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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: While the majority of Americans own stocks and retirement accounts,

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Speaker 2: only thirty four percent of those surveyed by the FED

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Speaker 2: said their plans were on track. And famously, nearly four

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Speaker 2: and ten Americans have enough cash saved up to cover

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Speaker 2: a surprise four hundred dollars expense.

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Speaker 1: Don't have enough cash, and we.

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Speaker 2: Don't learn nearly enough about saving money and investment in

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Speaker 2: this country. But Melody Hobson hopes to change that. Melody

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Speaker 2: Hobson is the co CEO of investment firm Aerial Investments,

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Speaker 2: out with the New York Times best selling book for children,

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Speaker 2: Priceless Facts About Money. Hobson is also on the board

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Speaker 2: of Bloomberg Philanthropies, the philanthropic organization of Michael Bloomberg, the

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Speaker 2: founder and majority owner of Bloomberg LP, which owns Bloomberg News.

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Speaker 2: And thank you for joining us here, Melody. You know

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Speaker 2: this book in particular, you start with your own experience

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Speaker 2: growing up in Chicago with a single mother who sometimes

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Speaker 2: was looking to make ends meet. Now you stand on

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Speaker 2: the board of multiple boards of fortune five hundred companies.

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Speaker 2: In a lot of ways, is this book very personal

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Speaker 2: to you? Is it a memoir of some sort.

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Speaker 1: It's not a memoir.

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Speaker 3: I thought my story was very important in the beginning

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Speaker 3: to grounding the book, but I also shared John Rogers's

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Speaker 3: story who found it Aeriel, just as a beginning, setting

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Speaker 3: the stage of why the book makes sense and inviting

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Speaker 3: the reader into our lives as we were children, you know,

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Speaker 3: explaining what was like with when we were children. For me,

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Speaker 3: money was such a big deal when I was a child,

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Speaker 3: because we had such a hard time making ends meet

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Speaker 3: that I felt that letting the reader know why money

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Speaker 3: became so important to me as a subject matter was

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Speaker 3: something that they would then appreciate my passion for the subject.

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Speaker 1: You know.

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Speaker 2: Something we were talking about was this idea that only

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Speaker 2: about half the states in the United States really teach

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Speaker 2: financial literacy require it when you go to school. How

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Speaker 2: might that change over the next couple of years. Do

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Speaker 2: you think that there could be a bigger push here

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Speaker 2: to get financial literacy taught in schools.

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Speaker 1: I'm hopeful.

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Speaker 3: I don't know that there's any trigger that will lead

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Speaker 3: to that. I was really happy to hear that the

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Speaker 3: state of Maine actually bought my book for every elementary

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Speaker 3: school student in the state. I was astounded by that,

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Speaker 3: and I thought, that's great, because we want children to

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Speaker 3: have this knowledge, and honestly, I want the children to

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Speaker 3: be the gateway to the parent. I'm hoping a lot

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Speaker 3: of parents will pick up the book and be astounded

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Speaker 3: by the facts that they read and think, I need

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Speaker 3: to do more and learn more because most of our

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Speaker 3: money habits are learned from our parents.

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Speaker 4: Right, And most parents don't talk to their kids, don't

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Speaker 4: feel comfortable talking to their kids about this stuff.

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Speaker 1: I know mine didn't, So.

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Speaker 4: That's a piece.

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Speaker 1: The book is a piece.

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Speaker 4: Hopefully getting it into schools is another piece of it.

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Speaker 1: Is there a holistic a healthy model.

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Speaker 4: Can you look to another country, another civilization and say

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Speaker 4: they've done that right, and we need to sort of

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Speaker 4: adopt those practices.

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Speaker 1: I wish I could.

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Speaker 3: The world is pretty financially illiterate the subjects of money

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Speaker 3: and investing other than counting. We don't go very far

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Speaker 3: in schools in most places. And I know there are

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Speaker 3: things home mech and classes like that, but I think

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Speaker 3: we need to go a lot deeper really understand the

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Speaker 3: fundamentals of the stock market and investing. When you think

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Speaker 3: about the fact, when you get your first job, you

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Speaker 3: look at that four one K plan and you have

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Speaker 3: to make decisions that ultimately affect your family's financial security

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Speaker 3: over the long term in terms of your retirement, and

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Speaker 3: no one's really trained you to think about how to

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Speaker 3: make those decisions.

