Bernie Madoff,
• 59:47
  Speaker 3: a handful of short sellers looked at that and said,
• 59:50
  Speaker 3: none of the strategy makes sense. This is clearly a fraud.
• 59:54
  Speaker 3: I know three or four people quants that looked at
• 1:00:01
  Speaker 3: that looked Renaissance Technologies. Is a quant that did that.
• 1:00:06
  Speaker 3: I'm drawn a blank on the guy's name. A former
• 1:00:09
  Speaker 3: MIT professor who wrote Beat the Dealer Right. He was
• 1:00:14
  Speaker 3: one of the people there. There were a handful of
• 1:00:18
  Speaker 3: folks who looked at who ed Thorpe, who looked at
• 1:00:23
  Speaker 3: at made off and said, something doesn't smell right with this.
• 1:00:28
  Speaker 3: It wasn't. And he managed to skate through the dot
• 1:00:32
  Speaker 3: com implosion, but he couldn't skate through the financial crisis.
• 1:00:37
  Speaker 3: The SEC didn't figure it out. It was the market
• 1:00:40
  Speaker 3: crash that you know, the tide went out and he
• 1:00:42
  Speaker 3: was naked and everybody saw what was going on. So
• 1:00:47
  Speaker 3: short sellers serve a really important purpose. It's become really
• 1:00:51
  Speaker 3: challenging to do. People have been abusive with litigation. The SEC.
• 1:00:56
  Speaker 3: You know, they don't like being shown up. You would
• 1:00:58
  Speaker 3: think they would work with short sellers to reveal to
• 1:01:04
  Speaker 3: uncover fraud, but instead it's that they haven't been especially nice.
• 1:01:09
  Speaker 3: And the way to make money, there's two ways to
• 1:01:11
  Speaker 3: make money as a short seller. So the way it
• 1:01:16
  Speaker 3: works is I borrow stock from you and then I
• 1:01:19
  Speaker 3: sell it, and when I buy it back lower, I
• 1:01:21
  Speaker 3: return the shares to you. Right, That's how and I
• 1:01:24
  Speaker 3: pay you a fee for that. That's how short selling works.
• 1:01:26
  Speaker 3: So that's one way to make money as a short seller.
• 1:01:29
  Speaker 3: The other way is to write up research reports. But
• 1:01:33
  Speaker 3: that whole business, that side of the business. You know,
• 1:01:37
  Speaker 3: back in the old days, when you would trade, it
• 1:01:39
  Speaker 3: would cost you fifteen to twenty cents a share. Then
• 1:01:43
  Speaker 3: it was ten cents a share, then it was five cents.
• 1:01:45
  Speaker 3: And the way research shops would make money is, Hey,
• 1:01:49
  Speaker 3: run all your trading through us. We'll give you all
• 1:01:51
  Speaker 3: our research for free, soft dollar. And so at five
• 1:01:55
  Speaker 3: cents a share, people doing tens of millions of shares
• 1:01:58
  Speaker 3: trading a day. Hey, it adds up to you know,
• 1:02:01
  Speaker 3: ten million here, ten million there. Pretty soon it's real money.
• 1:02:06
  Speaker 3: That business is really shrunk dramatically, so the you know,
• 1:02:10
  Speaker 3: there is a need for newspapers that business says, and
• 1:02:14
  Speaker 3: local reporting that's shrunk. The fascinating thing about the Internet
• 1:02:19
  Speaker 3: and digital and modern technology is a lot of the
• 1:02:23
  Speaker 3: institutional building block blocks of our society have had their
• 1:02:27
  Speaker 3: legs cut out from on them. Between Craigslist and eBay
• 1:02:31
  Speaker 3: and then all the dating apps, and then all the
• 1:02:33
  Speaker 3: bring a trailer and cars and bids like and Zillow.
• 1:02:38
  Speaker 3: Each of these were giant real estate, giant newspaper advertising sections,
• 1:02:43
  Speaker 3: the classifieds, garage sales, used cars, house listings. That's all gone,
• 1:02:50
  Speaker 3: and you know, you lose newspapers and democracy suffers. Well,
• 1:02:55
  Speaker 3: the same thing happens in the market. The business of
• 1:02:58
  Speaker 3: short selling has becomeing recently difficult. Trading is essentially free
• 1:03:03
  Speaker 3: these days, so it's really hard. It's one thing to say,
• 1:03:06
  Speaker 3: we have to trade, all right, run it, give some
• 1:03:09
  Speaker 3: to him and some to her and some to them,
• 1:03:11
  Speaker 3: and you know, well, that's how we'll pay for our research,
• 1:03:14
  Speaker 3: as opposed to, oh, trading's free. I got to write
• 1:03:16
  Speaker 3: a check for a quarter million dollars. I don't think
• 1:03:19
  Speaker 3: I want to do that. And so that business has
• 1:03:21
  Speaker 3: become really, really challenging. And it's unfortunate because they served
• 1:03:25
  Speaker 3: an important purpose in the market.
• 1:03:28
  Speaker 2: Okay, you take down Susie Orman and Dave Ramsey. Dave,
• 1:03:34
  Speaker 2: of course, is really all over TikTok and Instagram wheels.
• 1:03:38
  Speaker 2: Can you go into that a little bit.
• 1:03:41
  Speaker 3: So, look, they both serve a purpose, and I every
• 1:03:45
  Speaker 3: now and then they just kind of cross the line
• 1:03:47
  Speaker 3: and it makes me a little crazy. So if you
• 1:03:51
  Speaker 3: and Dave Ramsey, bless him. He's built a great business.
• 1:03:55
  Speaker 3: Good for him. Susie Orman. Also, finally, now there's a
• 1:03:58
  Speaker 3: woman or there has a woman on that saying the
• 1:04:01
  Speaker 3: same thing, telling people how to deploy fundamental budgeting. Right,
• 1:04:07
  Speaker 3: there's a need for that. I'm not like anti Susie
• 1:04:10
  Speaker 3: Orman or anti Dave Ramsey. It's when they start saying
• 1:04:14
  Speaker 3: stuff that's just clickbait kind of nonsense. It pisses me off,
• 1:04:19
  Speaker 3: all right, so I get so let me sum up,
• 1:04:23
  Speaker 3: Dave Ramsey, Hey, get your personal budget together. Spend less
• 1:04:28
  Speaker 3: than you earn, don't run up credit card debt, invest
• 1:04:32
  Speaker 3: in yourself via education or whatever. Invest in your long
• 1:04:36
  Speaker 3: term by saving for the future. This is really, you know,
• 1:04:40
  Speaker 3: the sort of stuff we should be teaching in high school,
• 1:04:43
  Speaker 3: you know, back in the day when there was home ech,
• 1:04:47
  Speaker 3: family budgeting. A lot of this stuff is pretty basic,
• 1:04:49
  Speaker 3: and some people really need to hear this over and
• 1:04:53
  Speaker 3: over again. Where it starts to get a little crazy
• 1:04:57
  Speaker 3: is what I call the spending skolds, and it's never
• 1:05:02
  Speaker 3: buy a sports car, don't spend a lot of money
• 1:05:05
  Speaker 3: on a boat, don't do this, and they leave out
• 1:05:07
  Speaker 3: the last part of the sentence, which is if you
• 1:05:11
  Speaker 3: can't afford it. Right, I'm a boater. My first boat
• 1:05:16
  Speaker 3: was like a forty dollars row boat, and then a kayak,
• 1:05:21
  Speaker 3: and then eventually a little thing with a little outboard,
• 1:05:24
  Speaker 3: and now I have During the financial crisis, I bought
• 1:05:29
  Speaker 3: a boat that was a short sale. The guy was
• 1:05:30
  Speaker 3: about to lose it to the bank, and you can negotiate.
• 1:05:34
  Speaker 3: So I've had that c Ray for twenty years. But
• 1:05:38
  Speaker 3: the takeaway is I could afford it. If you're buying
• 1:05:43
  Speaker 3: something as a flex, well, you're wasting your money, nobody.
• 1:05:47
  Speaker 3: And that's the flip side of Instagram and TikTok. You know,
• 1:05:51
  Speaker 3: you just see the tip of the iceberg. You don't
• 1:05:53
  Speaker 3: see the two thirds that are below the waterline. You
• 1:05:56
  Speaker 3: see a big house or a fancy car, or jewelry
• 1:05:59
  Speaker 3: or watch whatever. You're only seeing the asset. You're not
• 1:06:03
  Speaker 3: seeing the liability on the other side of that. You're
• 1:06:06
  Speaker 3: not seeing Hey, it's nice that you have a two
• 1:06:08
  Speaker 3: million dollar house. How much is your mortgage? Two million dollars?
• 1:06:11
  Speaker 3: All right, so you have nothing. Here's the asset, here's
• 1:06:14
  Speaker 3: the mortgage. They offset right, that's a very different experience.
• 1:06:18
  Speaker 3: And when I see people flexing and buying things that
• 1:06:22
  Speaker 3: they can't afford, that's where D Dave Ramsey and Stusie
• 1:06:26
  Speaker 3: Orman one hundred percent right, where I kind of get
• 1:06:29
  Speaker 3: a little pissed. Is you know, if you buy a latte,
• 1:06:32
  Speaker 3: you're pissing away millions of dollars. Hey, not for nothing.
• 1:06:36
  Speaker 3: I don't want to be a top ten percent or
• 1:06:38
  Speaker 3: a top one percenter. If a five dollars latte is
• 1:06:41
  Speaker 3: the difference between a comfortable retirement or not. You're doing
• 1:06:46
  Speaker 3: something else wrong. You're just doing something else wrong, no matter.
• 1:06:50
  Speaker 3: And there's a concept called denominator blindness where you just
• 1:06:54
  Speaker 3: see the numerator but not the denominator. All right, So
• 1:06:58
  Speaker 3: five dollars, I guess over thirty years, you could say
• 1:07:03
  Speaker 3: it extrapolates out to hundreds of thousands of dollars. That's
• 1:07:07
  Speaker 3: before you inflation adjusted. But hey, over that same thirty
• 1:07:11
  Speaker 3: year period, how much is your earning going to go
• 1:07:14
  Speaker 3: up if you're not buying a latte for the next
• 1:07:16
  Speaker 3: thirty years because you're only making one hundred grand now, well,
• 1:07:20
  Speaker 3: thirty years from now, you're not still making one hundred grand.
• 1:07:24
  Speaker 3: You're probably making closer to eight hundred grand. And again,
• 1:07:27
  Speaker 3: who cares about a five dollars latte? When the funny
• 1:07:31
  Speaker 3: thing is, when when all the latte crap came out,
• 1:07:35
  Speaker 3: we were looking at about thirty years of no increase
• 1:07:40
  Speaker 3: in wages for the bottom sixty percent of earners in America.
• 1:07:44
  Speaker 3: And to me, rather than waste my time scolding people
• 1:07:48
  Speaker 3: not to buy a latte, I think you should look
• 1:07:52
  Speaker 3: at Hey, how come nobody's income in the bottom on
• 1:07:55
  Speaker 3: a half of society is keeping up with inflation. We're
• 1:07:59
  Speaker 3: watching hell health care go up nine percent a year
• 1:08:01
  Speaker 3: for the past twenty five years. We're watching education go
• 1:08:04
  Speaker 3: up that much. Wages are badly lagging for pick a number,
• 1:08:09
  Speaker 3: bottom forty fifty sixty percent of society. I don't think
• 1:08:13
  Speaker 3: lecturing those people about five dollars lattes is going to
• 1:08:16
  Speaker 3: help them. What would really help them is trying to
• 1:08:19
  Speaker 3: figure out why we are not keeping up wages. And
• 1:08:24
  Speaker 3: that was the great irony of the pandemic is suddenly,
• 1:08:29
  Speaker 3: not only was there a giant fiscal stimulus that made
• 1:08:33
  Speaker 3: its way into everybody's pockets, but a lot of companies
• 1:08:37
  Speaker 3: quickly realized, oh, we're competing for a modest pool of workers,
• 1:08:42
  Speaker 3: and the only way we're going to be able to
• 1:08:44
  Speaker 3: keep find the people we need is by giving them
• 1:08:48
  Speaker 3: a salary increase. I know a lot of folks aren't
• 1:08:51
  Speaker 3: thrilled with Amazon and Bezos and the crapification of the site,
• 1:08:57
  Speaker 3: but I think it was around twenty sixteen they realized, hey,
• 1:09:01
  Speaker 3: we have a shit ton of money. We don't pay
• 1:09:03
  Speaker 3: taxes because we don't show a profit. So they raised
• 1:09:06
  Speaker 3: their minimum wage to fifteen dollars nationwide and scooped up
• 1:09:11
  Speaker 3: all these people. And for a couple of years you
• 1:09:14
  Speaker 3: would go through a Walmart and it looked like crap.
• 1:09:17
  Speaker 3: They couldn't hire enough people and their incentives were really misaligned.
• 1:09:22
  Speaker 3: So over the past let's call it ten years, there's
• 1:09:26
  Speaker 3: been a pretty big catchup for a lot of people.
• 1:09:29
  Speaker 3: I think medium wage is up to like eighty thousand
• 1:09:32
  Speaker 3: dollars now in the United States from like forty three.
• 1:09:37
  Speaker 3: Not that much. That not that far. I'll go. Let's
• 1:09:41
  Speaker 3: just take a quick look to see where we are.
• 1:09:45
  Speaker 3: I mean, eleven ninety two per week, that's that's not bad.
