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Ed Mendel Talks About Ethics in Finance and Business · Masters in Business

0:02
Speaker 1: This is Master's in Business with very Ridholts on Bloomberg Radio.
0:09
Speaker 1: This week on the podcast, I have an extra special guest.
0:12
Speaker 1: His name is Ed Mendel. What can I say about Eddie?
0:15
Speaker 1: He is the co founder of ned Davis Research, which
0:20
Speaker 1: is a enormously successful institutional research shop sold to euro
0:25
Speaker 1: Money about six or seven years ago for for a
0:29
Speaker 1: price tag that is uh, google ble, but I could
0:32
Speaker 1: tell you it's in the hundreds of millions of dollars. Uh.
0:35
Speaker 1: He very successfully took the genius that was ned Davis
0:40
Speaker 1: and wrapped an entire business model around it. And while
0:44
Speaker 1: Ed himself is very humble and credits uh, Ned's genius
0:49
Speaker 1: for the success of the firm, really he is one
0:52
Speaker 1: of these um underappreciated UM people in finance who who
0:57
Speaker 1: took a great idea and found a way to turn
1:00
Speaker 1: it into a very very successful business. I don't think
1:03
Speaker 1: there would have been a Nit David's Research without Ed
1:06
Speaker 1: Mendel's contributions. He's also very actively involved in philanthropy. He's
1:12
Speaker 1: one of the minority owners of the Atlanta Falcons and
1:15
Speaker 1: just uh an all around inspirational guy. I've relied on
1:20
Speaker 1: his insights over the years not just for helping to
1:26
Speaker 1: put together the forerunner of Masters in Business. We discussed
1:30
Speaker 1: a little bit about how his contributions actually helped lead
1:35
Speaker 1: to this show, but also his insights about running a
1:39
Speaker 1: business and managing people, and managing capital and assets, and
1:42
Speaker 1: being able to think about the various ways that business
1:47
Speaker 1: has done properly intelligently, ethically, and and um just just
1:54
Speaker 1: being smart about how to run a shop. And so
1:56
Speaker 1: I have tremendous amount of gratitude to him personally for
2:00
Speaker 1: for sharing his insights with me over the years. He
2:03
Speaker 1: mentors a lot of people. Uh and and he's just
2:06
Speaker 1: one of these people who are in a household name
2:09
Speaker 1: but have had an enormous influence on on finance and business.
2:13
Speaker 1: And even though you may not have heard of him,
2:16
Speaker 1: you probably should have. So, with no further ado, here
2:19
Speaker 1: is my conversation with Eddie Mendel. My special guest today
2:27
Speaker 1: is Ed Mendel. He is co founder of NED Davis
2:31
Speaker 1: Research as well as the brokerage firm Davis Mendel and Reeginstein,
2:36
Speaker 1: which we're both founded in nineteen eighty. Collectively, they're known
2:40
Speaker 1: as the NID Davis Research Group. Ed helped to build
2:43
Speaker 1: one of the largest stock and bond research followings on
2:46
Speaker 1: Wall Street, working closely with ned Davis since nineteen seventy one.
2:51
Speaker 1: Their research is best characterized as an objective, disciplined approach
2:55
Speaker 1: to investing, focusing on risk management, primary trends, and avoiding
3:01
Speaker 1: major financial disasters. Ed has been associated philanthropically with numerous
3:07
Speaker 1: national and Atlanta charities. He is also a minority owner
3:11
Speaker 1: of the NFL football team, the Atlanta Falcons. Edmundel, Welcome
3:16
Speaker 1: to Bloomberg. Thank you. So I've been looking forward to
3:19
Speaker 1: this for a while. I think I know you for
3:23
Speaker 1: more than a decade, maybe close to two decades, because
3:26
Speaker 1: of your work at ned Davis Research and and being
3:29
Speaker 1: a partner, Uh to Ned. Let's ask the first question.
3:34
Speaker 1: You guys began in the middle of a bear market
3:38
Speaker 1: in the nineteen seventies in your work in markets, How
3:43
Speaker 1: did that impact your psychology the rest of your career?
3:47
Speaker 1: It's got as focused and uh, we really became an
3:52
Speaker 1: institutional research firm, and we were very fortunate that when
3:57
Speaker 1: we started it was nanti five percent retail. It ended
4:00
Speaker 1: up being n institutional, and so it wasn't a matter
4:06
Speaker 1: of anything but being at the right place at the
4:09
Speaker 1: right time with the right product, and I just knew
4:12
Speaker 1: that Ned was a genius and that we would somehow
4:16
Speaker 1: be successful. The seventies, you guys were at a brokerage firm.
4:21
Speaker 1: How did you and Ned hook up? How did you
4:22
Speaker 1: guys find each other? I started at J. C. Bradford
4:25
Speaker 1: in Nashville, and Ned came home from Harvard and started
4:30
Speaker 1: working for J. C. Bradford. I went and introduced myself
4:34
Speaker 1: to Ned, and we struck a friendship and uh and uh,
4:38
Speaker 1: you know, eight years later we left to start our
4:41
Speaker 1: own firm. You mentioned being launching your career in the
4:45
Speaker 1: nineteen seventies and Ned David's research in eighty. You started
4:50
Speaker 1: mostly at retail, but it eventually morphed two institutional Was
4:56
Speaker 1: that because the retail investor was not a participant? Was
5:00
Speaker 1: it the psychology? How did you shift to such a
5:03
Speaker 1: heavily heavily waited institutional practice. Bradford, I don't think really
5:08
Speaker 1: understood what they had on their hands with Ned. So
5:11
Speaker 1: I was one of the first people to go out
5:13
Speaker 1: and market Ned in Texas, in the state of Texas,
5:16
Speaker 1: and in Houston, and going backwards, I was a retail broker.
5:22
Speaker 1: My career really got helped tremendously. By May Day, uh
5:27
Speaker 1: May one commission structures changed used to be you could,
5:32
Speaker 1: so I became really one of the first discount brokers.
5:35
Speaker 1: And so it was eighty two cents to sell a
5:37
Speaker 1: hundred chairs of IBM. But Mary Lynch and Kidder and
5:41
Speaker 1: pain Webber would not let you discount. So I went
5:43
Speaker 1: around to all the wealthy people I could find in
5:46
Speaker 1: Atlanta and offered him at discount. So I became the
5:51
Speaker 1: biggest producer at Bradford. But then I started asking Med
5:56
Speaker 1: to leave, and we were going to leave in seventy eight,
5:59
Speaker 1: and we ended up leaving in nineteen eighty, which is
6:01
Speaker 1: another story which I'll get to later. Okay, well, let's
6:04
Speaker 1: let's get to it right now. You started in eighty.
6:07
Speaker 1: Why why did you wait till that year? We were
6:10
Speaker 1: gonna leave in seventy eight, and UH Ned was going
6:13
Speaker 1: to move to uh Sarasota, Venice, Florida, and uh we
6:17
Speaker 1: were going to start the firm. But Bradford came to
6:20
Speaker 1: Ned and made him a partner and uh and he stayed.
6:25
Speaker 1: But then in nineteen seventy nine he went to Jimmy
6:29
Speaker 1: Bradford and told Jimmy that he wanted a computer, and
6:33
Speaker 1: Jimmy told him, I've seen computers that you're doing fine,
6:36
Speaker 1: just the way it is. And so Ned went out
6:39
Speaker 1: on his own and spent thirty five thousand dollars on
6:42
Speaker 1: a Hewitt Packard computer that did graphics. And within the
6:47
Speaker 1: six months you could buy a chip that made it
6:49
Speaker 1: ten times faster, and within a year you could buy
6:53
Speaker 1: the computer with the chip in it. It was ten
6:55
Speaker 1: times faster for a total of seven thousand dollars. And
6:59
Speaker 1: uh okay uh. And I recall Ned saying that he
7:03
Speaker 1: had pitched Bradford on technology and computerization and the ability
7:09
Speaker 1: to crunch a lot of numbers, and the response was
7:12
Speaker 1: sort of, hey, what you're doing is working fine? Yeah
7:14
Speaker 1: that Jimmy said, it's working. It's working just fine. But Ned,
7:18
Speaker 1: ned Is was a genius. And you know, among many
7:21
Speaker 1: other things, it was clean data. Uh you know, we
7:24
Speaker 1: cleaned data for Ibbotson and SMP and uh you know,
7:28
Speaker 1: we were known for our charts and our data among
7:31
Speaker 1: many other things. But the other great story uh that
7:36
Speaker 1: came out of that is uh uh Ned told me
7:39
Speaker 1: I think the fourth biggest lie ever told. And he
7:43
Speaker 1: told me when we started that we were going to
7:44
Speaker 1: need a programmer, but just for a year. And I
7:47
Speaker 1: think when we sold the company we had fourteen programmers.
