1 00:00:13,880 --> 00:00:17,280 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:17,320 --> 00:00:19,360 Speaker 1: My name is Mike Reagan. I'm a senior editor of 3 00:00:19,440 --> 00:00:23,200 Speaker 1: Bloomberg Vldonna hik Across asset reporter with Bloomberg, and this 4 00:00:23,239 --> 00:00:25,880 Speaker 1: week on the show, well, as you know, we love 5 00:00:25,960 --> 00:00:29,560 Speaker 1: to talk about crazy market stories on this show, and 6 00:00:30,160 --> 00:00:32,240 Speaker 1: this year is almost over. But I think it's pretty 7 00:00:32,280 --> 00:00:34,600 Speaker 1: safe to say that the collapse of f t X 8 00:00:34,680 --> 00:00:37,519 Speaker 1: and the rest of Sam bankman Fried's crypto empire was 9 00:00:37,560 --> 00:00:41,360 Speaker 1: the craziest thing any of us saw this year. And 10 00:00:41,400 --> 00:00:43,680 Speaker 1: of course it will take many months, maybe years, to 11 00:00:43,720 --> 00:00:46,920 Speaker 1: sort out exactly what caused this mess. But we're going 12 00:00:46,960 --> 00:00:49,840 Speaker 1: to talk to one chief investment officer who has taken 13 00:00:49,840 --> 00:00:53,800 Speaker 1: a sort of philosophical look at spfs tolerance for risk 14 00:00:54,320 --> 00:00:58,800 Speaker 1: and how unusually high it was. But first, vil Donna, 15 00:00:59,160 --> 00:01:03,320 Speaker 1: it's almost years. Do you have any resolutions? I didn't 16 00:01:03,400 --> 00:01:07,000 Speaker 1: until you just asked me. I guess, And now you're 17 00:01:07,040 --> 00:01:10,800 Speaker 1: coming up with the best resolutions yet. Well, we know 18 00:01:10,920 --> 00:01:13,679 Speaker 1: that I belong to a lot of book clubs that 19 00:01:13,760 --> 00:01:17,080 Speaker 1: I'm not inviting you too, So my girlfriend next year 20 00:01:17,080 --> 00:01:20,160 Speaker 1: will read more books and join more book clubs that 21 00:01:20,280 --> 00:01:24,679 Speaker 1: I will not invite me to Yeah, that's really just targeted. 22 00:01:25,280 --> 00:01:28,119 Speaker 1: Want to be part of them? Targeted? You would probably 23 00:01:28,120 --> 00:01:30,160 Speaker 1: say no anyway, And then I don't know what books 24 00:01:30,160 --> 00:01:33,920 Speaker 1: are you reading right now? I'm reading a crime book. 25 00:01:34,360 --> 00:01:37,400 Speaker 1: I like crime books. Yeah, it's called Lush Life. Lush Life. Yeah, 26 00:01:37,480 --> 00:01:40,040 Speaker 1: it's very good. Actually I think maybe the guy had 27 00:01:40,080 --> 00:01:42,440 Speaker 1: something to do with the wire. So a lot of 28 00:01:42,480 --> 00:01:51,120 Speaker 1: the dialogue is like very lingo, like Richard, Alright, what's yours? Oh, 29 00:01:51,280 --> 00:01:53,920 Speaker 1: I resolve. I'm going to ask all of our guests, 30 00:01:54,120 --> 00:01:59,080 Speaker 1: um much more complicated questions like fifty part questions. Questions 31 00:01:59,400 --> 00:02:01,840 Speaker 1: are you starting like I've I've been letting them off 32 00:02:01,840 --> 00:02:04,960 Speaker 1: easy with just the twelve part questions? Are you starting 33 00:02:04,960 --> 00:02:07,720 Speaker 1: with today's guests? We'll see, we'll see. Bring him. Who 34 00:02:07,760 --> 00:02:10,640 Speaker 1: are we talking today? It's Victor Hagani. He's the founder 35 00:02:10,639 --> 00:02:13,320 Speaker 1: and chief investment officer of ELM Wealth, which is an 36 00:02:13,320 --> 00:02:15,600 Speaker 1: index wealth manager. Thank you so much for coming back 37 00:02:15,600 --> 00:02:18,520 Speaker 1: on the podcast. Great to be back again, and I 38 00:02:18,560 --> 00:02:22,280 Speaker 1: hope you're ready for Mike's Mike's multipart question. Let's do 39 00:02:22,360 --> 00:02:26,000 Speaker 1: my best. So I know you so you actually joined 40 00:02:26,080 --> 00:02:28,480 Speaker 1: us on the podcast earlier this year, so thank you 41 00:02:28,560 --> 00:02:31,720 Speaker 1: for coming back, but maybe just as a little recap, 42 00:02:31,760 --> 00:02:33,920 Speaker 1: you can just tell us a bit about ELM and 43 00:02:34,120 --> 00:02:37,480 Speaker 1: what you guys do. Sure. My story is that I 44 00:02:37,520 --> 00:02:40,840 Speaker 1: started off working in at Solomon Brothers in research in 45 00:02:42,080 --> 00:02:45,000 Speaker 1: eventually was a founding partner of l T c M. 46 00:02:45,840 --> 00:02:48,960 Speaker 1: And after the collapse of l T c M, I 47 00:02:49,040 --> 00:02:51,079 Speaker 1: stayed around for a little while to help with the 48 00:02:51,160 --> 00:02:54,000 Speaker 1: unwinding of positions and and help my partners get a 49 00:02:54,000 --> 00:02:57,679 Speaker 1: new venture started. And then I took a long sabbatical 50 00:02:58,600 --> 00:03:02,720 Speaker 1: of ten years starting from my late thirties and UM 51 00:03:03,280 --> 00:03:05,400 Speaker 1: and I emerged from that sort of with a back 52 00:03:05,400 --> 00:03:08,920 Speaker 1: to basics idea of how I wanted to invest for 53 00:03:09,040 --> 00:03:12,000 Speaker 1: my own family, and that led to the creation of 54 00:03:12,480 --> 00:03:16,280 Speaker 1: a wealth management wealth advisory firm that would share a 55 00:03:16,320 --> 00:03:21,480 Speaker 1: low cost, globally diversified, dynamic index investing type of approach 56 00:03:22,320 --> 00:03:25,040 Speaker 1: with anybody that that wanted to get involved. And so 57 00:03:25,280 --> 00:03:29,280 Speaker 1: I've been UM running ELM Wealth for eleven years. Will 58 00:03:29,320 --> 00:03:32,239 Speaker 1: have a partner who's become the CEO, James White and 59 00:03:32,440 --> 00:03:35,480 Speaker 1: uh and we do the My favorite part of the 60 00:03:35,520 --> 00:03:38,960 Speaker 1: whole thing, besides helping our investors, is doing research and 61 00:03:39,000 --> 00:03:41,760 Speaker 1: having a platform to write about different things going on 62 00:03:41,840 --> 00:03:45,120 Speaker 1: and I guess one of our our articles caught your attentions, 63 00:03:45,160 --> 00:03:49,880 Speaker 1: and hence I'm here all of your articles cut thanks 64 00:03:50,840 --> 00:03:57,040 Speaker 1: the ten Uere sabbatical cat. Actually, how do I sign up? Well, 65 00:03:57,320 --> 00:04:00,400 Speaker 1: kind of you've got to uh, don't don't want to 66 00:04:00,400 --> 00:04:04,000 Speaker 1: do it the way that I did it, But it 67 00:04:04,120 --> 00:04:06,400 Speaker 1: was one of the best things in my life for sure, 68 00:04:06,400 --> 00:04:09,920 Speaker 1: and especially my my kids were all young and I 69 00:04:09,960 --> 00:04:12,400 Speaker 1: was young, and it was just a great thing that 70 00:04:12,400 --> 00:04:13,840 Speaker 1: that I did. But I don't think I would have 71 00:04:13,920 --> 00:04:18,000 Speaker 1: done it had LTCM not UM failed. So you want 72 00:04:18,040 --> 00:04:19,800 Speaker 1: to go there, you have it, kept working those eighty 73 00:04:19,800 --> 00:04:23,080 Speaker 1: hour weeks and grinding it out. Well, let's talk about 74 00:04:23,160 --> 00:04:26,839 Speaker 1: that piece you wrote. Vildon and I were both talking 75 00:04:26,839 --> 00:04:29,239 Speaker 1: about it is because it's I love it when people 76 00:04:29,240 --> 00:04:32,120 Speaker 1: take this sort of more philosophical, sort of thirty thou 77 00:04:32,440 --> 00:04:36,360 Speaker 1: view of stories like this rather than you know, picking 78 00:04:36,360 --> 00:04:38,159 Speaker 1: apart the weeds, because I think there's a lot to 79 00:04:38,200 --> 00:04:41,320 Speaker 1: be learned from that sort of approach. And and this, 80 00:04:41,480 --> 00:04:45,040 Speaker 1: this one's called a missing piece of the SPF puzzle. 81 00:04:45,160 --> 00:04:47,760 Speaker 1: And you talk about UM what you call the classic 82 00:04:47,960 --> 00:04:52,080 Speaker 1: theory of choice under uncertainty. Talk to us about what 83 00:04:52,240 --> 00:04:55,240 Speaker 1: that means and how it plays out in real life 84 00:04:55,279 --> 00:04:58,160 Speaker 1: and investing. Sure, so you know, and I mean some 85 00:04:58,200 --> 00:05:02,560 Speaker 1: people think that the that the start of financial decision 86 00:05:02,600 --> 00:05:07,240 Speaker 1: making was around three hundred years ago when Daniel Bernoulli 87 00:05:07,880 --> 00:05:11,120 Speaker 1: uh and and some of his family and friends were 88 00:05:11,160 --> 00:05:14,839 Speaker 1: debating the St. Petersburg Paradox. It's a game where the 89 00:05:14,920 --> 00:05:19,480 Speaker 1: expected value of the game is infinite. But anybody that 90 00:05:19,640 --> 00:05:22,240 Speaker 1: takes a look at it would would uh, you know, 91 00:05:22,279 --> 00:05:24,480 Speaker 1: would say, well, okay, it has an infinite expected value, 92 00:05:24,520 --> 00:05:26,440 Speaker 1: but I don't think i'd pay more than you know, 93 00:05:26,520 --> 00:05:28,520 Speaker 1: ten dollars to play it. And the way that the 94 00:05:28,560 --> 00:05:32,599 Speaker 1: game would work is or works, is that you flip 95 00:05:32,600 --> 00:05:37,159 Speaker 1: a coin and you your payoff is the number of 96 00:05:37,720 --> 00:05:40,520 Speaker 1: heads that you get in a row is well two 97 00:05:40,560 --> 00:05:42,760 Speaker 1: to the number of heads that you get in