Speaker 1: Strap on your parachute. It's time for What Goes Up
Speaker 1: with Sarah Ponzick and Mike Reagan. Hello and welcome to
Speaker 1: What Goes Up, a Bloomberg weekly market podcast on Sarah Ponza,
Speaker 1: reporter on the Cross Asset Team, and I'm Mike Reagan,
Speaker 1: a senior editor on the Markets Team. This week on
Speaker 1: the show, you could say the tone of markets has
Speaker 1: changed all of a sudden. Real yields are rising along
Speaker 1: with the dollar as inflation expectations fall, triggering selling in
Speaker 1: the likes of gold, for example. Cracks have begun to
Speaker 1: show in the credit markets and in the stock market.
Speaker 1: It's economically sensitive areas that have once again turned losers.
Speaker 1: Is this just a blip or is this possibly something more?
Speaker 1: And speaking of something more, we of course will close
Speaker 1: out the episode with our tradition the craziest thing I
Speaker 1: saw in Markets this week? Sarah, I gotta say the
Speaker 1: craziest thing I saw in markets this week. It's actually
Speaker 1: the most disgusting thing I've seen in markets this week too.
Speaker 1: I'm gonna give you a little tease at that, ye
Speaker 1: do we have to wait to the end of the
Speaker 1: show to find out what this most disgusting thing is
Speaker 1: Mike keeping us all on our brace yourself because it's nasty,
Speaker 1: it's crazy and it's nasty. Alright, it's interesting. And if
Speaker 1: you saw anything crazy in markets or even disgusting in
Speaker 1: markets that you want to share with us, give us
Speaker 1: a call on the Bloomberg Podcast hotline six four six
Speaker 1: three to four three four nine zero and leave us
Speaker 1: a voicemail and maybe we'll play it on the show. Also,
Speaker 1: you can tweet to us at podcasts and let us
Speaker 1: know what you think of the show where you've seen
Speaker 1: something crazy. We'd love to hear from you. Sarah, I'm
Speaker 1: excited for this week's guests. Do you know why? You
Speaker 1: must know me well enough to know why my only
Speaker 1: guest would be is is he also from Philly? Mike, now,
Speaker 1: well close enough. He's a Jersey guy. He's a he's
Speaker 1: a Jersey guy like me. I'm from Philly, but I've
Speaker 1: kind of converted to full Jersey guy by now I've defected.
Speaker 1: You've won me over in the Garden State. Eight. Yeah,
Speaker 1: it's all the Italian food won me over. I think
Speaker 1: that's fair enough. Over the Tuesday, but yeah, yeah, it's
Speaker 1: all about the stomach. But glad to have him on
Speaker 1: the show first time on What Goes Up. His name
Speaker 1: is Larry pitt Kowski. He is the co managing partner
Speaker 1: at good Haven Capital Management in good Old Milburn, New Jersey. Larry,
Speaker 1: welcome to the show. Thank you, it's nice to be here.
Speaker 1: O great, So, Larry, I was checking out the good
Speaker 1: Haven Fund before the show. One thing that popped out
Speaker 1: at me. I love to look at sort of the
Speaker 1: asset allocation, and at least as of the end of August,
Speaker 1: equity exposure was about seventy four percent cash and government
Speaker 1: securities making up the rest about a quarter of the fund. So,
Speaker 1: as Sarah will tell you, I'm I'm about to launch
Speaker 1: a twelve part question based on that, probably as I
Speaker 1: usually sit down, say, take take notes on this question now.
Speaker 1: But to me, so that seems like it correct me
Speaker 1: if I'm wrong. But historically, is that sort of a
Speaker 1: low equity exposure for your fund? And you know, depending
Speaker 1: on the f the answer is yes. I'm curious. Does
Speaker 1: it have something to do with this sort of froughthy
Speaker 1: valuations we've seen over the summer, the market getting up
Speaker 1: in in in some cases depending on what index, what
Speaker 1: sector you're looking at almost back to dot com style valuations,
Speaker 1: and if that is a low equity exposure, uh, anything
Speaker 1: in this correction getting you ready to sort of up
Speaker 1: up that equity exposure or or what. I'm just curious
Speaker 1: how you're thinking about that non equity portion of the
Speaker 1: of the fund. You know, Mike, get a good haven.
Speaker 1: The amount of cash and cash equivalence we've got is
Speaker 1: normally a byproduct of finding more or less things to
Speaker 1: do where you know, I don't manage the portfolio too
Speaker 1: Some target cash levels, however, you know, you make a
Speaker 1: fair point. During periods where there's more stress and more bargains,
Speaker 1: cash levels will normally come down, often sometimes dramatically, and
Speaker 1: when there's less to do, cash levels will will build.