• 1:09:52
  Speaker 3: So when I see people complaining about five dollar lattes
• 1:09:56
  Speaker 3: or don't buy a sports car. Yeah, if you can't
• 1:09:59
  Speaker 3: afford it, don't buy it. But if that's something that
• 1:10:01
  Speaker 3: floats your boat and you want to go do it,
• 1:10:03
  Speaker 3: and you're going to hang out with friends, you're gonna
• 1:10:05
  Speaker 3: have fun going on road trips. And you know the
• 1:10:07
  Speaker 3: thing about the I had a conversation with one of
• 1:10:10
  Speaker 3: the people I work with who has a lake house.
• 1:10:12
  Speaker 3: He lives in Michigan, and he, you know, is debating
• 1:10:15
  Speaker 3: getting a small boat and he could easily afford it
• 1:10:20
  Speaker 3: and kind of was hesitant because of the scolding. And
• 1:10:24
  Speaker 3: I'm like, the problem isn't never buy a boat. By
• 1:10:27
  Speaker 3: the way, the boat is the least expensive part of boating.
• 1:10:31
  Speaker 3: Then there's repairs and gas and maintenance and dock fees
• 1:10:34
  Speaker 3: and winter storage and beer, and like, the boat is
• 1:10:37
  Speaker 3: the cheapest part of boating. If you can afford this
• 1:10:41
  Speaker 3: and you want to spend time with your family and
• 1:10:43
  Speaker 3: your kids will go out and you'll you know, have
• 1:10:45
  Speaker 3: great experiences and create memories, knock yourself out. And he
• 1:10:49
  Speaker 3: bought the boat and it's been a blast. It's not
• 1:10:53
  Speaker 3: about it's just too lazy and easy to always say no.
• 1:10:57
  Speaker 3: I don't think you should just say no. I think
• 1:10:59
  Speaker 3: you have to think these things through and put it
• 1:11:02
  Speaker 3: into some context and find some nuance, and hey, if
• 1:11:05
  Speaker 3: you can't buy it, afford a boat or a latte.
• 1:11:08
  Speaker 3: If you can't afford it, don't buy it. But if
• 1:11:11
  Speaker 3: you understand the costs and what goes into it, like
• 1:11:15
  Speaker 3: someone did, someone did something, Never buy a beach house.
• 1:11:20
  Speaker 3: Why don't you want to go to the beach and
• 1:11:23
  Speaker 3: relax over the summer. The most fun I have had
• 1:11:26
  Speaker 3: is hanging out reading a book, listening to the ocean.
• 1:11:29
  Speaker 3: Why should I not buy a beach house? Well, it's expensive,
• 1:11:32
  Speaker 3: and there are maintenance costs and this and that. Listen,
• 1:11:37
  Speaker 3: you could buy a two hundred thousand dollars shack, you
• 1:11:39
  Speaker 3: could buy a forty million dollar mansion and everything in between.
• 1:11:44
  Speaker 3: Just saying no kind of seems lazy.
• 1:11:47
  Speaker 2: Okay, I want to go a little bit deeper into
• 1:11:49
  Speaker 2: the latte because you talk about the enumenterator and denominated
• 1:11:54
  Speaker 2: be very specific that the latte. I think it's Susie
• 1:11:59
  Speaker 2: Orman extra lates to this incredible payment in the future,
• 1:12:02
  Speaker 2: And you dig down and say, she's assuming a rate
• 1:12:06
  Speaker 2: of return that's actually twice of what one might expect.
• 1:12:12
  Speaker 3: So first it's non inflation adjusted so that's number one.
• 1:12:16
  Speaker 3: That's where you end up with a part of it. Second,
• 1:12:19
  Speaker 3: if I'm remembering it correctly, I'm doing this for memory,
• 1:12:21
  Speaker 3: it was either twelve percent or fourteen percent. You know,
• 1:12:24
  Speaker 3: you should really look for about ten percent over long periods,
• 1:12:28
  Speaker 3: So that that was a believe it or not, two
• 1:12:31
  Speaker 3: percent after thirty years adds up to about thirty five
• 1:12:34
  Speaker 3: percent of the total returns. It's a huge, huge, outsized impact.
• 1:12:39
  Speaker 3: And then it also ignored the other side of the equation.
• 1:12:44
  Speaker 3: If you're also seeing your income go up and you're
• 1:12:47
  Speaker 3: seeing you know, you're every time you bump up your salary,
• 1:12:52
  Speaker 3: you put more money into your four oh one k.
• 1:12:56
  Speaker 3: It worked out to be net of everything about what
• 1:12:59
  Speaker 3: a car would cost, assuming there's still cars thirty years
• 1:13:03
  Speaker 3: from now. So here's your choice. Never have another Starbucks
• 1:13:08
  Speaker 3: or Blue Bottle or whatever your favorite local coffee brewer is.
• 1:13:13
  Speaker 3: Never have another one of their four five six dollars lattes,
• 1:13:16
  Speaker 3: and thirty years from now it'll pay for a car
• 1:13:19
  Speaker 3: or so right not, I'm going to bet thirty years
• 1:13:22
  Speaker 3: from now they're probably not selling cars, or they're selling
• 1:13:26
  Speaker 3: self driving cars and everybody is ubering everywhere, or not
• 1:13:29
  Speaker 3: I have no idea, but it's not millions of dollars.
• 1:13:33
  Speaker 3: You're not retiring. And I use the example of hey,
• 1:13:38
  Speaker 3: the median income thirty years ago was twenty three thousand dollars.
• 1:13:41
  Speaker 3: Now it's twenty six thousand dollars. Now it's eighty something thousand.
• 1:13:45
  Speaker 3: And the median home price was like forty five thousand,
• 1:13:49
  Speaker 3: and now it's four hundred thousand. So now that's thirty
• 1:13:52
  Speaker 3: years ago. So extrapola thirty years forward, and these hundreds
• 1:13:57
  Speaker 3: of thousands of dollars in Latte save, it's really insignificant
• 1:14:01
  Speaker 3: to homes that are going to be ten twenty million
• 1:14:04
  Speaker 3: dollars in the future, and relative to salaries that are
• 1:14:08
  Speaker 3: going to be half a million a million just for
• 1:14:10
  Speaker 3: the meeting and salary thirty forty years from now. So
• 1:14:14
  Speaker 3: by just showing you half of the equation, you really
• 1:14:19
  Speaker 3: miss it. I'll give you another example that I love
• 1:14:23
  Speaker 3: and you by the way, there is a Twitter feed
• 1:14:27
  Speaker 3: called TikTok Investors, and this guy goes out and picks
• 1:14:32
  Speaker 3: out the dumbest, most ridiculous investment advice and financial advice
• 1:14:38
  Speaker 3: on TikTok. You know, how do we maintain our lifestyle?
• 1:14:45
  Speaker 3: We day traded Home says this handsome couple, what's their secret?
• 1:14:49
  Speaker 3: We only buy stocks that go up. If they don't
• 1:14:52
  Speaker 3: go up, we don't buy them. And I'm like, are
• 1:14:54
  Speaker 3: they purposefully channeling Will Rogers? Do they have any idea
• 1:14:58
  Speaker 3: ps pandemic crash happens in twenty twenty two, they move
• 1:15:04
  Speaker 3: into real estate. They're done with done with stocks. Hey,
• 1:15:07
  Speaker 3: if you're on a boat on April fifteenth, you don't
• 1:15:10
  Speaker 3: know any taxes, really, the IRS will beg to diff
• 1:15:14
  Speaker 3: with you. In fact, the IRS had to put out
• 1:15:16
  Speaker 3: a fact sheet forty two things that are on social
• 1:15:20
  Speaker 3: media that are not true being in international waters. If
• 1:15:24
  Speaker 3: you're a US citizen, you still owe taxes. It's not
• 1:15:27
  Speaker 3: a So one of the memes that he identified cracked
• 1:15:32
  Speaker 3: me up. Somebody took the bag of groceries that Kevin
• 1:15:38
  Speaker 3: from Home Alone bought, and way back then it was
• 1:15:42
  Speaker 3: like twenty dollars and ninety cents. I think Home Alone
• 1:15:45
  Speaker 3: was nineteen ninety or nineteen ninety three, something like that,
• 1:15:48
  Speaker 3: so it was twenty dollars. The same bag of groceries
• 1:15:50
  Speaker 3: today is fifty seven dollars. Oh my god, look at
• 1:15:54
  Speaker 3: how much worse the American dollar is done. It's like,
• 1:15:58
  Speaker 3: wait a second. When I go to buy groceries today,
• 1:16:02
  Speaker 3: I'm not using money I put aside in nineteen ninety.
• 1:16:05
  Speaker 3: I'm using money I earned in twenty twenty five. So
• 1:16:08
  Speaker 3: let's compare the groceries went up this much, how much
• 1:16:13
  Speaker 3: have salaries gone up? And it turns out that salaries
• 1:16:16
  Speaker 3: have gone up about ten percent more than the groceries
• 1:16:20
  Speaker 3: went up. So in reality, the groceries are a little
• 1:16:24
  Speaker 3: bit cheaper. But that's if you're just using your wages.
• 1:16:29
  Speaker 3: If Kevin would have taken the money he spent on
• 1:16:33
  Speaker 3: groceries and invested in the market, well from nineteen ninety
• 1:16:37
  Speaker 3: today it's worth two thousand dollars or some crazy number.
• 1:16:42
  Speaker 3: I detail it in the book. He could have bought
• 1:16:45
  Speaker 3: the groceries and still had, you know, ten x left over.
• 1:16:49
  Speaker 3: The purpose of money is not a store of value.
• 1:16:53
  Speaker 3: It's amazing people don't understand this. The purpose of money
• 1:16:57
  Speaker 3: is a median medium of exchange change. You get paid
• 1:17:01
  Speaker 3: in dollars. You use those dollars to pay your rent
• 1:17:04
  Speaker 3: or your mortgage, to buy the basic necessities of life, food, medicine, clothing,
• 1:17:11
  Speaker 3: to pay your taxes, to occasionally buy entertainment, travel, movies, whatever, music, whatever,
• 1:17:18
  Speaker 3: and to invest. You can start a business, you can
• 1:17:20
  Speaker 3: put in the market. That's it. And when you look
• 1:17:22
  Speaker 3: at money ten twenty thirty years later that's been invested,
• 1:17:27
  Speaker 3: it's gone up appreciably. I always cracked up every time
• 1:17:31
  Speaker 3: someone says, you know, the dollar has lost ninety six
• 1:17:34
  Speaker 3: percent of its value over the past hundred years. Why
• 1:17:38
  Speaker 3: the fuck would you hold on to a dollar bill
• 1:17:41
  Speaker 3: for one hundred years. Money only has value when it's
• 1:17:46
  Speaker 3: in motion, when it's being put to work. If you
• 1:17:49
  Speaker 3: want to sit on a dollar bill or one hundred
• 1:17:53
  Speaker 3: dollars or one thousand dollars for a century and miss
• 1:17:57
  Speaker 3: the opportunity to let it compound over time, time, that's on. You.
• 1:18:01
  Speaker 3: Don't blame the dollar. My job is to get the
• 1:18:04
  Speaker 3: dollars out of my hands as fast as I can.
• 1:18:07
  Speaker 3: The money comes in, I pay all my bills, and
• 1:18:10
  Speaker 3: I put money into my four oh one k anything
• 1:18:13
  Speaker 3: that's left and I pay my taxes anything that's left over.
• 1:18:15
  Speaker 3: After that, now I have to figure out what am
• 1:18:18
  Speaker 3: I going to do with this dollar that's going to
• 1:18:20
  Speaker 3: either bring me or my family joy or bring someone
• 1:18:23
  Speaker 3: else joy, or keep up with inflation and off that's
• 1:18:28
  Speaker 3: the purpose of a dollar not sitting in a mason
• 1:18:31
  Speaker 3: jar in someone's backyard for a hundred years. But that's
• 1:18:35
  Speaker 3: kind of and coming back to the original question, you know,
• 1:18:38
  Speaker 3: what are they selling? Well, they're selling gold bullion, they're
• 1:18:42
  Speaker 3: selling bitcoin, They're selling something. And the only way the story,
• 1:18:47
  Speaker 3: the narrative works is if you realize dollars are not valuable.
• 1:18:54
  Speaker 3: You know, I speak at a lot of public events
• 1:18:56
  Speaker 3: and we open it up for Q and A, and
• 1:18:59
  Speaker 3: in variably someone says, you know, what's your views on
• 1:19:03
  Speaker 3: the collapse of the dollar? But by the way, the
• 1:19:06
  Speaker 3: dollar over the past six months has been pretty close
• 1:19:09
  Speaker 3: to all time highs relative to other currencies. Remembered currency
• 1:19:14
  Speaker 3: is always relative. Where else are you gonna go? You're
• 1:19:16
  Speaker 3: gonna go to the Japanese yen? No, the Euro they
• 1:19:19
  Speaker 3: have structural problems, the Chinese wand please don't make me
• 1:19:23
  Speaker 3: laugh that we are the cleanest shirt in the hamper.
