Latest / Bloomberg Intelligence / Author Spencer Jakab on Book: 'Heads I Win, Tails I Win'(Audio)

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Author Spencer Jakab on Book: 'Heads I Win, Tails I Win'(Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York Bloomberg eleventh, Rio to Washington,
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  Speaker 1: This is taking stock. Coming up on taking stock, Sir
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  Speaker 1: John Templeton once said that there is only one long
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  Speaker 1: term investment objective, maximum total returns after tax. We're gonna
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  Speaker 1: be speaking with Spencer Jacob and his new book heads
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  Speaker 1: I Win Tales, I Win, Why smart investors fail, and
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  Speaker 1: how to tilt the odds in your favor. That's all
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  Speaker 1: coming up next. Right now, Let's go to Charlie Pellett
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  Speaker 1: hundred index up eight now two, a gain of four
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  Speaker 1: tenths of one percent. Morgan Stanley shares her up by
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  Speaker 1: one point four percent, Microsoft rallying six point one percent,
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  Speaker 1: as we mentioned, Morgan Stanley posted profit that beat analysts estimates.
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  Speaker 1: Is revenue from wealth management and bond trading exceeded expectations.
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  Speaker 1: Here's n y U Stern School of Business professor Brad
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  Speaker 1: Hints requartered and last quarter. But again, the d mbscent
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  Speaker 1: going to get that. So they outlook remains let's keep
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  Speaker 1: the cost out. United Continental Holdings rising to its highest
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  Speaker 1: value in almost three months after chief executive officer Oscar
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  Speaker 1: Munio said he is reviewing all aspects of the airline's
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  Speaker 1: operations in an effort to boost profitability. U a l
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  Speaker 1: is up by nine tenths of one percent. Gold down
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  Speaker 1: fifteen ounce the thirteen sixteen, the drop there of one
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  Speaker 1: point two percent, the tenure down eight thirty seconds of
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  Speaker 1: the yield of one point five eight percent. Recapping stocks higher,
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  Speaker 1: SMP up nine, a gain of four tenths of one
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  Speaker 1: percent two on Wall Street. Now look at other stories
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  Speaker 1: making news. Thank you, Charlie from the Bloomberg News Room.
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  Speaker 1: the first few days of the convention have been peaceful
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  Speaker 1: last three days have been um pre even uh, not
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  Speaker 1: aid to Iraq. The funds will help build the war
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  Speaker 1: torn country and support displaced residents. Secretary of State John
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  Speaker 1: by securing more than two billion dollars of pledges that
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  Speaker 1: we know will be forthcoming, we have exceeded our expectations.
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  Speaker 1: This is Bloomberg, Charlie, and we thank you and again
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  Speaker 1: recapping stocks higher with the SMP five hundred index up
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  Speaker 1: nine points to seventy three, a gain of four tenths
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  Speaker 1: of one percent. I'm Charlie Pellett, and that's a Bloomberg
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  Speaker 1: business flash. You're listening to taking Stock with pim Box
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  Speaker 1: and Jatholne Hayes on Bloomberg Radio. If you buy the
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  Speaker 1: same securities as other people, you will have the same
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  Speaker 1: results as other people. It's impossible to produce a superior
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  Speaker 1: performance unless you do something different. I'm the majority, so
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  Speaker 1: says Sir John Templeton. One of the world's most famous
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  Speaker 1: and successful investors. Here to tell us more about how
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  Speaker 1: to tilt the odds in your favor is Spencer Jacob.
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  Speaker 1: He is the author of a new book entitled Heads
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  Speaker 1: I Win, Tales I Win, Why smart investors Fail and
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  Speaker 1: how to tilt the odds in your favor. Spencer Jacob,
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  Speaker 1: thanks for being with us. First question, why did you
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  Speaker 1: write this book? Well, the reason I wrote the book.
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  Speaker 1: I mean, I've got nearly a quarter century under my belt. Now,
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  Speaker 1: I was a top rated stock analyst that I became
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  Speaker 1: an investing columnist. And you know, in my line of work,
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  Speaker 1: you get asked all the time, what do you think
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  Speaker 1: I should buy? What do you think about Apple gold,
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  Speaker 1: or you know, go back fifteen years, what do you
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  Speaker 1: think about Cisco or pets dot Com? And you know
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  Speaker 1: that my advice, you know, has been I really don't know.
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  Speaker 1: I mean, despite the fact that I'm paid to to
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  Speaker 1: do this, there really is no one who can reliably
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  Speaker 1: tell you what to buy or what to sell tomorrow.
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  Speaker 1: What I can tell you, though, is that your results
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  Speaker 1: are much worse than you wise. And people are really
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  Speaker 1: shocked when I tell them the numbers um that I
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  Speaker 1: m in my book. It's it's based. It's absolutely true.
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  Speaker 1: Though the average investor is way below the market averages. Uh.
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  Speaker 1: And it's it's quite easy to narrow the gap, or
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  Speaker 1: quite simple, I should say, but not easy. All right.