Speaker 1: I would say the current cash level we've got, which
Speaker 1: as of you know recently is you know, kind of
Speaker 1: sitting around let's say high teens, is you know, kind
Speaker 1: of probably on average to what we've had over the
Speaker 1: last bunch of years. But it's interesting in this spring, uh,
Speaker 1: during the height of the market swomen you know, March
Speaker 1: of we put about of our then cash to work
Speaker 1: as there were despite the unbelievable uncertainty and the unpredictability
Speaker 1: and something nobody had ever seen as far as in
Speaker 1: you know, an economy that had partially shut down. We
Speaker 1: did put a lot of cash to work and high
Speaker 1: quality things that I think are already turning out to
Speaker 1: be very good buys. And I would say that's how
Speaker 1: we look to behave. We look to behave opportunistically when
Speaker 1: there are lots of things to do. However, I wouldn't
Speaker 1: ever say that I'm sitting around every day, you know,
Speaker 1: making some kind of market prediction by having a little
Speaker 1: bit more a little less cash. I don't know anybody
Speaker 1: who can do that. I certainly can't do it, but
Speaker 1: you make a very good point. It is a often
Speaker 1: a byproduct of finding more or less to do end
Speaker 1: flows of money. You have to be a psychic in
Speaker 1: order to be able to time that, really, especially the
Speaker 1: way markets have been lately, Larry. I was looking through
Speaker 1: your holdings as well, and I noticed that Barrett Gold
Speaker 1: is one of your top holdings. And as I kind
Speaker 1: of mentioned off the bat of the show that lately,
Speaker 1: although we had seen this unbelievable run at least in
Speaker 1: the price of spot gold over the past couple of months,
Speaker 1: that since waned as we've seen inflation expectations come off
Speaker 1: as it looks like we might not get a fiscal
Speaker 1: package from Congress. I wonder is your holding of Barrett
Speaker 1: Gold at all tied to an outlook on growth and
Speaker 1: outlook on inflation, or is there a different reason that
Speaker 1: you're actually interested Barrett Gold. It's a very interesting story.
Speaker 1: We made it a big holding when John Thorne, the
Speaker 1: current executive chairman of the board, came in and really
Speaker 1: started to clean up what had been a prior mess
Speaker 1: under old management where they made an acquisition of a
Speaker 1: copper company with no due diligence and they overlevered themselves.
Speaker 1: And I'm primarily a business analyst. Okay, I'm a securities analyst.
Speaker 1: I'm a business analyst, I'm a stock picker, and I'm
Speaker 1: a risk manager. Lastly our macroeconomic thoughts. So Barreck has
Speaker 1: been an important holding for us for a couple of years.
Speaker 1: And I never minded having the optionality of the exposure
Speaker 1: to gold, which is an alternative currency for all intensive purposes,
Speaker 1: as part of the thesis, as long as the majority
Speaker 1: of the thesis, which was the business. The evaluation we
Speaker 1: paid the management team was really the predominant reason to
Speaker 1: be in it now when Barrick merged with Rangold and
Speaker 1: Mark Bristow took over it because the story got even better,
Speaker 1: okay a couple of years ago, because Wrangled was the
Speaker 1: best managed gold miner I think in the world and
Speaker 1: had unbelievable statistics for creating shareholder value. So as I
Speaker 1: was looking at the portfolio somewhat recently, what you've seen
Speaker 1: since the pandemic as far as money printing increases in
Speaker 1: debt and that goes you know, in the US and
Speaker 1: around the world, it does lead one to be even
Speaker 1: happier to have some exposure and material exposure to an
Speaker 1: alternative currency. The thing to keep in mind about these
Speaker 1: types of things, you know, after the OAIT financial crisis,
Speaker 1: the number of people who were thoughtful and you know,
Speaker 1: really had a strong view that we were about to
Speaker 1: enter a period of hyper inflation and the stuff done
Speaker 1: during the Great Financial Crisis to create certain bailouts was
Speaker 1: going to create a weeker dollar and runaway inflation, all
Speaker 1: kinds of problems. There were strong views about that, and instead,
Speaker 1: over the next nine years we had deflation and a
Speaker 1: stronger dollar. So you gotta be very careful because these
Speaker 1: are very difficult things. But from where I sit today,
Speaker 1: Barrick is a we We have an enormous unrealized gain
Speaker 1: in it. The thesis and how they're running the company
Speaker 1: keeps getting better, and it's hard not to look at
Speaker 1: what's happening as far as printing of money deficits stimulus,
Speaker 1: you know, negative real interest rates. The Federal Reserve is
Speaker 1: very clear that they want to keep rates low for
Speaker 1: a long long time, and and feel that it's nice
Speaker 1: to have something in the portfolio that has some potential
Speaker 1: exposure positively to all those things, but wrapped around what
Speaker 1: appears to be a well run company. And it's not
Speaker 1: an easy business to be in. You know, mining is
Speaker 1: is not There's not an enormous number of companies in
Speaker 1: that business that have created a lot of long term value.
Speaker 1: But Mark Bristow has done it. At at Wrangled were
Speaker 1: forever grateful for John Thorn for having come in and
Speaker 1: really right in this ship. And so that's how we
Speaker 1: think about that position and how it he came where
Speaker 1: it is today. It's funny I always think back on
Speaker 1: that there was that famous open letter to the Fed
Speaker 1: that like thirty forty investors and fund managers signed warning
Speaker 1: of you know, Zimbabwe like inflation from quantitative using and
Speaker 1: I guess a lesson there. Larry has never saw in
Speaker 1: your your name to a letter like that predicting dire outcomes.