7:50
Speaker 1: So the fourth biggest lie is you we're going to
7:53
Speaker 1: get a programmer, but just for a year, just for
7:55
Speaker 1: a year. Let's talk a little bit about you guys
7:58
Speaker 1: hanging you shingle and in really the final inning innings
8:04
Speaker 1: of a sixteen year bear market. How did you guys
8:08
Speaker 1: have the nerve to launch into that environment and how
8:11
Speaker 1: did you get clients? We started and Ned thought that
8:15
Speaker 1: within four months we would have the products that he
8:17
Speaker 1: had in his head up and running, but it was
8:20
Speaker 1: two years later. So we never took any money out
8:23
Speaker 1: of the business for two years and put it back
8:25
Speaker 1: into the business. Uh, completely and totally. And uh I
8:31
Speaker 1: had a big retail business, and so the retail helped
8:36
Speaker 1: carry us until we got up and running with the
8:38
Speaker 1: institutional business. And that eventually morphed to almost all purely
8:43
Speaker 1: institutional totally, which uh's a blessing. Why do you say
8:49
Speaker 1: that the retail is h you know, where's my check?
8:53
Speaker 1: Where's my dividend? I'm gonna sue you. It's a it's
8:56
Speaker 1: just a it's just and so you know, if you're
9:00
Speaker 1: going to do it, you might as well get paid big.
9:03
Speaker 1: And we we were blessed that as far as the
9:06
Speaker 1: right time, in the right place. Um, we got paid
9:09
Speaker 1: in soft dollars and commissions. So I explained soft dollars
9:13
Speaker 1: because a lot of listeners may not be familiar with it. Well, uh,
9:17
Speaker 1: we would go to the State of Texas and tell
9:19
Speaker 1: them we wanted twenty five thousand dollars. And if I
9:22
Speaker 1: went to you and said, I have this service, and
9:24
Speaker 1: you know you'll like it, but you had to write
9:27
Speaker 1: a check personally for twenty five thousand dollars, you go,
9:30
Speaker 1: I really like a lot of money. But the State
9:33
Speaker 1: of Texas was going to buy a million shares of
9:35
Speaker 1: Boeing through one of our clearing frooms, pain Web Goldman
9:39
Speaker 1: sacks are especially bear Stearns, And so they'd buy a
9:42
Speaker 1: million shares and ten sents a share back then or
9:45
Speaker 1: fifteen and give us ten or fifteen thousand dollars. And
9:49
Speaker 1: it's another word. You guys set up the broker dealer
9:52
Speaker 1: in order too. Hey, we're gonna spend the money on
9:55
Speaker 1: the commission anyway, it might as well pay for the
9:58
Speaker 1: It was other people's money, and so that's what made
10:01
Speaker 1: the business very successful. Were you ever actively involved in
10:05
Speaker 1: trading yourself? Were you mostly doing institutional sales? Mostly institutional sales?
10:11
Speaker 1: And um, so the business was sold in. Do you
10:14
Speaker 1: still have any involvement? Because I know Ned still does.
10:17
Speaker 1: So you're you're free and clear for seven years now,
10:21
Speaker 1: that's right. The falcons and grandchildren is what's keeping you busy? Um.
10:26
Speaker 1: So when you guys launched the Night, who are your competitors?
10:30
Speaker 1: Who was out there selling the sort of quantitative technical
10:36
Speaker 1: research that that you guys were doing. Again, we were
10:39
Speaker 1: just at the right place, at the right time, with
10:41
Speaker 1: with the right product. And one of the products though
10:44
Speaker 1: we ended up by accident, um, was the chart service.
10:49
Speaker 1: We did the charts for Ned, and UH, as long
10:52
Speaker 1: as you're doing it for him, you might as well
10:53
Speaker 1: make we had we really didn't have an idea that
10:55
Speaker 1: that would be such a huge hit for client presentations,
10:58
Speaker 1: for marketing and meetings and brochures, and so we had
11:03
Speaker 1: a huge, uh publishing complex by sending out these huge
11:10
Speaker 1: chart books that were three or four inches thick. And
11:12
Speaker 1: then we got into customized research. So let's talk about
11:15
Speaker 1: customized research because at present and for the past decade
11:20
Speaker 1: or so, ned Davis Research generates two thousand custom research
11:26
Speaker 1: projects a year. Am I getting that right? It's been
11:30
Speaker 1: six years since I've been there, but a lot. So
11:34
Speaker 1: what's a typical request? How is this ramped up over time?
11:38
Speaker 1: That sounds like a lot of specific, individualized research or
11:43
Speaker 1: is there a ton of overlap from one to the next. Again,
11:47
Speaker 1: some of the best projects and ideas have come from
11:50
Speaker 1: our clients, and so NED is just incredible about devouring
11:56
Speaker 1: data and information and studies. And so we had a
12:00
Speaker 1: whole research department of people that would do projects that
12:04
Speaker 1: other people thought of doing or uh, they would want
12:09
Speaker 1: the models or stuff built just for them on a
12:11
Speaker 1: proprietary basis. So we once we got in their back pocket,
12:17
Speaker 1: we stayed there. So let me let me share one
12:20
Speaker 1: of my favorite ned Davis quotes and you could perhaps
12:23
Speaker 1: give me a little color on it. We are in
12:25
Speaker 1: the business of making mistakes. The only difference between winners
12:29
Speaker 1: and losers is that winners make small mistakes while losers
12:33
Speaker 1: make big mistakes. Discuss well, you know, Ned's also famous
12:38
Speaker 1: for saying they're the only thing worse than making a
12:42
Speaker 1: forecast is sticking by it. And he wrote famously wrote
12:45
Speaker 1: a book would you Rather be right or Make money? Yes?
12:48
Speaker 1: Being right or making money? Title? And uh, you know,
12:53
Speaker 1: risk control? Uh you know, I'm reminded of one of
12:58
Speaker 1: the biggest hedge fund p pole here in New York
13:02
Speaker 1: once told me he puts on a trade and then
13:05
Speaker 1: it starts worrying about everything that can go wrong. But uh,
13:10
Speaker 1: having a stop loss and controlling risk and not letting
13:14
Speaker 1: a little mistake become a disastrous mistake is incredibly important.
13:19
Speaker 1: The version of that I learned when I began in
13:21
Speaker 1: the business was it's okay to be wrong, it's unforgivable
13:25
Speaker 1: to stay wrong. And I think there's a lot to that. UM.
13:28
Speaker 1: So the I keep coming back to the risk management
13:32
Speaker 1: side of this. How much did really making your bones
13:36
Speaker 1: in the nineties seventies, in the midst of that horrific
13:39
Speaker 1: bear market plus inflation plus uh twelve risk free treasury yields?
13:46
Speaker 1: How much did that impact the psychology of what you
13:49
Speaker 1: guys were doing? Because you keep talking about um and
13:52
Speaker 1: everything I've read from both of you is manage your risk,
13:58
Speaker 1: don't let disasters happen. Pay attention to the primary trend.
14:01
Speaker 1: How formative were the nineties seventies to to Ned David's research. Again, Ned,
14:10
Speaker 1: Ned's genius is what I what I banked on. I
14:13
Speaker 1: realized very early that it wasn't Ed mental research. He
14:17
Speaker 1: was Ned Davis research. So you were, you were, and
14:21
Speaker 1: I appreciate your humility, but you were instrumental in taking
14:27
Speaker 1: his brilliant insights and building a business around it. Because
14:32
Speaker 1: left to his own devices, I get the feeling that
14:35
Speaker 1: Ned would be very happy to just stare at the
14:37
Speaker 1: computer crunch numbers, but perhaps not monetize that in the
14:42
Speaker 1: ways that you've managed to. Well, yeah, I had to
14:45
Speaker 1: go out on the road and hire the people. Ned
14:47
Speaker 1: did not want to deal with lawyers or accountants, and uh,
14:51
Speaker 1: he wanted to do research, which it was is that's
14:54
Speaker 1: his forte and uh he did it unbelievably well, and
14:58
Speaker 1: he wasn't distracted, and so he did not go out
15:02
Speaker 1: on the road a whole lot. And uh so it
15:05
Speaker 1: was left up to me to to to do the
15:07
Speaker 1: marketing and build the firm, and that started in nineteen
15:10
Speaker 1: eighty and then thirty years later the firm was sold
15:13
Speaker 1: to your own money. You guys built a reputation for
15:16
Speaker 1: being fact based, quantitative and really one of the first
15:21
Speaker 1: major technical analysis firms. So, so let's talk about that
15:26
Speaker 1: a little bit. You're an institutional salesperson, NED is looking
15:30
Speaker 1: at charts. How did you perceive the value of technicals
15:36
Speaker 1: for for your institutional clients way back in the seventies
15:40
Speaker 1: and night when you launched, NED would be the first
15:42
Speaker 1: to tell you that technical analysis doesn't work half the time,
15:46
Speaker 1: but neither just fundamentals. And so the genius which NED
15:50
Speaker 1: has is to be able to mesh and look at everything.
15:54
Speaker 1: And so we also, did you know, a incredible deal
15:57
Speaker 1: on on sentiment and uh so we had some of
16:04
Speaker 1: the best ciniment charts you know around. So Ned's geniuses
16:08
Speaker 1: that he looked at everything and he just didn't hang
16:11
Speaker 1: his hat on technical analysis. So, but you were out
16:15
Speaker 1: in the trenches selling the product to institutions. Did you
16:19
Speaker 1: find that when you were discussing charts, sentiment, everything else,
16:23
Speaker 1: that all the work that was being generated in house.