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Speaker 4: And hopefully you're doing that when you get your first job,

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Speaker 4: because it took me over a decade before I finally

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Speaker 4: started to invest my earnings here.

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Speaker 3: Well, so many companies now are automatically enrolling there are employees,

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Speaker 3: so that helps a lot that inertia. Once you get

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Speaker 3: into that plan, you keep investing. That's a great thing.

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Speaker 3: We have to make sure when people change jobs. The

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Speaker 3: average American has thirteen jobs in their lifetime that they

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Speaker 3: don't change jobs and cash out every time that they move.

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Speaker 3: And there's such interesting data about that. The Wall Street

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Speaker 3: Journal did a great story yesterday about the fact that

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Speaker 3: the smaller the amount you have in your four one

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Speaker 3: K plan, the more likely you are to sell it.

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Speaker 3: The bigger the amount you have, the more likely you

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Speaker 3: are to roll over.

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Speaker 5: Yeah, it's fascinating and the experience of switching jobs and

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Speaker 5: seamlessly getting your four oh one K across still a

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Speaker 5: clunky process. But with this book, what I think is

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Speaker 5: interesting is that, of course, you go into the history

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Speaker 5: of money thousands of years back. But I'm curious if

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Speaker 5: you thought about future proofing this at all, because you

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Speaker 5: walk through a sample bank transaction.

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Speaker 1: Do you think things could look.

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Speaker 5: Different in twenty thirty years when the children who are

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Speaker 5: reading this book are actually applying these lessons.

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Speaker 1: Well, we hinted at some of it. First of all.

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Speaker 3: I don't think knowing the history changes anything. I think

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Speaker 3: that's actually great and really important.

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Speaker 1: And it's fascinating.

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Speaker 3: I mean just explaining things like, you know, precious metals

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Speaker 3: are the results of meteors, meteors hitting the Earth's surface.

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Speaker 3: I mean most people don't think about that, are fossil

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Speaker 3: fuels or dinosaurs. You know, there are lots of things

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Speaker 3: there that I think, no matter who you are, whatever

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Speaker 3: time we're in today or thirty years from now, but

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Speaker 3: will be great. I hinted some of the things to come,

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Speaker 3: and I talk about, for example, paying with your phone,

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Speaker 3: and hint at some of these other things, and I

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Speaker 3: think that that we will see. However, it doesn't change

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Speaker 3: some of the fundamental ideas that I think are important.

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Speaker 3: For example, I'm encouraging parents to use cash around young children,

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Speaker 3: because these concepts are incredibly hard to understand. They're mystical

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Speaker 3: when you see money spewed out of a machine like

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Speaker 3: an ATM, or you see your parents only paying with

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Speaker 3: plastic and so a lot of parents will tell me

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Speaker 3: their children will say to them when they say, we

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Speaker 3: can't afford this, put it on a credit card, which

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Speaker 3: suggests they don't understand the fact that the credit credit

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Speaker 3: card is something you have to pay or that money

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Speaker 3: is finite.

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Speaker 1: So, no matter where we are with how.

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Speaker 3: Money and exchange and all of these things work, decades

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Speaker 3: from now, hundreds of years from now, I think this

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Speaker 3: foundational information is still very important and probably very evergreen.

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Speaker 2: Well, the concept of a twenty five percent interest rate

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Speaker 2: right for the credit card.

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Speaker 1: You know, it's interesting.

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Speaker 2: Goldman came out with a note in the last couple

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Speaker 2: of days saying that the next ten years for the

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Speaker 2: S and P five hundred might not be as good

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Speaker 2: as the last couple of decades. If you are a

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Speaker 2: young person investing a dollar today, if you are worried

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Speaker 2: about the next ten years, how do you think about investing?