Speaker 1: The lesson is is that trying to put together a
Speaker 1: portfolio using macroeconomic predictions is really, really hard. There's a
Speaker 1: couple of people in the world that have done it well,
Speaker 1: you know, there's Soros and drugcon Miility. But I think
Speaker 1: a lot of investors you should you should really try
Speaker 1: to steer clear of having that be the thing that is, uh,
Speaker 1: you know, the driving force and how you're picking stocks
Speaker 1: for your portfolio, because it's very, very hard, and very
Speaker 1: few people get that kind of stuff right. So I'm
Speaker 1: and again the interesting thing also, but Barrick is, you know,
Speaker 1: it's become over the last few months, a lot of
Speaker 1: people have become interested in this sector and it's and
Speaker 1: it's interesting. And of course with golden nineteen hundred bucks
Speaker 1: there cash flow is a lot more than when gold
Speaker 1: is a thirteen hundred bucks. But you know, when we
Speaker 1: made it a bigger holding a couple of years ago,
Speaker 1: you know, nobody was calling me up saying, oh, that's
Speaker 1: really interesting you made that a bigger holding. I was
Speaker 1: getting more you know, polite, like what the heck are
Speaker 1: you thinking? And you know what are you doing? And
Speaker 1: you know and and things that I wouldn't repeat on
Speaker 1: your very high class Uh you know, a podcast so
Speaker 1: high class, Larry, I'm sure people are people are writing
Speaker 1: in like why Gold? Why not Apple? But yeah, I'm
Speaker 1: so flattered that you called this high class. I think
Speaker 1: Mike's a bit surprised. I think he might best probably
Speaker 1: I think he he dialed into the wrong but I
Speaker 1: gotta go. But but Larry, you make a great point.
Speaker 1: I mean, I think a lot of investors struggle to
Speaker 1: wear that micro and macro cap at the same time.
Speaker 1: And Sarah and I appreciate being able to talk individual
Speaker 1: names like this. I don't know how many guests we
Speaker 1: have on We're like, I'm not allowed to talk about
Speaker 1: individual stocks, so it's it's refreshing for us. So I
Speaker 1: just I want to talk about the biggest holding um
Speaker 1: at least as of the the end of last month,
Speaker 1: Berkshire Hathaway. Maybe a few listeners have heard of that company, Larry,
Speaker 1: kind of an obscure one there, But uh, are you
Speaker 1: are you a buffetologist, I assume, and I guess the
Speaker 1: the big question I have is, you know, eventually we're
Speaker 1: gonna get this passing of the reins from Buffett to
Speaker 1: his successor. Is that a buying opportunity or a selling opportunity?
Speaker 1: Do you think I've you know, owned you know, Berkshire
Speaker 1: on and off in different sizes for many decades. And
Speaker 1: the interesting thing is that, which I wrote about in
Speaker 1: a last shareholder letter, is that, you know, I find
Speaker 1: that many people who are you know, supposed to be
Speaker 1: you know, professional investors, have very strange ways of thinking
Speaker 1: about Berkshire. Some you know, there's some form of worship
Speaker 1: without really you know, doing any real, you know, deep
Speaker 1: analytical work and thinking about it as a business. And
Speaker 1: some just you know, there's never ending joy in a
Speaker 1: kind of a gotcha kind of moment of finding anything
Speaker 1: that Berkshire does wrong with just like, oh, I told
Speaker 1: you that's so good. So, you know, neither of those
Speaker 1: two extremes are logical ways to think if you're trying
Speaker 1: to make logical decisions with with money. So from my
Speaker 1: perspective when I looked at them, by the way in
Speaker 1: the in you know, March March April, during the height
Speaker 1: of the market collapse, I basically doubled our exposure to Berkshire. So,
Speaker 1: you know what, what was I thinking? I was thinking, well,
Speaker 1: you know, we have an economy that is shut down
Speaker 1: to a great extent. Here's a company that has a
Speaker 1: hundred forty billion dollars of of cash. Here's a company
Speaker 1: that has a long history of great shareholder returns. Their
Speaker 1: main business is property and casualty insurance in a couple
Speaker 1: of different sectors. My feeling was that property and casualty insurance,
Speaker 1: the market for pricing in terms is improving claims from
Speaker 1: the and they would be able to deal with the
Speaker 1: you know, COVID nineteen claims, and there's some noise around
Speaker 1: some of that. And the stock price was I thought,
Speaker 1: selling at a very attractive price really kind of approached
Speaker 1: the book value. The optionality for them to put money
Speaker 1: to work in different rescue financing and transactions existed, though
Speaker 1: they may or may not do it, and I think
Speaker 1: it's unfortunately a certainty that at some point Mr Buffet
Speaker 1: and Mrmonger won't be you know, calling the shots anymore,
Speaker 1: I think, and I have some knowledge the bench at
Speaker 1: Berkshire is much more talented and deeper, uh than I
Speaker 1: think people really give it credit for. And I think
Speaker 1: Berkshire twenty years ago was really, you know, a holding
Speaker 1: company with a securities portfolio. I think it's much more
Speaker 1: than that today. The magic of Berkshire is the generation
Speaker 1: of insurance float at no cost, which then can be
Speaker 1: invested and helped to drive book value growth. And a
Speaker 1: couple of very large businesses, the railroad business, the utility business, uh,
Speaker 1: the insurance business, and an investment portfolio that one has
Speaker 1: to make a judgment of. So when you when you
Speaker 1: put that all in the mix, I thought, at the
Speaker 1: prices that were available in the spring, I thought these
Speaker 1: were really dirt cheap prices, and so we what an
Speaker 1: enormous amount. And you know, I think that it is
Speaker 1: playing out reasonably well. The negative on Berkshire, which is material,
Speaker 1: it's just size. It's hard to move the needle. You know,
Speaker 1: it's five billion dollar market cap and they do something
Speaker 1: very clever and they make a billion dollars. It doesn't
Speaker 1: really move the needle that much. But if you buy
Speaker 1: back more stock or you know, at some point you
Speaker 1: distribute more money, you know, that's a lovable problem. So
Speaker 1: One of the keys I found over over all the
Speaker 1: years is just to try and be rational and not
Speaker 1: you know, get caught up in too much emotional drama
Speaker 1: about how you think about any holding. You know, so Berkshire.