16:27
Speaker 1: Was there an advantage to working with charts and technicals?
16:31
Speaker 1: Was it different than what everybody else was selling? What
16:33
Speaker 1: what made this so successful? Because it's easy to say
16:37
Speaker 1: in retrospect, well, we were more wrong than right. But
16:39
Speaker 1: at the time you're the guy who's selling it and
16:42
Speaker 1: you don't know how much wronger or writer it's going
16:45
Speaker 1: to be. Ned had incredible historical perspective on the market
16:50
Speaker 1: and everything, and so we we we we went out there.
16:54
Speaker 1: We had a broad based service. We had like ten
16:56
Speaker 1: different services and so uh, we did just didn't hang
17:00
Speaker 1: our hat on you know, the bond commentary or the
17:04
Speaker 1: stock rankings, but between Ned's hotline, which is probably the
17:08
Speaker 1: best historic perspective and FED watching around and then the
17:12
Speaker 1: chart service where we got you know, people really dependent
17:15
Speaker 1: on us for their client presentations, marketing and meetings, uh
17:21
Speaker 1: and brochures. And then we added to that we were
17:25
Speaker 1: doing all this customized research. So it's a service business.
17:29
Speaker 1: So you know, I came from a southern town retail
17:33
Speaker 1: and in Little Rock, Arkansas. But the customers always right,
17:38
Speaker 1: and we did we tried to do more than our
17:41
Speaker 1: share in a relationship, and we tried not to goug
17:45
Speaker 1: the customers and for value received, we we gave them
17:49
Speaker 1: a great total product. But we were very lucky that
17:52
Speaker 1: the soft dollars we're able to cover the course and
17:56
Speaker 1: it was painless for them to pay us. And by
18:00
Speaker 1: the time you guys ended up selling in I want
18:03
Speaker 1: to say NED Davis Research was institutionally one of the
18:07
Speaker 1: most widely followed institutional services out there. Is that a
18:12
Speaker 1: Is that a fair statement? Fair statement? We know that
18:15
Speaker 1: the early days NED was attracted to computers, but here
18:20
Speaker 1: we are in TV computers are running everything from high
18:24
Speaker 1: frequency trading to analyzing SEC filings too, just about anything
18:30
Speaker 1: you could think of. How have computers changed the game
18:34
Speaker 1: of institutional investment? Again, I've been out of the business
18:38
Speaker 1: for seven years, and the you know, it's the E
18:44
Speaker 1: T F s and the trading that have diminished everything.
18:49
Speaker 1: And the it's it's what made it wasn't the computer.
18:53
Speaker 1: It was Ned's uh interpretation of the data and the
18:58
Speaker 1: information and so uh you layered upon you know, the
19:03
Speaker 1: computer you had needs needs, historic perspective and uh economic view,
19:09
Speaker 1: monetary view, and that's what made us different. We had
19:13
Speaker 1: to differentiate ourselves and so the computer, you know, and
19:18
Speaker 1: this goes back to two. Reagan deserves a lot of
19:22
Speaker 1: credit for things that he did, but he was very lucky.
19:25
Speaker 1: The personal computer came along and created twenty six million
19:29
Speaker 1: jobs that it also made us unbelievably productive, I mean
19:35
Speaker 1: unbelievably used to take us all day to do a
19:37
Speaker 1: mailing list literally, and once you started working with the computer,
19:42
Speaker 1: it was seconds. I mean, you know, once we got
19:45
Speaker 1: everything up and running. So it's the productivity that made
19:49
Speaker 1: us unbelievably successful. Also, but the pushback to that would be, well,
19:54
Speaker 1: computers were available and they can make everybody productive. Why
19:58
Speaker 1: were you guys able to take advant antage of it
20:00
Speaker 1: when others didn't. Well, again, I alluded to the data.
20:06
Speaker 1: Ned was the first with data and clean data, and
20:10
Speaker 1: so he uh I could look at five charts to
20:14
Speaker 1: day and with a red pen and knows knows when
20:17
Speaker 1: when a chart is six or the slightest bit off,
20:21
Speaker 1: just by eyeballing. Yes, So his one of his many
20:24
Speaker 1: genius things is but we we we were a freak
20:28
Speaker 1: about clean data. And there's a lot of it was
20:31
Speaker 1: a lot of or probably still is a lot of
20:33
Speaker 1: bad data out there. Let's talk a little bit about
20:36
Speaker 1: the modern stock market. How did you guys think about
20:40
Speaker 1: managing risk when you uh launched the firm in in
20:45
Speaker 1: the early eighties. You know, I was thirty years old,
20:48
Speaker 1: and uh I was too naive or stupid to really worry.
20:56
Speaker 1: I knew it would be a big success, and so
21:01
Speaker 1: there wasn't any question that, you know, between my retail
21:04
Speaker 1: business and having Ned as a partner, that it was
21:07
Speaker 1: going to be successful. So it wasn't a question of
21:09
Speaker 1: managing risk. It was it was about putting money back
21:13
Speaker 1: into the business and building it. And so not taking
21:16
Speaker 1: money out for two years and hiring salespeople and hiring
21:20
Speaker 1: people and programmers. Uh and and uh you know that's
21:27
Speaker 1: wold help laid the foundation for the thing to be successful.
21:30
Speaker 1: So you said you didn't take money out for two years,
21:33
Speaker 1: and basically the revenue was coming from the high net
21:36
Speaker 1: worth side, but you guys had to be taking salaries.
21:39
Speaker 1: You weren't just doing nothing, no nothing, not an every
21:43
Speaker 1: dollar went back into the business for two years, and
21:47
Speaker 1: so you were really paying your dues in in that period. Yeah,
21:50
Speaker 1: I remember writing checks for thirty five dollars and seventy
21:53
Speaker 1: dollars and cringing and cringing. So at what point did
21:57
Speaker 1: the firm begin to be able to allow the two
22:00
Speaker 1: of you to take a salary in two years? Took
22:04
Speaker 1: two years? Two years? And what was it that changed
22:07
Speaker 1: the launch of the new products? You know, we were
22:09
Speaker 1: building an institutional base that that was taking off, and
22:13
Speaker 1: we started clearing through bear Stearns. Greenberg was very helpful
22:18
Speaker 1: and convincing the that you know, he took us aside
22:20
Speaker 1: for his eight seconds and said, just come here, we'll
22:24
Speaker 1: take care of everything. That They had an unbelievable clearing operation.
22:28
Speaker 1: This is bear Stons in the early eighties. At the
22:30
Speaker 1: time they were the third or fourth largest broker's farm
22:33
Speaker 1: is that, but they were probably the biggest clearing firm
22:36
Speaker 1: for for what we did, institutional institutional trading, and so
22:40
Speaker 1: we didn't have to have floor brokers or clearing or
22:43
Speaker 1: back office. So you know, the banker New York would
22:46
Speaker 1: call up bear Stearns and buy a million chairs of
22:49
Speaker 1: Boeing for a dime, and they would credit and gave
22:54
Speaker 1: credit that this one, this one, and this center at
22:56
Speaker 1: Davis Research. So so that's a hundred thousand dollar commission
23:00
Speaker 1: on that transaction back then, whatever it was. It made
23:05
Speaker 1: it so easy for people to pay us. So in
23:07
Speaker 1: other words, they would pay for the research via the
23:10
Speaker 1: institutional trades, which they're gonna do anyway, and really, what
23:13
Speaker 1: the heck is tanking? It did not cost them anything
23:15
Speaker 1: ten cents on on bus share of Boeing then, but
23:19
Speaker 1: even then it wasn't their money, so because it's institutional
23:23
Speaker 1: and other people fund of but what they spend I
23:28
Speaker 1: guess it doesn't really matter who there trading for. What
23:32
Speaker 1: matters is who they're UM executing through and where the
23:36
Speaker 1: money man. In other words, whether they paid a nickel
23:39
Speaker 1: or adam, the fifteen cents didn't affect their bottom line.
23:42
Speaker 1: That's right. So o PM and big institutional trading made
23:46
Speaker 1: it easy. But you guys are fairly full service. You
23:49
Speaker 1: guys were, and ned Davis still is a fairly full
23:54
Speaker 1: service UM research shop. What does if I go to
23:58
Speaker 1: nd R and say I want everything? How much can
24:01
Speaker 1: I spend a year with them? Again, I've been out
24:03
Speaker 1: for six years, give me a ballpark from ten years ago? Um,
24:08
Speaker 1: you know dollars? Okay, So that's a lot of data,
24:12
Speaker 1: a lot of charts, a lot of custom research. But
24:15
Speaker 1: you know, Goldman Sachs used to have six hundred cash traders.