a row. 98 00:05:42,839 --> 00:05:45,680 Speaker 1: So if you flip one head and then the next 99 00:05:45,680 --> 00:05:47,320 Speaker 1: one is tail, that's one head in a row and 100 00:05:47,360 --> 00:05:50,040 Speaker 1: you get paid two dollars. And then if you've flipped 101 00:05:50,400 --> 00:05:52,360 Speaker 1: you know, three heads in a row, that would be 102 00:05:52,960 --> 00:05:55,320 Speaker 1: uh you know, eight eight dollars that you would get 103 00:05:55,440 --> 00:05:59,080 Speaker 1: And so you could see that the probability of that 104 00:05:59,120 --> 00:06:03,039 Speaker 1: occurrence is the reciprocal of the payoff, and so the 105 00:06:03,080 --> 00:06:06,280 Speaker 1: expected value is infinite, but you're not going to get 106 00:06:06,320 --> 00:06:08,080 Speaker 1: a hundred heads in a row that would give you 107 00:06:08,120 --> 00:06:11,440 Speaker 1: a massive payoff. And people realize that and they say, well, okay, 108 00:06:11,480 --> 00:06:13,839 Speaker 1: you know that I'll play this game, but I wouldn't 109 00:06:13,880 --> 00:06:16,800 Speaker 1: pay an infinite amount for it. And so bernow Lli 110 00:06:17,240 --> 00:06:20,520 Speaker 1: thought about, well, how can we reconcile that? It seems 111 00:06:20,560 --> 00:06:23,280 Speaker 1: like you know what's going on here, and he realized 112 00:06:23,760 --> 00:06:28,320 Speaker 1: and put forward the idea that the marginal benefit that 113 00:06:28,360 --> 00:06:31,000 Speaker 1: we get from more and more wealth goes down with 114 00:06:31,120 --> 00:06:34,520 Speaker 1: each additional unit of wealth, this idea of the decreasing 115 00:06:34,720 --> 00:06:38,680 Speaker 1: marginal utility of wealth, and he modeled that in a 116 00:06:38,800 --> 00:06:41,839 Speaker 1: very simple way. He said, well, what if my you 117 00:06:42,000 --> 00:06:44,159 Speaker 1: the utility that I get from wealth is equal to 118 00:06:44,240 --> 00:06:47,200 Speaker 1: the natural log of wealth. That's just one function which 119 00:06:47,240 --> 00:06:50,479 Speaker 1: goes up, but it goes up at a decreasing pace. 120 00:06:51,080 --> 00:06:54,880 Speaker 1: Then you get a solution to the St. Petersburg valuation, 121 00:06:54,920 --> 00:06:56,960 Speaker 1: you know, which is I'd pay a tiny bit of 122 00:06:56,960 --> 00:06:59,840 Speaker 1: of my wealth to play it. But it really took 123 00:07:00,000 --> 00:07:04,560 Speaker 1: off again in the nineteen forties when uh John von Neumann, 124 00:07:04,560 --> 00:07:08,720 Speaker 1: the polymath, and the economist Oscar Morgenstern came together and 125 00:07:08,720 --> 00:07:13,440 Speaker 1: wrote a book that put forward a logically reasoned proposition 126 00:07:13,480 --> 00:07:17,080 Speaker 1: that if we maximize our expected utility, that that tells 127 00:07:17,160 --> 00:07:20,080 Speaker 1: us the right decisions to make under uncertainty. And that's 128 00:07:20,120 --> 00:07:23,360 Speaker 1: really the beginning of this classic theory of choice. You know, 129 00:07:23,400 --> 00:07:26,000 Speaker 1: I think most people feel that way, and economists have 130 00:07:26,040 --> 00:07:28,400 Speaker 1: it developed that and brought it up to now and 131 00:07:28,400 --> 00:07:31,600 Speaker 1: and basically, we don't need a fancy theory to know 132 00:07:31,880 --> 00:07:35,080 Speaker 1: that when we're faced with some coin flips that we 133 00:07:35,080 --> 00:07:36,720 Speaker 1: don't want to bet, even if the odds are in 134 00:07:36,720 --> 00:07:38,360 Speaker 1: our favor, that we don't want to bet all of 135 00:07:38,400 --> 00:07:41,520 Speaker 1: our wealth on heads coming up each time, even if 136 00:07:41,560 --> 00:07:43,720 Speaker 1: heads has a sixty percent chance of coming up. It's 137 00:07:43,800 --> 00:07:47,600 Speaker 1: like some biased coin thought experiment. And so, you know, 138 00:07:47,640 --> 00:07:50,880 Speaker 1: what's what's really interesting in this whole SPF case is 139 00:07:50,920 --> 00:07:53,480 Speaker 1: that he was sort of on record on a number 140 00:07:53,480 --> 00:07:57,400 Speaker 1: of occasions of saying that that his conclusion was that 141 00:07:57,480 --> 00:07:59,760 Speaker 1: he should make decisions as if as though he had 142 00:07:59,800 --> 00:08:06,480 Speaker 1: no risk aversion basically maximizing the expected value of his choices, 143 00:08:06,840 --> 00:08:09,120 Speaker 1: you know, making a choice that would maximize the expected 144 00:08:09,200 --> 00:08:11,880 Speaker 1: value of his wealth, which he intended to give away. 145 00:08:12,000 --> 00:08:16,640 Speaker 1: He said, rather than trying to maximize this this expected utility. 146 00:08:17,240 --> 00:08:19,440 Speaker 1: Have you ever encountered anyone I mean, maybe if your 147 00:08:19,480 --> 00:08:21,160 Speaker 1: goal is to make a lot of money and give 148 00:08:21,200 --> 00:08:23,400 Speaker 1: it away, is the only only chance you have that 149 00:08:23,480 --> 00:08:25,400 Speaker 1: kind of risk color and says, have you ever encountered 150 00:08:25,440 --> 00:08:28,840 Speaker 1: anyone with that sort of blinders onto risk? Like he 151 00:08:28,960 --> 00:08:31,480 Speaker 1: is sort of hinted at no, Although I I have 152 00:08:31,800 --> 00:08:35,520 Speaker 1: heard some people say that their approach to making decisions 153 00:08:35,600 --> 00:08:37,800 Speaker 1: under uncertainty is to take a certain amount of their 154 00:08:37,800 --> 00:08:40,200 Speaker 1: money and put it aside and treasury bills, and that's 155 00:08:40,240 --> 00:08:43,440 Speaker 1: safe and if they lost everything else, they would be 156 00:08:43,480 --> 00:08:45,440 Speaker 1: really happy that they had that, and then to be 157 00:08:45,559 --> 00:08:49,960 Speaker 1: really aggressive with risk with that discretionary amount that they 158 00:08:50,000 --> 00:08:53,520 Speaker 1: had above what they put away. But when you but 159 00:08:53,520 --> 00:08:57,400 Speaker 1: but when I've met a few of these people in conversations, 160 00:08:57,400 --> 00:09:00,560 Speaker 1: we've talked about it that when I really analyzed decisions 161 00:09:00,600 --> 00:09:03,319 Speaker 1: that they were making with that discretionary capital, they were 162 00:09:03,360 --> 00:09:07,840 Speaker 1: nowhere near risk neutral. It was just their way of of, uh, 163 00:09:08,000 --> 00:09:10,960 Speaker 1: sort of thinking about things. But they still were sort 164 00:09:10,960 --> 00:09:14,200 Speaker 1: of had a normal level of risk aversion. And it's interesting, 165 00:09:14,200 --> 00:09:17,199 Speaker 1: I mean that in practice people have not used this 166 00:09:17,280 --> 00:09:19,920 Speaker 1: expected utility theory very much. It's not used much in 167 00:09:19,960 --> 00:09:23,360 Speaker 1: the financial planning industry, for instance. Uh and and one 168 00:09:23,360 --> 00:09:25,800 Speaker 1: of the criticisms is, oh, it's really hard for people 169 00:09:25,880 --> 00:09:30,960 Speaker 1: to calibrate or to express their utility function. But actually, 170 00:09:30,960 --> 00:09:32,920 Speaker 1: what we've found is that when we talk to people 171 00:09:32,960 --> 00:09:37,080 Speaker 1: about risk taking and you know, expected compensation for taking risk, 172 00:09:37,520 --> 00:09:40,960 Speaker 1: that people fall into a reasonable kind of range of 173 00:09:41,080 --> 00:09:44,360 Speaker 1: risk aversion that most people seem to be and you know, 174 00:09:44,400 --> 00:09:48,240 Speaker 1: we don't really see this incredibly high risk aversion where 175 00:09:48,240 --> 00:09:50,040 Speaker 1: people don't want to take any risk in the face 176 00:09:50,120 --> 00:09:54,760 Speaker 1: of nice opportunities, or even more rare than high risk 177 00:09:54,800 --> 00:09:57,280 Speaker 1: aversion is this super low risk aversion where it's like 178 00:09:57,320 --> 00:10:03,600 Speaker 1: just let me, you know, I think, although you know, 179 00:10:03,640 --> 00:10:07,120 Speaker 1: I guess that a gambling addiction in some ways, right 180 00:10:07,320 --> 00:10:10,280 Speaker 1: is you know, I'm not really talking about pathological conditions. 181 00:10:10,280 --> 00:10:12,640 Speaker 1: I mean, if you have a gambling addiction, you know, 182 00:10:12,720 --> 00:10:15,120 Speaker 1: that's a different story, I guess. And you know, maybe 183 00:10:15,200 --> 00:10:18,800 Speaker 1: those people are characterized by having a risk seeking they 184 00:10:18,800 --> 00:10:23,440 Speaker 1: don't generally rise to the level of you know, owner 185 00:10:23,520 --> 00:10:27,720 Speaker 1: and CEO of a major financial for billion dollars or something. 