Speaker 1: I may change my mind one day, but I thought
Speaker 1: it was a very good thing to increase our exposure
Speaker 1: to dramatically in this spring. And as it turns out,
Speaker 1: you know, a lot of the criticism lately of Berkshire
Speaker 1: had been, oh, you know, it's a it's a lot
Speaker 1: of old economy assets. Will meanwhile, you know, something like
Speaker 1: the portfolio is Apple and they've been too inactive. Well,
Speaker 1: you know, shortly after all that criticism, they made a
Speaker 1: ten billion dollar deal from some you know, natural gas
Speaker 1: distribution assets from Dominion. Uh, you know, so there, and
Speaker 1: they've done plenty of other things over the last month
Speaker 1: or so, so you know, and you had a board member, actually,
Speaker 1: Meryl Whitmer, who's well respected investors on the board, who
Speaker 1: bought I think two million dollars worth is in the
Speaker 1: open market for herself and her family in the spring.
Speaker 1: So you know, but again we'll just try. You know,
Speaker 1: I'm ably assisted here in in uh doing the analysis
Speaker 1: and running a good haven on the portfolio side. Uh,
Speaker 1: you know, by ARTI quak and we'll just continue to
Speaker 1: you know, crunch through the numbers and and think about,
Speaker 1: you know, where the business or the company has headed
Speaker 1: over time. I kept thinking back during the turmoil in
Speaker 1: the spring. I kept thinking back to the financial crisis,
Speaker 1: when they made those really well timed investments, uh with
Speaker 1: the preferred shares and in some of the banks that
Speaker 1: were struggling back then. I was kind of expecting something
Speaker 1: like that this time. I wonder if it's know, if
Speaker 1: it tells you anything. You know, Buffett calls it his
Speaker 1: elephant hunting gun. All that cash, you know, he like
Speaker 1: you said, he's he's fired a few shots from it,
Speaker 1: but still kind of holding fire with all that cash
Speaker 1: through all all of this. Does that tell you anything
Speaker 1: about perhaps how just uncertain and risky this environment is
Speaker 1: where where Buffett doesn't seem to be comfortable really writing
Speaker 1: a giant check for for some distressed asset right now.
Speaker 1: I think in the March and April time frame, one
Speaker 1: of the things that I think got in the way
Speaker 1: of Berkshire potentially doing some rescue finance was the FED
Speaker 1: coming in so fast and in such an extreme way
Speaker 1: into the credit markets, which I think allowed a lot
Speaker 1: of bar words that were viable and interesting but on
Speaker 1: somewhat shaky ground to access. The fixed income markets are
Speaker 1: the equity markets, and you saw the you know, the
Speaker 1: number of underwriting is done by across the investment banking spectrum.
Speaker 1: And I think, you know, if not for that massive
Speaker 1: FED intervention, some of those companies would have been knocking
Speaker 1: on Berkshire's door, you know, but you know again, you know,
Speaker 1: they they have not been. Thursday morning, Berkshire announced a
Speaker 1: deal with Scripts which was a you know, a preferred
Speaker 1: with some warrants on very attractive terms, you know, kind
Speaker 1: of of smaller size, but a very typical Berkshire deal.
Speaker 1: And you know they did by, you know, recently a
Speaker 1: slug of all the Japanese the five or six major
Speaker 1: Japanese trading houses, and you know, so but they were
Speaker 1: less active at that period. And you know, again, I
Speaker 1: think there were a couple of reasons. And and Mr
Speaker 1: buffin May very well and Deputies May very very well
Speaker 1: looked at, uh, you know, a shutdown economy and said, well,
Speaker 1: you know, let's you know, let's tread gingerly a little bit.