24:18
Speaker 1: They have now to the soft dollar business has diminished
24:21
Speaker 1: two from six hundred to two. Yeah, and that's computers
24:25
Speaker 1: essentially well, and also now eat heat. Everything is going
24:28
Speaker 1: to E T F s and UM volume is actually
24:31
Speaker 1: way down. It's it's a very different business. So we've
24:34
Speaker 1: seen a move towards passive investing from a lot of
24:38
Speaker 1: the mom and pop investors as well as on the
24:42
Speaker 1: institutional side, we've seen the rise of ETFs. And as
24:46
Speaker 1: these two things have happened, we've seen a huge decrease
24:50
Speaker 1: in trading volume. What does this mean for what used
24:55
Speaker 1: to be called institutional training and now is called I
24:58
Speaker 1: don't even know what what do you call it these days?
25:00
Speaker 1: Is it just by side research? How do how do
25:02
Speaker 1: you describe it? If you have to pay hard dollars
25:06
Speaker 1: for a service stuff, it's tough and you have to
25:09
Speaker 1: justify and it's tough. So, uh, you know people that
25:16
Speaker 1: used to pay us one hundred thousand. I just heard
25:18
Speaker 1: of somebody you know, going to forty thousand. So it's
25:23
Speaker 1: it's the margins get squeezed, and uh, you know, everything
25:28
Speaker 1: was wonderful and you could pay with other people's money
25:30
Speaker 1: no longer. Well, there's still some of it out there,
25:34
Speaker 1: but you know, Europe is going to the m F
25:37
Speaker 1: m F I D and that's gonna you know, that's
25:41
Speaker 1: a hard dollar squeeze as well. Yeah. Well but the
25:44
Speaker 1: SEC let people off the hook here. But still black
25:48
Speaker 1: Rock I think went from two hundred and twenty providers
25:50
Speaker 1: down to a hundred And what does that mean in
25:53
Speaker 1: terms of hard research dollars drying up? Drying up? So
25:58
Speaker 1: you're no longer in in as involved in the business
26:01
Speaker 1: as you are, You're doing other stuff. How closely do
26:04
Speaker 1: you watch the stock market? Um? As a retiree. You know,
26:09
Speaker 1: I get up in the morning. Uh, and I love reading,
26:13
Speaker 1: and so I'm somewhat addicted to the market. So I
26:16
Speaker 1: get up very tough to pull that needle. Yes it
26:20
Speaker 1: is and it's still the greatest game ever and so uh,
26:25
Speaker 1: you know, I love the game and I love reading.
26:29
Speaker 1: Uh and uh, the market is still my number one love.
26:35
Speaker 1: Are you still invested in the market or have you
26:37
Speaker 1: moved more towards a fixed income portfolio? Third? Or third
26:42
Speaker 1: or third? And uh? Stock spawns cash? Is that real estate?
26:47
Speaker 1: Real estate? Well, the Falcons are a very big investment
26:50
Speaker 1: all sud but uh and we have a big, big
26:53
Speaker 1: stadium that's that's really nice. Um so uh uh. I
27:00
Speaker 1: I'm very big on having goals and uh meaning investing
27:06
Speaker 1: towards goals, just personal personal goals. Years ago, I always
27:10
Speaker 1: had something in my wallet of all the goals and
27:12
Speaker 1: it changes because at thirty, it's very different than its
27:15
Speaker 1: sixty or forty and uh. And so you know right now,
27:20
Speaker 1: you know, accumulating great more wealth, it won't make me
27:24
Speaker 1: any happier. Maybe give more money to charity, but I
27:29
Speaker 1: really don't want to accumulate any more things, uh, except
27:34
Speaker 1: a Super Bowl ring. So let's talk a little bit
27:37
Speaker 1: about the falcons. How do you like them? And what
27:40
Speaker 1: changes are coming to the NFL. You know, I'm from Arkansas.
27:47
Speaker 1: It's a razor. Back then it was always wait until
27:49
Speaker 1: next year. And you know, you don't appreciate how hard
27:53
Speaker 1: it is to get to the super Bowl and to
27:56
Speaker 1: win it. Uh, it's the most competitive thing in the
27:59
Speaker 1: world all to reach that level. So many things have
28:02
Speaker 1: to go right, plus you have to get lucky. You
28:05
Speaker 1: just appreciate the good times and h if if if
28:10
Speaker 1: everything breaks right. But again, two or three key injuries
28:14
Speaker 1: and it's it's problematic. So the big issue we won't
28:17
Speaker 1: even talk about. We'll save the kneeling and the football
28:20
Speaker 1: anthem stuff for for later. In general, we've been seeing
28:25
Speaker 1: sports see a lot of pressure with cable people on
28:30
Speaker 1: bundling and moving to the internet. What is the future
28:33
Speaker 1: of sports broadcast? Look like is it going to be
28:36
Speaker 1: mobile and internet is because the idea of television and
28:40
Speaker 1: cable and saying here, I'm subscribing to cable and I
28:43
Speaker 1: have to get these two channels whether I want them
28:46
Speaker 1: or not. Is that going to change? How rapidly is
28:49
Speaker 1: that going to change? We know it's changing. What what
28:52
Speaker 1: do we think happens? But again, jeff Nis and Baron's
28:55
Speaker 1: basically talks about that, you know, the sports entertainment, it's
29:00
Speaker 1: just still one of those things football it's in h
29:03
Speaker 1: L is something that you want to see live, right,
29:07
Speaker 1: you can't you can't read about it afterwards, but you can.
29:10
Speaker 1: But it's not it's not the same. It's not the same.
29:13
Speaker 1: And so you know, we we have a product that
29:19
Speaker 1: uh people want to have and uh, you know, I
29:24
Speaker 1: had a partner named John Emily who died recently, but it
29:27
Speaker 1: it was one of the most successful venture people in
29:31
Speaker 1: in Atlanta and he always told me since Eddie, no
29:35
Speaker 1: matter whether we win or whether we lose, the value
29:38
Speaker 1: of the franchise goes up every day. That's that's a
29:42
Speaker 1: pretty interesting point. We have been speaking with Edmundell of
29:47
Speaker 1: Ned David's Research and the Atlanta Falcons. If you enjoy
29:50
Speaker 1: this conversation. Be sure and check out our podcast extras,
29:54
Speaker 1: where we keep the tape rolling and continue chatting about
29:56
Speaker 1: all sorts of interesting things. You can find that wherever
30:00
Speaker 1: find podcasts are sold iTunes, Overcast, SoundCloud, Bloomberg dot com, etcetera.
30:07
Speaker 1: Be sure and check out my daily column. You'll find
30:09
Speaker 1: that on Bloomberg dot Com. You can follow me on
30:11
Speaker 1: Twitter at rid Holts. I'm Barry rid Holts. You're listening
30:15
Speaker 1: to Masters in Business on Bloomberg Radio. Welcome to the podcast, Eddie.
30:32
Speaker 1: Thank you so much for doing this. There are two
30:35
Speaker 1: things I have to thank you for. One is when
30:39
Speaker 1: I first had the idea a decade ago, for hey,
30:45
Speaker 1: let's not ask people what's their favorite stock or where
30:48
Speaker 1: the Dow is going to be in a year. Let's
30:50
Speaker 1: find out who they are and how they got that way.
30:53
Speaker 1: Let's find smart, successful people and say, so, what can
30:56
Speaker 1: we learn from you. One of the very first version
31:00
Speaker 1: of this show was Ned Davis. We did on the phone.
31:04
Speaker 1: You helped to arrange that. I want to say, that's
31:06
Speaker 1: almost ten years ago. Am I am? I ballpark with
31:09
Speaker 1: that so that that was a fascinating conversation and it
31:13
Speaker 1: was so clear after we did it. Even though it
31:16
Speaker 1: sounded terrible, it was on the phone and I had
31:18
Speaker 1: no idea what the hell I was doing. It was
31:21
Speaker 1: clear to me that Wow, not doing four minutes and
31:24
Speaker 1: then a commercial, but letting people, hey, tell me about this,
31:29
Speaker 1: and letting them speak and share their history, their anecdotes,
31:34
Speaker 1: their experiences was really valuable. And that's led to a
31:39
Speaker 1: whole run of fascinating people telling me really amazing stories.
31:44
Speaker 1: And I have you to help for sending that up
31:46
Speaker 1: to begin with. Um, the other thing I had to
31:50
Speaker 1: say is when I was thinking about launching my shop,
31:54
Speaker 1: I came to you and said, Hey, I'm I'm wrestling
31:56
Speaker 1: with these ideas, and you gave me a lot of
31:59
Speaker 1: really good advice and I wanna thank you for that.
32:02
Speaker 1: It was it was very very help remembering. Oh, I
32:05
Speaker 1: trust me, I remember everything. UM So so let's talk
32:09
Speaker 1: a little bit about about football. Um, are we going
32:12
Speaker 1: to ever see live football on Facebook, Twitter, etcetera. I
32:18
Speaker 1: know there have been some contracts and some announcements made.
32:20
Speaker 1: Are we going to ever be in a situation where
32:23
Speaker 1: I don't need to be home in front of a television.
32:25
Speaker 1: I could just pull up my phone and watch a game.
32:28
Speaker 1: I'm a minority owner, but you have some insight. Is that?