186 00:10:28,720 --> 00:10:30,960 Speaker 1: So had you been thinking about this all along? Because 187 00:10:31,000 --> 00:10:33,920 Speaker 1: he has been very media friendly, not just recently obviously 188 00:10:33,960 --> 00:10:36,680 Speaker 1: after the fallout, but all along he had been sort 189 00:10:36,679 --> 00:10:38,959 Speaker 1: of out and about talking to people about you know, 190 00:10:39,120 --> 00:10:41,920 Speaker 1: him wanting to give away his wealth and his very 191 00:10:41,960 --> 00:10:46,040 Speaker 1: low risk conversion a little bit um. So actually the 192 00:10:46,679 --> 00:10:49,800 Speaker 1: place where I came across expected value being used in 193 00:10:49,840 --> 00:10:52,000 Speaker 1: a way that I thought wasn't quite right was was 194 00:10:52,040 --> 00:10:55,840 Speaker 1: actually in some of this effective altruism literature. There's this 195 00:10:55,880 --> 00:10:59,000 Speaker 1: one discussion that I read about three or four years 196 00:10:59,040 --> 00:11:02,360 Speaker 1: ago where there was an argument that that we should 197 00:11:02,360 --> 00:11:05,280 Speaker 1: all vote, not because we have a civic duty to 198 00:11:05,360 --> 00:11:08,400 Speaker 1: do so, but actually that if you think that your 199 00:11:08,480 --> 00:11:11,680 Speaker 1: vote has this tiny, tiny chance of making a difference 200 00:11:11,720 --> 00:11:14,360 Speaker 1: in the outcome of the election, that if you think 201 00:11:14,400 --> 00:11:17,280 Speaker 1: that the election of the people in the policies that 202 00:11:17,360 --> 00:11:21,040 Speaker 1: you support would make hundreds of billions or trillions of 203 00:11:21,040 --> 00:11:24,360 Speaker 1: dollars of difference to the world, then you should just 204 00:11:24,480 --> 00:11:27,760 Speaker 1: vote based on that small probability. Because the expected value 205 00:11:27,760 --> 00:11:31,200 Speaker 1: of your vote, the small probability times as big outcome 206 00:11:31,320 --> 00:11:33,360 Speaker 1: is a really is a big positive number, and you 207 00:11:33,400 --> 00:11:35,520 Speaker 1: should that should motivate you to get out of bed 208 00:11:35,559 --> 00:11:38,600 Speaker 1: and go vote. And so that's using expected value for 209 00:11:38,679 --> 00:11:42,120 Speaker 1: a lottery like payout. I think that analysis is not 210 00:11:42,320 --> 00:11:44,800 Speaker 1: quite correct. You know, I think that that huge payout 211 00:11:44,800 --> 00:11:47,120 Speaker 1: that you would get, which you would automatically be giving 212 00:11:47,160 --> 00:11:49,600 Speaker 1: to charity because it wouldn't actually come to you, uh, 213 00:11:49,720 --> 00:11:52,400 Speaker 1: needs to be discounted by the fact that you have 214 00:11:52,559 --> 00:11:56,679 Speaker 1: a marginal decreasing utility of of of wealth even when 215 00:11:56,679 --> 00:11:58,320 Speaker 1: you're giving it away, you know. And I think that's 216 00:11:58,679 --> 00:12:01,600 Speaker 1: kind of really an interesting part of the SPF case 217 00:12:01,840 --> 00:12:04,600 Speaker 1: right now, Victory, I wonder if you think back to 218 00:12:05,400 --> 00:12:08,079 Speaker 1: uh the long term capital management days, and boy, I 219 00:12:08,080 --> 00:12:10,560 Speaker 1: guess it's almost twenty five years now since uh, since 220 00:12:10,559 --> 00:12:13,560 Speaker 1: all that happened, um, you know, And if you were 221 00:12:13,600 --> 00:12:16,160 Speaker 1: to make a Venn diagram of F t X and 222 00:12:16,360 --> 00:12:19,520 Speaker 1: l t c M, is there are there any overlaps there? 223 00:12:19,720 --> 00:12:23,439 Speaker 1: And one thing I'm thinking of is I would guess 224 00:12:23,440 --> 00:12:25,120 Speaker 1: and correct me if I'm wrong, But I would guess. 225 00:12:25,120 --> 00:12:27,839 Speaker 1: If you asked everyone involved at l T c M 226 00:12:28,440 --> 00:12:30,840 Speaker 1: back then are you taking too much risk? The answer 227 00:12:30,840 --> 00:12:33,959 Speaker 1: would beat no, we're not. You know, we're not taking 228 00:12:34,000 --> 00:12:37,640 Speaker 1: on too much risk. It's just our positions got so big, right, 229 00:12:37,720 --> 00:12:40,480 Speaker 1: and and that was really what led to the trouble. 230 00:12:40,640 --> 00:12:43,280 Speaker 1: And at FT actually have this scenario where they have 231 00:12:43,400 --> 00:12:46,880 Speaker 1: this massive position in this coin they invented themselves the 232 00:12:46,920 --> 00:12:49,520 Speaker 1: f t T token, where they're also the big whale 233 00:12:49,679 --> 00:12:53,120 Speaker 1: in in that position of that asset. But I don't know, 234 00:12:53,280 --> 00:12:55,720 Speaker 1: is are there any sort of overlaps of the two 235 00:12:55,880 --> 00:12:59,160 Speaker 1: that spring come on from from your experience at l 236 00:12:59,200 --> 00:13:01,560 Speaker 1: T c M And you're, uh, what you've been able 237 00:13:01,600 --> 00:13:04,120 Speaker 1: to observe with f t X. Well, first, you know, 238 00:13:04,160 --> 00:13:06,840 Speaker 1: as you said earlier, we don't really know exactly what 239 00:13:07,080 --> 00:13:09,040 Speaker 1: happened at f t X. I mean, one thing that 240 00:13:09,160 --> 00:13:13,120 Speaker 1: seems to be the case is that Alameda had bad 241 00:13:13,160 --> 00:13:15,560 Speaker 1: trading results at some point and lost seems to have 242 00:13:15,600 --> 00:13:17,720 Speaker 1: lost a lot of money. The one thing that we 243 00:13:17,760 --> 00:13:20,959 Speaker 1: know is that that SPF was out there saying that 244 00:13:21,040 --> 00:13:23,080 Speaker 1: he was you know, that he was in favor of 245 00:13:23,120 --> 00:13:26,640 Speaker 1: making decisions with a very low or no risk aversion 246 00:13:26,840 --> 00:13:30,760 Speaker 1: at all. So you know, at LTCM, we we were 247 00:13:31,200 --> 00:13:34,920 Speaker 1: risk averse. We were uh, we were not thinking too 248 00:13:35,040 --> 00:13:38,120 Speaker 1: we were not looking to maximize expected value, but we 249 00:13:38,120 --> 00:13:42,120 Speaker 1: were looking to maximize risk adjusted return. And so that's 250 00:13:42,200 --> 00:13:44,599 Speaker 1: that's a difference. But you know what I what I 251 00:13:44,600 --> 00:13:47,920 Speaker 1: would say is that you know, investing involves two types 252 00:13:47,960 --> 00:13:51,680 Speaker 1: of decisions, right, one of them is find the good investments. 253 00:13:51,720 --> 00:13:53,720 Speaker 1: Find the things that are that you think are gonna 254 00:13:53,920 --> 00:13:57,760 Speaker 1: give a good return, a good risk adjusted return, and uh, 255 00:13:57,800 --> 00:13:59,800 Speaker 1: and try to buy those things and find the other 256 00:13:59,840 --> 00:14:02,120 Speaker 1: things things if if you're running along short find things 257 00:14:02,120 --> 00:14:04,280 Speaker 1: that aren't good and sell those or go short those 258 00:14:04,360 --> 00:14:07,320 Speaker 1: or whatever. So that's the part of the process that's 259 00:14:07,360 --> 00:14:12,640 Speaker 1: identifying and evaluating different assets and different investments, and and 260 00:14:12,679 --> 00:14:17,080 Speaker 1: that's really where almost all of the attention of people 261 00:14:17,200 --> 00:14:19,840 Speaker 1: goes and uh. And but there's this other decision that 262 00:14:19,840 --> 00:14:21,760 Speaker 1: we have to make, which is how big. Once we've 263 00:14:22,240 --> 00:14:25,400 Speaker 1: figured out the the what are the good and bad things, 264 00:14:25,440 --> 00:14:27,880 Speaker 1: then we need to figure out how much of those 265 00:14:27,920 --> 00:14:30,400 Speaker 1: trades do I want to put on? And especially if 266 00:14:30,400 --> 00:14:33,680 Speaker 1: we can use leverage or options or derivatives. Uh. You know, 267 00:14:33,720 --> 00:14:35,560 Speaker 1: we have quite a lot of flexibility in terms of 268 00:14:35,600 --> 00:14:37,160 Speaker 1: how much of them we can buy and sell. We 269 00:14:37,200 --> 00:14:39,960 Speaker 1: may not be constrained by just how much capital we 270 00:14:40,000 --> 00:14:42,600 Speaker 1: have to invest, but we could own more, go short 271 00:14:42,680 --> 00:14:46,880 Speaker 1: or whatever. And that sizing decision doesn't get as much attention, 272 00:14:47,360 --> 00:14:51,200 Speaker 1: doesn't get a lot of treatment in universities and finance 273 00:14:51,240 --> 00:14:55,280 Speaker 1: programs and so on. And yet that's the one that's 274 00:14:55,280 --> 00:14:58,200 Speaker 1: more critical because if you even if you can find 275 00:14:58,240 --> 00:15:00,680 Speaker 1: the right investments, but you do them and too large 276 00:15:00,680 --> 00:15:04,320 Speaker 1: a size, that can end in failure. Whereas actually, if 277 00:15:04,320 --> 00:15:07,320 Speaker 1: you find the wrong investments but you size them correctly, 278 00:15:07,760 --> 00:15:10,680 Speaker 1: it's not a happy outcome for you, but it's survivable 279 00:15:10,800 --> 00:15:13,720 Speaker 1: and you go on and you have enough capital to 280 00:15:13,800 --> 00:15:16,840 Speaker 1: spend or to support yourself or whatever. So, you know, 281 00:15:16,880 --> 00:15:20,800 Speaker 1: I think that it seems likely that Alameda took too 282 00:15:20,880 --> 00:15:24,880 Speaker 1: much risk that guided by this principle of maximizing expected 283 00:15:24,960 --> 00:15:28,720 Speaker 1: value coming from the top or the the owner. Um. However, 284 00:15:28,720 --> 00:15:31,480 Speaker 1: he came to that decision which we'll talk about more um, 285 00:15:31,560 --> 00:15:33,720 Speaker 1: and he took too much risk, and the result was 286 00:15:33,760 --> 00:15:36,480 Speaker 1: that they lost money. I think