• 1:19:26
  Speaker 3: There's no other way to describe it. So whenever and
• 1:19:29
  Speaker 3: I get that question, I'm like, yes, you're right, dollars
• 1:19:32
  Speaker 3: are worthless. Their fiat currency has collapsed. My office, my firm,
• 1:19:37
  Speaker 3: offers a very free service. Send me all your worthless dollars,
• 1:19:42
  Speaker 3: and we will dispose of them properly. You don't have
• 1:19:45
  Speaker 3: to worry about being weighted down by all that useless
• 1:19:50
  Speaker 3: Fiat currency. And everybody kind of snickers. But the point
• 1:19:54
  Speaker 3: is you get paid in dollars, You spend your dollars,
• 1:19:57
  Speaker 3: you pay your taxes, and invest in dollars. That's all
• 1:20:00
  Speaker 3: it's supposed to do. It was never supposed to be
• 1:20:04
  Speaker 3: a store of value. And it's shocking how obvious it
• 1:20:09
  Speaker 3: is if you just think about it for a second.
• 1:20:11
  Speaker 3: And these guys have been getting away with this bullshit
• 1:20:14
  Speaker 3: for decades. I've heard that that was one of the
• 1:20:17
  Speaker 3: things in the book. That man that was like I
• 1:20:20
  Speaker 3: stubbed my toe on that twenty five years ago, and
• 1:20:23
  Speaker 3: it's just slowly festered, and finally it all came out
• 1:20:26
  Speaker 3: in the book.
• 1:20:34
  Speaker 2: Let's back up, and let's look at it from a distance.
• 1:20:37
  Speaker 2: If you look at the book in general, you say,
• 1:20:41
  Speaker 2: everybody's full of shit. Nobody can forecast, whether it be CNBC,
• 1:20:46
  Speaker 2: any other outlet, anybody. You said earlier, of course that
• 1:20:52
  Speaker 2: they're selling something, they're getting paid in some way, right,
• 1:20:55
  Speaker 2: do not trust them. Two, do not believe that you
• 1:21:00
  Speaker 2: can pick stocks if for no other reason. Only a
• 1:21:04
  Speaker 2: very small number of stocks actually are profitable. Three have
• 1:21:10
  Speaker 2: a plan, which you referenced earlier, You want to go.
• 1:21:13
  Speaker 2: Four put your money in index funds. So if we
• 1:21:18
  Speaker 2: look at that from the beginning, let's start with the forecast.
• 1:21:23
  Speaker 2: The advice are you used to in even research? Are
• 1:21:27
  Speaker 2: you saying, really we should ignore all of that?
• 1:21:30
  Speaker 3: No? No, And I talk about in the book you
• 1:21:34
  Speaker 3: need to find people who are worthy of your time
• 1:21:38
  Speaker 3: and attention. Right I create, I listed my personal all
• 1:21:42
  Speaker 3: star team and a few names off the top of
• 1:21:44
  Speaker 3: my head. Jason Zwig of The Wall Street Journal edited
• 1:21:49
  Speaker 3: Danny Konneman's book Thinking Fast and Slow just has great
• 1:21:53
  Speaker 3: insights into how people behave around money and the bad
• 1:21:56
  Speaker 3: things they do and what we can learn from them.
• 1:21:59
  Speaker 3: Sam Row writes about market structure and super insight insightful.
• 1:22:04
  Speaker 3: My friend Jonathan Miller, my go to guy about real estate.
• 1:22:08
  Speaker 3: Everything he writes about real estate is data driven, is
• 1:22:13
  Speaker 3: based in reality, and he's been studying real estate for forty years,
• 1:22:18
  Speaker 3: and on and on. I go through through the list
• 1:22:20
  Speaker 3: of people who I find have some things in common.
• 1:22:26
  Speaker 3: First of all, they've all they're all little seasons. They've
• 1:22:31
  Speaker 3: been through cycles before, they know how the movie ends.
• 1:22:34
  Speaker 3: They know you know this too, shell pass, So that's helpful.
• 1:22:38
  Speaker 3: They have a defendable process. They're not just throwing darts.
• 1:22:42
  Speaker 3: They're not just getting lucky. They think about markets from
• 1:22:46
  Speaker 3: a broad perspective, and their insights and way of analyzing
• 1:22:51
  Speaker 3: things and sharing that information is incredibly useful. But like
• 1:22:56
  Speaker 3: Sturgeon's law, you know, ninety percent of the stuff coming
• 1:22:59
  Speaker 3: out really isn't isn't useful. So the people on my
• 1:23:05
  Speaker 3: All Star list, and you know I had a limited
• 1:23:09
  Speaker 3: to ten. Who's writing about music, it's Bob left Sets
• 1:23:14
  Speaker 3: and Ted Goya. Those are the people that I can
• 1:23:18
  Speaker 3: rely on that I'm getting somebody who knows their industry,
• 1:23:22
  Speaker 3: who knows the ups and downs, who's seen all the
• 1:23:25
  Speaker 3: wartz in it, and basically can give you some insight
• 1:23:30
  Speaker 3: into that, you know the fact that something's on TV
• 1:23:36
  Speaker 3: on CNBC. I'm a big fan of Bob Pasani and
• 1:23:40
  Speaker 3: Carl Kantonia. They're rational, they make sense. They could take,
• 1:23:45
  Speaker 3: you know, what could be very emotional challenging things and
• 1:23:50
  Speaker 3: put it into context. My partner Josh Brown is on
• 1:23:52
  Speaker 3: CNBC two or three times a week, and I could
• 1:23:56
  Speaker 3: always rely on him to be a voice of reason
• 1:23:59
  Speaker 3: when everybody's running around with their hair on fire. But
• 1:24:02
  Speaker 3: there's a bunch of people I could give you more
• 1:24:05
  Speaker 3: people from CNBC. Santoli used to be over at Barons.
• 1:24:10
  Speaker 3: He's at CNBC. Very very Mike Santoli, very rational guy.
• 1:24:16
  Speaker 3: I like the way he thinks about the world. It's historical,
• 1:24:20
  Speaker 3: it's analytical, and you know, you could go through sector
• 1:24:24
  Speaker 3: bi sector. Dana Telsey has been covering retail for forever.
• 1:24:29
  Speaker 3: Nobody understands the retail world better than her. So my
• 1:24:32
  Speaker 3: advice to people is not to just say, hey, it
• 1:24:35
  Speaker 3: all sucks, turn it off, because again, the world isn't
• 1:24:38
  Speaker 3: black and white, it's nuanced. You have to be a
• 1:24:41
  Speaker 3: little selective. You have to choose people who you know
• 1:24:45
  Speaker 3: have a good track record. It's not just dumb luck.
• 1:24:48
  Speaker 3: They're thoughtful, they're experienced, and they add value. There are
• 1:24:52
  Speaker 3: lots of things out there. I had to stop my
• 1:24:56
  Speaker 3: list at ten. I probably could have made it one hundred.
• 1:25:00
  Speaker 3: There are so many great substacks out there. There's so
• 1:25:02
  Speaker 3: many great sources. You'll as you go through the book,
• 1:25:07
  Speaker 3: you'll find I'm coding everybody from Derek Thompson to trunk
• 1:25:13
  Speaker 3: fan to on and on people with an expertise in
• 1:25:17
  Speaker 3: a specific area that I've been watching them for years
• 1:25:21
  Speaker 3: and realizing, oh, these guys are or girls are onto something.
• 1:25:27
  Speaker 3: They're consistently more right than wrong. So I don't when
• 1:25:31
  Speaker 3: it comes to you know, I don't want to just
• 1:25:34
  Speaker 3: say turn off the TV, never open a newspaper, magazine again,
• 1:25:38
  Speaker 3: just read nonfiction and books and novels. I think that's overstating,
• 1:25:43
  Speaker 3: and I think you just have to be a little skeptical,
• 1:25:49
  Speaker 3: be critical, and when you do decide to read someone
• 1:25:54
  Speaker 3: on a regular basis and trust what they're saying, make
• 1:25:58
  Speaker 3: sure they're worthy of your trust. I don't want to say, hey,
• 1:26:01
  Speaker 3: everybody's full of shit and everybody's wrong, because I know
• 1:26:04
  Speaker 3: that's not true, but enough people are full of shit
• 1:26:07
  Speaker 3: and so many people have been wrong. You have to
• 1:26:10
  Speaker 3: really be a little selective into who you're following, who
• 1:26:14
  Speaker 3: you're taking advice from, and TikTok and Instagram Are you
• 1:26:20
  Speaker 3: are you kidding me? Every It's not just the irs.
• 1:26:24
  Speaker 3: I just got something from a friend. One of the
• 1:26:29
  Speaker 3: journals of psychology has said had a whole article that
• 1:26:34
  Speaker 3: all of this advice on how to manage ADHD on
• 1:26:38
  Speaker 3: Twitter and TikTok. It's mostly wrong. It's not quite vaccine denial,
• 1:26:45
  Speaker 3: but it's mostly wrong. And if you listen to this,
• 1:26:48
  Speaker 3: you will it will not serve you well. And so
• 1:26:50
  Speaker 3: this comes up on a regular basis. I talk about
• 1:26:54
  Speaker 3: the Dunning Kruger effect in the book, which is our
• 1:26:58
  Speaker 3: ability to evovaluate our own skill set, and we end up,
• 1:27:04
  Speaker 3: as it turns out, that is a discrete skill, separate
• 1:27:09
  Speaker 3: from the underlying skill. And so we have a tendency
• 1:27:12
  Speaker 3: to think we have an ability to do something when
• 1:27:16
  Speaker 3: often we don't. And then the next adjacent step to
• 1:27:20
  Speaker 3: that is something called epistemic trespass when somebody is an
• 1:27:25
  Speaker 3: expert in this area and they're like, what the hell,
• 1:27:28
  Speaker 3: I'm an expert in this, I'm going to try my
• 1:27:30
  Speaker 3: expertise in that field adjacent field When all right, you
• 1:27:34
  Speaker 3: spent thirty years researching, writing, studying about this. You have
• 1:27:37
  Speaker 3: a point of view, and you have a good track record.
• 1:27:39
  Speaker 3: That's great in field A field B is wholly unrelated.
• 1:27:43
  Speaker 3: Why would you imagine you have an expertise in that?
• 1:27:46
  Speaker 3: But that's how us humans are. We step over the line,
• 1:27:50
  Speaker 3: and you know, I give a lot of examples of
• 1:27:53
  Speaker 3: people who are great real estate investors but terrible economic forecasters,
• 1:27:58
  Speaker 3: and so epistemic trespasses is just another one of those examples.
• 1:28:02
  Speaker 3: So if you find people who know what their skills are,
• 1:28:06
  Speaker 3: stay within that, like the tennis, operate within their own
• 1:28:10
  Speaker 3: abilities by all means, subscribe to their substracts, watch them
• 1:28:14
  Speaker 3: on TV. But you have to go through that, you know,
• 1:28:18
  Speaker 3: information hygiene process, that filtering process to get to the
• 1:28:23
  Speaker 3: good stuff, because there's so much let's just call it
• 1:28:26
  Speaker 3: noise that's distraction and doesn't help you get to where
• 1:28:30
  Speaker 3: you have to go.
• 1:28:31
  Speaker 2: Okay, let's go to the other end. So what I've
• 1:28:34
  Speaker 2: learned is don't invest in pull my money out or
• 1:28:38
  Speaker 2: put my money down on a whim. Put my money
• 1:28:42
  Speaker 2: in index funds forgetting the super wealthy, forgetting people who
• 1:28:46
  Speaker 2: have complicated income in the States and other things. Is
• 1:28:51
  Speaker 2: that generally the advice and how does one do it?
• 1:28:55
  Speaker 3: So that's the advice from Larren Buffett. He said, Hey,
• 1:28:58
  Speaker 3: if you're not in, if you didn't participate in Berkshire
• 1:29:02
  Speaker 3: Hathaway way back when, just buy the broad index. So
• 1:29:06
  Speaker 3: you can do this with the S and P five hundred.
• 1:29:09
  Speaker 3: You could do it with a broader index like the
• 1:29:12
  Speaker 3: Vanguard Total Market, which is a little more diverse and
• 1:29:15
  Speaker 3: a little less volatile, and that should be the core
• 1:29:19
  Speaker 3: of your investment portfolio. I don't care if it's fifty
• 1:29:23
  Speaker 3: sixty percent. Having some broad index, so you're at least
• 1:29:27
  Speaker 3: going to get what the market gives you. That's your
• 1:29:31
  Speaker 3: starting point if you are compelled, if this is the
• 1:29:34
  Speaker 3: sort of thing that you really want to do, and
• 1:29:37
  Speaker 3: you want to decorate the tree, says two Jews talking
• 1:29:41
  Speaker 3: about finance, Well, the index is the tree, The ornaments,
• 1:29:46
  Speaker 3: the lights, the garland, those were all the little seasonings.
• 1:29:49
  Speaker 3: If you want to buy a tech fund, or if
• 1:29:52
  Speaker 3: you want to add a shareholder yield fund or something
• 1:29:57
  Speaker 3: like that, sure you could put whatever stink you on
• 1:30:00
  Speaker 3: it knock yourself out, as long as you're starting from
• 1:30:03
  Speaker 3: a core point of I'm not market timing, I'm not stockpicking.
• 1:30:08
  Speaker 3: I'm just gonna buy the whole market and let it
• 1:30:10
  Speaker 3: do its thing. History has told us that's the best
• 1:30:14
  Speaker 3: way to accumulate wealth. When we look at the data,
• 1:30:18
  Speaker 3: and there's there are a number of The SPIVA, which
• 1:30:22
  Speaker 3: is the SNP Investor Analysis. Each year they do an
• 1:30:26
  Speaker 3: annual report and they tell you how many mutual fund
• 1:30:29
  Speaker 3: managers beat the index, beat their benchmark, and in any
• 1:30:34
  Speaker 3: given year about half of them, a little more than
• 1:30:38
  Speaker 3: half of them fail to beat the benchmark. So you're
• 1:30:40
  Speaker 3: not even a fifty percent in year one, you go
• 1:30:44
  Speaker 3: five years out net A fees, it's eighty three percent
• 1:30:48
  Speaker 3: of them fail to beat the Plane Jain Boring index.