32:34
Speaker 1: Is that something that we're thinking about constantly. Yes, you
32:37
Speaker 1: know they're looking at all aspects of of of everything
32:41
Speaker 1: to monetize this, and you know, to keep millennials and
32:46
Speaker 1: keep people interested in in uh in football. But you know, UH,
32:52
Speaker 1: we have a lot of people at the NFL home office,
32:55
Speaker 1: and they're constantly working away, working away. So there's a
33:01
Speaker 1: couple of really interesting things going on in football. UM.
33:06
Speaker 1: And I know you don't speak on behalf of league
33:08
Speaker 1: of the team, so I'm being circumspected in what I
33:11
Speaker 1: can ask you. You're not an authorized spokesperson for NFL,
33:15
Speaker 1: but you're certainly an astute observer. Um. Three things that
33:20
Speaker 1: I've been thinking about aware of. The first is, uh,
33:24
Speaker 1: the idea of people's phones being the most important screen
33:29
Speaker 1: in their life. I have to think we're going to
33:31
Speaker 1: see Netflix or Twitter or Facebook eventually doing a regular broadcast.
33:37
Speaker 1: The other thing, which we haven't heard a lot about
33:39
Speaker 1: this year, but was pretty big the past couple of years, UH,
33:43
Speaker 1: and I've been reading about some of the new technologies,
33:47
Speaker 1: was the concussion issues. And I've been reading about these
33:51
Speaker 1: new helmets that supposedly lighter, stronger, more dissipating of energy.
33:59
Speaker 1: How much is technology going to be the basis of
34:02
Speaker 1: a solution for you know, keeping players safer over time?
34:07
Speaker 1: You know, we recognize it as a big deal. And
34:10
Speaker 1: I think that this is a year, a couple of
34:12
Speaker 1: four million dollars a year. I think we were spending
34:15
Speaker 1: on research to come up with safer, better, you know, helmets.
34:20
Speaker 1: But you know, it is, it is. It's a big
34:23
Speaker 1: issue in uh uh, you know, it's a major concern.
34:28
Speaker 1: The most recent piece of technology I was reading about
34:31
Speaker 1: is this new helmet. A couple of I remember was
34:34
Speaker 1: M I T or cal Tech, but a couple of
34:36
Speaker 1: professors developed this helmet. If the standard helmet is three
34:40
Speaker 1: hundred dollars, this is nine hundred dollars. But supposedly, the
34:45
Speaker 1: the physics underlying um impact energy dissipation has progressed to
34:51
Speaker 1: the point where there's we should really expect to see
34:55
Speaker 1: some significant changes going forward. Is that I know you
34:59
Speaker 1: can't speak public really officially, but is it fair to
35:02
Speaker 1: say that technology is going to be a big part
35:05
Speaker 1: of the solution. Just about has to be. But you know,
35:09
Speaker 1: they're they're founding from junior high school, high school, college.
35:12
Speaker 1: You know this, this is a cumulative effect. It's not
35:15
Speaker 1: just it's not just the NFL. So that that's an
35:19
Speaker 1: issue that um, uh kind of got overwhelmed this this
35:24
Speaker 1: year by by other stuff. Um, what else do you
35:27
Speaker 1: see that's interesting taking place in football? I I just
35:30
Speaker 1: read a fascinating review of of the the commissioner, Um Goodell,
35:40
Speaker 1: and he's about to re up his contract. Basically the
35:44
Speaker 1: owners seem to think he's doing a tremendous job in
35:48
Speaker 1: a very difficult environment. Is that a fair, fair assessment?
35:52
Speaker 1: You know again, I'm not I'm still the minority partner
35:55
Speaker 1: from fifteen minutes ago, right, So so you're not, um
35:59
Speaker 1: turn around to uh to say anything. If you google,
36:04
Speaker 1: there was a recent story about on ESPN and a
36:07
Speaker 1: handful of other places. The consensus seems to be very
36:12
Speaker 1: challenging couple of years, especially under this president. Um, but
36:15
Speaker 1: he's done about as good a job as anybody really
36:18
Speaker 1: is can expect of him. Fair fair assessment. But like
36:23
Speaker 1: you know this better than anybody, everything changes, So you know,
36:27
Speaker 1: there's never been a time when that when there wasn't
36:29
Speaker 1: something to worry about. Of course, and the marketer in life,
36:32
Speaker 1: so we were. We were just discussing this the other day,
36:36
Speaker 1: that we are biologically programmed to notice bad news. And
36:42
Speaker 1: one of my colleagues in the office, Mike Batnick, wrote
36:45
Speaker 1: a piece why good news is overlooked. Good news is
36:48
Speaker 1: never a threat, but bad news is a threat, and
36:51
Speaker 1: that's why we basically place such disproportionate weight on that. Well,
36:57
Speaker 1: except for right now, I think good news in the
36:59
Speaker 1: market is good news and bad news just isn't true. Well,
37:03
Speaker 1: what sort of bad news in the market isn't true?
37:05
Speaker 1: What what do you see as as the memes that
37:08
Speaker 1: are out there that are negative for the market. But
37:11
Speaker 1: we're over emphasizing, we're putting too much weight on We'll
37:14
Speaker 1: get back to black swan events. I'm not big on, right,
37:19
Speaker 1: but they're in Japanese folklore. There's a thing called white swans,
37:25
Speaker 1: and a white swan is something right in front of
37:27
Speaker 1: you that you just can't see. We don't just stop
37:30
Speaker 1: paying attention to and so uh, this next time around,
37:35
Speaker 1: just like in O one, the dot com was right
37:37
Speaker 1: in front of you, and I said, didn't see it,
37:39
Speaker 1: and they saw it. They just said, what can we do?
37:43
Speaker 1: It's easy to clean up after O eight, No money down,
37:46
Speaker 1: pay what you want, interest only, no documentation. How can
37:50
Speaker 1: anybody not be surprised? But it was right in front
37:53
Speaker 1: of you, and so this this, in fact, I have
37:57
Speaker 1: to again give kudos to Ned David's research. One of
38:00
Speaker 1: my favorite charts that if you looked at you couldn't
38:04
Speaker 1: help but not see something coming. There were three charts
38:08
Speaker 1: that I tracked in the early two thousands, some of
38:11
Speaker 1: which came from you. One was cost of owning versus
38:15
Speaker 1: cost of renting. That was a pretty standard chart. The
38:17
Speaker 1: one that I first noticed from ned davis research was
38:21
Speaker 1: median income versus median home price. Ned was putting that
38:25
Speaker 1: out and for decades it you know, moved up and
38:28
Speaker 1: down a little bit, and then in oh four oh
38:31
Speaker 1: five it went straight up through the roof and it
38:36
Speaker 1: was clear something strange was going on. There was no
38:40
Speaker 1: other way to describe that. UM. And then the third
38:44
Speaker 1: one was, and I think this also might have been
38:47
Speaker 1: you guys, was total value of the UM total value
38:54
Speaker 1: of the housing stock, meaning all the homes in America
38:57
Speaker 1: relative to g d P and some really it was,
39:01
Speaker 1: you know, pretty steady for decades, and then suddenly three
39:04
Speaker 1: standard orders of magnitude. If you were I called the
39:09
Speaker 1: financial crisis the jumping dolphin of crises. Do you remember
39:14
Speaker 1: the three D paintings that people used to have. If
39:17
Speaker 1: you stared at it right, suddenly you would see the
39:19
Speaker 1: leaping dolphin. Those charts with the leaping dolphin. If you
39:22
Speaker 1: saw those charts, it was obvious, hey, this is all
39:25
Speaker 1: going to blow up. Um. But if you weren't looking
39:27
Speaker 1: in the right place, well, the market keeps going higher.
39:30
Speaker 1: It must the market must know that this is an
39:32
Speaker 1: important I heard over and over again. Well, getting back
39:38
Speaker 1: to the the white swan, Uh, you know, things are
39:42
Speaker 1: really great right now. There's no economists not saying, you know,
39:46
Speaker 1: there's no recession for a couple of years, and uh,
39:49
Speaker 1: you know, earnings are record highs growing, and so the
39:57
Speaker 1: white swan that's out there is that maybe things are
40:00
Speaker 1: too good and you're you know, you're gonna have a
40:03
Speaker 1: blow off that's gonna tighten economy. You can't lower unemployment
40:09
Speaker 1: any further, can you? Again? Uh, you know there's laves
40:15
Speaker 1: damn license statistics. Uh uh, nothing would surprise me. But uh,
40:22
Speaker 1: you know the you know this thing is somewhat manipulated EU,
40:31
Speaker 1: especially jan and Japan. You know they owned sixty of
40:36
Speaker 1: all the e t s and sixty percent of the topics,
40:38
Speaker 1: and Switzerland owns two billion dollars worth of stock out
40:42
Speaker 1: of thin air. Mother nature doesn't like to be fooled.
40:45
Speaker 1: So whatever happens will come out in inflation or currencies
40:50
Speaker 1: or the bond market. Uh So let me push back.