Speaker 1: But I think the FED intervention and the ability of
Speaker 1: companies to access traditional financing so quickly. It was very
Speaker 1: different than if you remember the the global financial crisis.
Speaker 1: That's not that that process took months. You know that,
Speaker 1: you know, FED intervention and go for you know that,
Speaker 1: and it gave Berkshire an opportunity to you know, put
Speaker 1: some capital to work. It does feel as though, I
Speaker 1: mean policy response, but everything this year has almost just
Speaker 1: happened at warp speed. Um. You mentioned earlier on the
Speaker 1: Larry how Berkshire is a really big company. Um, so
Speaker 1: something has to happen to really move the needle. And
Speaker 1: I'm just gonna make my way down the list and
Speaker 1: looking at the portfolio, and I see you also have
Speaker 1: Alphabet as another one of your top holdings, which is
Speaker 1: also a large company. And I'm also going to preface
Speaker 1: this by saying it's my turn now, Mike to ask
Speaker 1: a twelve part question. Uh, but one I want to
Speaker 1: ask you. I know, Uh, there's a lot of talk
Speaker 1: about how some people when they think of value investing,
Speaker 1: they think about it in the wrong way that some
Speaker 1: think of value investing, and you're leaving out possible ways
Speaker 1: to value a company. You know, especially this year, a
Speaker 1: lot of people have brought up conversations about how to
Speaker 1: price the likes of intangible assets, and I just wonder
Speaker 1: how you work this into your thinking um and your
Speaker 1: process when you're looking at companies to put in your portfolio,
Speaker 1: and how Alphabet might fit into that that process as well.
Speaker 1: By the way, Mike, I don't know how to tell
Speaker 1: you this, but that's my favorite question so far that
Speaker 1: Sarah just asked. So well, thank you. Don't take this
Speaker 1: the wrong way, you know, Sarah, you raised a really
Speaker 1: interesting point. And in my last shareholder letter, I attached
Speaker 1: a letter I had written to then clients talking about
Speaker 1: how owning good businesses with high returns on capital that
Speaker 1: had some defensible mode of some sort, that were well
Speaker 1: managed quality is not inconsistent with value investing. And it's
Speaker 1: one of the things that I think is, uh, you know,
Speaker 1: here at good Haven, as I took control of the
Speaker 1: firm recently, we we needed to hearken back to a
Speaker 1: little bit more our history and owning Alphabet for instance, Uh,
Speaker 1: you know, purchases were mostly made after a bunch of
Speaker 1: years ago, after they had uh you know, they had
Speaker 1: shortly bought YouTube and there was all kinds of noise,
Speaker 1: people saying, oh my god, you know you paid whatever
Speaker 1: it was, a billion, six billion eight to YouTube and
Speaker 1: that's an insane evaluation. And the companies a one tricked pony,
Speaker 1: and you know, paid searches is peaking. And I think
Speaker 1: that you make a very good point, Sarah. I think,
Speaker 1: first of all, in the world of technology, for those
Speaker 1: of us that have been around a long time, one
Speaker 1: of the problems with investing in technology many years ago, Okay,
Speaker 1: in my my recent letter, I talked about how in
Speaker 1: two of somebody come to and said, look, half the
Speaker 1: you know, half the world, you know in ten or
Speaker 1: fifteen years is going to have a PC. You know,
Speaker 1: you want to put a big chunk of your net
Speaker 1: worth in the top three PC companies. And they were
Speaker 1: then Commodore, Tandy and Whang. And if you would have
Speaker 1: done that, you would have lost a lot of money. Right.
Speaker 1: It was a very hard business to see the future
Speaker 1: because it was aging so rapidly. However, if you looked
Speaker 1: at you know, Alphabet six seven, eight years ago, I
Speaker 1: think you would have seen something selling it a relatively
Speaker 1: attractive p ratio, maybe not eight times earnings, maybe was
Speaker 1: low teens or mid teens and growing rapidly. And then
Speaker 1: you had to do some research and you had to
Speaker 1: say to yourself, Okay, you know the snowball of advertising
Speaker 1: budgets moving digital from non digital. You know where is
Speaker 1: it is? The ninth inning is at the second ending?
Speaker 1: Is it's still growing? And and how are they going
Speaker 1: to allocate capital? And what about these new things they
Speaker 1: just bought YouTube? Is it sensible? And I think if
Speaker 1: one would have come to a sensible conclusion, I think
Speaker 1: the earnings and Alphabet's case, I think the earnings growth
Speaker 1: over the last six or seven years has you know,
Speaker 1: very much told the story of the underlying intrinsic value growth.
Speaker 1: I think that, Sarah, your question raises a you know,
Speaker 1: kind of an interesting point. Was some of the differences
Speaker 1: in today and looking at a company like an Alphabet
Speaker 1: or an Apple. First, of all, these companies they take
Speaker 1: very little capital to run. I mean many many years ago.