at LTCM, you know, 287 00:15:36,560 --> 00:15:40,760 Speaker 1: inadvertently we wound up with positions that were too big 288 00:15:40,840 --> 00:15:45,160 Speaker 1: that that they wound up getting themselves sort of related 289 00:15:45,200 --> 00:15:48,080 Speaker 1: to each other just by the fact that we own them. Right, 290 00:15:48,120 --> 00:15:50,640 Speaker 1: So when as soon as we got into trouble and 291 00:15:50,720 --> 00:15:53,560 Speaker 1: artificial correlation almost just from yeah, I mean, there were 292 00:15:53,640 --> 00:15:56,760 Speaker 1: there were some you know, deeper, deeper reasons for them 293 00:15:56,800 --> 00:15:59,000 Speaker 1: to be correlated in some cases, but in many cases, 294 00:15:59,080 --> 00:16:01,760 Speaker 1: you know, they would have been going in the opposite direction, 295 00:16:02,400 --> 00:16:06,240 Speaker 1: and they got correlated because we own them. And but anyway, 296 00:16:06,240 --> 00:16:08,240 Speaker 1: it was it was too much risk. You know, I 297 00:16:08,240 --> 00:16:10,920 Speaker 1: don't think there's any disputing that. So I think that's, 298 00:16:10,960 --> 00:16:13,480 Speaker 1: you know, a parallel, but I would say mostly that 299 00:16:13,640 --> 00:16:15,520 Speaker 1: it's you know, I don't that that. I think that 300 00:16:15,640 --> 00:16:19,840 Speaker 1: mostly they're sort of separate circles. And you know, in 301 00:16:19,880 --> 00:16:22,840 Speaker 1: particular this, you know, our approach was, you know, to 302 00:16:22,880 --> 00:16:25,840 Speaker 1: be very aware of risk and you know sometimes you 303 00:16:25,840 --> 00:16:28,160 Speaker 1: you you don't get it right, and uh, you know, 304 00:16:28,200 --> 00:16:32,720 Speaker 1: as opposed to a policy of maximizing expected value, which 305 00:16:33,000 --> 00:16:34,920 Speaker 1: you know, which I think is what was going on there. 306 00:16:41,600 --> 00:16:44,000 Speaker 1: So let's talk a little bit more about how SPF 307 00:16:44,040 --> 00:16:47,320 Speaker 1: al Amida f t X all of this actually happened. 308 00:16:47,320 --> 00:16:49,720 Speaker 1: Because in your note you have this amazing sentence it says, 309 00:16:50,240 --> 00:16:54,400 Speaker 1: when spfs stated preferences encountered the real world, it results 310 00:16:54,400 --> 00:16:58,000 Speaker 1: in almost surely going bust at some point, and pretty 311 00:16:58,080 --> 00:17:01,680 Speaker 1: quickly for someone who knows their way around financial markets. Yeah, 312 00:17:01,760 --> 00:17:04,560 Speaker 1: so I think a great example to just just to 313 00:17:04,640 --> 00:17:06,879 Speaker 1: work through a little bit. As you know. At one point, 314 00:17:07,000 --> 00:17:11,159 Speaker 1: SPF has a Twitter thread where he says, if I 315 00:17:11,200 --> 00:17:15,200 Speaker 1: were faced with an opportunity that had a ten percent 316 00:17:15,320 --> 00:17:18,400 Speaker 1: chance of a big payoff and a nine chance of 317 00:17:18,960 --> 00:17:22,000 Speaker 1: going to zero. Well, he said, I wouldn't invest a 318 00:17:22,040 --> 00:17:26,560 Speaker 1: hundred percent of my capital in that one trade, because um, 319 00:17:26,600 --> 00:17:28,520 Speaker 1: you know, I'd like to be able to do it 320 00:17:28,560 --> 00:17:32,480 Speaker 1: again afterwards, find another one like that afterwards. Uh, but 321 00:17:32,800 --> 00:17:35,800 Speaker 1: I would put like fifty of my capital into that. 322 00:17:36,160 --> 00:17:39,119 Speaker 1: And that's very very risk tolerant. That's not quite going 323 00:17:39,200 --> 00:17:41,520 Speaker 1: all the way to his stated preference of being risk 324 00:17:41,560 --> 00:17:44,879 Speaker 1: neutral and trying to maximize expected value, but that's really 325 00:17:44,960 --> 00:17:48,959 Speaker 1: being you know, extremely risk tolerant. And so from that 326 00:17:49,080 --> 00:17:50,800 Speaker 1: you could sort of say, well, what if he found 327 00:17:50,960 --> 00:17:54,199 Speaker 1: five of these to do in a row. Well, you know, 328 00:17:54,200 --> 00:17:56,159 Speaker 1: if he did five of them in a row, his 329 00:17:56,320 --> 00:18:00,600 Speaker 1: probability of of losing five times in a row, you know, 330 00:18:00,640 --> 00:18:02,800 Speaker 1: fifty percent of his money five times in a row, 331 00:18:02,800 --> 00:18:06,399 Speaker 1: which would leave him without in a five percent loss, 332 00:18:06,840 --> 00:18:08,760 Speaker 1: you know, would be probably over fifty you know, close 333 00:18:08,800 --> 00:18:11,800 Speaker 1: to in that ballpark, right, you know, ten percent chance 334 00:18:12,119 --> 00:18:14,600 Speaker 1: of that happening every time. So you can kind of 335 00:18:14,640 --> 00:18:17,480 Speaker 1: see how it. You know, even in a world where 336 00:18:17,480 --> 00:18:19,960 Speaker 1: you could find some amazing you know, which I don't 337 00:18:20,000 --> 00:18:23,320 Speaker 1: think exists. I've never seen an investment opportunity that has 338 00:18:23,320 --> 00:18:25,879 Speaker 1: a ten percent chance of making a thousand times my 339 00:18:25,920 --> 00:18:28,600 Speaker 1: wealth or something like that. I've never come across that, 340 00:18:28,720 --> 00:18:31,879 Speaker 1: never seen it. But even if you could find those things, 341 00:18:32,000 --> 00:18:34,680 Speaker 1: if you bet in that way, you have a very 342 00:18:34,760 --> 00:18:38,560 Speaker 1: very high probability of of losing you know, all of 343 00:18:38,600 --> 00:18:41,680 Speaker 1: your money. Um, you know, Victor, I'm smiling here because 344 00:18:41,720 --> 00:18:45,359 Speaker 1: I'm thinking of the clients of partners out there listening 345 00:18:45,359 --> 00:18:47,119 Speaker 1: to this and going on, bullie, Victor, what has he 346 00:18:47,200 --> 00:18:49,119 Speaker 1: got my go what's he got me into crypto and 347 00:18:49,240 --> 00:18:52,120 Speaker 1: coin flips and talking about losing all my money once? 348 00:18:52,160 --> 00:18:54,720 Speaker 1: But so let's pivot it to to what's really in 349 00:18:54,760 --> 00:18:57,920 Speaker 1: your wheelhouse here, and that's that's those boring old regular markets. 350 00:18:58,040 --> 00:19:01,800 Speaker 1: And you know, we talked about how uh, sort of 351 00:19:02,400 --> 00:19:04,959 Speaker 1: having no limit for your risk colorance can cause these 352 00:19:04,960 --> 00:19:07,920 Speaker 1: spectacular blow ups. I do feel like for the average 353 00:19:08,320 --> 00:19:10,960 Speaker 1: Joe investor, whether it's a four O one care and 354 00:19:11,040 --> 00:19:13,320 Speaker 1: I R or or you know, your your your basic 355 00:19:13,359 --> 00:19:17,919 Speaker 1: nest egg investor, that maybe having too much fear of 356 00:19:18,000 --> 00:19:22,200 Speaker 1: risk is a bigger issue and and not sort of uh, 357 00:19:22,320 --> 00:19:24,640 Speaker 1: you know, being willing to take on risk. And I'm 358 00:19:24,680 --> 00:19:26,879 Speaker 1: thinking this, especially after the year that we've had in 359 00:19:26,880 --> 00:19:29,400 Speaker 1: the stock market and the bond market for that matter. Um, 360 00:19:29,480 --> 00:19:30,720 Speaker 1: you know, the year is not over yet, but I 361 00:19:30,720 --> 00:19:32,760 Speaker 1: think it's a safe bet to say that we're going 362 00:19:32,840 --> 00:19:35,080 Speaker 1: to close on a you know, a down year in 363 00:19:35,080 --> 00:19:37,679 Speaker 1: the in the equity market, it's pretty rare to have 364 00:19:37,800 --> 00:19:40,280 Speaker 1: two down years in a row. I think the dot 365 00:19:40,320 --> 00:19:45,000 Speaker 1: com collapse was one, Uh, nineteen seventies, I think was 366 00:19:45,040 --> 00:19:48,080 Speaker 1: the last time before that. Is that too simplistic of 367 00:19:48,119 --> 00:19:51,760 Speaker 1: a view of the equity market right now to assume 368 00:19:51,800 --> 00:19:54,359 Speaker 1: that you can't have two down years in a row? Um, 369 00:19:54,520 --> 00:19:57,440 Speaker 1: we're you know, is that is that an enticing entry 370 00:19:57,480 --> 00:19:59,320 Speaker 1: point to you? And what you know, what would you 371 00:19:59,359 --> 00:20:01,560 Speaker 1: call what we saw a client who called you up 372 00:20:01,560 --> 00:20:04,600 Speaker 1: and was asking you what to do here on January one? 373 00:20:04,720 --> 00:20:07,199 Speaker 1: When it's time to think about the next year. So 374 00:20:07,240 --> 00:20:09,439 Speaker 1: the way that we like to look at it is 375 00:20:09,800 --> 00:20:11,440 Speaker 1: the way that we like to look at investing is 376 00:20:11,480 --> 00:20:15,280 Speaker 1: really thinking that the main risky asset that investors have 377 00:20:15,359 --> 00:20:20,600 Speaker 1: access to is diversified portfolios of global equities, US equities 378 00:20:20,640 --> 00:20:23,679 Speaker 1: and non US equities and the low risk things that 379 00:20:23,720 --> 00:20:26,320 Speaker 1: they want to come that we should compare those expected 380 00:20:26,359 --> 00:20:29,680 Speaker 1: returns to our government bonds. You know, I would say, 381 00:20:29,680 --> 00:20:33,120 Speaker 1: in particular, for long term investors, it would be tips 382 00:20:33,240 --> 00:20:39,080 Speaker 1: inflation protected bonds giving a long term real yield in 383 00:20:39,240 --> 00:20:43,640 Speaker 1: excess of inflation or below inflation of their yielding Yeah, 384 00:20:43,920 --> 00:20:47,240 Speaker 1: back to positive thankfully, you know, or treasury bills or 385 00:20:47,320 --> 00:20:49,680 Speaker 1: government bonds whatever. But you know, that's sort of your 386 00:20:49,840 --> 00:20:52,760 Speaker 1: your low risk alternative. So we need to look at 387 00:20:52,760 --> 00:20:56,080 Speaker 1: equities relative to the low risk alternative because it's an 388 00:20:56,080 --> 00:20:58,639 Speaker 1: either or thing that either we have more equities or 389 00:20:58,640 --> 00:21:00,960 Speaker 1: we have more safe assets. And so when we look 390 00:21:01,000 --> 00:21:04,320 Speaker 1: at that today, let's say we look at tips today, 391 00:21:04,359 --> 00:21:06,800 Speaker 1: So long term tips are yielding about one point two 392 00:21:06,800 --> 00:21:10,200 Speaker 1: percent in that ballpark, uh, much higher than they were 393 00:21:10,760 --> 00:21:14,359 Speaker 1: a year ago when the negatives the real yield, So 394 00:21:14,520 --> 00:21:16,160 Speaker 1: they would so if you bought them, they would give 395 00:21:16,200 --> 00:21:18,879 Speaker 1: you uh. And also pre tax they would give you 396 00:21:19,200 --> 00:21:22,080 Speaker 1: one point two percent above whatever inflation turned out to be. 397 00:21:22,160 --> 00:21:25,000 Speaker 1: So in this past year, when CPI inflation ran at 398 00:21:25,040 --> 00:21:27,800 Speaker 1: eight percent, they actually were giving you they would give 399 00:21:27,840 --> 00:21:29,600 Speaker 1: you a nine point two percent return if we got 400 00:21:29,600 --> 00:21:32,760 Speaker 1: another eight percent of inflation ahead of us. And then 401 00:21:32,800 --> 00:21:35,639 Speaker 1: we need to think about, well what do equities offer. 402 00:21:35,680 --> 00:21:38,240 Speaker 1: So we could look at US equities and using the 403 00:21:38,320 --> 00:21:41,119 Speaker 1: cyclically adjusted earnings yield. So if we buy equities, were 404 00:21:41,119 --> 00:21:44,480 Speaker 1: getting a certain amount of expected earnings from them, and 405 00:21:44,960 --> 00:21:46,439 Speaker 1: you know, if we try to just guess at what 406 00:21:46,520 --> 00:21:48,879 Speaker 1: earnings are likely to be by looking over the past 407 00:21:48,920 --> 00:21:51,919 Speaker 1: ten years and averaging that together, you know, I think 408 00:21:51,960 --> 00:21:54,639 Speaker 1: that US equities have an earnings yield right now of 409 00:21:54,760 --> 00:21:58,640 Speaker 1: around around four percent or a little bit lower than that. 410 00:21:58,720 --> 00:22:01,720 Speaker 1: You know, it's gone up as the equity markets come down, 411 00:22:02,200 --> 00:22:05,640 Speaker 1: and so you know, we're getting around a three percent 412 00:22:06,359 --> 00:22:11,040 Speaker 1: expected extra return from or maybe it's two point five 413 00:22:11,160 --> 00:22:14,520 Speaker 1: to three percent extra return from owning US equities rather 414 00:22:14,560 --> 00:22:17,080 Speaker 1: than owning tips. And then we say, well, is that 415 00:22:17,320 --> 00:22:20,439 Speaker 1: how how attractive is that? It's okay, I mean, you know, 416 00:22:20,840 --> 00:22:23,560 Speaker 1: it's two and a half three percent extra return. It's nice, 417 00:22:23,960 --> 00:22:25,720 Speaker 1: but it's not so nice that we'd want to have 418 00:22:25,800 --> 00:22:28,840 Speaker 1: a lot of it. So from with that starting point, 419 00:22:28,880 --> 00:22:32,320 Speaker 1: we are underweight US equities for our clients because we 420 00:22:32,400 --> 00:22:33,960 Speaker 1: don't think that that two and a half to three 421 00:22:33,960 --> 00:22:36,440 Speaker 1: percent is great. And then we also want to think 422 00:22:36,480 --> 00:22:39,919 Speaker 1: about the risk of US equities and uh, you know, 423 00:22:39,960 --> 00:22:42,320 Speaker 1: we could look at their volatility or we you know, 424 00:22:42,400 --> 00:22:45,560 Speaker 1: we prefer to look at their momentum as a proxy 425 00:22:45,640 --> 00:22:48,800 Speaker 1: for risk and momentum in US equities is still negative, 426 00:22:48,840 --> 00:22:51,760 Speaker 1: even though it's getting closer to neutral. So between those 427 00:22:51,760 --> 00:22:54,160 Speaker 1: two things, we would be underweight US equities, and applying 428 00:22:54,200 --> 00:22:57,520 Speaker 1: those same ideas to non US equities, we would be 429 00:22:57,560 --> 00:23:02,280 Speaker 1: overweight them, even though risk and momentum is negative, causing 430 00:23:02,359 --> 00:23:05,240 Speaker 1: us to want less of non US equities, their earnings 431 00:23:05,320 --> 00:23:08,359 Speaker 1: yields are quite high. US non US equities have done 432 00:23:08,720 --> 00:23:11,159 Speaker 1: really poorly over the last ten years and are offering 433 00:23:11,240 --> 00:23:14,040 Speaker 1: quite high, you know, earnings relative to the price you 434 00:23:14,080 --> 00:23:16,280 Speaker 1: pay for them, So we would be we're a little 435 00:23:16,280 --> 00:23:20,840 Speaker 1: bit overweight, just slightly overweight non US equities and underweight 436 00:23:21,000 --> 00:23:24,639 Speaker 1: US equities, and all together underweight equities. So we have 437 00:23:24,680 --> 00:23:28,919 Speaker 1: about in our typical client portfolios, we have between fifty 438 00:23:28,960 --> 00:23:32,520 Speaker 1: to sixty percent of the portfolios are in low risk 439 00:23:32,600 --> 00:23:36,760 Speaker 1: assets right now, whereas back in the middle of two 440 00:23:36,760 --> 00:23:40,320 Speaker 1: thousand and twenty one, we were probably like of the 441 00:23:40,440 --> 00:23:43,520 Speaker 1: client portfolios were invested in risky assets and only ten 442 00:23:43,560 --> 00:23:46,040 Speaker 1: percent and low risk assets. So I don't think it's 443 00:23:46,040 --> 00:23:50,760 Speaker 1: a great time for equities perspectively relative to safe assets. 444 00:23:51,320 --> 00:23:53,199 Speaker 1: And I don't and I think that, yeah, I mean, 445 00:23:53,240 --> 00:23:54,720 Speaker 1: we could definitely have two years in a row of 446 00:23:55,160 --> 00:23:57,439 Speaker 1: negative returns. A lot of that will probably hinge on 447 00:23:57,480 --> 00:24:00,159 Speaker 1: what the Fed does and what happens to long term 448 00:24:00,200 --> 00:24:02,639 Speaker 1: interest rates. And I'm gonna go out on a limb 449 00:24:02,680 --> 00:24:06,280 Speaker 1: and guess that all you're listening to, Uh, Sam Bankman 450 00:24:06,320 --> 00:24:09,000 Speaker 1: Freed podcast did not make you more bullish on crypto 451 00:24:09,560 --> 00:24:13,639 Speaker 1: to talcate allocate anything crypto. Just gonna go out on 452 00:24:13,640 --> 00:24:17,960 Speaker 1: a limb and guess that, Victor, how did play out 453 00:24:17,960 --> 00:24:21,880 Speaker 1: in Obviously we have the benefit of hindsight, but how 454 00:24:21,880 --> 00:24:23,560 Speaker 1: did it turn out in terms of what you had 455 00:24:23,560 --> 00:24:27,359 Speaker 1: been expecting? Our approach to investing was was pretty good 456 00:24:27,400 --> 00:24:31,040 Speaker 1: for our clients. Our clients, Uh, I don't know client 457 00:24:31,119 --> 00:24:35,520 Speaker 1: returns until now are I don't know exactly the right 458 00:24:35,640 --> 00:24:39,479 Speaker 1: number under ten percent of losses on average over the 459 00:24:39,920 --> 00:24:43,440 Speaker 1: over the year, which is better than a sixty portfolio. 460 00:24:43,560 --> 00:24:45,359 Speaker 1: It's it's much better than if they just had a 461 00:24:45,359 --> 00:24:49,679 Speaker 1: static portfolio based on our baseline. But I am surprised 462 00:24:49,720 --> 00:24:53,480 Speaker 1: by how sort of goldilocks things seem to be right 463 00:24:53,520 --> 00:24:56,960 Speaker 1: now that the interest rates. You know that if we 464 00:24:57,000 --> 00:24:59,840 Speaker 1: went back, you know, over a year ago, nobody saw 465 00:25:00,000 --> 00:25:03,560 Speaker 1: four hundred basis points of four percent increases and interest 466 00:25:03,640 --> 00:25:06,120 Speaker 1: rates coming we got that. Wow, that was a big surprise. 467 00:25:06,720 --> 00:25:09,560 Speaker 1: And sure interest rates, long term interest rates are higher, 468 00:25:09,600 --> 00:25:12,679 Speaker 1: but they're not so much higher. And people are expecting 469 00:25:12,800 --> 00:25:16,040 Speaker 1: that the Fed is going to raise rates a bit 470 00:25:16,080 --> 00:25:19,879 Speaker 1: more and then dramatically bring rates down by a couple 471 00:25:19,920 --> 00:25:23,479 Speaker 1: of percent starting in the middle of next year and 472 00:25:23,600 --> 00:25:26,000 Speaker 1: bringing them all the way back down because inflation is 473 00:25:26,000 --> 00:25:28,199 Speaker 1: going to get under control and in all of this, 474 00:25:28,280 --> 00:25:31,159 Speaker 1: we're not going to have a massive recession and companies, 475 00:25:31,800 --> 00:25:35,480 Speaker 1: corporate earnings are gonna be okay. And uh so you 476 00:25:35,520 --> 00:25:37,560 Speaker 1: know it. You know, I think that if I knew, 477 00:25:37,800 --> 00:25:40,040 Speaker 1: if all that you told me was that, uh, you know, 478 00:25:40,080 --> 00:25:44,479 Speaker 1: inflation picked up dramatically as it has done, and that 479 00:25:44,600 --> 00:25:47,080 Speaker 1: economic growth had been strong, and that the FED raised 480 00:25:47,160 --> 00:25:50,240 Speaker 1: rates by four percent, I would not have guessed that 481 00:25:50,440 --> 00:25:52,440 Speaker 1: markets would look the way that they do right now. 482 00:25:52,440 --> 00:25:54,879 Speaker 1: So it's been a surprise in that sense, and I 483 00:25:54,920 --> 00:25:58,080 Speaker 1: suppose it almost always is, but yeah, it's quite surprising. 