• 1:30:52
  Speaker 3: You go ten years and you're in ninetieth percentile, and
• 1:30:57
  Speaker 3: by the time you're twenty years out, it's essentially no,
• 1:31:00
  Speaker 3: oh buddy. A handful of people, the Warren Buffets, the
• 1:31:04
  Speaker 3: Peter Lynches of the world their household names because there's
• 1:31:08
  Speaker 3: so few of them. But for those couple of guys,
• 1:31:12
  Speaker 3: and even Warren Buffett will tell you the bulk of
• 1:31:14
  Speaker 3: his outperformance was in the early part of his career.
• 1:31:18
  Speaker 3: The latter part, you probably would have been better off
• 1:31:21
  Speaker 3: in an index than Berkshire Hathaway. That's just the academic research,
• 1:31:27
  Speaker 3: that's just the math. Start out, and you know, our
• 1:31:30
  Speaker 3: whole business is so asked backwards. I started attracting capital
• 1:31:36
  Speaker 3: from people because I would say, here's how you should invest.
• 1:31:39
  Speaker 3: You could do it yourself. Buy a broad index. You
• 1:31:42
  Speaker 3: want to diversify a little bit. Okay, you can own
• 1:31:44
  Speaker 3: a little overseas assets, you can own some momentum, you
• 1:31:47
  Speaker 3: can own shareholder yield India and Japan, look interest, whatever
• 1:31:52
  Speaker 3: you wanna tag onto that. Knock yourself out, but start
• 1:31:56
  Speaker 3: with this. Rebalance it every three years to whatever you're
• 1:31:59
  Speaker 3: starting numbers are supposed to be. You know, if it's
• 1:32:02
  Speaker 3: supposed to be sixty percent, it's run away, and it's
• 1:32:05
  Speaker 3: now eighty percent of your portfolio. Right, cut a little back,
• 1:32:08
  Speaker 3: put some of that into other the other holdings you have,
• 1:32:11
  Speaker 3: and that's it. You're good for the next thirty forty years.
• 1:32:16
  Speaker 3: Our whole business really grew from that because enough people said, yeah,
• 1:32:21
  Speaker 3: that makes sense, but I don't trust myself, and I
• 1:32:22
  Speaker 3: don't have the time or the interest. You do it,
• 1:32:26
  Speaker 3: and so we started managing money for people kind of
• 1:32:30
  Speaker 3: that way. The core is a broad index. Some of
• 1:32:32
  Speaker 3: it's US, some of its overseas. We add certain flavors
• 1:32:38
  Speaker 3: to it. Here's a little here's a little momentum, here's
• 1:32:41
  Speaker 3: a little emerging market small cap value. Ultimately, ten twenty
• 1:32:47
  Speaker 3: years down the road, you kind of end up in
• 1:32:49
  Speaker 3: the same place. Anyway, we want to reduce a little
• 1:32:52
  Speaker 3: volatility for our clients. We want to get to the
• 1:32:54
  Speaker 3: same place, but without the crazy swings like we've seen
• 1:32:58
  Speaker 3: the past few weeks. But it almost doesn't matter what
• 1:33:01
  Speaker 3: the portfolio is. What matters is your behavior, because we
• 1:33:07
  Speaker 3: see time and time again, if you just whatever that
• 1:33:10
  Speaker 3: portfolio is, if you just let it do its thing
• 1:33:13
  Speaker 3: for a few decades, it'll compound and add up to
• 1:33:16
  Speaker 3: a shock shockingly large amount of money over the decades. Instead,
• 1:33:22
  Speaker 3: we try and get in the way. I don't like
• 1:33:25
  Speaker 3: this president, I don't like the way this market looks.
• 1:33:27
  Speaker 3: I don't like I mean, I use the examples of
• 1:33:29
  Speaker 3: Bush and Obama and Biden and Trump, and you know,
• 1:33:34
  Speaker 3: there are some studies that have shown when a president
• 1:33:39
  Speaker 3: of one party gets elected and you're looking at zip
• 1:33:43
  Speaker 3: codes by how that zip code voted, if they didn't
• 1:33:46
  Speaker 3: vote for that president, they end up selling a lot
• 1:33:49
  Speaker 3: of equities by zip code and missing the ongoing rally.
• 1:33:55
  Speaker 3: And it happened with Bush, it happened with Obama, it
• 1:33:59
  Speaker 3: happened with Trump one, it happens with Biden, and it
• 1:34:04
  Speaker 3: happened again with Trump two. That the fact that you
• 1:34:08
  Speaker 3: don't like this guy's politics leads you to sell stocks.
• 1:34:14
  Speaker 3: And you know, you go back to I think it's
• 1:34:16
  Speaker 3: nineteen fifty, right. If you invest a dollar when Democrats
• 1:34:21
  Speaker 3: were president, it turns into something like fifty two dollars.
• 1:34:25
  Speaker 3: If you only invested when Republicans were president, it turns
• 1:34:28
  Speaker 3: out to be forty eight dollars, And if you invested
• 1:34:31
  Speaker 3: the whole time, it's two thousand dollars. So markets don't
• 1:34:34
  Speaker 3: really give a crap about presidents. Now, if you're retiring
• 1:34:37
  Speaker 3: next year and you're unhappy about all this volatility, Monday,
• 1:34:42
  Speaker 3: there are tariffs Tuesday, they're off Wednesday. This we're recording
• 1:34:45
  Speaker 3: on a day where a market scream hire because over
• 1:34:49
  Speaker 3: the weekend Trump said, you know, maybe we'll reduce some
• 1:34:53
  Speaker 3: of the tariffs and we'll make it more focused and
• 1:34:55
  Speaker 3: it won't be as crazy, and like it was an
• 1:34:57
  Speaker 3: offhand remark, and the next thing, you know, the markets
• 1:35:00
  Speaker 3: to the races. So if you sold last week, you
• 1:35:03
  Speaker 3: missed all of this. It's impossible to time his sort
• 1:35:09
  Speaker 3: of crazy, erratic comments. And so I understand if you
• 1:35:14
  Speaker 3: need the money in the next year or two, this
• 1:35:16
  Speaker 3: is really disconcerting. But if you don't need the money
• 1:35:19
  Speaker 3: for ten years, you have to look past the other
• 1:35:22
  Speaker 3: side of this. Presidency, just as you had to look
• 1:35:26
  Speaker 3: past the Biden presidency where stocks did really well, and
• 1:35:30
  Speaker 3: you had to look past the first Trump presidency where
• 1:35:33
  Speaker 3: stocks actually did even better despite the pandemic and everything.
• 1:35:37
  Speaker 3: Trump had one of the best stop market returns from
• 1:35:41
  Speaker 3: when he took office from twenty seventeen until when he
• 1:35:45
  Speaker 3: left in a cloud from January sixth. It's not whose president.
• 1:35:50
  Speaker 3: The presidents get way too much credit when the markets
• 1:35:53
  Speaker 3: are doing well, and they get way too much blame
• 1:35:56
  Speaker 3: when the economy and the markets are doing poorly. It's
• 1:35:59
  Speaker 3: not just who's in the White House. It's a whole
• 1:36:03
  Speaker 3: lot of moving parts. Politics is really just a teeny
• 1:36:07
  Speaker 3: part of it.
• 1:36:15
  Speaker 2: Okay, leaving finance out. Sure, there's a thought that, well,
• 1:36:19
  Speaker 2: you know, the Democrats is going to be election in
• 1:36:21
  Speaker 2: twenty twenty six, going to be election in twenty twenty eight,
• 1:36:25
  Speaker 2: and you know, we'll see what happens, will roll the dice.
• 1:36:28
  Speaker 2: Then there's a contrary thought that, well, no, we're moving
• 1:36:33
  Speaker 2: into autocracy. This is a whole new error. W we're
• 1:36:35
  Speaker 2: in a constitutional crisis. Two things, are you saying that
• 1:36:40
  Speaker 2: the market exists outside of all of this, or you
• 1:36:44
  Speaker 2: choose not to pay attention, or is it possible that
• 1:36:49
  Speaker 2: we're entering a new era? You know.
• 1:36:54
  Speaker 3: A little bit of all the above, and let me
• 1:36:56
  Speaker 3: unpack each of those. So first I tell people tune
• 1:37:01
  Speaker 3: out the noise. Right. I wrote a blog post a
• 1:37:04
  Speaker 3: couple of weeks ago, Hey, listen, if you don't need
• 1:37:07
  Speaker 3: your money for the next four years, you have to
• 1:37:08
  Speaker 3: look through the Trump presidency to the other side. And
• 1:37:13
  Speaker 3: regardless of what you think of him and the markets,
• 1:37:18
  Speaker 3: you can't make investments based on what he's doing. You
• 1:37:22
  Speaker 3: just can't. It's unpredictable, it's unforeseeable, and you can't just
• 1:37:26
  Speaker 3: assume that whatever he does goes to hell. Now the
• 1:37:30
  Speaker 3: narrative has changed in a couple of ways, because initially
• 1:37:33
  Speaker 3: it was hey, tax cuts, Hey deregulation, business friendly environment.
• 1:37:38
  Speaker 3: Markets ran up in anticipation of that, right up until
• 1:37:43
  Speaker 3: February twenty twenty five, where oh, this guy's serious about
• 1:37:47
  Speaker 3: these twenty five percent tariffs? What the hell? Then they
• 1:37:51
  Speaker 3: were on again, off again, on again, off again, And
• 1:37:54
  Speaker 3: the sentiment today seems to be, all right, this is
• 1:37:57
  Speaker 3: all you know what, China hasn't treated us fairly. Maybe
• 1:37:59
  Speaker 3: this should be more tariffs, but we're gonna definitely take
• 1:38:03
  Speaker 3: it down a couple of notches. So those two things
• 1:38:06
  Speaker 3: are right. I am not comfortable with a lot of
• 1:38:10
  Speaker 3: the autocratic things we're reading about. And you know, if
• 1:38:14
  Speaker 3: you read jv. Last and the Bulwark, he's pretty negative
• 1:38:21
  Speaker 3: about the outcome of all this. The debate is will
• 1:38:26
  Speaker 3: or won't Trump follow what court's rule? Is the rule
• 1:38:31
  Speaker 3: of loss still in effect. After January sixth, I wrote
• 1:38:35
  Speaker 3: up an analysis and kind of came to the conclusion
• 1:38:38
  Speaker 3: that how is it possible that the US is four
• 1:38:41
  Speaker 3: percent of the world's population, Right, we're about twenty percent
• 1:38:46
  Speaker 3: of global GDP, but we're like fifty something percent of
• 1:38:51
  Speaker 3: the total market cap of all the publicly traded stocks
• 1:38:54
  Speaker 3: in the world. And the answer was three things, so
• 1:38:59
  Speaker 3: sanctity of personal property, sanctity of contracts, and rule of law.
• 1:39:06
  Speaker 3: And I kind of spitballed. That's worth about twenty five
• 1:39:09
  Speaker 3: trillion dollars, right, And so that was the problem with
• 1:39:14
  Speaker 3: January sixth was there's a whole political and partisan issue.
• 1:39:19
  Speaker 3: There's a whole debate about the pardons. I don't really
• 1:39:23
  Speaker 3: think there should be any debate there. There's a whole
• 1:39:26
  Speaker 3: lot of stuff that's going on that a lot of
• 1:39:28
  Speaker 3: thoughtful people are really unhappy with, regardless of party affiliation.
• 1:39:35
  Speaker 3: But the real question is, hey, is there is there
• 1:39:39
  Speaker 3: still going to be a rule of law? And some
• 1:39:42
  Speaker 3: people are very negative and think that a lot of
• 1:39:45
  Speaker 3: these things. We've seen some deportations and some issues. You
• 1:39:50
  Speaker 3: had John Roberts, Chief Justice of the Supreme Court, who
• 1:39:54
  Speaker 3: had an embarrassingly laughable, you know, dread Scott type of
• 1:39:59
  Speaker 3: a opinion about the personal exemption from criminal liability for presidents,
• 1:40:10
  Speaker 3: even if they're not quite doing their jobs, if they're
• 1:40:13
  Speaker 3: sort of operating outside of that, Like law students centuries
• 1:40:18
  Speaker 3: from now are gonna mock every jackass justice that signed that.
• 1:40:22
  Speaker 3: Their whatever reputation they had flushed down the toilet. But
• 1:40:28
  Speaker 3: now you have John Roberts coming out and rebooking, rebuking
• 1:40:33
  Speaker 3: Trump for implying that courts don't apply to him, judges
• 1:40:38
  Speaker 3: don't apply to him. I am not thrilled with how
• 1:40:42
  Speaker 3: many you know, the Camelot and the Kennedy's were the
• 1:40:45
  Speaker 3: best and the brightest. I'm not all that keen about uh,
• 1:40:50
  Speaker 3: the worst and the dumbest that he surrounded himself with.
• 1:40:54
  Speaker 3: And I can't disagree with friends who say he's doing
• 1:40:58
  Speaker 3: permanent damage to a man in society, to the government.