Speaker 1: If you look at general motors are Bethlehem Steel or
Speaker 1: a ust you know, it takes an enormous amount of
Speaker 1: actual physical you know, plant equipment to an inventory to
Speaker 1: make these things run. Digital companies are are different, and
Speaker 1: often you know, there's less capital spending, but there's more
Speaker 1: run through the income statements. So you make a very
Speaker 1: good point that one has to consider such things as
Speaker 1: intangible assets and and returns on capital and think about
Speaker 1: it all differently. I don't think that one wants to
Speaker 1: wade into starting to veer into you know, metrics, you know,
Speaker 1: is all about having they eyeballs. I don't think that
Speaker 1: that's necessary of a way to think about valuation. To
Speaker 1: have found some of the big tech companies where Alphabet
Speaker 1: or Facebook attractive investments at different points over the last six,
Speaker 1: seven or eight or eight years, and I think it
Speaker 1: it is important for value of people, you know, to
Speaker 1: not forget that owning quality is perfectly consistent with value.
Speaker 1: The other thing that I think you're raising a good
Speaker 1: question is if you own something of such good quality
Speaker 1: and it grows very well, you should be very loath
Speaker 1: to sell it just because the valuation is no longer
Speaker 1: dirt cheap. That's a second issue. But anyway, that's all right.
Speaker 1: I think we've gotten most of the top holdings, but
Speaker 1: one more before we get to the crazy things. Jeffries, uh,
Speaker 1: Jeffreys Financial Group, tell us what you like about them? Well,
Speaker 1: Jeffreys reported earnings Thursday morning that we're you know, stellar.
Speaker 1: You know, I can think of a few more even,
Speaker 1: you know, even more positive words. Jeffries is a investment
Speaker 1: bank that came together through the merger of Old Jeffreys
Speaker 1: and Leucadia. Rich Handler runs the place very well and
Speaker 1: owns an enormous amount of stock. The price, even after
Speaker 1: you know some recent gains is probably uh, let's call
Speaker 1: it eighteen bucks. I think tangible book values twenty six bucks.
Speaker 1: They're improving the return on equity. They're good at what
Speaker 1: they do, they're good at protecting book value. And in
Speaker 1: a world where bargains are not easy to find, I
Speaker 1: think something at that valuation with that kind of talented
Speaker 1: management team, and again, you know, the earnings that you
Speaker 1: have seen you both Thursday morning and in the recent
Speaker 1: couple of quarters, I think should tell you that they're
Speaker 1: on the right track. You know. I I always expected
Speaker 1: them to get rolled up by another bank. Um, I
Speaker 1: wonder what what the story is there. Maybe Handler just
Speaker 1: as wants no part of that right now. I don't know.
Speaker 1: That's that's something you'll have to ask him. But you know,
Speaker 1: I think I think from as an owner, I think
Speaker 1: as long as they continue to, you know, to build value.
Speaker 1: I think everything will you know, the rest of it
Speaker 1: will take care of them, will take care of itself.
Speaker 1: So all right, fair enough, Sarah. We'll have to get uh,
Speaker 1: have to get Rich Handler on the show and UH
Speaker 1: explain it all to us. Something that'll be the next ask.
Speaker 1: All right, it's that time. It's it's the time you've
Speaker 1: been waiting for the craziest things we saw in markets
Speaker 1: this week. Stand clear of the craziest things we saw
Speaker 1: in markets this week. I'm gonna go first, Sara, Yeah,
Speaker 1: because we've been waiting on our toes just because we
Speaker 1: want to hear what's gross that you have to tell us. Mike,
Speaker 1: I've been waiting with bated brev as you can probably guess.
Speaker 1: I am a big fan of of the alternative at
Speaker 1: Alternative Alternative Asset UH marketplace, and Sarah does not get
Speaker 1: any more alternative than this. And I should give a
Speaker 1: plug to the terminal. If you have a Bloomberg terminal
Speaker 1: type in NI space, auction go and you'll you can
Speaker 1: follow along with the crazy things I find on there,
Speaker 1: because there's always something crazy being auctioned UH in the
Speaker 1: alternative asset space and this is really alternative, Sarah, so
Speaker 1: and I auction though you just gave up your sweet sauce.
Speaker 1: I did, I know, and I got other I have
Speaker 1: other tricks. I have other tricks, though, So I I
Speaker 1: throw the bone. Throw the bone to people a little bit.
Speaker 1: As you probably know, UH, there's a robust market for
Speaker 1: Michael Jackson memorabilia. You know, if you could get your
Speaker 1: hands on one of his old gloves or one of
Speaker 1: those loafers he moon walked in worth of fortune. This
Speaker 1: one shocked me. Though. Someone is auctioning off I should
Speaker 1: preps this. As you may remember, Michael Jackson had some
Speaker 1: some problems with drug abuse towards the end there, and
Speaker 1: he was right before he died, he was actually hooked
Speaker 1: up to UH and I V that would administer these
Speaker 1: these painkiller drugs to him. It's a tragic story too.
Speaker 1: I'm kind of now, I'm kind of feeling bad I
Speaker 1: even brought this up. Anyway, it better be worth it.