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Speaker 3: So, first of all, I think that that's a nuanced

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Speaker 3: argument that Goldman is making. I saw the report, and

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Speaker 3: I think top line, they're right. However, the driver of

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Speaker 3: the SMP over the last decade, as we all know,

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Speaker 3: has been a very narrow group of stocks. We know

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Speaker 3: the MAG seven has had an outsized effect on the

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Speaker 3: returns that we've seen there, and so I often think

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Speaker 3: we have the s and P five hundred, it's really

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Speaker 3: the SMP four ninety three and then the.

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Speaker 1: MAG seven that is turbo charged those results.

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Speaker 3: So I would say I'd like to be a bit

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Speaker 3: more nuanced in thinking about that return in the future.

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Speaker 3: And I think there are areas in market that are

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Speaker 3: very undervalued where we have the opportunity for for real

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Speaker 3: appreciation over the next decade. If you look at how

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Speaker 3: smaller company stocks have done versus large gap the Russell

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Speaker 3: two thousand, or where we live at aeral the Russell

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Speaker 3: two thousand value versus the SMP five hundred, there is

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Speaker 3: a gaping hole in valuations right now, and we think

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Speaker 3: therefore there's a tremendous opportunity for smaller cap stocks to

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Speaker 3: have returns that are more like what we've seen historically.

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Speaker 3: If you look back to nineteen twenty six, before we get.

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Speaker 4: To the small caps, I.

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Speaker 5: Knowe I'm itching over Katie.

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Speaker 4: Champions the small caps for us on this Programay, I

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Speaker 4: just want to know what your take on that report,

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Speaker 4: because I feel like if we're kicking off this decade

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Speaker 4: with Nvidia, you know, in Facebook and Microsoft and Amazon

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Speaker 4: and Alphabet in the SMP, that's a great start for

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Speaker 4: this decade. And then if you get open Ai and

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Speaker 4: SpaceX and start adding these innovative companies. I mean, it

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Speaker 4: seems so pessimistic for Goldman Sachs to forecast only a

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Speaker 4: three percent annualized rate, as we showed on the chart

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Speaker 4: that I created from data Trek, that has only happened

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Speaker 4: like in the Great Depression or the Financial Crisis. I mean,

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Speaker 4: only when horrible catastrophes happen do.

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Speaker 1: We get returns that low for a ten year period.

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Speaker 3: And that's why I say I'm not necessarily convinced. However,

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Speaker 3: the stocks that you mentioned, I think their price for perfection.

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Speaker 3: I think you can be a great company, and I

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Speaker 3: mean great and not necessarily a great stock.

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Speaker 1: And I think it.

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Speaker 3: Presumes that everything goes perfectly, and I think that is

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Speaker 3: very hard to accomplish over long periods of time.

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Speaker 1: I was very humbled when.

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Speaker 3: I read stories in the last few weeks about Boeing

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Speaker 3: and Intel, where you see what is happening there. When

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Speaker 3: I came out of college, Intel was the Microsoft, Nvidia,

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Speaker 3: the Indie Grove was, you know, superstar legend. So the

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Speaker 3: idea that that company has one hundred billion dollar market cap,

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Speaker 3: I never would have anticipated that, And yet that is

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Speaker 3: where we are because life has along the way.

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Speaker 1: So again, you.

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Speaker 3: Can be a great company and have things happen. I'm

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Speaker 3: not suggesting any ill will on these businesses or these companies.

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Speaker 1: I'm just saying from here.

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Speaker 3: If I'm as we are at Aerial looking for value,

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Speaker 3: I would look elsewhere because the risk of owning the

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Speaker 3: names does go up with these valuations, right.

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Speaker 5: So the margin for error super narrow if you're one

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Speaker 5: of these huge magnificence.

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Speaker 3: I mean, I read the story about you know, Tesla

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Speaker 3: having a six trillion dollar market cap. At some point

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Speaker 3: you have individual stocks that represent the market cap one

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Speaker 3: stock of the entire Rustle two thousand.

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Speaker 1: I can't even wrap my brain around that.

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Speaker 3: And in terms of what that means, the kind of

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Speaker 3: stocks that have been orphaned along the way, and therefore

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Speaker 3: the opportunity that exists and the concentration takes the risk up.