• 1:41:02
  Speaker 3: Michael Loui we talked about Michael Lewis's new book, Who
• 1:41:05
  Speaker 3: Is Government. The stories in the book about what functions
• 1:41:10
  Speaker 3: governments perform, the US government performs, and how crucial it
• 1:41:14
  Speaker 3: is for the successful functioning of the US society is
• 1:41:20
  Speaker 3: so perfectly timed. He just has a knack for skating
• 1:41:24
  Speaker 3: to where the puck is. And it's really disheartening to
• 1:41:28
  Speaker 3: see a lot of these things that what this is
• 1:41:32
  Speaker 3: really a mass rapid privatization of the public commons. Here
• 1:41:37
  Speaker 3: we are back to the tragedy of the commons. Somebody
• 1:41:40
  Speaker 3: has figured out how to capture a lot of the
• 1:41:43
  Speaker 3: value of the US government and bring for the private site.
• 1:41:47
  Speaker 3: So that's the negative, that's the downside risk the positive,
• 1:41:51
  Speaker 3: and it's always hard to be positive. You go back
• 1:41:54
  Speaker 3: through history and you had the Red Scare and McCarthy,
• 1:41:57
  Speaker 3: and you had, you know, the Japanese internment during World
• 1:42:01
  Speaker 3: War Two, and then you had prohibition, and you had
• 1:42:04
  Speaker 3: you know, to say nothing of the Civil War, and
• 1:42:06
  Speaker 3: then all of the parts of the South that you know,
• 1:42:12
  Speaker 3: never quite got over the Civil War and put a
• 1:42:16
  Speaker 3: lot of laws into place that were just overtly unfair
• 1:42:21
  Speaker 3: and overtly racist. And so we've come through a whole
• 1:42:26
  Speaker 3: lot of problems in the United States, and it always
• 1:42:30
  Speaker 3: feels terrible, it always looks terrible. I want to be
• 1:42:33
  Speaker 3: a glass half full and not a glass half empty
• 1:42:35
  Speaker 3: sort of guy and say, on the one hand, the
• 1:42:40
  Speaker 3: United States has survived all these things. And then the
• 1:42:43
  Speaker 3: second part of that is, and there's so much money
• 1:42:46
  Speaker 3: at risk that I can't imagine that, you know, all right,
• 1:42:51
  Speaker 3: a couple, a couple of the big law firms have
• 1:42:53
  Speaker 3: knuckled under, and that's always disappointing to see. Paul Weiss
• 1:42:57
  Speaker 3: in particular, is getting slagged these days for really whimping out.
• 1:43:03
  Speaker 3: But they are part of the judicial system. They're part
• 1:43:07
  Speaker 3: of the legal system, I think, and I'm hopeful that
• 1:43:12
  Speaker 3: the financial system. You know, you saw what happened. He
• 1:43:17
  Speaker 3: was acting erradically and saying wacky things and doing crazy
• 1:43:21
  Speaker 3: shit with tariffs, and the market said, hold my beer,
• 1:43:25
  Speaker 3: we don't want anything to do with this, and it
• 1:43:27
  Speaker 3: started selling off. I don't think in my entire thirty
• 1:43:30
  Speaker 3: years in finance, I have heard so much angst and
• 1:43:35
  Speaker 3: anguish and complaints about a ten percent drop, you know,
• 1:43:40
  Speaker 3: ten percent happens twice every three years, about once every
• 1:43:43
  Speaker 3: eighteen months. It's not clockwork, but you look over a century,
• 1:43:47
  Speaker 3: that's about the average. And so I think the takeaway
• 1:43:52
  Speaker 3: is and I think, what the reason we had those
• 1:43:55
  Speaker 3: constructive comments from him? He tweeted, once the Dow is
• 1:44:00
  Speaker 3: down a thousand points in two days. Any president that
• 1:44:04
  Speaker 3: has that should be impeached. Well, bad news. Don the
• 1:44:08
  Speaker 3: Dow has been down a lot more than that on
• 1:44:11
  Speaker 3: a short number of days. Your own standard is, hey,
• 1:44:15
  Speaker 3: you're screwing up. If the market is your measure, and
• 1:44:18
  Speaker 3: I know he looks at the market, it's pretty well understood.
• 1:44:22
  Speaker 3: So I think that's a little bit of a check
• 1:44:25
  Speaker 3: on his worst impulses, because if he does stuff and
• 1:44:29
  Speaker 3: the market says, oh no, this won't stand that scene.
• 1:44:34
  Speaker 3: I don't know if the courts are going to be
• 1:44:35
  Speaker 3: a check on him. Certainly, unlike he's the president forty seven.
• 1:44:41
  Speaker 3: When he was president forty five, there were pe adults
• 1:44:45
  Speaker 3: around him that kind of restrained his worst impulses. He
• 1:44:49
  Speaker 3: does not have that now. Now he's surrounded by people
• 1:44:52
  Speaker 3: who were of the same ILKs and gold, to say
• 1:44:56
  Speaker 3: nothing of the unelected Elmo doing his thing. So that's
• 1:45:03
  Speaker 3: a real risk. It's a genuine risk. The follow up
• 1:45:07
  Speaker 3: post to Lose the Noise was seven potential errors, and
• 1:45:12
  Speaker 3: I named recession, market crash, dollars, geopolitical chaos. I went
• 1:45:19
  Speaker 3: through like seven things and said, hey, four months ago,
• 1:45:22
  Speaker 3: these were really low. Now they're still kind of low,
• 1:45:27
  Speaker 3: but they're somewhat higher than where they were before January twentieth,
• 1:45:32
  Speaker 3: and so I don't see a recession imminent. I don't
• 1:45:35
  Speaker 3: see a market crash imminent. I don't see a collapse
• 1:45:38
  Speaker 3: of the US dollar happening anytime soon. But all of
• 1:45:43
  Speaker 3: those things are now higher probabilities of occurring than they
• 1:45:48
  Speaker 3: were before the noise. I don't you know, people think
• 1:45:52
  Speaker 3: they know my politics, They really don't. My favorite thing
• 1:45:56
  Speaker 3: about Biden was I didn't have to hear from him
• 1:45:59
  Speaker 3: every day, and the constant noise out of this White
• 1:46:05
  Speaker 3: House will see if it kind of fades. So if
• 1:46:10
  Speaker 3: you remember in twenty sixteen, when Trump was elected but
• 1:46:15
  Speaker 3: not inaugurated until January twenty of twenty seventeen, he was
• 1:46:19
  Speaker 3: tweeting at people, he was calling them names. I love
• 1:46:23
  Speaker 3: Tim Apple, Tim Cook of Apple was Tim Apple, And
• 1:46:27
  Speaker 3: the first couple of months of him doing this. Every
• 1:46:29
  Speaker 3: time he would single out a company, the stock would
• 1:46:33
  Speaker 3: get shellacked. For a couple of days, it would get whacked,
• 1:46:36
  Speaker 3: and then people kind of figured out, oh, this is
• 1:46:39
  Speaker 3: just paper tiger stuff. He's not going off after any
• 1:46:42
  Speaker 3: of these companies, unlike China where they're unhappy with a
• 1:46:46
  Speaker 3: couple of companies and they disappear the CEOs for a
• 1:46:50
  Speaker 3: few years. We still have contract rights, property rights, rule
• 1:46:54
  Speaker 3: of law, and it's worth tens of trillions of dollars.
• 1:46:57
  Speaker 3: So he hasn't been doing as much of that nonsense
• 1:47:01
  Speaker 3: as he did last time. I think he's been focused
• 1:47:05
  Speaker 3: on a different agenda. So I don't again it's nuanced.
• 1:47:09
  Speaker 3: I don't want to just say tune it out, because
• 1:47:11
  Speaker 3: you really can't, but you have to put it into context. Then,
• 1:47:15
  Speaker 3: one of the things I wrote in Tune out the
• 1:47:18
  Speaker 3: Noise was, Hey, it's been three weeks of tariff stuff.
• 1:47:22
  Speaker 3: Tariff stuff. Tariffs were on, tarafts were off, tariffs with
• 1:47:26
  Speaker 3: Canada and Mexico, and then Canada and Mexico agreed to
• 1:47:30
  Speaker 3: do shit they were already doing. Then the tarafts were off,
• 1:47:33
  Speaker 3: Then the taraffs came back, and then this taffs for
• 1:47:35
  Speaker 3: Europe and taraffs for China. China is a much savvy,
• 1:47:42
  Speaker 3: savvyer geopolitical player than I think a lot of people
• 1:47:46
  Speaker 3: give them credit for. And so China turned around and said,
• 1:47:51
  Speaker 3: what are the reddest of the red districts? Great, we're
• 1:47:55
  Speaker 3: not buying your soybeans. You're gonna put tariffs on us.
• 1:47:58
  Speaker 3: We're not buying your soy beans, We're not buying your cars,
• 1:48:00
  Speaker 3: we're not buying your liths. And they're going to say,
• 1:48:04
  Speaker 3: you want to tarif us, We're going to tarify you back.
• 1:48:06
  Speaker 3: Same thing kind of with Canada. What are you talking
• 1:48:11
  Speaker 3: about Canada? Like when you build a car in North America.
• 1:48:17
  Speaker 3: By the way, forty five negotiated the More North American
• 1:48:22
  Speaker 3: Trade Agreement, which forty seven criticized. It's like, dude, that
• 1:48:26
  Speaker 3: was yours. What do you mean? So parts are made
• 1:48:29
  Speaker 3: in some places, they're shipped to other places, they're assembled,
• 1:48:32
  Speaker 3: they get chipped into other places. The tariffs that were
• 1:48:37
  Speaker 3: proposed would have raised the cost of US cars. I
• 1:48:40
  Speaker 3: think it was something like twelve grand, and Japanese cars
• 1:48:44
  Speaker 3: something like eight grand. Even the Japanese cars made in
• 1:48:48
  Speaker 3: all the plants. There's Honda plants here there's Tiota plants here,
• 1:48:52
  Speaker 3: just as there's Mercedes and BMW plants. They didn't go
• 1:48:56
  Speaker 3: to the Midwest. They went to the union free places
• 1:49:00
  Speaker 3: like Alabama, and you look at all these different places
• 1:49:02
  Speaker 3: where these cars are made. I'm this is wishful thinking
• 1:49:08
  Speaker 3: on my part. I don't know how this plays out.
• 1:49:11
  Speaker 3: I don't imagine it goes on forever. I don't even
• 1:49:14
  Speaker 3: think it goes on for four years. I think two.
• 1:49:18
  Speaker 3: I'm hopeful that two years from now, you know, Obama
• 1:49:22
  Speaker 3: got elected, big swing to the left. What happens during
• 1:49:25
  Speaker 3: the midterm elections, swings back and now you have to
• 1:49:29
  Speaker 3: reach a course the isle and negotiate the way every
• 1:49:32
  Speaker 3: president is done for for forever. Hopefully we see a
• 1:49:37
  Speaker 3: little more of that, a little more negotiation. A lot
• 1:49:41
  Speaker 3: of Republican congressmen have been afraid of getting primaried from
• 1:49:46
  Speaker 3: the right, and what we've been seeing in these deep
• 1:49:49
  Speaker 3: red states. And this isn't Antifa showing up, this isn't
• 1:49:53
  Speaker 3: Democrats showing up. These are Republicans showing up and booing
• 1:49:56
  Speaker 3: their congressmen. I think they should start to get worried
• 1:50:00
  Speaker 3: about being primaried from the middle right. They're not going
• 1:50:04
  Speaker 3: to be primaried from the left and the far right.
• 1:50:07
  Speaker 3: People are unhappy about Wait, my social security is getting cut.
• 1:50:11
  Speaker 3: I have to call the Social Security office. You fired
• 1:50:14
  Speaker 3: all the people to answer the phones. Like. It's kind
• 1:50:17
  Speaker 3: of fascinating watching all these groups suddenly realize, Hey, we
• 1:50:23
  Speaker 3: should have been a little more skeptical, we should have
• 1:50:25
  Speaker 3: been a little less gullible, we should have thought about
• 1:50:28
  Speaker 3: this a little more critically before we cast our vote,
• 1:50:32
  Speaker 3: because this isn't what we were voting for. And so
• 1:50:37
  Speaker 3: I don't care if it's politics or investing or what
• 1:50:40
  Speaker 3: have you. You really have to think about things intelligently,
• 1:50:45
  Speaker 3: not just make emotional decisions off the seat of your pants,
• 1:50:50
  Speaker 3: because you end up either with a portfolio you're unhappy
• 1:50:54
  Speaker 3: with or a Congress you're unhappy with. And you know
• 1:50:58
  Speaker 3: what is today, we're recording the towards the end of March,
• 1:51:02
  Speaker 3: so we're barely two months into this presidency. I can't
• 1:51:09
  Speaker 3: imagine the sort of mayhem is going to keep up forever.
• 1:51:12
  Speaker 3: I kinda I'm hoping that they settle into a groove,
• 1:51:17
  Speaker 3: the noise level comes down and some of the volatility
• 1:51:20
  Speaker 3: goes away. But truth be told, that's wishful thinking I
• 1:51:24
  Speaker 3: have no idea what's going to happen.
• 1:51:26
  Speaker 2: Okay, let's go back. Let's say I'm just an individual
• 1:51:32
  Speaker 2: and I buy an index. Fun is it set it
• 1:51:35
  Speaker 2: and forget it like wrong for Peal? Or do I
• 1:51:38
  Speaker 2: have to like anybody else three, four or five years ago,
• 1:51:42
  Speaker 2: I have to do my own rebalancing.