Speaker 1: Someone in is auctioning off the final I V Bag
Speaker 1: that he was hooked up to, and it comes complete
Speaker 1: with Michael Jackson's blood stains on the I V bag.
Speaker 1: I'm ashamed of myself. I can see our producer. She's
Speaker 1: like she's covering her face. She's so ashamed of this,
Speaker 1: of this crazy thing. Okay, this is ridiculous, but I'm
Speaker 1: also I can't say I'm not curious for what this
Speaker 1: is going for. Well, let's I was going to get
Speaker 1: to that. Let's let's play prices right now. And here's
Speaker 1: where the value comes in, I think is if it
Speaker 1: is stained with his blood. I mean you could maybe
Speaker 1: clone Michael Jackson. I'm just throwing that out there to
Speaker 1: the buyers out there. If some if some crazy mad
Speaker 1: scientists looking guy in a lab coat and wild hair
Speaker 1: shows up at this auction, I think we know where
Speaker 1: this is going. That's the only one should be able
Speaker 1: to go. Let's play prices, right, Sarah, what would you
Speaker 1: expect to bid for the winning bid to be for
Speaker 1: for this item? I'm lost. I I don't even have
Speaker 1: anything to base this off of. I have no single comparison.
Speaker 1: But I'm gonna go ahead and I'm going I guess
Speaker 1: to k Oh, I've got a lot of lousy poker
Speaker 1: face on that one. Larry, uh So, Larry, you can
Speaker 1: probably you can probably read my poker face there. And
Speaker 1: and let's hear your prices are right. I don't know.
Speaker 1: I kind of liked I kind of like the range
Speaker 1: of Sarah's price. Yeah, yeah, Tift. I so think the
Speaker 1: guys it's some memorabilia merchant in Las Vegas who is
Speaker 1: in charge of this auction. They're saying they're they're hoping
Speaker 1: to get I agree that that's slow. I don't know
Speaker 1: about two. Unless you can actually clone Michael Jackson, then
Speaker 1: you know, then what what prices? At least I got
Speaker 1: the base right, but I look I I as soon
Speaker 1: as I said it, I knew I likely overshot, but
Speaker 1: nothing to compare. Well, you know, maybe they're low ball
Speaker 1: in here, and and someone as enthusiastic of a collector
Speaker 1: is Sarah Ponza will show up and and bid two two.
Speaker 1: I am a big Michael Jackson music fan. I must
Speaker 1: say that's there you go, there you go. So I
Speaker 1: apologize to anyone who's grossed out by that. I'm kind
Speaker 1: of grossed out myself about the about that one, but
Speaker 1: I wanted to. I wanted to show you how strange
Speaker 1: and how crazy the alternative asset space can go. Sara,
Speaker 1: you talked to a lot of allocation experts. Maybe you
Speaker 1: can throw that in there. What sort of allocations should
Speaker 1: you should you have to celebrity I v bags. Yeah,
Speaker 1: the next time I'm on the phone with a multi
Speaker 1: asset strategist or investor, I'm gonna suggest this, say, you know,
Speaker 1: and instead of adding to your gold that's in your portfolio,
Speaker 1: you should run an I auction on the terminal and uh,
Speaker 1: see what you can get better bang for your buck. Look,
Speaker 1: Larry's Larry's fund has a decent amount of cash. It
Speaker 1: out there, all right, Sarah, what do you gut? Can
Speaker 1: you top that? I don't think I can stop it,
Speaker 1: to be honest, but let's go ahead with it anyway.
Speaker 1: So we've been talking a lot about trying to figure
Speaker 1: out the right way to value a company and knowing
Speaker 1: a company that you owned. Well, this week there was
Speaker 1: just a bit of a funny I guess I'm gonna
Speaker 1: call it a kerfuffle. Um that uh didn't really make sense.
Speaker 1: So at the beginning of the week, there were these
Speaker 1: reports that Amazon was partnering with Echelon Fitness to make
Speaker 1: a five hundred dollar fitness bike, and it immediately tanked
Speaker 1: Peloton's stock price. Because everyone knows that when Amazon enters
Speaker 1: your space, Um, not the best thing for you as
Speaker 1: a company. Well, the next day, it didn't take very long.
Speaker 1: Amazon came out and denied that they were in partnership
Speaker 1: for this bike at all. They told Echelon to stop
Speaker 1: selling the bike. Supposedly this was being called the X
Speaker 1: Prime bike, and an Amazon spokeswoman had to come out
Speaker 1: and basically say the bike wasn't related to Amazon, and
Speaker 1: Echelon then blamed the it in on quote unquote miscommunication. Um,
Speaker 1: and it really makes me think, like I wonder if
Speaker 1: this was just a ploy for them to get their
Speaker 1: name out there for me to be thinking, Oh, I
Speaker 1: think this. I think Echelon has made this really cheap
Speaker 1: bike in partnership with Amazon, even if it's not true.
Speaker 1: But you know, the price of name recognition is pretty high.
Speaker 1: That's a pretty good one. Has anyone contacted that woman
Speaker 1: from the Peloton commercials that that everyone was outraged about that?