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  Speaker 1: So right now, looking at the SMP five year to date,
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  Speaker 1: the return is about six point three. If you're lagging
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  Speaker 1: that six point three in your portfolio, what are some
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  Speaker 1: of the ideas that you recommend well, if you're lagging
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  Speaker 1: this year, UM, and you're adopting some principles. Let's say
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  Speaker 1: you're not invested in the things that happened to be
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  Speaker 1: doing well this year, but you're a passive investor, you're
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  Speaker 1: not buying crazy names, then you have absolutely nothing to
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  Speaker 1: worry about. As a matter of fact, I think that
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  Speaker 1: the act of worrying about only making two percent with
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  Speaker 1: the markets of six is exactly the sort of attitude
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  Speaker 1: that gets people into trouble because you're always chasing performance,
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  Speaker 1: You're always looking for a fund manager who has the
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  Speaker 1: magic touch. You're jumping from person to person, stock to stock,
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  Speaker 1: sector to sector, and that makes you a typical investor
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  Speaker 1: and a typical investor. UM. Let's say you know you
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  Speaker 1: you compare to people. Let's say PIM, you and I
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  Speaker 1: both inherited a bunch of money thirty years ago, and uh,
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  Speaker 1: I was a typical investor and you were a completely
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  Speaker 1: robotic passive investor. Uh. After that period of thirty years,
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  Speaker 1: given the same amount of money and not allowed to
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  Speaker 1: touch it, you would have five to seven times as
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  Speaker 1: much money as I I would And that's a reflection
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  Speaker 1: of all the mistakes that people make that compounded over
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  Speaker 1: that very long period of time. So I would say, um,
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  Speaker 1: you know, be passive, be a robotic, be cheap, uh,
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  Speaker 1: don't pay too much for uh, you know, for a
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  Speaker 1: pool of passive investments, you really can't do much better.
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  Speaker 1: And if you're tracking the market or something close to it,
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  Speaker 1: you're doing better than eight or nine out of ten investors,
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  Speaker 1: which is pretty good. So people don't want to except that,
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  Speaker 1: you know, they can only sort of track the market
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  Speaker 1: or come close to it. But it's you know, and
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  Speaker 1: people are not aware of this, but it's far far
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  Speaker 1: better than what most people do. Professional money managers are
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  Speaker 1: professional money managers any better at selecting investments to produce
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  Speaker 1: the kinds of returns that their customers want than the
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  Speaker 1: customers themselves. No, I think that people who have heard
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  Speaker 1: statistics on it actually assume that they must be worse.
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  Speaker 1: Because you hear that in any given year, sevent of
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  Speaker 1: fund managers will will lack the market. At any given decade,
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  Speaker 1: over will lack the market. It isn't because they're bad.
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  Speaker 1: They're actually, you know, maybe slightly better than than you
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  Speaker 1: are at picking stocks. But when you tack their costs
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  Speaker 1: onto it, all the costs of managing money, the cost
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  Speaker 1: of holding some cash, the cost of their their um
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  Speaker 1: you know, paying them, and the profits of their companies.
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  Speaker 1: That's when the lag comes in. So professional money managers
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  Speaker 1: are not bad investors. They're probably slightly good investors compared
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  Speaker 1: to the man on the street. But once you once
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  Speaker 1: you pay them, the return is not too good. And people,
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  Speaker 1: you know, it's it's surprising that that people will read
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  Speaker 1: these reports and they'll read interviews with them. And I
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  Speaker 1: know lots of money managers. I'm friends with many, and
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  Speaker 1: they'll see someone who's rated four or five stars and
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  Speaker 1: put money into their fund and take it out of
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  Speaker 1: someone who's been lagging recently and statistically. Although I don't
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  Speaker 1: recommend putting money with any active manager. Uh, that's actually
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  Speaker 1: the worst thing you can do. Uh. It's it's like
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  Speaker 1: the Sports Illustrated cover curse the guy who was on
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  Speaker 1: the cover of a magazine because he's really hot. Bill
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  Speaker 1: Miller when he was on his fifteen year streak is
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  Speaker 1: likely to revert the mean and do poorly afterwards. As
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  Speaker 1: people found out the hard way with Bill Miller after
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  Speaker 1: the fifteen years streak ended, he was one of the
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  Speaker 1: worst managers for a few years. What do you think
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  Speaker 1: of the words of Charlie Munger. He says that the
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  Speaker 1: academics have done a terrible disservice to intelligent investors by
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  Speaker 1: glorifying the idea of diversification. Well, um, I think that
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  Speaker 1: you don't put all of your eggs in one basket.
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  Speaker 1: I think and if you're a Charlie Munger or you're
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  Speaker 1: Warren Buffett, uh, and you have fifteen or twenty stocks,
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  Speaker 1: and you're extremely patient like them, Uh, then you can
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  Speaker 1: do quite well. You don't need to have five or
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  Speaker 1: a thousand stocks. I think he's right about that. Would
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  Speaker 1: Warren Bufetts say, you know, just you know, I don't
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  Speaker 1: disagree with putting all your eggs in one basket. You
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  Speaker 1: just need to really watch the basket. But what Charlie
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  Speaker 1: Munger and Warren Buffett and a handful of people have
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  Speaker 1: that most people don't have his patients For example, why
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  Speaker 1: I point out techniques in my book that will actually
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  Speaker 1: gain you an edge over the market, but people lack
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  Speaker 1: the patients to adopt those techniques unfortunately. Well, I want
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  Speaker 1: to thank you very much for shedding some light on this.
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  Speaker 1: Spencer Jacob is the author of the new book heads
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  Speaker 1: I Win, Tails, I Win, Why smart investors fail, and
• 10:50
  Speaker 1: how to tilt the odds in your favor. I'm Pim
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  Speaker 1: Fox and this is Bloomberg, coming up on taking stock, metals, mining,
• 11:04
  Speaker 1: and commodities. We've got Gordon Johnson, the head of Alternative
• 11:08
  Speaker 1: Energy and a director of Axiom Capital Management. That's next.