• 1:51:46
  Speaker 3: You know, it depends on how much money you're starting with,
• 1:51:48
  Speaker 3: and how what your age is. If you're a twenty
• 1:51:52
  Speaker 3: something thirty something and you're throwing a couple of hundred
• 1:51:55
  Speaker 3: bucks into the market every month, one hundred bucks every
• 1:51:58
  Speaker 3: other paycheck, whatver it is, you don't really have to
• 1:52:02
  Speaker 3: pay a lot of attention to it. You can let
• 1:52:04
  Speaker 3: it do its thing. If you're coming up on retirement,
• 1:52:08
  Speaker 3: well then you probably want to have a mix of
• 1:52:11
  Speaker 3: stocks and bonds. You probably don't want to be pure equity.
• 1:52:15
  Speaker 3: We used to talk about the sixty forty portfolio. You
• 1:52:19
  Speaker 3: run into a longevity problem with that because when social
• 1:52:23
  Speaker 3: security was set up, Hey, you'd retire at sixty five,
• 1:52:27
  Speaker 3: you'd play a few rounds of golf, you drop dead.
• 1:52:30
  Speaker 2: That's it.
• 1:52:30
  Speaker 3: You're done. If you make it today, the odds are
• 1:52:34
  Speaker 3: if you make it to sixty five today, and I
• 1:52:37
  Speaker 3: just saw with the Bill Burr Special, so drop dead
• 1:52:40
  Speaker 3: years just kind of is stuck in my head. But
• 1:52:43
  Speaker 3: if you make it to sixty five, the odds are
• 1:52:45
  Speaker 3: you're going to make it to eighty eighty five, maybe
• 1:52:47
  Speaker 3: even ninety, And so your money has to last that
• 1:52:51
  Speaker 3: much longer than it used to, and so sixty forty
• 1:52:56
  Speaker 3: might not be enough equity to cover that. So maybe
• 1:53:00
  Speaker 3: you stay with a seventy thirty portfolio until you're pick
• 1:53:04
  Speaker 3: a number seventy five, and then you can throttle back
• 1:53:08
  Speaker 3: the equity and have a little less volatility. But when
• 1:53:11
  Speaker 3: I say rebalance, what I mean is if your portfolio
• 1:53:14
  Speaker 3: is sixty percent Vanguard Total Market and five percent whatever
• 1:53:21
  Speaker 3: the next eight things, over the course of time, those
• 1:53:25
  Speaker 3: numbers will get out of whack, and every couple of
• 1:53:28
  Speaker 3: years you should. By the way, the software, I don't
• 1:53:31
  Speaker 3: care if you're with Fidelity or Schwab or Think or
• 1:53:34
  Speaker 3: Swim or what or Morgansteen, whatever e Trade, whatever online
• 1:53:40
  Speaker 3: broker you're using. There you push your button and it
• 1:53:43
  Speaker 3: automatically you can set your portfolio up to say here's
• 1:53:47
  Speaker 3: my portfolio. I want to rebalance this every three years,
• 1:53:51
  Speaker 3: or I want a notification when it gets more than
• 1:53:54
  Speaker 3: five percent away from my starting percentages. The technology has
• 1:53:58
  Speaker 3: made it really simple to do that. It's not eight
• 1:54:01
  Speaker 3: guys in green visors in the basement working around the clock,
• 1:54:06
  Speaker 3: it's the software just makes it fast and easy to do.
• 1:54:09
  Speaker 2: Okay, generally speaking, should I buy the dip? I'm talking
• 1:54:15
  Speaker 2: about significant when the market is off ten percent and
• 1:54:19
  Speaker 2: we've already established the average person doesn't know what to
• 1:54:22
  Speaker 2: buy and there was only a few stocks that will
• 1:54:25
  Speaker 2: pay them a long difference. But if you say, well,
• 1:54:26
  Speaker 2: you know, stock down ten percent, I should buy Microsoft
• 1:54:29
  Speaker 2: and Apple and a Nvidia.
• 1:54:32
  Speaker 3: So here's the way I look at the world. And
• 1:54:35
  Speaker 3: by the way, I love this question. Here's the way
• 1:54:37
  Speaker 3: I look at the world. You go back, you look
• 1:54:39
  Speaker 3: at the math. How often are we down ten percent? Hey,
• 1:54:42
  Speaker 3: twice every three years? Are you better off buying the dip?
• 1:54:45
  Speaker 3: Are you better off making regular contributions come hell or
• 1:54:49
  Speaker 3: high water every month dollar cost averaging? We've done studies
• 1:54:54
  Speaker 3: about this. If you have a windfall and a lump
• 1:54:57
  Speaker 3: sum of money, are you better off putting the money
• 1:54:59
  Speaker 3: all and it wants? You're better off spreading it out.
• 1:55:03
  Speaker 3: So there are a lot of variations on this But
• 1:55:07
  Speaker 3: the first thing is I have to ask the question,
• 1:55:10
  Speaker 3: do you really want to pay that close attention to
• 1:55:12
  Speaker 3: the market? Do you want to buy every ten, twenty percent,
• 1:55:16
  Speaker 3: thirty percent down? Is that something? Is that how you
• 1:55:18
  Speaker 3: want to spend your time. If the answer is yes,
• 1:55:21
  Speaker 3: I really like tracking the market in the economy, and
• 1:55:24
  Speaker 3: I could manage my own behavior and I feel comfortable
• 1:55:27
  Speaker 3: doing this, then here's what I would say to people. Hey,
• 1:55:30
  Speaker 3: you should be putting money into your four to oh
• 1:55:33
  Speaker 3: one K or your portfolio every month. The little money
• 1:55:36
  Speaker 3: comes out of your paycheck every month to do this.
• 1:55:40
  Speaker 3: Anytime the market's down ten percent, you want to double
• 1:55:44
  Speaker 3: up and throw a little more money in. Great, the
• 1:55:47
  Speaker 3: odds are that's going to work out in your favor.
• 1:55:50
  Speaker 3: Anytime the market is down twenty percent, guess what. Well,
• 1:55:54
  Speaker 3: Now that happens even less frequently we get down twenty percent,
• 1:55:59
  Speaker 3: I want to say, once every four or five years,
• 1:56:03
  Speaker 3: step up, increase that cash flow even more into the market.
• 1:56:07
  Speaker 3: What about down thirty percent? Hey, we were down thirty
• 1:56:10
  Speaker 3: four percent in twenty twenty. We were down much more
• 1:56:14
  Speaker 3: than thirty percent in eight oh nine, we were down
• 1:56:17
  Speaker 3: thirty percent in two thousand. You go back to nineteen
• 1:56:22
  Speaker 3: eighty seven, the crash was just twenty two percent. For
• 1:56:25
  Speaker 3: the whole year, you were from peak to trough, you
• 1:56:27
  Speaker 3: were down over thirty percent. Anytime markets in the US
• 1:56:31
  Speaker 3: go back to nineteen twenty nine, anytime you're down thirty percent,
• 1:56:35
  Speaker 3: back up the truck. Buy as much as you can afford.
• 1:56:39
  Speaker 3: Don't borrow money to do this. But if you have
• 1:56:41
  Speaker 3: spare cash, absolutely down thirty percent, buy the caveat is under.
• 1:56:48
  Speaker 3: For the vast, vast majority of people, it will be
• 1:56:51
  Speaker 3: the most difficult thing in their life to fight the
• 1:56:55
  Speaker 3: negative hair headlines, to fight the panic, and actually be
• 1:56:59
  Speaker 3: a contral and do the opposite of what most of
• 1:57:02
  Speaker 3: the crowd is doing, which is panic selling ps. Down
• 1:57:06
  Speaker 3: thirty percent doesn't mean you're not gonna end up down
• 1:57:09
  Speaker 3: forty or fifty percent. Uh eight oh nine, you were
• 1:57:13
  Speaker 3: down fifty six percent, seventy three, seventy four, down fifty
• 1:57:16
  Speaker 3: seven percent. It happens all too frequently, and you just
• 1:57:21
  Speaker 3: have to be prepared. Hey, I'm gonna throw a little
• 1:57:24
  Speaker 3: more money in down ten percent, a little more down
• 1:57:26
  Speaker 3: twenty into broad index funds. If you're picking a stock,
• 1:57:31
  Speaker 3: you got to make sure that down forty percent you're
• 1:57:34
  Speaker 3: not buying a Lehman Brothers or Silicon Valley Bank or
• 1:57:39
  Speaker 3: you know, an en Run. So when you buy a
• 1:57:41
  Speaker 3: broad index, you don't have to worry about it going
• 1:57:43
  Speaker 3: to zero. You have to worry about it doing poorly
• 1:57:46
  Speaker 3: for a decade or so. And the if buying down
• 1:57:52
  Speaker 3: thirty percent is hard. You look at market history and
• 1:57:55
  Speaker 3: you see nineteen sixty six to nineteen eighty two the
• 1:57:58
  Speaker 3: Dow kissed one thousand and ninety sixty six. It didn't
• 1:58:01
  Speaker 3: get over that on a permanent basis till nineteen eighty two,
• 1:58:05
  Speaker 3: and that's before we start talking about inflation. So sixteen
• 1:58:08
  Speaker 3: years your return is effectively zero. Then you adjusted for inflation,
• 1:58:13
  Speaker 3: your turn is down sixty or seventy percent, and inflation
• 1:58:17
  Speaker 3: adjusted returns. But if you diligently put money in the
• 1:58:20
  Speaker 3: market every month over those miserable sixteen years, well from
• 1:58:24
  Speaker 3: eighty two to two thousand the market was up one
• 1:58:27
  Speaker 3: thousand percent, and that's where you know you really kill it.
• 1:58:31
  Speaker 3: So the fact that markets go through these long periods
• 1:58:35
  Speaker 3: of time where and I don't believe we're in one
• 1:58:38
  Speaker 3: of those periods. Now, they'll go through a secular bear
• 1:58:40
  Speaker 3: market where it's flat to negative for ten fifteen years.
• 1:58:45
  Speaker 3: That's an opportunity to save. It's going to feel terrible,
• 1:58:48
  Speaker 3: but when you're on the other side of it, it
• 1:58:50
  Speaker 3: feels great. So long answer cut down to short a
• 1:58:55
  Speaker 3: little at ten twenty thirty percent. But even buying down
• 1:59:00
  Speaker 3: thirty percent is no guarantee that the market bottoms and
• 1:59:02
  Speaker 3: turns around. Every generation we see a down fifty percent,
• 1:59:08
  Speaker 3: and that's an amazing buying opportunity. Nineteen twenty nine being
• 1:59:13
  Speaker 3: the exception. Down fifty percent. Hey, you still had a
• 1:59:16
  Speaker 3: whole lot way to go before the market's recovered. But
• 1:59:21
  Speaker 3: it's a different world. It's a different market than it
• 1:59:24
  Speaker 3: was a century ago.
• 1:59:33
  Speaker 4: Okay, left Field, Steve Cone, the SEC cracks down, he
• 1:59:39
  Speaker 4: turns it into a family office. That period of time expires.
• 1:59:44
  Speaker 4: He says that he's getting these amazing returns. Is he
• 1:59:49
  Speaker 4: just brilliant lucky or is it fraud?
• 1:59:52
  Speaker 3: So I don't think it's fraud. He's just been doing
• 1:59:57
  Speaker 3: it too long with too many employees. You know, if
• 2:00:01
  Speaker 3: you read the book by Ryan Holiday about conspiracy about
• 2:00:08
  Speaker 3: the Hulk Holgan thing, two people knew and they couldn't
• 2:00:11
  Speaker 3: keep it a secret. So the thing that always cracks
• 2:00:14
  Speaker 3: me up about the moon landing was faked. They're like
• 2:00:18
  Speaker 3: forty thousand people working at NASA, how on Earth? And
• 2:00:22
  Speaker 3: ten thousand worked on the lunar Apollo missions. How you
• 2:00:29
  Speaker 3: going to get ten thousand people to keep a secret
• 2:00:31
  Speaker 3: if you can't get three people to keep a secret.
• 2:00:33
  Speaker 3: So I don't think there's any fraud there. It would
• 2:00:37
  Speaker 3: have come out number one, number two. He is one
• 2:00:42
  Speaker 3: of those Michael Jordan type gifted mutants that does things
• 2:00:48
  Speaker 3: that the average person simply cannot do. And you can
• 2:00:52
  Speaker 3: name a bunch of them, Renaissance technologies in Jim Simon's
• 2:00:55
  Speaker 3: d E Shaw, David Shaw, there are Jane Street Tray.
• 2:01:00
  Speaker 3: There are a handful of these companies that have just
• 2:01:05
  Speaker 3: shot the lights out for decades. They don't want your money.
• 2:01:10
  Speaker 3: You don't have enough money to give them. And if
• 2:01:13
  Speaker 3: you have a billion dollars maybe they'll talk to you.
• 2:01:16
  Speaker 3: But and even then they don't want to put you
• 2:01:19
  Speaker 3: in their flagship funds because they tend not to do
• 2:01:22
  Speaker 3: as well. They tend to do really well, and they
• 2:01:25
  Speaker 3: don't do as well when too much money flows in.
• 2:01:28
  Speaker 3: So yeah, if you have the opportunity to be in
• 2:01:32
  Speaker 3: a top ten funds by all means. Jim Chano said this,
• 2:01:37
  Speaker 3: and I'm pretty sure I put this in the book,
• 2:01:40
  Speaker 3: but I'm in quoting it for forever. He was a
• 2:01:42
  Speaker 3: short seller and a hedge fund manager. He's semi retired
• 2:01:46
  Speaker 3: and ran Kinnekosa Associates, and he said, when I started
• 2:01:50
  Speaker 3: forty years ago in the nineteen eighties, there were one
• 2:01:53
  Speaker 3: hundred hedge fund managers, and all of them produced alpha,
• 2:01:58
  Speaker 3: all of them beat the market, They produced amazing returns.