484 00:25:58,800 --> 00:26:01,119 Speaker 1: They passed a loss somewhere Victor where we have to 485 00:26:01,160 --> 00:26:04,959 Speaker 1: ask every guest about their their outlook for inflation. Uh, 486 00:26:06,320 --> 00:26:08,639 Speaker 1: it's it's a new law. You don't strike me as 487 00:26:08,680 --> 00:26:12,800 Speaker 1: the type of guy who's going to you know, try 488 00:26:12,800 --> 00:26:15,040 Speaker 1: to predict where it's going, but rather react and and 489 00:26:15,080 --> 00:26:17,280 Speaker 1: sort of play the cards on the table. Is that right? 490 00:26:17,400 --> 00:26:21,160 Speaker 1: Or do you have an inflation uh forecast in mind? Well? Yeah, 491 00:26:21,320 --> 00:26:24,480 Speaker 1: so I guess that, Um that that's you're you're right. 492 00:26:24,520 --> 00:26:26,560 Speaker 1: I mean my starting point is to look at the 493 00:26:26,600 --> 00:26:29,320 Speaker 1: break even inflation rate between tips and nomenal bonds. Is 494 00:26:29,359 --> 00:26:31,800 Speaker 1: to you know, think about some of these surveys that 495 00:26:31,880 --> 00:26:35,119 Speaker 1: come out where and that the break even show a normalization. 496 00:26:35,400 --> 00:26:38,880 Speaker 1: They do. I mean, long term break evens are where 497 00:26:38,960 --> 00:26:41,919 Speaker 1: they're they're under three percent. I mean we have what 498 00:26:42,240 --> 00:26:44,560 Speaker 1: thirty you know, thirty year tips are around just over 499 00:26:44,600 --> 00:26:49,760 Speaker 1: one percent, and thirty year nominal bonds are just below 500 00:26:49,880 --> 00:26:52,119 Speaker 1: four percent. Right, So yeah, so we're you know, in 501 00:26:52,160 --> 00:26:55,280 Speaker 1: the in the mid to high twos. But also there 502 00:26:55,280 --> 00:26:57,080 Speaker 1: should be sort of a risk premium and all of that, 503 00:26:57,200 --> 00:26:59,920 Speaker 1: right because to take inflation, you know, it's not really 504 00:27:00,640 --> 00:27:02,399 Speaker 1: whatever that number is, it should be a bit of 505 00:27:02,440 --> 00:27:05,399 Speaker 1: an overestimate of what people are really expecting for inflation. 506 00:27:05,720 --> 00:27:08,400 Speaker 1: But that's you know, sort of mid twos. And then 507 00:27:08,760 --> 00:27:11,679 Speaker 1: you know, these inflation surveys are coming out sort of 508 00:27:11,680 --> 00:27:15,239 Speaker 1: mid twos as well. So I guess I wouldn't want 509 00:27:15,280 --> 00:27:18,119 Speaker 1: to go too far out on a limb, but you know, 510 00:27:18,160 --> 00:27:21,600 Speaker 1: I think that those are underestimates of what's going what 511 00:27:21,640 --> 00:27:23,600 Speaker 1: we're going to see in terms of inflation, I think 512 00:27:23,640 --> 00:27:28,560 Speaker 1: that the forces that gave us uh so much um 513 00:27:28,720 --> 00:27:32,000 Speaker 1: low inflation or the deflationary forces of the last couple 514 00:27:32,040 --> 00:27:35,439 Speaker 1: of decades have slowed a lot or have reversed in 515 00:27:35,480 --> 00:27:41,479 Speaker 1: some global Yeah yeah, and uh so, you know, and 516 00:27:41,520 --> 00:27:43,719 Speaker 1: I think that there are these lags, you know, like 517 00:27:43,760 --> 00:27:46,720 Speaker 1: by the time that my barber actually I don't go 518 00:27:46,760 --> 00:27:49,280 Speaker 1: to a barber, I just buzzed my own and if 519 00:27:49,280 --> 00:27:51,919 Speaker 1: I did go into a barber, I know that for 520 00:27:52,000 --> 00:27:54,440 Speaker 1: the barbers that I do know that you know, there's 521 00:27:54,440 --> 00:27:58,760 Speaker 1: just a lot of uh businesses that haven't raised that 522 00:27:58,760 --> 00:28:01,960 Speaker 1: haven't gotten around to raising prices yet. And uh you know, 523 00:28:02,000 --> 00:28:03,920 Speaker 1: so I think there's still a lot a lot more 524 00:28:03,960 --> 00:28:06,040 Speaker 1: that we'll see, at least in the nearer term, before 525 00:28:06,040 --> 00:28:08,560 Speaker 1: it really pans out. Uh you know. I mean, things 526 00:28:08,600 --> 00:28:11,280 Speaker 1: like oil are a big wild card in the whole thing. 527 00:28:11,359 --> 00:28:14,480 Speaker 1: I mean, if oil comes down to thirty dollars a barrel, 528 00:28:14,520 --> 00:28:17,560 Speaker 1: then yeah, you know, we're gonna see some some big 529 00:28:17,640 --> 00:28:20,760 Speaker 1: changes some you know, a big downward move in in 530 00:28:20,880 --> 00:28:24,680 Speaker 1: the headline inflation anyway. But assuming you know that things 531 00:28:24,880 --> 00:28:27,040 Speaker 1: stay where they are, I think that I'd be a 532 00:28:27,080 --> 00:28:29,639 Speaker 1: little bit more bearish on inflation than what the markets 533 00:28:29,640 --> 00:28:46,960 Speaker 1: are telling us. Well, with that, Victor, the good news 534 00:28:47,120 --> 00:28:49,560 Speaker 1: and maybe bad news for you, is that we can't 535 00:28:49,600 --> 00:28:54,320 Speaker 1: let you go until you participate in our gimmick or tradition, 536 00:28:54,600 --> 00:28:58,720 Speaker 1: not a gimmick tradition, both of the craziest thing we 537 00:28:58,760 --> 00:29:01,280 Speaker 1: saw markets this we can it's it's you know, New 538 00:29:01,360 --> 00:29:03,920 Speaker 1: Year's so it can be the craziest thing you saw 539 00:29:04,480 --> 00:29:07,040 Speaker 1: in the past year. I'd say, so my craziest thing, 540 00:29:07,480 --> 00:29:10,000 Speaker 1: it's probably not that crazy. And I've and when I've 541 00:29:10,120 --> 00:29:12,880 Speaker 1: pointed this crazy thing out to people, I find that 542 00:29:12,960 --> 00:29:15,600 Speaker 1: I get kind of like a bit of a negative 543 00:29:15,600 --> 00:29:18,720 Speaker 1: reaction from them, even though I'm telling them some good news. 544 00:29:18,760 --> 00:29:22,080 Speaker 1: And so maybe that's the really crazy part of what 545 00:29:22,120 --> 00:29:24,600 Speaker 1: I'm going to say. But two thousand and twenty two 546 00:29:24,640 --> 00:29:27,960 Speaker 1: has been a tough year for investors that you know, 547 00:29:28,160 --> 00:29:31,360 Speaker 1: we've that you know, even if you're doing well, your 548 00:29:31,480 --> 00:29:34,880 Speaker 1: portfolio is probably down ten to fifteen percent. Uh, you know, 549 00:29:34,960 --> 00:29:38,440 Speaker 1: bonds are down close to fifteen percent, Equities are down 550 00:29:38,440 --> 00:29:41,000 Speaker 1: close to fifteen percent. It's been hard to avoid being 551 00:29:41,040 --> 00:29:43,880 Speaker 1: down ten to fifteen percent. And if you were really 552 00:29:43,920 --> 00:29:47,120 Speaker 1: concentrated in some bad thing, the things that did poorly, 553 00:29:47,200 --> 00:29:49,480 Speaker 1: then um, you would even be worse. But let's say 554 00:29:49,480 --> 00:29:53,200 Speaker 1: you're down, you know, ten to fifteen percent on your portfolio. Well, 555 00:29:53,280 --> 00:29:55,240 Speaker 1: then you say, gosh, you know, it's actually much worse 556 00:29:55,240 --> 00:29:59,080 Speaker 1: than that, because uh, in real terms, UM down another 557 00:29:59,120 --> 00:30:03,440 Speaker 1: eight percent because prices of everything are higher. Assuming that 558 00:30:03,560 --> 00:30:05,960 Speaker 1: cp I is relevant rather than some other index that 559 00:30:06,000 --> 00:30:08,480 Speaker 1: could be worse, although the haircut index would be better, 560 00:30:09,680 --> 00:30:12,840 Speaker 1: and so uh. So you know, the the typical investor 561 00:30:12,960 --> 00:30:16,720 Speaker 1: and myself, for instance, among them, Uh, you know I'm down. 562 00:30:17,040 --> 00:30:20,520 Speaker 1: Uh let's say just over twenty on a real basis, 563 00:30:20,640 --> 00:30:25,800 Speaker 1: that the real purchasing power of my wealth is down 564 00:30:26,640 --> 00:30:29,800 Speaker 1: in two thousand and twenty two roughly. Well that sounds terrible, 565 00:30:29,840 --> 00:30:32,280 Speaker 1: you know, that really is bad. But the crazy thing 566 00:30:32,320 --> 00:30:35,600 Speaker 1: about it is that what we really care about is 567 00:30:35,640 --> 00:30:40,040 Speaker 1: the real, the inflation adjusted real income stream, long term 568 00:30:40,080 --> 00:30:43,000 Speaker 1: income stream that we can generate from our wealth. So 569 00:30:43,040 --> 00:30:47,560 Speaker 1: our wealth is down in real terms, does that mean 570 00:30:47,600 --> 00:30:51,400 Speaker 1: that we're gonna be able to spend less over