1 00:00:03,080 --> 00:00:07,440 Speaker 1: Broadcasting live to New York Bloomberg eleventh, Rio to Washington, 2 00:00:07,520 --> 00:00:11,920 Speaker 1: d C. Bloomber to Boston, Bloomberg twelve hundred to San 3 00:00:11,960 --> 00:00:17,079 Speaker 1: Francisco Bloomberg nine to the Country's Jam General one and 4 00:00:17,239 --> 00:00:21,040 Speaker 1: around the globe the Bloomberg Radio Plus Athen Bloomberg got gone. 5 00:00:21,320 --> 00:00:25,560 Speaker 1: This is taking stock. Coming up on taking stock, Sir 6 00:00:25,680 --> 00:00:29,080 Speaker 1: John Templeton once said that there is only one long 7 00:00:29,200 --> 00:00:35,280 Speaker 1: term investment objective, maximum total returns after tax. We're gonna 8 00:00:35,280 --> 00:00:38,280 Speaker 1: be speaking with Spencer Jacob and his new book heads 9 00:00:38,320 --> 00:00:41,839 Speaker 1: I Win Tales, I Win, Why smart investors fail, and 10 00:00:41,920 --> 00:00:44,760 Speaker 1: how to tilt the odds in your favor. That's all 11 00:00:44,760 --> 00:00:47,159 Speaker 1: coming up next. Right now, Let's go to Charlie Pellett 12 00:00:47,159 --> 00:00:49,520 Speaker 1: in the Bloomberg news room, and I thank you, pim Fox. 13 00:00:49,520 --> 00:00:51,800 Speaker 1: We're looking at an update here for the DAL, the SMP, 14 00:00:51,920 --> 00:00:55,160 Speaker 1: and NEZDAK, the Dow Industrials and SMP five hundred index 15 00:00:55,480 --> 00:00:58,360 Speaker 1: on track for records. This update is brought to you 16 00:00:58,400 --> 00:01:02,640 Speaker 1: by National Realty for viders of one hundred percent satisfaction 17 00:01:02,680 --> 00:01:06,280 Speaker 1: guaranteed New York City realty investments see them at n 18 00:01:06,480 --> 00:01:10,880 Speaker 1: r i A. Dot net stocks are advancing quarterly numbers 19 00:01:10,920 --> 00:01:15,000 Speaker 1: from Microsoft and Morgan Stanley, scurring optimism that corporate earnings 20 00:01:15,040 --> 00:01:18,440 Speaker 1: can support further gains. We do have the SMP five 21 00:01:18,520 --> 00:01:22,160 Speaker 1: hundred index up eight now two, a gain of four 22 00:01:22,200 --> 00:01:25,360 Speaker 1: tenths of one percent. Morgan Stanley shares her up by 23 00:01:25,440 --> 00:01:29,440 Speaker 1: one point four percent, Microsoft rallying six point one percent, 24 00:01:29,959 --> 00:01:33,560 Speaker 1: and Heuser Busch InBev has won US antitrust approval for 25 00:01:33,640 --> 00:01:36,959 Speaker 1: its takeover of s A. B. Miller after the maker 26 00:01:37,080 --> 00:01:39,800 Speaker 1: of Budweiser agreed to give up ownership of the Miller 27 00:01:39,880 --> 00:01:44,560 Speaker 1: brand and open the door to greater competition from craft beers. Well, 28 00:01:44,640 --> 00:01:48,040 Speaker 1: as we mentioned, Morgan Stanley posted profit that beat analysts estimates. 29 00:01:48,120 --> 00:01:52,120 Speaker 1: Is revenue from wealth management and bond trading exceeded expectations. 30 00:01:52,480 --> 00:01:55,720 Speaker 1: Here's n y U Stern School of Business professor Brad 31 00:01:55,840 --> 00:01:59,920 Speaker 1: Hints requartered and last quarter. But again, the d mbscent 32 00:02:00,000 --> 00:02:02,240 Speaker 1: making cycle tends to be tied to GDP, so if 33 00:02:02,280 --> 00:02:04,840 Speaker 1: you're if you don't have a booming economy, you're not 34 00:02:04,920 --> 00:02:08,280 Speaker 1: going to get that. So they outlook remains let's keep 35 00:02:08,320 --> 00:02:12,519 Speaker 1: the cost out. United Continental Holdings rising to its highest 36 00:02:12,600 --> 00:02:16,040 Speaker 1: value in almost three months after chief executive officer Oscar 37 00:02:16,120 --> 00:02:19,640 Speaker 1: Munio said he is reviewing all aspects of the airline's 38 00:02:19,720 --> 00:02:23,079 Speaker 