• 2:02:02
  Speaker 3: Now there's ten thousand hedge funds, it's kind of the
• 2:02:05
  Speaker 3: same one hundred guys still producing great returns. The problem,
• 2:02:11
  Speaker 3: as we've expanded to three trillion dollars in hedge funds
• 2:02:15
  Speaker 3: and I think it's eleven thousand funds now, is you
• 2:02:18
  Speaker 3: dilute the talent. It makes the market more efficient. The
• 2:02:22
  Speaker 3: way a lot of these funds make their money is
• 2:02:25
  Speaker 3: they identify an inefficiency and they sort of, you know,
• 2:02:31
  Speaker 3: mine that vein until it's exhausted. And as an inefficient market,
• 2:02:37
  Speaker 3: as the price is closed, the inefficiency goes away. So
• 2:02:40
  Speaker 3: Renaissance Technologies, Jim Simon's just passed away a few years ago,
• 2:02:45
  Speaker 3: was head of He was a codebreaker for the NSA
• 2:02:49
  Speaker 3: disagreed with them about Vietnam and left. He eventually, I
• 2:02:53
  Speaker 3: think he started an MIT, ended up at Sonny Stonybrook
• 2:02:56
  Speaker 3: where I went to college, eventually led the math department,
• 2:02:59
  Speaker 3: and then he launched Renaissance. And they have like they
• 2:03:04
  Speaker 3: don't hire people from Wall Street. They have hundreds and
• 2:03:07
  Speaker 3: hundreds of applied physics and coders and math whizzes, and
• 2:03:14
  Speaker 3: they're using computer technology long before most other firms were
• 2:03:20
  Speaker 3: to identify these little anomalies to capture whatever the gap
• 2:03:25
  Speaker 3: is and to close the trade out quickly. They supposedly
• 2:03:30
  Speaker 3: I think it was Greg Zuckerman's book, The Man Who
• 2:03:32
  Speaker 3: Beat the Markets. It's really the man who figured out
• 2:03:37
  Speaker 3: how to trade on a very profitable basis. Nobody's even
• 2:03:41
  Speaker 3: close to them. They put up like sixty percent a
• 2:03:44
  Speaker 3: year for forty years. The numbers are just mind blowing.
• 2:03:48
  Speaker 3: And it's not anyone fund. It's an entire organization that
• 2:03:52
  Speaker 3: deploys hundreds and hundreds of different strategies, and as long
• 2:03:57
  Speaker 3: as each strategy generates enough return, they keep doing it,
• 2:04:01
  Speaker 3: and they keep tweaking this when they their core fund,
• 2:04:04
  Speaker 3: the medallion funds, when they opened it, so after a
• 2:04:08
  Speaker 3: few years they essentially kicked out all their outside investors,
• 2:04:12
  Speaker 3: returned their money and said, this is just for us
• 2:04:15
  Speaker 3: because it worked if it had, you know, a billion
• 2:04:18
  Speaker 3: dollars in it, When it had three or four billion,
• 2:04:21
  Speaker 3: you couldn't generate those sort of returns. It's the inefficiencies
• 2:04:24
  Speaker 3: are that small, all right. And when I say a
• 2:04:27
  Speaker 3: billion dollars is small, US equity markets are fifty sixty seven.
• 2:04:32
  Speaker 3: It depends on what we close today. Trillion dollars A
• 2:04:35
  Speaker 3: billion dollars is pocket change, but at sixty percent compounded,
• 2:04:41
  Speaker 3: it's just an astonishing amount of money. That was one
• 2:04:45
  Speaker 3: organizational approach to Shaw is a very specific quantitative approach.
• 2:04:51
  Speaker 3: Jane Street Trading has figured out Citadel Millennium. There's like,
• 2:04:56
  Speaker 3: like I know the names off the top of my
• 2:04:58
  Speaker 3: Head's cause year in, year out, these guys are at
• 2:05:01
  Speaker 3: the top of the league charts. They're putting out numbers.
• 2:05:04
  Speaker 3: They all have outside investors, they're all audited sacks. Steve
• 2:05:10
  Speaker 3: Cohen's original funds became a family office and now it's
• 2:05:15
  Speaker 3: point seventy two. They have, you know, mainstream auditors. People
• 2:05:19
  Speaker 3: are looking at the books. I would be stunned if
• 2:05:22
  Speaker 3: any of them were doing anything you know, way too
• 2:05:25
  Speaker 3: far off the reservation, and people figure out ways to
• 2:05:32
  Speaker 3: identify these little inefficiencies. Citadel Ken Griffin runs Citadel. They
• 2:05:37
  Speaker 3: were one of the earliest high frequency traders. They figured out,
• 2:05:41
  Speaker 3: as the Nasdaq and the NYC, we're moving to electronic trading,
• 2:05:47
  Speaker 3: how can we do this cheaper, faster, better than everybody
• 2:05:50
  Speaker 3: else and capture you know, the market does hundreds of
• 2:05:56
  Speaker 3: billions of shares a day. If you can find out
• 2:06:00
  Speaker 3: we want to buy buy this at a dollar fifty
• 2:06:03
  Speaker 3: seven and sell it at a dollar fifty eight to
• 2:06:06
  Speaker 3: make a market for somebody. If you could do that
• 2:06:09
  Speaker 3: billions and billions of time, it adds up. So that
• 2:06:12
  Speaker 3: was their genius high frequency training. Each one of these
• 2:06:17
  Speaker 3: giant funds, giant hedge funds that have been so successful,
• 2:06:21
  Speaker 3: they've all like the six blind men describing the elephant.
• 2:06:25
  Speaker 3: They've all figured out different ways to identify something that
• 2:06:32
  Speaker 3: the market doesn't understand. First, get in there, capture the profit,
• 2:06:37
  Speaker 3: and get out and then move on to the next thing.
• 2:06:40
  Speaker 3: And I mean that's really a gross oversimplification, but they've
• 2:06:44
  Speaker 3: been so consistent over you know, at least the top
• 2:06:48
  Speaker 3: twenty have been so consistent over time. It's kind of shocking.
• 2:06:52
  Speaker 3: Every now and then they have a bad year, they
• 2:06:54
  Speaker 3: have an off year. But and that's kind of makes
• 2:06:59
  Speaker 3: me hopeful because I don't imagine these guys are going
• 2:07:03
  Speaker 3: to allow the guys in DC to mess it up.
• 2:07:07
  Speaker 3: They just have too much money at risk. Steve Cohen
• 2:07:11
  Speaker 3: just bought the New York Knicks. What do you mean
• 2:07:13
  Speaker 3: You're gonna put tariffs on this stuff? Like, I'm hopeful that,
• 2:07:17
  Speaker 3: you know, I can't say I've been the world's biggest
• 2:07:19
  Speaker 3: fan of the point one percent. I'm hoping that for
• 2:07:23
  Speaker 3: a change, the point one percent's interest now aligns with
• 2:07:28
  Speaker 3: the rest of Americas. And Hey, we want a functioning economy,
• 2:07:32
  Speaker 3: we want to functioning market, we want the rule of law.
• 2:07:35
  Speaker 3: This is important. Please don't let this go to help.
• 2:07:38
  Speaker 2: Okay, just to be clear, it's the Mets, not the Knicks.
• 2:07:42
  Speaker 3: The Mets, the Mets. The Cohen bought the What did
• 2:07:44
  Speaker 3: I say? Did I say?
• 2:07:45
  Speaker 2: You said the Knicks? I just want to be coming.
• 2:07:47
  Speaker 3: I'm going to a Nick game tomorrow. But it was
• 2:07:49
  Speaker 3: the New York Mets.
• 2:07:50
  Speaker 2: Oh, okay, you've done all of these interviews. Name two
• 2:07:55
  Speaker 2: people who you liked interviewing best. Either because their personalities
• 2:08:01
  Speaker 2: or the charisma or what they had to say. Two
• 2:08:04
  Speaker 2: most memorable.
• 2:08:05
  Speaker 3: You want music people, I have.
• 2:08:07
  Speaker 2: Some No no, no, no no no. I want to
• 2:08:09
  Speaker 2: flatten the landscape, just period the two that stick out.
• 2:08:14
  Speaker 3: There's so many that stick out. So Ken Feinberg was
• 2:08:20
  Speaker 3: the special master for the nine to eleven Victims Fund
• 2:08:25
  Speaker 3: for the Gulf of Are we still calling it Golf
• 2:08:27
  Speaker 3: of Mexico? The Gulf of Mexico BP oil spill. He's
• 2:08:31
  Speaker 3: done so many of these, and for the most part,
• 2:08:34
  Speaker 3: Bloomberg lets me bring in whoever I want to interview,
• 2:08:37
  Speaker 3: Steve Miller, Lawrence Juber, Don Felder, like any John Pizarelli,
• 2:08:43
  Speaker 3: anytime I like meet somebody who's kind of interesting, Hey,
• 2:08:46
  Speaker 3: you want to come on Bloomberg. They kind of leave
• 2:08:48
  Speaker 3: me alone. But Ken Feinberg, what does he have to
• 2:08:53
  Speaker 3: do with finance? What's this about? And I'm like, well,
• 2:08:57
  Speaker 3: not for nothing, but the insurance industry. And nine to
• 2:09:00
  Speaker 3: eleven was focused on Wall Street and then what went
• 2:09:03
  Speaker 3: on in the Gulf, and like I had a fight
• 2:09:08
  Speaker 3: to get that on, not just Bloomberg, Like some of
• 2:09:11
  Speaker 3: the guys I work with, what are you doing? My
• 2:09:13
  Speaker 3: research assistant at the time was like, what the hell
• 2:09:17
  Speaker 3: does this have to do with what we do? And
• 2:09:21
  Speaker 3: of course he comes on and he's this thick New
• 2:09:24
  Speaker 3: York accent, soft spoken guy American hero, talk about a
• 2:09:28
  Speaker 3: thankless task, taking this giant victim's fund and having to
• 2:09:33
  Speaker 3: get everybody who lost someone in the nine to eleven
• 2:09:38
  Speaker 3: attacks to sign up for it, right, So that's every family,
• 2:09:42
  Speaker 3: every spouse, every whatever. And then explain, Hey, I don't
• 2:09:47
  Speaker 3: think it's right that the guy who jumped out of
• 2:09:50
  Speaker 3: the hundredth floor, the bond trader who landed on the
• 2:09:54
  Speaker 3: firemen and they both died. I don't think it's right
• 2:09:58
  Speaker 3: that his family is getting more money than the fireman's family.
• 2:10:02
  Speaker 3: But that's what Congress has forced me to do, is
• 2:10:06
  Speaker 3: to make these payments based on economic loss. My hands
• 2:10:11
  Speaker 3: are tied. If you want, you could go to court
• 2:10:14
  Speaker 3: and maybe in ten years you get something, or you
• 2:10:18
  Speaker 3: take the money now. And by the way, it was,
• 2:10:20
  Speaker 3: this was all like decent chunks of money. Put this,
• 2:10:24
  Speaker 3: start grief, wrap up the grieving process, put this behind you,
• 2:10:29
  Speaker 3: and start living your life instead of being stuck in court.
• 2:10:33
  Speaker 3: Like so, I the person who told me this is
• 2:10:37
  Speaker 3: a terrible idea. What are you doing on that much
• 2:10:40
  Speaker 3: So broadcast over the weekend. That Monday, I go into
• 2:10:43
  Speaker 3: the office and I get a hug and he's like,
• 2:10:46
  Speaker 3: you're a son of a bitch. First podcast that made
• 2:10:49
  Speaker 3: me cry. He's an American hero. I'm like, right, it's
• 2:10:53
  Speaker 3: by the way, you can't listen to that without having
• 2:10:56
  Speaker 3: the hair on the back of your next stand up.
• 2:10:59
  Speaker 3: I have a hundred, but I'm going to give you
• 2:11:01
  Speaker 3: a recent one that stands out because you know, most
• 2:11:07
  Speaker 3: of these people are successful and smart and accomplished, and like, wow,
• 2:11:11
  Speaker 3: that guy's really interesting. Every now and then you meet
• 2:11:14
  Speaker 3: someone and it's just like what the so I've been
• 2:11:19
  Speaker 3: kind of I was scheduled to have him on during
• 2:11:21
  Speaker 3: the pandemic. Then the pandemic hit, and so I finally
• 2:11:25
  Speaker 3: got him back, like years later, finally got to him.
• 2:11:28
  Speaker 3: David Rubinstein of the Carlisle Group is just one of
• 2:11:32
  Speaker 3: these human beings that everything he touches is better for
• 2:11:38
  Speaker 3: his involvement. And let me just give you and all
• 2:11:42
  Speaker 3: this stuff is you know, none of this is off
• 2:11:45
  Speaker 3: the record. All this stuff was sent on the air.
• 2:11:48
  Speaker 3: So I used to think he stole my gig at Bloomberg.
• 2:11:51
  Speaker 3: I'm like, God, damn chairman of founder of Carlisle Group.