40:53
Speaker 1: If I had to guess the white swan that's right
40:56
Speaker 1: in front of us, it's just everything is good, maybe
40:59
Speaker 1: two it. So let me push back against that. Every
41:03
Speaker 1: time there's some sort of financial crisis, be at O
41:07
Speaker 1: eight oh nine or two thousand or seventy four or
41:10
Speaker 1: twenty nine, or pick your crisis. In the United States,
41:13
Speaker 1: the government always steps in to do something. You know,
41:16
Speaker 1: we created the SEC, we created the fd I C.
41:19
Speaker 1: Isn't that standard that? Uh, some disaster befalls us and
41:24
Speaker 1: and uh the free marketers suddenly become maybe we can
41:29
Speaker 1: manage this a little more aggressively. Well again, I had
41:34
Speaker 1: breakfast with the president of the Doubt of the Atlanta
41:38
Speaker 1: Third and uh I asked him the next speed bump,
41:42
Speaker 1: what are you gonna do? This is last year at breakfast,
41:45
Speaker 1: and he says, we're just gonna do more que And
41:48
Speaker 1: so that's now the solution to everything that it must
41:51
Speaker 1: be because they don't they don't ask if there's a
41:53
Speaker 1: plan B. There is there isn't a plan B. And
41:56
Speaker 1: so you know you so they'll buy real estate in
42:00
Speaker 1: E T S or whatever this next time. But they're
42:03
Speaker 1: already doing that in Europe. So every general fights the
42:06
Speaker 1: last battle. QUI worked fine when the issue was a
42:10
Speaker 1: frozen credit market. But if you just have a cyclical
42:14
Speaker 1: slowdown in a recession, what is quigan? That's that's the
42:18
Speaker 1: that's the question, and uh, it's going to be very interesting. Yeah,
42:22
Speaker 1: to say the least, I want to get to our
42:25
Speaker 1: favorite questions. But there's one thing, Um, I have to
42:29
Speaker 1: ask about sentiment. You're raising that issue. Um, things are
42:33
Speaker 1: too good? Do you think the investing public thinks things
42:37
Speaker 1: are too good? Because up until recently they did not
42:41
Speaker 1: embrace this rally. They were not The market tripled since
42:45
Speaker 1: the March O nine lows, and they seem to constantly
42:48
Speaker 1: be waiting for the black swan, not the white swan.
42:52
Speaker 1: You know, but you have record low mutu fun cash
42:55
Speaker 1: and you know the markets tripled, revenue is only up,
43:00
Speaker 1: and so there's but profits are higher, Yeah, No, profits
43:02
Speaker 1: are higher, but some of that's financial engineering, meanings share
43:05
Speaker 1: by backs like that. Yeah, I just read the two
43:10
Speaker 1: and a half trillion dollars overseas. You know, Apple and
43:14
Speaker 1: Oracle on all these companies already spent five hundred and
43:16
Speaker 1: sixty big and yeah they still have stellar balance sheets.
43:23
Speaker 1: But uh, you know the it's but it's not the public,
43:28
Speaker 1: it's it's but the public or whoever is buying twenty
43:30
Speaker 1: billion dollars at the e t s a month and
43:33
Speaker 1: the sixty four threeon dollar questions, who's gonna when they want?
43:38
Speaker 1: If they ever start selling the ets, it could get
43:42
Speaker 1: ugly very fast. But you know, uh, you know, you
43:47
Speaker 1: you know, in the bullmarkt be bullish. So this is
43:51
Speaker 1: this is just a good time to be bullish the least.
43:54
Speaker 1: Let's jump to our favorite questions. These are what I
43:57
Speaker 1: asked all of our guests tell me the most important
44:00
Speaker 1: thing people don't know about your background? Um um. I
44:11
Speaker 1: had a grandfather who got me interested in the market
44:14
Speaker 1: when I was seven, and I started buying stocks when
44:18
Speaker 1: I was seven, and he gave me a healthy disrespect
44:21
Speaker 1: for the banking system. Yes, and uh, he had all
44:25
Speaker 1: his money in a safety deposit box when the when
44:28
Speaker 1: the when the crash came. And he also taught me
44:32
Speaker 1: about being a scavenger buyer fixed income because he made
44:39
Speaker 1: his money buying railroad, mind's opinion and nickel on the dollar.
44:43
Speaker 1: And then he thought he invented uh text rattles back
44:47
Speaker 1: in the thirties, Did he or he did it? So
44:51
Speaker 1: he was way ahead of his time. He also was
44:53
Speaker 1: a socialist and uh a socialist market trader, Yes he was.
44:59
Speaker 1: And he claimed he was secretary treasurer of the Socialist
45:02
Speaker 1: Party between nineteen fifteen and nineteen eighteen and booty for
45:05
Speaker 1: Eugene Debs five times. And he said they disbanded the
45:09
Speaker 1: Socialist Party when FDR was elected because he was the
45:11
Speaker 1: biggest socialist that ever lived. Well, we created we created
45:16
Speaker 1: social scar We did a lot of things under under FDO,
45:19
Speaker 1: medicaid um, certainly the sec There's a ton of stuff
45:23
Speaker 1: that that he did. I find a lot of people
45:25
Speaker 1: who have been successful in the market and have accumulated
45:30
Speaker 1: wealth are starting to get pretty concerned about inequality because
45:36
Speaker 1: they would rather the public be fairly satisfied and not
45:41
Speaker 1: calling for revolution. If you asked me for the one
45:44
Speaker 1: thing that you know bothers me is that this this
45:47
Speaker 1: has not been distributed. It's been great for wealthy people.
45:51
Speaker 1: I think, uh, blue collar, middle class people are struggling.
45:56
Speaker 1: And you're you're this is the white Swan that you
46:00
Speaker 1: saw it in Trump being elected, but you saw it
46:02
Speaker 1: in the British exit, sat in Spain, but last week
46:05
Speaker 1: in Calonia. Absolutely, Czechoslovakia and Austria, but you saw France
46:10
Speaker 1: the two major parties were cut off. Even Merkel had
46:15
Speaker 1: her niece buckled and so and then nationalism is out there,
46:21
Speaker 1: and uh, you know, bad things happen when you know that.
46:26
Speaker 1: And you're tracing this to income inequality, and you know,
46:29
Speaker 1: I'm just tracing it that. I think that that just
46:32
Speaker 1: what you said. The whole there's a whole class of
46:34
Speaker 1: people out there that haven't participated and are not happy.
46:38
Speaker 1: And if the numbers are right of fifty one or something,
46:41
Speaker 1: can't you know, come up with two d dollars or whatever.
46:45
Speaker 1: It's it's there. You know, there there's a problem out there,
46:49
Speaker 1: and uh, you know, I haven't got the answer, but
46:52
Speaker 1: you know you're seeing something right in front of you.
46:55
Speaker 1: And you know, you got the people in Brussels, unelected
46:59
Speaker 1: bureaucrats that are sort of like Monty Python Black Night
47:03
Speaker 1: that lost one arm, one leg, the other arm the
47:06
Speaker 1: other leg and says it's just a no, he said,
47:09
Speaker 1: it's just a flesh with But they're not paying any
47:11
Speaker 1: attention that right underneath. What's what's happening right underneath their noses?
47:17
Speaker 1: But you de Greece and Italy have these parties in
47:21
Speaker 1: the pin nationalism, popularism, nationalism. People are pushing back against
47:27
Speaker 1: globalization and the loss of jobs to low cost providers.
47:32
Speaker 1: It's not just China, but it's Turkey and Vietnam, and
47:34
Speaker 1: els and the computers and and shobots and no, it
47:39
Speaker 1: is it is. If you had to pick one thing
47:41
Speaker 1: that is worrisome, is you hit on it that it's it's,
47:44
Speaker 1: it's it's This has not been a broad based, wonderful
47:48
Speaker 1: thing for everybody, and and that is a of a concern.
47:52
Speaker 1: So that may perhaps that's the whites one you talked about.
47:54
Speaker 1: Let's let's talk about your early mentors. Who were the
47:57
Speaker 1: people who affected the way you think about business and markets. Well,
48:04
Speaker 1: first was my grandfather, and then you know, second was
48:07
Speaker 1: ned and U Marty's wag. What was your relationship with
48:12
Speaker 1: Marty's wife? For you young uns, listenings. Wig was a
48:15
Speaker 1: very famous technician owned I think it was the most
48:19
Speaker 1: expensive home in America at one point in time, the
48:22
Speaker 1: top of room and regular on Rukaiser and he had
48:27
Speaker 1: all the Beatles outfits and Marl Monroe's outfit and uh
48:31
Speaker 1: was quite a remarkable individual. And how did Marty uh
48:35
Speaker 1: affect you? Just just his studies and you know, he
48:39
Speaker 1: was just brilliant and you know, uh also I was
48:43
Speaker 1: would tell you that this is under Ripley's believe it
48:45
Speaker 1: or not that uh talking about failures, that I was
48:51
Speaker 1: partners with Marty and ned and not one but to
48:54
Speaker 1: retail letters and both went south, really, which I would
49:00
Speaker 1: have thought would be impossible to do. Let me tell
49:03
Speaker 1: you that's a that's question number seven. Let's ask it now.