1: operations in an effort to boost profitability. U a l 39 00:02:23,320 --> 00:02:26,200 Speaker 1: is up by nine tenths of one percent. Gold down 40 00:02:26,360 --> 00:02:29,720 Speaker 1: fifteen ounce the thirteen sixteen, the drop there of one 41 00:02:29,760 --> 00:02:32,560 Speaker 1: point two percent, the tenure down eight thirty seconds of 42 00:02:32,600 --> 00:02:36,680 Speaker 1: the yield of one point five eight percent. Recapping stocks higher, 43 00:02:36,840 --> 00:02:39,160 Speaker 1: SMP up nine, a gain of four tenths of one 44 00:02:39,240 --> 00:02:43,200 Speaker 1: percent two on Wall Street. Now look at other stories 45 00:02:43,280 --> 00:02:47,000 Speaker 1: making news. Thank you, Charlie from the Bloomberg News Room. 46 00:02:47,080 --> 00:02:49,600 Speaker 1: I'm Jill Schneider. This news update is brought to you 47 00:02:49,720 --> 00:02:52,880 Speaker 1: by the Jeep Grand Cherokee, the most awarded suv ever. 48 00:02:53,280 --> 00:02:56,080 Speaker 1: The Grand Cherokee continues to raise the bar with its 49 00:02:56,160 --> 00:03:00,399 Speaker 1: luxurious interior and legendary four by four capability. I wanted 50 00:03:00,440 --> 00:03:03,959 Speaker 1: your local Jeep dealer today. Meredith mcgivor, a staff writer 51 00:03:04,080 --> 00:03:07,880 Speaker 1: for the Trump Organization, is taking responsibility for passages from 52 00:03:07,919 --> 00:03:12,799 Speaker 1: Milania Trump's Republican Convention speech resembling Michelle Obama's two thousand 53 00:03:12,919 --> 00:03:16,600 Speaker 1: eight Democratic Convention speech. McIvor posted a letter to Trump's 54 00:03:16,639 --> 00:03:19,880 Speaker 1: campaign website. She says she offered her resignation to Donald 55 00:03:19,880 --> 00:03:23,440 Speaker 1: Trump and his family, which they rejected. Cleveland Police Chief 56 00:03:23,480 --> 00:03:26,840 Speaker 1: Calvin Williams says he's pleased that's so far. Demonstrations during 57 00:03:26,880 --> 00:03:29,160 Speaker 1: the first few days of the convention have been peaceful 58 00:03:29,480 --> 00:03:31,400 Speaker 1: for us in the city of Cleveland right now, the 59 00:03:31,480 --> 00:03:35,200 Speaker 1: last three days have been um pre even uh, not 60 00:03:35,360 --> 00:03:38,120 Speaker 1: too much going on, and when things have sparked up, 61 00:03:38,600 --> 00:03:41,720 Speaker 1: our officers law enforcement partners were there to take care 62 00:03:41,760 --> 00:03:44,960 Speaker 1: of it. Donor countries are pledging another round of humanitarian 63 00:03:45,040 --> 00:03:47,360 Speaker 1: aid to Iraq. The funds will help build the war 64 00:03:47,480 --> 00:03:51,360 Speaker 1: torn country and support displaced residents. Secretary of State John 65 00:03:51,400 --> 00:03:54,000 Speaker 1: Kerry spoke at a meeting today with more than thirty 66 00:03:54,040 --> 00:03:57,280 Speaker 1: other foreign ministers in Washington. I'm pleased to announce that 67 00:03:57,480 --> 00:04:00,640 Speaker 1: by securing more than two billion dollars of pledges that 68 00:04:00,760 --> 00:04:05,280 Speaker 1: we know will be forthcoming, we have exceeded our expectations. 69 00:04:05,840 --> 00:04:08,920 Speaker 1: Kerry opened the event by saying Islamic state remains a threat. 70 00:04:09,320 --> 00:04:11,880 Speaker 1: Beaches on Coney Island are open again today after a 71 00:04:12,000 --> 00:04:15,800 Speaker 1: possible shark sighting shut down beaches yesterday. The city Department 72 00:04:15,840 --> 00:04:19,160 Speaker 1: of Parks and Recreation was investigating reports of both sharks 73 00:04:19,279 --> 00:04:22,040 Speaker 1: and sting rays in the water. Global News twenty four 74 00:04:22,080 --> 00:04:25,920 Speaker 1: hours a day, powered by more than journalists and analysts 75 00:04:25,960 --> 00:04:28,640 Speaker 1: in more than one d twenty countries. I'm Jil Schneider. 