the 571 00:30:51,440 --> 00:30:55,800 Speaker 1: next thirty years. Well, actually, the surprise or the crazy 572 00:30:55,880 --> 00:31:00,600 Speaker 1: thing is that because interest rates have gone up so 573 00:31:00,680 --> 00:31:03,960 Speaker 1: much from a year ago from minus one percent to 574 00:31:04,120 --> 00:31:06,800 Speaker 1: just over one percent today, and I'm talking again about 575 00:31:07,200 --> 00:31:11,320 Speaker 1: real interest rates, that actually the long term income stream 576 00:31:11,320 --> 00:31:14,400 Speaker 1: that we could generate from our wealth is probably ten 577 00:31:14,440 --> 00:31:17,640 Speaker 1: percent higher than it was twelve months ago, which I 578 00:31:17,680 --> 00:31:20,760 Speaker 1: think is just a crazy thing because everybody's sort of, 579 00:31:20,880 --> 00:31:24,960 Speaker 1: you know, moping around like this sucks. You know, I'm 580 00:31:25,000 --> 00:31:28,280 Speaker 1: down and then I'm down more because of inflation. But actually, 581 00:31:29,000 --> 00:31:32,160 Speaker 1: uh and and and this result that the whole outlook 582 00:31:32,200 --> 00:31:35,440 Speaker 1: for the pension industries is turned around because of this. Right. Oh, 583 00:31:35,560 --> 00:31:37,800 Speaker 1: that's a great point. That's a really great way to 584 00:31:37,800 --> 00:31:41,000 Speaker 1: see it, Right, is that pensions are less underfunded because 585 00:31:41,000 --> 00:31:43,479 Speaker 1: their liabilities. That's a great point, which I kind of was, 586 00:31:43,880 --> 00:31:46,040 Speaker 1: I forgot to bring that up, but that's a really 587 00:31:46,160 --> 00:31:48,479 Speaker 1: great perspective to think about it. That for pension funds, 588 00:31:48,920 --> 00:31:51,800 Speaker 1: they're better off in general because their liabilities have gone 589 00:31:51,960 --> 00:31:54,360 Speaker 1: have been reduced by more than their assets. And and 590 00:31:54,400 --> 00:31:57,320 Speaker 1: we're like little pension funds ourselves with our savings. So 591 00:31:57,640 --> 00:32:00,360 Speaker 1: I think that's crazy. Who knew the s to the 592 00:32:00,360 --> 00:32:03,960 Speaker 1: pension crisis was you know what the worst bear markets 593 00:32:03,960 --> 00:32:06,240 Speaker 1: and stocks, and well, well if the you know, it 594 00:32:06,240 --> 00:32:08,000 Speaker 1: doesn't have to be that way, if equities had gone 595 00:32:08,000 --> 00:32:11,600 Speaker 1: down a lot more, if we were down in our portfolios, 596 00:32:11,680 --> 00:32:13,680 Speaker 1: then we wouldn't be able to say that, you know 597 00:32:13,760 --> 00:32:16,960 Speaker 1: that it's just that we're only down, you know, fifteen 598 00:32:18,480 --> 00:32:20,240 Speaker 1: in real terms. It allows that to be the case. 599 00:32:20,240 --> 00:32:23,200 Speaker 1: But I do think that the really weird part about 600 00:32:23,240 --> 00:32:26,480 Speaker 1: it is what people's reactions are. It's like, leave me alone. 601 00:32:26,520 --> 00:32:28,120 Speaker 1: I just want to be can't you just let me 602 00:32:28,160 --> 00:32:30,680 Speaker 1: be miserable? I know I'm down. I don't believe you. 603 00:32:30,800 --> 00:32:34,080 Speaker 1: This is ridiculous. You know, there's something wrong with your analysis, 604 00:32:34,160 --> 00:32:36,400 Speaker 1: or maybe there's a tax effect that you're not talking about. 605 00:32:36,400 --> 00:32:38,520 Speaker 1: But you know, I think that's kind of the funniest 606 00:32:38,560 --> 00:32:40,720 Speaker 1: part about it is that it just it does not 607 00:32:41,040 --> 00:32:43,520 Speaker 1: seem to It does not seem to make anybody happier. 608 00:32:43,560 --> 00:32:46,080 Speaker 1: But I thought i'd share that. There's definitely a lot 609 00:32:46,080 --> 00:32:48,640 Speaker 1: of other crazy things going on, and god knows what 610 00:32:48,680 --> 00:32:51,120 Speaker 1: an options markets and and all of that, but this 611 00:32:51,160 --> 00:32:53,280 Speaker 1: is the one that I feel sort of the most 612 00:32:53,400 --> 00:32:58,000 Speaker 1: interesting and all and allows a year on a high 613 00:32:58,080 --> 00:33:00,880 Speaker 1: note for sure. Well, let's hear Vildona. Have you ever 614 00:33:00,920 --> 00:33:06,680 Speaker 1: had a pet rock? I am of the age where 615 00:33:06,760 --> 00:33:08,840 Speaker 1: yes I did have. In fact, I think we made them. 616 00:33:09,040 --> 00:33:12,680 Speaker 1: You have a collection fifth grade, uh, fifth grade art 617 00:33:12,680 --> 00:33:15,440 Speaker 1: class or something. Uh. But I think I know where 618 00:33:15,440 --> 00:33:17,720 Speaker 1: you're going with this one, and it's good. It's not 619 00:33:17,880 --> 00:33:21,960 Speaker 1: it's not of the past year, but it's more representative 620 00:33:22,040 --> 00:33:23,880 Speaker 1: of like the big stories of the past year. So 621 00:33:24,000 --> 00:33:27,640 Speaker 1: Jamie Diamond from JP Morgan, he said, Crypto is like 622 00:33:27,760 --> 00:33:30,520 Speaker 1: pet rocks, and I just love it because when you 623 00:33:30,520 --> 00:33:33,800 Speaker 1: think of pet rocks, they're so they're cute, right, Yeah, 624 00:33:33,840 --> 00:33:36,240 Speaker 1: and people, and I wanted to ask you if you 625 00:33:36,280 --> 00:33:38,239 Speaker 1: had a pet rock? Of course I did. Yeah, there, 626 00:33:39,640 --> 00:33:41,800 Speaker 1: he said, why do we allow this stuff to take place? 627 00:33:42,080 --> 00:33:44,840 Speaker 1: The big things in the eighties were the parachute pants. 628 00:33:45,560 --> 00:33:47,320 Speaker 1: I don't know what that is that they're like these 629 00:33:47,440 --> 00:33:49,800 Speaker 1: vinyl I don't know what that like. Pants made out 630 00:33:49,800 --> 00:33:53,880 Speaker 1: of parachute. No, my parents wouldn't wouldn't let me get any, 631 00:33:54,160 --> 00:33:57,520 Speaker 1: so I didn't have been very hot. But now they're 632 00:33:57,600 --> 00:34:00,360 Speaker 1: they're way past my time. But I've heard Crypto compared 633 00:34:00,360 --> 00:34:02,120 Speaker 1: to the beanie I think the Beanie Babies is a 634 00:34:02,160 --> 00:34:06,240 Speaker 1: better because there was an active market for beanie babies, 635 00:34:06,240 --> 00:34:09,799 Speaker 1: and there was manipulated prices, you know, people trying to 636 00:34:09,800 --> 00:34:11,480 Speaker 1: corner the market and all that. I don't know if 637 00:34:11,480 --> 00:34:13,920 Speaker 1: pet rocks ever, what do people do with their pet rocks? 638 00:34:14,320 --> 00:34:16,400 Speaker 1: I think he just sat it on your desk and 639 00:34:16,440 --> 00:34:19,840 Speaker 1: then eventually making into the garden. Yeah, exactly right. I 640 00:34:19,960 --> 00:34:23,400 Speaker 1: think there was a secondary market for Jamie. Jamie Diamond 641 00:34:23,400 --> 00:34:25,839 Speaker 1: knows better than me. He maybe he's securitized. He's been 642 00:34:25,880 --> 00:34:28,680 Speaker 1: hating on crypto for a long time, and he kind 643 00:34:28,680 --> 00:34:30,120 Speaker 1: of warmed up a little bit there, but then he 644 00:34:30,680 --> 00:34:34,600 Speaker 1: reverted back. He said great or something. He was he 645 00:34:34,680 --> 00:34:37,239 Speaker 1: was right all along, probably, but all right, I like 646 00:34:37,320 --> 00:34:39,799 Speaker 1: that one. That's pretty good. Alright, Well, don I'm gonna 647 00:34:39,800 --> 00:34:43,120 Speaker 1: start mine with a tribute question. Do you know you 648 00:34:43,120 --> 00:34:47,120 Speaker 1: know who Hugh Hefner is? Was Hugh Hefner a member 649 00:34:47,160 --> 00:34:52,840 Speaker 1: of the two thousand Los Angeles Lakers. No, I was 650 00:34:52,880 --> 00:34:59,279 Speaker 1: taking you that he was, like, probably he was. But 651 00:34:59,680 --> 00:35:03,880 Speaker 1: he was the owner of a championship ring from the 652 00:35:03,920 --> 00:35:07,000 Speaker 1: two thousand Los Angeles Lakers that was gifted to him 653 00:35:07,239 --> 00:35:10,680 Speaker 1: by their owner at the time, what's the owner's name, 654 00:35:10,960 --> 00:35:18,880 Speaker 1: Jerry Buss gave him there two thousand championship ring l 655 00:35:18,920 --> 00:35:20,399 Speaker 1: A Lakers. I'll shave you a picture of it. It's 656 00:35:20,400 --> 00:35:23,200 Speaker 1: the ugliest ring I've ever seen. This picture is perfect 657 00:35:23,239 --> 00:35:26,560 Speaker 1: for the podcast. Cannot see it, we can describe it 658 00:35:26,560 --> 00:35:29,160 Speaker 1: a little bit. It's like it's got all these diamonds, 659 00:35:29,320 --> 00:35:32,160 Speaker 1: says World Champs. It's golden diamonds. Looks like something Mr. 660 00:35:32,200 --> 00:35:35,200 Speaker 1: T would where you'd think just the intrinsic value of 661 00:35:35,520 --> 00:35:37,279 Speaker 1: the raw materials in it. I think you know where 662 00:35:37,480 --> 00:35:39,960 Speaker 1: we're going with this. Where we're going. I know where 663 00:35:40,000 --> 00:35:44,160 Speaker 1: we're going. Victor probably doesn't. We're going to the prices precise. 