49:06
Speaker 1: Tell me about a time you failed and what you
49:08
Speaker 1: learned from it. Marty's wide and that Davis two of
49:11
Speaker 1: the most successful technicians in history. How did you not
49:15
Speaker 1: make a go of those news letters? Uh? Good question?
49:21
Speaker 1: But I think you know one was a bond letter
49:25
Speaker 1: and it goes back to you know, no, well Einstein
49:28
Speaker 1: has it goes up to heaven and Holy One calls
49:31
Speaker 1: him in and says, can you explain the bond market
49:34
Speaker 1: to me. So I don't think anybody can explain the
49:36
Speaker 1: bond market. NY, we had a bond letter and uh,
49:41
Speaker 1: for whatever reason that I think ned Marty's Forte was
49:45
Speaker 1: not in bonds. But I don't, I really don't remember.
49:48
Speaker 1: I tried to, you know, suppressed suppress it. But I
49:52
Speaker 1: think more importantly, I think it was the retail is
49:57
Speaker 1: a much more difficult market than selling two institutions like So,
50:02
Speaker 1: you know, I learned. The one lesson I learned from
50:04
Speaker 1: that is that, uh, you know sticks, you know, dance
50:08
Speaker 1: with them who bring you. That's a that's a fair question. Um,
50:12
Speaker 1: what about investors, Any investors affect the way you look
50:15
Speaker 1: at business or finance. Um, you know, I'm a big
50:20
Speaker 1: believer in blink going out and finding people that can
50:24
Speaker 1: do things that that you cannot do. And uh, and
50:30
Speaker 1: there's plenty of those. But I'm not a big believer
50:33
Speaker 1: in hitch funds at eight or nine at one time,
50:37
Speaker 1: but meaning money invested in not running. Yeah, but they
50:41
Speaker 1: they can't. They can't perform now for whatever whatever reason,
50:45
Speaker 1: the conditions have changed. At one point in time, some
50:48
Speaker 1: of them were creating alpha. Very few these days, very few, Yeah,
50:52
Speaker 1: maybe two or three percent. Wow, that's fascinating. Um, let's
50:56
Speaker 1: talk about books. This is everybody's famous favorite question. Uh,
51:00
Speaker 1: tell us about books that you've you read? What what
51:03
Speaker 1: sort of stuff do you like? Fiction? Nonfiction? Well? I
51:06
Speaker 1: read three or four hours every day, but really I
51:09
Speaker 1: don't read fiction and nonfiction anymore. So what are you reading?
51:13
Speaker 1: But I do? My favorite Arthur is Malcolm Gladwell Blink
51:18
Speaker 1: and tipping Point, and the tipping point is AIDS, epidemics,
51:22
Speaker 1: syphilis epidemics, crime epidemics, stop market, bond markets. Everything goes
51:26
Speaker 1: to a tipping point, and life goes to a tipping point,
51:31
Speaker 1: and it's always good to remember that. Uh, you know,
51:36
Speaker 1: it's there. There's a tipping point out there, you know,
51:38
Speaker 1: at some point for everything, for everything, for everything, things
51:43
Speaker 1: that cannot go on eventually stop stop. And then Blink
51:47
Speaker 1: is getting one of my favorite books. But whether it's
51:50
Speaker 1: an electrician or car mechanic, finding these people that can
51:53
Speaker 1: do things and they know things in a blink and
51:56
Speaker 1: they're keeping them dear, you know, is really real. Make
52:00
Speaker 1: makes your life a lot easier. Have you have you
52:02
Speaker 1: read Outliers yet? Yes? I have. That was a really
52:05
Speaker 1: interesting everything he does is great, always, always fascinating. Although
52:09
Speaker 1: I WI will tell you, yes, the Beatles played the
52:13
Speaker 1: Cavern Club eight hours a day for a year, I
52:17
Speaker 1: can play the Cavern Club eight hours a day for
52:19
Speaker 1: a hundred years. I will never be the Beatles, and
52:22
Speaker 1: vice versa. There are people who pick stuff up so
52:25
Speaker 1: rapidly that they're just built for certain things. But I
52:29
Speaker 1: find all his books thought provoking and interesting. And he's
52:33
Speaker 1: an excellent writer. I mean, his pros is just lovely.
52:37
Speaker 1: His podcast from last year were great. Only maybe two
52:40
Speaker 1: of the ones this year were the ones from last
52:43
Speaker 1: year was um, a history of what what? What's the
52:47
Speaker 1: name of his podcast? Revisionist history. Revisionist History, That's what
52:51
Speaker 1: it was. Yeah, I listened to a few of them.
52:52
Speaker 1: I thought they were very interesting. He's always interesting. Who
52:56
Speaker 1: else do you read anybody else? I read you at
53:00
Speaker 1: think that you have the best service out there, and
53:04
Speaker 1: especially like your ten A m Reads The Morning ten
53:07
Speaker 1: things each day the Morning Reads. Thank you for saying that. Um,
53:11
Speaker 1: they're usually out seven seven thirty in the morning. I
53:14
Speaker 1: try and get them out as early as possible. I
53:16
Speaker 1: I sift through a lot of jump to get to that. Um,
53:19
Speaker 1: there's a long story behind the reeds. I'll have to
53:21
Speaker 1: share them one day, but thank you so much for
53:23
Speaker 1: saying that it is um. It is an interesting thing
53:27
Speaker 1: that forces me to realize how much of what's produced
53:33
Speaker 1: is just noise, and finding something that is insightful, educational
53:39
Speaker 1: and and helpful is is hard. So out of the
53:43
Speaker 1: thousands of things, identifying those ten things each day is
53:46
Speaker 1: a little bit of a challenge. Well, I appreciate. I
53:49
Speaker 1: appreciate the kind words. What do you do outside of
53:52
Speaker 1: the office to uh stay either mentally or physically fit? Well,
53:58
Speaker 1: the mental part is eating. But you know, in the morning,
54:02
Speaker 1: I all the CBS sports uh, Bleacher Report, you know,
54:07
Speaker 1: I'm a I'm a sports junkie. But also no surprise
54:11
Speaker 1: and so. But also there's lots of things that I
54:13
Speaker 1: like reading in the morning. What else? What else do
54:16
Speaker 1: you read? The Wall Street Journal? You know? Barons Zulov? Uh.
54:22
Speaker 1: You know there's ten or twenty people that you know,
54:24
Speaker 1: I really like getting their stuff Zuolov, give me a
54:27
Speaker 1: couple of other names. Who else do you would like
54:29
Speaker 1: to read? I like to read the Pimco people. Um.
54:35
Speaker 1: The one person that is is brilliant and uh uh
54:40
Speaker 1: is um double line. Uh, Jeff fascinating, fascinating, Uh fascinating
54:49
Speaker 1: and uh uh he's uh he's out there thinking on
54:56
Speaker 1: another on another level. He he definitely is. And every
54:59
Speaker 1: now and then I'll read something of his and I'm like, Wow,
55:02
Speaker 1: he's not afraid to really put it all out there,
55:05
Speaker 1: and as often as not, he's right on some of
55:07
Speaker 1: these real outlawyer calls that you would think is a
55:11
Speaker 1: much lower success. He was one of the first people
55:14
Speaker 1: come out on Trump. That's exactly right. I remember saying, Hey,
55:17
Speaker 1: you're ender. I remember reading him saying, you're underestimating the
55:21
Speaker 1: anger in the country, and you're underestimating, uh, the potential
55:26
Speaker 1: for a change candidate to win. And Trump is a
55:29
Speaker 1: change candidate. And he wanted to buy the Buffalo Bills
55:32
Speaker 1: and uh they didn't let him. He I don't know
55:36
Speaker 1: what what happened, but he would be a fantastic owner.
55:39
Speaker 1: But he he uh to two things. He uh he
55:44
Speaker 1: forecasts that they wouldn't win many many games this year,
55:47
Speaker 1: which has not been true. They have a good team.
55:49
Speaker 1: And the other most fascinating thing, which we could have
55:52
Speaker 1: a whole another segment on he talks about his autism.
55:55
Speaker 1: Uh huh uh and I found that lots of the
55:59
Speaker 1: really unbelievable people on the street, just like in the
56:03
Speaker 1: Big Short, have Aspergers as Bergers are somewhere on the
56:07
Speaker 1: spectrum across across the board. Um, I've heard that about
56:12
Speaker 1: Ken Fisher mentioned his dad was, you know, pre diagnosis,
56:17
Speaker 1: he thought he was Asperger's. Ken himself very easily could
56:21
Speaker 1: be go down the list of of of people who
56:24
Speaker 1: have the ability to remove their emotions from the decision
56:28
Speaker 1: making process. And if you could do that, there might
56:31
Speaker 1: be a little spectrum going on with that, for sure.
56:34
Speaker 1: That's and that's what you need to do to be
56:37
Speaker 1: to be great, you know, you need to be different
56:40
Speaker 1: from the average human and information completely and totally different
56:44
Speaker 1: than than than than a normal person. Not to name drop,
56:49
Speaker 1: but I'm going to name drop. Marc Andreessen had has
56:52
Speaker 1: pointed out that Mark Zuckerberg at Facebook is a learning machine.