Speaker 1: Not that I know of, that last she'll sign on
Speaker 1: with that, she needs to sign on with that, That
Speaker 1: would that would seal the deal from me. That's a
Speaker 1: pretty good one, Sarah, I gotta admit that's a good one.
Speaker 1: It's no Michael Jackson, I v bag, but I took
Speaker 1: my hat to you on that one. Larry, how about you.
Speaker 1: Have you seen anything crazy in markets this week? Well,
Speaker 1: you know who could who could who could come up
Speaker 1: with anything that says, uh, you know, off the chart
Speaker 1: says that Michael Jackson, I back, Mike, I'm an instant,
Speaker 1: you know. I mean, look at this, Larry, I I
Speaker 1: Mike's tapping himself on the back. Yeah, that's true. Look.
Speaker 1: The wonderful thing about the markets that's fascinating me for
Speaker 1: you know, forever and ever is you know, there's always
Speaker 1: you know, uh, you know, dramatic swings and volatility and
Speaker 1: opportunities on either end. And you know it never, you know,
Speaker 1: human nature never ceases to amaze one. You know, when
Speaker 1: everything's doing well, everybody's uh uh you know, feeling optimistic,
Speaker 1: and when there were bargains and and and things to do,
Speaker 1: people are you know, hiding under the desk. You know
Speaker 1: as a as a smart as a smart friend of
Speaker 1: mine said, you can have you can have good headlines
Speaker 1: or cheap stock prices. You just cana at the same time,
Speaker 1: so so and and and and and that continues. So
Speaker 1: you know, human emotion will always and it's and every
Speaker 1: you know, you don't have to wait very long to
Speaker 1: see those extremes, and the markets of today you don't
Speaker 1: have to wait very long to see those extremes. And
Speaker 1: you know, I'm just waking up every day trying to
Speaker 1: you know, you those extremes to the advantage of me
Speaker 1: and my you know, fellow investors. So you know, I
Speaker 1: don't have anything is esoteric is your thing, But I'll
Speaker 1: continue to enjoy, uh, watching how emotions swing around and
Speaker 1: just try and make the most sense. Yeah, and you know,
Speaker 1: make a good point. I feel like the sentiment at
Speaker 1: the beginning of September is just remarkable, isn't it. Well,
Speaker 1: you know, it's unbelievable. Don't and don't forget where you know,
Speaker 1: where markets were in March and April, and what the
Speaker 1: outlook was, you know, and you know, and uh, you know,
Speaker 1: putting cash to work there was you know, you know,
Speaker 1: it was not easy. But you know it's, uh, for
Speaker 1: those of us have been around for a long time,
Speaker 1: that was a very unusual period. But you know, I've
Speaker 1: seen such periods before and they're never exactly the same.
Speaker 1: And but I think, you know, it's it's it's never
Speaker 1: more important to keep one's wits about one when there's
Speaker 1: you know, when there's such extreme volatility, and I think
Speaker 1: it served this well at you know Good Haven, where
Speaker 1: you know we're ranking is improving dramatically versus our peers,
Speaker 1: and we're happy to be, uh, you know, continuing to
Speaker 1: try and you know, build the track record. You know.
Speaker 1: All this talk about emotion makes me realize. I think
Speaker 1: the reason I guess two K, Mike, is because I
Speaker 1: think we've all just been embedded in this world in
Speaker 1: which the term has been stocks only go up, and
Speaker 1: we've seen asset prices rise, and I just think that
Speaker 1: anything days, especially in ivy bag of Michael Jackson's blood um,
Speaker 1: could go for a high price. Why not. Yep, it's
Speaker 1: it's a frothy it's a frothy market, Sarah. I can
Speaker 1: see where you where you overvalued the ivy bag. We'll see,
Speaker 1: we'll see maybe maybe you'll win. Maybe when the final
Speaker 1: auction is amount is known, you'll be you'll you'll have
Speaker 1: won the prices right on this, We'll have to check back,
Speaker 1: check back, because I do think they were low balling.
Speaker 1: You know. Look, when you're auctioning something and you're talking
Speaker 1: to the press, you should high ball it. Right, You're like, oh,
Speaker 1: we're hoping to get five million. I don't know why
Speaker 1: they low balled. Yeah, this isn't over. This isn't over.
Speaker 1: I think we'll have to circle back to this. It
Speaker 1: makes me wonder, makes me wonder if Sarah is actually
Speaker 1: the seller. Makes me wonder if Sarah is actually the
Speaker 1: seller of the item and she's trying to get the
Speaker 1: price up. Sarah, are you secretly the seller? Right? All right?
Speaker 1: There was I'm not supposed to mention that Larry. Larry
Speaker 1: clearly unveiled the mystery of the show. I am the seller,
Speaker 1: but unfortunately we are going to have to leave it there.
Speaker 1: Larry Pittkowski, thank you so much for joining us today,
Speaker 1: my pleasure, thank you for having me. What goes up?
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal website and app or wherever
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Speaker 1: The head of Bloomberg Podcast is Francesco Levie. Thanks for listening,
Speaker 1: See you next time.