664 00:35:44,440 --> 00:35:48,160 Speaker 1: The price is precise. You have just traded it's it's 665 00:35:48,239 --> 00:35:51,000 Speaker 1: up for auction, so we don't The price discovery on 666 00:35:51,080 --> 00:35:54,279 Speaker 1: it is not perfect early bidding. Four days left in 667 00:35:54,320 --> 00:35:56,839 Speaker 1: the bidding and mind you went. And this is where 668 00:35:57,080 --> 00:36:00,279 Speaker 1: we're recording in the middle of December here, so uh 669 00:36:00,880 --> 00:36:03,440 Speaker 1: keep that in mind. With Victors numbers about how down 670 00:36:03,520 --> 00:36:05,640 Speaker 1: far down the market is this year, we could redouble 671 00:36:05,719 --> 00:36:08,680 Speaker 1: that by the end of the year. Victor's gonna lookay, well, 672 00:36:08,680 --> 00:36:11,719 Speaker 1: I can't let you see it, Victor, because you gotta 673 00:36:11,719 --> 00:36:15,719 Speaker 1: get two bids in what do you suppose the prevailing 674 00:36:15,760 --> 00:36:20,560 Speaker 1: bid is for Hugh Hefner's l a Lakers Championship ring. 675 00:36:20,640 --> 00:36:22,880 Speaker 1: Remember this is that this is a heartbreaking team for me. 676 00:36:23,040 --> 00:36:26,719 Speaker 1: That shack Kobe and they went on the dismant on 677 00:36:26,800 --> 00:36:28,680 Speaker 1: my seventy six ers a few years later. This is 678 00:36:28,719 --> 00:36:31,440 Speaker 1: the first of three three championships in a row for 679 00:36:31,520 --> 00:36:34,719 Speaker 1: this team. Wow, and Hugh Heffner got a ring. I 680 00:36:34,920 --> 00:36:37,160 Speaker 1: don't know. I'm going with one point seven five million. 681 00:36:37,360 --> 00:36:41,440 Speaker 1: One point seven five million, okay, and remember playing prices precise, 682 00:36:42,000 --> 00:36:47,160 Speaker 1: so if you go over, I win. Okay, all right, 683 00:36:47,480 --> 00:36:52,680 Speaker 1: you just jumped out there right, all right. I was 684 00:36:52,719 --> 00:36:55,000 Speaker 1: going to give a little more details that. Oh sorry, 685 00:36:55,040 --> 00:36:57,840 Speaker 1: go ahead. Two bids in four days left in the auction. 686 00:36:58,040 --> 00:37:01,439 Speaker 1: The auction house is SCP Victor. What do you think 687 00:37:01,520 --> 00:37:03,239 Speaker 1: you can take? Just that was not a lot of 688 00:37:03,320 --> 00:37:07,760 Speaker 1: extra good details SCP Southeby's or somebody else. I don't 689 00:37:07,760 --> 00:37:10,080 Speaker 1: you know, that's a good question. I don't think so. 690 00:37:10,160 --> 00:37:16,120 Speaker 1: I think it's some some um collectibles focused. Oh my gosh, 691 00:37:16,160 --> 00:37:18,000 Speaker 1: this is such a tough one. I mean, I guess 692 00:37:18,000 --> 00:37:20,719 Speaker 1: you've got the You know that that having Hugh Hefner's 693 00:37:20,800 --> 00:37:22,680 Speaker 1: ring could be good or bad, you know, depending on 694 00:37:24,160 --> 00:37:28,000 Speaker 1: and then but I you know, I'm just gonna have 695 00:37:28,080 --> 00:37:31,000 Speaker 1: to go, I'm gonna say one more thing. Remember they 696 00:37:31,040 --> 00:37:33,880 Speaker 1: won three more they won three championships. A lot of 697 00:37:33,880 --> 00:37:35,839 Speaker 1: guys on the team, if even he was getting so 698 00:37:35,920 --> 00:37:38,600 Speaker 1: it's not that rare, right, I was gonna say that 699 00:37:38,640 --> 00:37:42,120 Speaker 1: there's a lot. Well I did say I was gonna 700 00:37:42,160 --> 00:37:45,200 Speaker 1: go low. So I but I'm not gonna go I'm 701 00:37:45,239 --> 00:37:47,799 Speaker 1: not gonna be obnoxious and just you know, undertake you, 702 00:37:47,840 --> 00:37:51,719 Speaker 1: because that wouldn't be No. No, I'm gonna I'm going 703 00:37:51,760 --> 00:37:53,640 Speaker 1: to go with what I was sort of thinking, because 704 00:37:53,680 --> 00:37:55,160 Speaker 1: I think that's the honest thing to do. Like we 705 00:37:55,640 --> 00:37:58,120 Speaker 1: probably should have written our things down. So I was like, 706 00:37:58,120 --> 00:38:00,239 Speaker 1: I was gonna go something, you know, in the two 707 00:38:00,320 --> 00:38:03,719 Speaker 1: fifty thousand range for it, you know, and and even 708 00:38:03,760 --> 00:38:05,600 Speaker 1: thinking that's a little bit high. So that's where I 709 00:38:05,600 --> 00:38:09,840 Speaker 1: would you always go for every time she hears the 710 00:38:09,880 --> 00:38:12,960 Speaker 1: other bid, she wants to re point six millions. Okay, 711 00:38:15,719 --> 00:38:18,680 Speaker 1: where is it? I will tell you something to remember 712 00:38:19,080 --> 00:38:22,280 Speaker 1: in future episodes of The Prices Precise. Sometimes the crazy 713 00:38:22,360 --> 00:38:24,839 Speaker 1: thing is that it's not as high as you think. Oh, 714 00:38:25,040 --> 00:38:33,400 Speaker 1: come on, bucks, so far as just raw materials alone, 715 00:38:33,440 --> 00:38:37,040 Speaker 1: that's gotta be uh, twenty grand worth of diamonds alone. 716 00:38:37,120 --> 00:38:38,840 Speaker 1: I don't know. Yeah, you could get that ring and 717 00:38:38,880 --> 00:38:43,720 Speaker 1: turn it into two nice earrings or something. So maybe 718 00:38:43,719 --> 00:38:46,759 Speaker 1: to your point, Q is not you think I think 719 00:38:46,760 --> 00:38:50,759 Speaker 1: in fairness though maybe you know that in a later 720 00:38:50,840 --> 00:38:53,680 Speaker 1: podcast you'll say what it sold for and then then 721 00:38:53,760 --> 00:38:56,239 Speaker 1: Bill Donna will be vindicated. It'll be it'll likely be 722 00:38:56,280 --> 00:38:58,520 Speaker 1: higher that we can take all of our big podcast 723 00:38:58,600 --> 00:39:04,080 Speaker 1: money and go, yeah, all this crazy money where sure, 724 00:39:04,360 --> 00:39:07,719 Speaker 1: So there you go, that's my craziest thing. But can 725 00:39:07,760 --> 00:39:11,040 Speaker 1: I say, because you always have auctions for craziest thing, 726 00:39:11,680 --> 00:39:14,520 Speaker 1: and I would no, for sure, but I would think 727 00:39:14,560 --> 00:39:18,520 Speaker 1: that the craziness there would have gone down since last year, 728 00:39:18,560 --> 00:39:21,279 Speaker 1: and some of them have been obnoxiously crazy. You're right, 729 00:39:21,320 --> 00:39:23,560 Speaker 1: You're right. They the froth is still there in the 730 00:39:23,600 --> 00:39:27,319 Speaker 1: crazy market for some reason, and you know, maybe it's 731 00:39:27,360 --> 00:39:30,879 Speaker 1: always there. I mean maybe some of these things, Uh, 732 00:39:31,280 --> 00:39:34,279 Speaker 1: you're you're dealing with a different stratosphere of wealth and 733 00:39:34,320 --> 00:39:36,680 Speaker 1: investors so that there's only so many to start with him. 734 00:39:36,880 --> 00:39:38,799 Speaker 1: But the froth does seem to be coming down. In fact, 735 00:39:38,840 --> 00:39:40,920 Speaker 1: a cousin of mine who lives in Los Angeles will 736 00:39:40,960 --> 00:39:44,280 Speaker 1: be really happy if I mentioned he's been following classic 737 00:39:44,320 --> 00:39:47,920 Speaker 1: car auctions and he's been noting that so many of 738 00:39:47,960 --> 00:39:49,839 Speaker 1: the cars much more than in the past, or not 739 00:39:49,880 --> 00:39:52,719 Speaker 1: getting to the reserve price, which you know is indicative 740 00:39:52,760 --> 00:39:55,680 Speaker 1: of a market where the sellers are like, well, come on, 741 00:39:55,880 --> 00:39:57,759 Speaker 1: this is a great car and should be at least 742 00:39:57,760 --> 00:40:00,160 Speaker 1: worth this much. You know, and and and you know, 743 00:40:00,200 --> 00:40:02,080 Speaker 1: we know that the auctioneers are trying to push them 744 00:40:02,120 --> 00:40:05,319 Speaker 1: to make deals happen, but you know, we're we're in 745 00:40:05,360 --> 00:40:08,479 Speaker 1: some sort of an adjustment period for sure. That's interesting. Yeah, 746 00:40:08,920 --> 00:40:11,920 Speaker 1: it's funny the different lenses to look at the sentiment 747 00:40:12,000 --> 00:40:21,359 Speaker 1: and market evaluation fascinating. Victor Haghani from ELM Partners so 748 00:40:21,400 --> 00:40:23,240 Speaker 1: great to catch up with you and hear your thoughts. 749 00:40:23,239 --> 00:40:26,319 Speaker 1: It's always very educational. Thank you so much for having 750 00:40:26,320 --> 00:40:36,200 Speaker 1: me on the show. I really appreciate it. What goes up, 751 00:40:36,200 --> 00:40:38,080 Speaker 1: We'll be back next week and so then you can 752 00:40:38,120 --> 00:40:41,000 Speaker 1: find us on the Bloomberg Terminal website and app or 753 00:40:41,040 --> 00:40:43,840 Speaker 1: wherever you get your podcasts. We love it if you 754 00:40:43,840 --> 00:40:45,880 Speaker 1: took the time to rate and review the show on 755 00:40:45,960 --> 00:40:49,200 Speaker 1: Apple Podcasts. Some more listeners can find us, and you 756 00:40:49,200 --> 00:40:52,799 Speaker 1: can find us on Twitter, follow me, at Rea Anonymous. Well. 757 00:40:52,840 --> 00:40:56,360 Speaker 1: Donna Hirach is at Bildanna Hirach. You can also follow 758 00:40:56,360 --> 00:41:00,840 Speaker 1: Bloomberg Podcasts at podcasts. What Kind Is Up is produced 759 00:41:00,840 --> 00:41:03,520 Speaker 1: by Stacy Wang. Thanks for listening. To see you next 760 00:41:03,520 --> 00:41:11,360 Speaker 1: time than