56:56
Speaker 1: He said he's never met anybody who learned as aggressively
57:01
Speaker 1: as him, constantly reading, constantly assimilating data and and your
57:05
Speaker 1: description immediately made me think of him though the jobs
57:10
Speaker 1: socially totally. But he didn't have any committees and he
57:16
Speaker 1: did all those things him, but he knew things other
57:20
Speaker 1: people didn't didn't know any knew it in a blink.
57:23
Speaker 1: And you can't teach that. It's just that's intuitive a curse.
57:30
Speaker 1: Why your socially inept? And uh, you know the big,
57:36
Speaker 1: the big short, big short life is I don't do this,
57:41
Speaker 1: I don't do that, I don't shave, I don't. It's
57:44
Speaker 1: just kind of man, I'm looking for. Michael Lewis is
57:48
Speaker 1: another one of those writers who was just unbelievable. So
57:51
Speaker 1: any any favorite Lewis books. While everything he's put out everything,
57:55
Speaker 1: he's everything. So it's Lewis and Gladwell and those are
57:58
Speaker 1: your favorite, But I'm more I'm more interested in life,
58:02
Speaker 1: in infects life. Did you read um The Undoing Project
58:09
Speaker 1: by Lewis? The book about Oh well, I'm gonna give
58:12
Speaker 1: you a book recommendation. Lewis wrote about Danny Khneman and
58:15
Speaker 1: Amos Tversky who discovered all of these behavioral issues that
58:21
Speaker 1: not just economists and economic behavior, but across the board
58:26
Speaker 1: the way humans behave. And it's a fascinating story. If
58:29
Speaker 1: you like Michael Lewis. It's a little different than some
58:33
Speaker 1: of his other books, but it's just as fascinating. It's
58:36
Speaker 1: really a fact, I now envy you for not having
58:39
Speaker 1: read it, because you get to read it. I've already
58:42
Speaker 1: read it. So let's get to our last two questions.
58:44
Speaker 1: My favorite questions. So if in then a millennial or
58:48
Speaker 1: someone who just graduated college came to you and said, Hey,
58:50
Speaker 1: I'm looking for some advice on career and finance, what
58:55
Speaker 1: sort of advice would you give him? Well, I actually
58:57
Speaker 1: try to mentor millennials, and I have a packet. I
59:02
Speaker 1: have found that most do not have a clue about interviewing.
59:06
Speaker 1: So I give him a packet on how to interview,
59:09
Speaker 1: and I try to take into the lunch or dinner,
59:11
Speaker 1: and I can tell you there's five or ten things
59:13
Speaker 1: that I reinforce that they must do to make a
59:17
Speaker 1: good first impression. And then there's three or four or
59:20
Speaker 1: five questions. I try to teach some of the questions
59:22
Speaker 1: they need to ask. But helping them in the interview
59:26
Speaker 1: processes is very, very important because they really do not
59:31
Speaker 1: show up ready to make a good first impression. Give
59:35
Speaker 1: us an example of each what what do you suggest
59:37
Speaker 1: they do on their interview and what sort of questions
59:42
Speaker 1: they need to put their resume on slightly thicker paper? Um,
59:47
Speaker 1: they need to have at the bottom like nice bonded
59:50
Speaker 1: linen paper that fuel substantial. That's right, it's noticed. And
59:55
Speaker 1: then that they need to have community service at the
59:58
Speaker 1: bottom of the resume. They have to have no spelling
1:00:01
Speaker 1: or punctuation or grammar zero, no errors whatsoever. They need
1:00:06
Speaker 1: to walk in with a briefcase. Open up the briefcase.
1:00:10
Speaker 1: Here's my resume. Well, it has to be organized. They
1:00:13
Speaker 1: walk into the left hand and shake a firm handshake,
1:00:16
Speaker 1: which a lot of them don't know how to handshake
1:00:18
Speaker 1: with a with a hand with a firm handshake. Uh.
1:00:21
Speaker 1: If they go to lunch or dinner and no, but yeah,
1:00:27
Speaker 1: I don't order spaghetty. But uh if the boss orders
1:00:33
Speaker 1: fish and chips and scotch on the rocks, you order
1:00:35
Speaker 1: the same exact thing. Commonality, it's the most important thing.
1:00:39
Speaker 1: And so you want to learn everything you can about
1:00:42
Speaker 1: that person in the company. Everything. And if you walk
1:00:46
Speaker 1: in and see that he's a tennis player, you're love
1:00:49
Speaker 1: tennis and uh um, and then you know the you
1:00:57
Speaker 1: know the the the process. Also the second thing is
1:01:04
Speaker 1: you want to ask them why is this position? Open um?
1:01:10
Speaker 1: How do you measure success? Um? Um? Good questions? Yeah,
1:01:15
Speaker 1: and what's the next what's the next stage in the process.
1:01:20
Speaker 1: You also want to take a card when you leave
1:01:22
Speaker 1: and write them a personal thank you and telling them
1:01:24
Speaker 1: you want to be part of their team and how
1:01:26
Speaker 1: impressed you were. And even if you get rejected, you
1:01:29
Speaker 1: want to go back again send the thank you note
1:01:31
Speaker 1: for being rejected and please keep me in mind in
1:01:34
Speaker 1: the future. But persistence pays off. Good good advice for
1:01:38
Speaker 1: any millennial. And our final question, what is it that
1:01:41
Speaker 1: you know about the world investing today that you wish
1:01:44
Speaker 1: you knew forty years ago when you were first starting.
1:01:49
Speaker 1: That's that is a good question, isn't that? It's my
1:01:51
Speaker 1: favorite question? Is it really that? That is my encore?
1:01:57
Speaker 1: After the everybody cheers, you come out, you do the
1:02:00
Speaker 1: song that's my last song. Well, you know, forty forty
1:02:04
Speaker 1: years ago, I think I was too naive and stupid
1:02:08
Speaker 1: to to to know how much risk I was taking,
1:02:13
Speaker 1: uh you know, at the time. But you know, it
1:02:16
Speaker 1: also goes back to uh the women neuronet at twenty
1:02:20
Speaker 1: five and men at thirty, and so thirty is just
1:02:23
Speaker 1: a wonderful aged too matriculate and to to to do things.
1:02:29
Speaker 1: And so I'll tell you one final story about Jesus. Uh,
1:02:36
Speaker 1: Jesus is the Son of God. Average life expectancy back
1:02:40
Speaker 1: then it was thirty two years of age. It's a
1:02:43
Speaker 1: misnomer because half the people died in childbirth two So
1:02:48
Speaker 1: did you ever wonder? Uh? They don't they know anything
1:02:51
Speaker 1: about it between the age of three and thirty zero.
1:02:55
Speaker 1: Why at thirty all of a sudden did he emerge
1:02:57
Speaker 1: Because he picked at thirty quite but he Jewish people
1:03:04
Speaker 1: do not allow you to become a rabbi until your
1:03:06
Speaker 1: twenty nine or thirty. You cannot teach life until you've experienced.
1:03:12
Speaker 1: Same thing with the medicine. Okay, you don't want a
1:03:15
Speaker 1: doctor that was no doogie howser you do him? So
1:03:20
Speaker 1: you know the third thirty you know lots of things
1:03:24
Speaker 1: and Judaism are well thought out. And this is why
1:03:27
Speaker 1: at thirty he emerged because nobody would listen to him
1:03:29
Speaker 1: until he was thirty. So I tell millennials also that
1:03:35
Speaker 1: college is the time to grow up and mature and
1:03:38
Speaker 1: then go out and get your and be men. Beach
1:03:41
Speaker 1: you know, in experienced life before you go out and
1:03:45
Speaker 1: and try to do something. So wait, so eventually you're
1:03:48
Speaker 1: you're team yourself up to become somebody a thirty when
1:03:51
Speaker 1: you can have a more successful chance of being successful.
1:03:55
Speaker 1: I think this is just me. I like that. That's fascinating.
1:03:59
Speaker 1: Ed's thank you so much for doing this. We have
1:04:02
Speaker 1: been speaking with Ed Mandel. He is a co founder
1:04:05
Speaker 1: of ned Davis Research as well as minority owner of
1:04:08
Speaker 1: the Atlanta Falcons. If you enjoy this conversation, be sure
1:04:12
Speaker 1: and look up an introd down an inch on Apple iTunes, Overcast, SoundCloud,
1:04:17
Speaker 1: Bloomberg dot com wherever final podcasts are sold, and you
1:04:21
Speaker 1: could see the other hundred and sixty or so such
1:04:24
Speaker 1: conversations that we've had previously. We love your comments, feedback
1:04:29
Speaker 1: and suggestions right to us at m IB podcast at
1:04:33
Speaker 1: Bloomberg dot net. I would be remiss if I forgot
1:04:37
Speaker 1: to mention our crack staff that helps put together UH
1:04:41
Speaker 1: these weekly podcasts. Medina Parwana is our audio producer, Taylor
1:04:46
Speaker 1: Riggs is in charge of booking UH, and Michael Batnick
1:04:49
Speaker 1: is our head of research. I'm Barry Riholts. You've been
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