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Speaker 3: The S and P five hundred to me is a

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Speaker 3: large cap growth index.

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Speaker 5: Now, well, let's build on what you were saying about

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Speaker 5: small caps, because we were having conversations yesterday about one

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Speaker 5: of our guests said that small caps are in a

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Speaker 5: secular bear market, and part of the reason why is

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Speaker 5: that you have high interest rates. You have these companies

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Speaker 5: with big debt burdens, and many of them in the

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Speaker 5: Russell two thousand, just a normal one for example, are unprofitable.

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Speaker 5: So talk us through your base case there.

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Speaker 1: How are you able to square that circle?

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Speaker 3: So I don't think that has changed from what we've

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Speaker 3: seen in the Wrestle two thousand. Historically, many, not all.

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Speaker 3: There are great companies in the Rustle two thousand Russell

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Speaker 3: two thousand Value Index that are not unprofitable businesses. There

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Speaker 3: are wonderful businesses that have great potential over time, but

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Speaker 3: the market has basically ignored those stocks and therefore there's

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Speaker 3: been no action in them. But it doesn't mean they

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Speaker 3: don't have great futures. There are companies that do things

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Speaker 3: that are very specific. Just because you aren't a T

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Speaker 3: these days, a one T at two a three D

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Speaker 3: doesn't mean you don't have a wonderful niche business that

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Speaker 3: can grow, and we have many of those in our portfolios,

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Speaker 3: from cruise ships to all sorts of consumer products companies

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Speaker 3: that are the best at what they do.

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Speaker 2: So, you know, another thing on the New York term.

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Speaker 2: I know we're talking about long term investments here as well,

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Speaker 2: but we are just really days away from the US election.

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Speaker 2: The elections are on the top of minds of many

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Speaker 2: investors at this juncture.

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Speaker 1: How weeks from today, two weeks.

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Speaker 2: From today, My gosh, it's a heavy reminder. And so

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Speaker 2: how do you think about the election and the impact

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Speaker 2: it would have on the markets.

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Speaker 1: It's interesting.

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Speaker 3: I think that it weighs on a lot of people's

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Speaker 3: spirits and their psychologies. But at the end of the day,

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Speaker 3: I've bought into our idol at ariel is Warren Buffett,

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Speaker 3: and Warren Buffett has been known to say markets are

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Speaker 3: stronger than governments, and so I think that we've seen

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Speaker 3: that time and time again. If you look back over

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Speaker 3: the last couple of decades and seen the different leaders

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Speaker 3: that we've had run the United States, the market has

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Speaker 3: not been felled by any one person, and I think

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Speaker 3: that's a testament to the fundamentals of the US economy

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Speaker 3: and that ultimately which will that is what will drive returns.

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Speaker 3: So while there's a lot of talk about markets and

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Speaker 3: what will happen as a result of who wins, I

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Speaker 3: think I'm more confident and I'm a long term investor.

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Speaker 1: We have a turtle as a logo. I always have

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Speaker 1: my turtle.

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Speaker 3: I'm more confident in the long term that the US

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Speaker 3: economy will do what it always has done in the

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Speaker 3: American capitalist system will work.

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Speaker 2: So I also want to ask you, abou Kamala Harris

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Speaker 2: from many here, because I know that you've personally signed

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Speaker 2: a number of letters that have come out in support

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Speaker 2: of her.

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Speaker 1: What is it about her.

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Speaker 2: That you think that the business community may not be understanding.

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Speaker 2: There are a lot of Republicans who will come out

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Speaker 2: and say that she is not the best for business.

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Speaker 1: What would you say to that.

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Speaker 3: I think she's probably more moderate than people think. I

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Speaker 3: think there are a lot of assumptions that are made

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Speaker 3: by association. I think one of the things I've been

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Speaker 3: very confused by is this idea that you be a

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Speaker 3: clone of another person that you work for or with.

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Speaker 3: I was president of Ariel when John Rodgers was CEO

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Speaker 3: for many many years.

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Speaker 1: We are now co.