• 2:11:55
  Speaker 3: It's doing my podcast stuff on. Like I used to
• 2:11:59
  Speaker 3: jokingly to someone who worked for him, your boss stole
• 2:12:02
  Speaker 3: my gig and I finally he had a book. So
• 2:12:05
  Speaker 3: it's always a great opportunity to get people when a
• 2:12:07
  Speaker 3: book comes out. So he comes on the show and
• 2:12:11
  Speaker 3: he just starts talking about, you know, I have a
• 2:12:15
  Speaker 3: we do deep dive a lot of research, and I
• 2:12:17
  Speaker 3: start asking him questions. So they started in DC and
• 2:12:23
  Speaker 3: it was a pretty successful business right from the out
• 2:12:27
  Speaker 3: of the gate forty years ago. And he started holding
• 2:12:31
  Speaker 3: these I don't even know what to call them, just conversations.
• 2:12:36
  Speaker 3: He would get somebody who was an expert in a
• 2:12:39
  Speaker 3: space and he would interview them. But the audience were
• 2:12:45
  Speaker 3: closed door. Senators and congressmen across the aisle, no party affiliation.
• 2:12:52
  Speaker 3: Everybody was there just to hear this conversation and becomes
• 2:12:56
  Speaker 3: smarter and better elected officials. He's just doing that. It's
• 2:13:01
  Speaker 3: there's no record, there's no broadcast, there's no book. It's
• 2:13:05
  Speaker 3: all on the side. And and that's what he did.
• 2:13:09
  Speaker 3: And then he like everything he touches. So the Washington
• 2:13:17
  Speaker 3: Monument in DC starting to crumble, they get occasional earthquakes.
• 2:13:22
  Speaker 3: Wasn't built to last forever. It's not an Egyptian pyramid,
• 2:13:26
  Speaker 3: but it's still an American, you know, part of American icography.
• 2:13:31
  Speaker 3: It's absolutely a landmark. He goes to Congress and says, hey,
• 2:13:37
  Speaker 3: you guys, this has falling apart. You know you're gonna
• 2:13:40
  Speaker 3: be embarrassed if the Washington Monument comes down on your
• 2:13:42
  Speaker 3: watch and the like. Nobody wants to do anything, so
• 2:13:47
  Speaker 3: he like they they the budgeting argument, whatever, it just
• 2:13:52
  Speaker 3: no one can get the shit together. And he turns
• 2:13:54
  Speaker 3: around and said, all right, I'm gonna start the ball rolling.
• 2:13:56
  Speaker 3: You guys will figure out a way to pay for it.
• 2:13:58
  Speaker 3: And he just goes a couple of buddies, Hey, I
• 2:14:01
  Speaker 3: need a couple of million dollars, and everybody throws money
• 2:14:03
  Speaker 3: in the kiddy, and he hires an architect and an
• 2:14:06
  Speaker 3: engineer and they figure out how to shore up the
• 2:14:09
  Speaker 3: Washington Monument, and eventually Congress comes through and does the bulk,
• 2:14:14
  Speaker 3: but he goes deep out of pocket. And then he
• 2:14:17
  Speaker 3: starts looking around the country and Monticello with Thomas Jefferson
• 2:14:22
  Speaker 3: and just all these monuments no one's taken care of,
• 2:14:25
  Speaker 3: and then all these the Constitution, the Declaration of Independence.
• 2:14:29
  Speaker 3: There are multiple copies of this. He buys them and
• 2:14:32
  Speaker 3: donates them to the Smithsonian. So it's not in Bill
• 2:14:36
  Speaker 3: Gates's layer. It's there for the American people. And he
• 2:14:40
  Speaker 3: grew up in Baltimore, a city that's kind of hard scrabble,
• 2:14:44
  Speaker 3: and he buys the Baltimore Orioles and essentially promises the town,
• 2:14:49
  Speaker 3: I'll build a new stadium, probably the best stadium in
• 2:14:52
  Speaker 3: Major League Baseball, and I'll keep the Orioles here, and
• 2:14:57
  Speaker 3: I'm gonna keep hot dogs two dollars and beer four dollars,
• 2:15:00
  Speaker 3: and this will be a core part of the waterfront revival.
• 2:15:03
  Speaker 3: Like wherever he goes, it's not I'm going to buy
• 2:15:07
  Speaker 3: a baseball team as a flex. It's all right. Someone
• 2:15:11
  Speaker 3: has to do something otherwise the Orioles are out of here.
• 2:15:13
  Speaker 3: You know, Baltimore is suffering. Let's see if we can
• 2:15:16
  Speaker 3: lock them here for ten or twenty years. And like,
• 2:15:20
  Speaker 3: as I'm having the interview, like, I don't know what
• 2:15:23
  Speaker 3: you think about me. As we're talking, hopefully you're saying, oh,
• 2:15:27
  Speaker 3: he seems to know what he's talking about. And he's
• 2:15:29
  Speaker 3: kind of amusing and Jesus Fucking this guy babbled. But
• 2:15:33
  Speaker 3: you know that's kind of the perspective you come away from.
• 2:15:37
  Speaker 3: I'm with him for an hour in change, and I'm like,
• 2:15:41
  Speaker 3: Jesus Christ, everything this guy touches is not just a
• 2:15:45
  Speaker 3: little better, it's so much better. And I'm just like
• 2:15:50
  Speaker 3: four or five things off the top of my head.
• 2:15:52
  Speaker 3: We spoke for like just that sort of stuff. We
• 2:15:54
  Speaker 3: spoke for twenty minutes, and that that's the most recent
• 2:15:59
  Speaker 3: one that has stood out with me, like, oh there
• 2:16:02
  Speaker 3: are You know, it's very easy to become when you're
• 2:16:06
  Speaker 3: looking at how not to invest that how bad a
• 2:16:09
  Speaker 3: lot of stuff is. It's easy to let yourself become cynical.
• 2:16:14
  Speaker 3: And that's why I really tried to say, don't just
• 2:16:17
  Speaker 3: say no to everything. Find the best in each and
• 2:16:21
  Speaker 3: that's your team. Like, you see a person like that,
• 2:16:26
  Speaker 3: and it's inspiring and it kind of gives you hope. Hey,
• 2:16:30
  Speaker 3: not everybody is an asshole out for themselves and running
• 2:16:34
  Speaker 3: rough shot and doesn't give a shit over what happens.
• 2:16:37
  Speaker 3: There are people, including some with assets and resources and
• 2:16:43
  Speaker 3: abilities that are making things better. So that kind of
• 2:16:47
  Speaker 3: makes me a little hopeful.
• 2:16:48
  Speaker 2: Okay, finally, you hated practicing law forgetting the podcast and
• 2:16:55
  Speaker 2: the blogging and the column and the Washington Post. What
• 2:16:59
  Speaker 2: do you like about finance?
• 2:17:04
  Speaker 3: It's this giant puzzle, It really is, so so I
• 2:17:09
  Speaker 3: have a tendency to go down the rabbit hole really
• 2:17:12
  Speaker 3: deep on anything I do, and sometimes it's something just
• 2:17:16
  Speaker 3: as as stupid as film or music or you know.
• 2:17:22
  Speaker 3: I still create. I can't help myself. I still create
• 2:17:26
  Speaker 3: playlists for different events. I included the scene the line
• 2:17:32
  Speaker 3: from a High Fidelity that there are rules in the book,
• 2:17:39
  Speaker 3: but I find finance to be this fascinating puzzle. And
• 2:17:44
  Speaker 3: I mentioned the six blind guys describing the elephant. But
• 2:17:47
  Speaker 3: there is no one black of white answer. There is
• 2:17:50
  Speaker 3: no one, you know, definitive response. It's a little art,
• 2:17:55
  Speaker 3: it's a little science. The reason I use bad ideas, numbers,
• 2:18:01
  Speaker 3: and behavior because those are three different ways to describe
• 2:18:05
  Speaker 3: how humans go through the world. We you know, we
• 2:18:09
  Speaker 3: grow up, we get jobs, we live our lives, and
• 2:18:12
  Speaker 3: we consume a lot of ideas and very often we
• 2:18:16
  Speaker 3: ignore the data and the numbers that either confirm or
• 2:18:20
  Speaker 3: deny those ideas, and that combination leads us to making
• 2:18:24
  Speaker 3: certain decisions and behaving in a certain way, and sometimes
• 2:18:28
  Speaker 3: if it's based on either a bad idea or not
• 2:18:30
  Speaker 3: understanding the numbers and data around it, the behavior leads
• 2:18:34
  Speaker 3: to a bad outcome. And so the concept of gee,
• 2:18:39
  Speaker 3: this is a giant wordle puzzle. How do I put
• 2:18:41
  Speaker 3: this together? How do I figure out? You know, how comes?
• 2:18:45
  Speaker 3: Sometimes stocks are cheap and other times stocks are expensive,
• 2:18:49
  Speaker 3: and in how come cheap stocks sometimes go down? It's
• 2:18:54
  Speaker 3: sort of the opposite word to od it. Oh, don't
• 2:18:56
  Speaker 3: buy expensive stocks. Expensive stocks keep going up. How can
• 2:19:01
  Speaker 3: we spend so much time on these aspects of investing
• 2:19:06
  Speaker 3: when really it's irrelevant. It doesn't matter. It really doesn't
• 2:19:11
  Speaker 3: matter if five percent of your portfolio is in shareholder
• 2:19:16
  Speaker 3: yield that's dividends and buybacks or momentum. In the long run,
• 2:19:20
  Speaker 3: it kind of all comes out in the wash. It
• 2:19:23
  Speaker 3: kind of all evens up. Yeah, maybe this portfolio will
• 2:19:27
  Speaker 3: outperform that portfolio a little bit. But when you run
• 2:19:31
  Speaker 3: the numbers and it's a you know, look at all
• 2:19:35
  Speaker 3: these different simulations or a rolling ten year returns, you
• 2:19:40
  Speaker 3: find out, Hey, you know, I was really lucky to
• 2:19:44
  Speaker 3: be born in a part of the world where whatever
• 2:19:47
  Speaker 3: skills I had, and certainly to quote Professor gall Scott
• 2:19:52
  Speaker 3: Galloway lucky to be born in the US as a
• 2:19:56
  Speaker 3: straight white male in the nineteen sixties. Like you, you
• 2:20:00
  Speaker 3: already won the lottery. When we look at how people's
• 2:20:04
  Speaker 3: portfolios return, there's an awful lot on randomness. There's an
• 2:20:08
  Speaker 3: awful lot of luck. If you start investing in a recession,
• 2:20:15
  Speaker 3: it feels terrible, but you're gonna end up doing really well.
• 2:20:18
  Speaker 3: You start investing in the late nineties, hey, you're gonna
• 2:20:23
  Speaker 3: feel it for a couple of years. And some of
• 2:20:26
  Speaker 3: the data shows that when people pan exel out of markets,
• 2:20:30
  Speaker 3: thirty one percent of them never you know, that's stock market.
• 2:20:33
  Speaker 3: It's not for me, and that's really hard to save
• 2:20:36
  Speaker 3: for retirement over long periods of time. So to me,
• 2:20:40
  Speaker 3: what's most interesting about the markets is trying to tease
• 2:20:44
  Speaker 3: out this. It's not just that it's a puzzle, but
• 2:20:48
  Speaker 3: it's a dynamic puzzle that constantly changes. This is never
• 2:20:52
  Speaker 3: a solution. You think you figured out the solution, and
• 2:20:56
  Speaker 3: then the market shifts and the market changes, and it's
• 2:21:00
  Speaker 3: a never ending thing. And it's kind of the most
• 2:21:04
  Speaker 3: to me of all the things I look at. And
• 2:21:06
  Speaker 3: I have a lot of different interests. It's the most
• 2:21:10
  Speaker 3: fascinating game in town. If your intellectual curiosity moves in
• 2:21:17
  Speaker 3: that direction, if you're good with numbers, if you understand
• 2:21:21
  Speaker 3: the human factors and the psychology of it, it's fascinating.
• 2:21:26
  Speaker 2: Okay, we've come to the end of the feeling we've known.
• 2:21:29
  Speaker 2: I've been talking to Barry Ridtholts. You see them everywhere
• 2:21:33
  Speaker 2: Bloomberg Online. It's got a new book, How Not to Invest.
• 2:21:38
  Speaker 2: If you're the type of person who's playing in the market,
• 2:21:41
  Speaker 2: or you're the type of person who's afraid of the market,
• 2:21:43
  Speaker 2: you should definitely read it. Get your head set on straight. Barry.
• 2:21:48
  Speaker 2: I want to thank you so much for taking the
• 2:21:50
  Speaker 2: time with my audience.
• 2:21:52
  Speaker 3: Bob, thank you so much. You know, full disclosure, I've
• 2:21:56
  Speaker 3: been reading you for a million years, and I've been
• 2:21:59
  Speaker 3: publishing you on my website. Yes, I want to say,
• 2:22:02
  Speaker 3: it's got to be like fifteen years about that's insane.
• 2:22:06
  Speaker 3: And I've I've had every time one of your pieces
• 2:22:09
  Speaker 3: come up, One's coming up Sunday, that just came up
• 2:22:12
  Speaker 3: Sunday Disruption. Someone always says to me, where'd you find
• 2:22:16
  Speaker 3: this guy? He's really interesting, And it's like, you know,
• 2:22:21
  Speaker 3: if you know a certain group of people. Bob is
• 2:22:23
  Speaker 3: a legend in that space.
• 2:22:26
  Speaker 1: You know.
• 2:22:27
  Speaker 2: Thank you very much. I'll leave it at that till
• 2:22:30
  Speaker 2: next time. This is Bob left set