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Speaker 3: We are very different leaders, but we are aligned in

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Speaker 3: our core beliefs around values. We make different decisions all

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Speaker 3: the time, and that doesn't make one of us better

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Speaker 3: than the other.

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Speaker 1: We're different, and.

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Speaker 3: So I think that when she's in the top seat,

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Speaker 3: when you are the boss, it's very different than working

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Speaker 3: for someone, And technically when you're vice president, you work

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Speaker 3: for someone, so it'll be I think the assumptions that

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Speaker 3: are made about who she is, those are yet to

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Speaker 3: be fully revealed. But I am encouraged by what I've

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Speaker 3: heard so far.

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Speaker 4: You know, we talk a lot about the things that

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Speaker 4: are wrong with this country, and Harris and Trump talk

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Speaker 4: about that too, and we really focus on the risks.

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Speaker 4: I wonder, you know, with a book like this looking

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Speaker 4: forward hopefully with hope, what does the US do right?

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Speaker 4: I mean, you've had such success in your career, and

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Speaker 4: the companies that you foster have had such success, I

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Speaker 4: imagine in large part because of the US environment. So

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Speaker 4: what does this country do right?

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Speaker 1: Oh?

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Speaker 3: My gosh, we do so many things right. I love America.

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Speaker 3: I think we are the best country in the world,

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Speaker 3: and that's not based upon some manifest destiny point of view.

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Speaker 1: It's just the.

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Speaker 3: Facts that if you look at just at the market level,

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Speaker 3: people want to be invested in the US.

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Speaker 1: That's where they see the opportunity.

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Speaker 3: If you look at some of the quintessential American things, hope,

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Speaker 3: Americans are always very hopeful. I think that's a wonderful

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Speaker 3: way to be. If you look at things like charity,

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Speaker 3: we are the most generous nation in the world. Literally,

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Speaker 3: there no nation comes close to us in terms of

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Speaker 3: looking after each other and giving back to our society.

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Speaker 3: If you look at opportunity, despite the fact that people

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Speaker 3: do not yet have the full opportunity that I believe

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Speaker 3: they should have, especially those who are black, black and brown,

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Speaker 3: and those who are women, we are not yet fully

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Speaker 3: at the table in any way.

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Speaker 1: Despite that fact, we.

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Speaker 3: Are still a better positioned than a lot of other

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Speaker 3: places in the world.

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Speaker 1: And you can be me.

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Speaker 3: You could be someone who grew up the youngest of

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Speaker 3: six kids, whose mom was struggling all the time, who

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Speaker 3: got evicted and cars got repossessed and phones got turned off,

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Speaker 3: And you can go to Princeton and you can be

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Speaker 3: on the Bloomberg Philanthropies and on the board of other

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Speaker 3: companies and you can run an investment firm. Now, there

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Speaker 3: was tremendous hard work that made that happen, But there

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Speaker 3: were some unique aspects of America and what makes America

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Speaker 3: great that allowed luck to come together there as well

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Speaker 3: and for me to happen. I think there's the idea

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Speaker 3: that we could have more melodies. Is what this book

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Speaker 3: is about and what our country is about.

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Speaker 2: Is there a warning kind of under the surface here too,

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Speaker 2: about as we kind of get into this recovery era?

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Speaker 2: Do you worry at all, Melody about a K shape recovery?

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Speaker 3: I mean, again, we're bottom up stock pickers at Ariel.

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Speaker 3: You could spend a lot of time worrying about a

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Speaker 3: lot of things. I have this quote that says we're

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Speaker 3: worrying is like sitting in a rocking chair. It gives

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Speaker 3: you something to do, but it doesn't take you anywhere.

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Speaker 3: I try to just think about what I can control,

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Speaker 3: what I can do, and we try to have at

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Speaker 3: least at aerial in terms of our portfolios, portfolios that

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Speaker 3: are resistant to different types of economies.

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Speaker 5: All right, Melody, that's a good place to leave it.

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Speaker 5: Really appreciate you taking the time with us today. That,

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Speaker 5: of course, is Melody Hobson, and her book Priceless Facts

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Speaker 5: About Money is available now