76 00:04:28,760 --> 00:04:31,960 Speaker 1: This is Bloomberg, Charlie, and we thank you and again 77 00:04:32,040 --> 00:04:35,240 Speaker 1: recapping stocks higher with the SMP five hundred index up 78 00:04:35,360 --> 00:04:38,440 Speaker 1: nine points to seventy three, a gain of four tenths 79 00:04:38,480 --> 00:04:42,000 Speaker 1: of one percent. I'm Charlie Pellett, and that's a Bloomberg 80 00:04:42,080 --> 00:04:46,480 Speaker 1: business flash. You're listening to taking Stock with pim Box 81 00:04:46,520 --> 00:04:50,640 Speaker 1: and Jatholne Hayes on Bloomberg Radio. If you buy the 82 00:04:50,760 --> 00:04:53,479 Speaker 1: same securities as other people, you will have the same 83 00:04:53,600 --> 00:04:57,320 Speaker 1: results as other people. It's impossible to produce a superior 84 00:04:57,400 --> 00:05:01,520 Speaker 1: performance unless you do something different. I'm the majority, so 85 00:05:01,800 --> 00:05:05,240 Speaker 1: says Sir John Templeton. One of the world's most famous 86 00:05:05,400 --> 00:05:09,280 Speaker 1: and successful investors. Here to tell us more about how 87 00:05:09,320 --> 00:05:12,400 Speaker 1: to tilt the odds in your favor is Spencer Jacob. 88 00:05:12,839 --> 00:05:14,919 Speaker 1: He is the author of a new book entitled Heads 89 00:05:15,000 --> 00:05:18,480 Speaker 1: I Win, Tales I Win, Why smart investors Fail and 90 00:05:18,600 --> 00:05:21,520 Speaker 1: how to tilt the odds in your favor. Spencer Jacob, 91 00:05:21,600 --> 00:05:24,160 Speaker 1: thanks for being with us. First question, why did you 92 00:05:24,240 --> 00:05:26,960 Speaker 1: write this book? Well, the reason I wrote the book. 93 00:05:26,960 --> 00:05:29,720 Speaker 1: I mean, I've got nearly a quarter century under my belt. Now, 94 00:05:30,279 --> 00:05:32,600 Speaker 1: I was a top rated stock analyst that I became 95 00:05:32,600 --> 00:05:35,880 Speaker 1: an investing columnist. And you know, in my line of work, 96 00:05:35,960 --> 00:05:38,080 Speaker 1: you get asked all the time, what do you think 97 00:05:38,120 --> 00:05:40,040 Speaker 1: I should buy? What do you think about Apple gold, 98 00:05:40,680 --> 00:05:42,640 Speaker 1: or you know, go back fifteen years, what do you 99 00:05:42,680 --> 00:05:46,280 Speaker 1: think about Cisco or pets dot Com? And you know 100 00:05:46,400 --> 00:05:49,640 Speaker 1: that my advice, you know, has been I really don't know. 101 00:05:49,960 --> 00:05:51,840 Speaker 1: I mean, despite the fact that I'm paid to to 102 00:05:51,960 --> 00:05:54,000 Speaker 1: do this, there really is no one who can reliably 103 00:05:54,080 --> 00:05:56,359 Speaker 1: tell you what to buy or what to sell tomorrow. 104 00:05:57,080 --> 00:05:58,800 Speaker 1: What I can tell you, though, is that your results 105 00:05:58,839 --> 00:06:01,360 Speaker 1: are much worse than you wise. And people are really 106 00:06:01,400 --> 00:06:04,320 Speaker 1: shocked when I tell them the numbers um that I 107 00:06:04,480 --> 00:06:06,719 Speaker 1: m in my book. It's it's based. It's absolutely true. 108 00:06:06,760 --> 00:06:11,200 Speaker 1: Though the average investor is way below the market averages. Uh. 109 00:06:11,800 --> 00:06:17,120 Speaker 1: And it's it's quite easy to narrow the gap, or 110 00:06:17,279 --> 00:06:19,520 Speaker 1: quite simple, I should say, but not easy. All right. 111 00:06:19,600 --> 00:06:23,600 Speaker 1: So right now, looking at the SMP five year to date, 112 00:06:23,720 --> 00:06:27,800 Speaker 1: the return is about six point three. If you're lagging 113 00:06:28,080 --> 00:06:32,160 Speaker 1: that six point three in your portfolio, what are some 114 00:06:32,279 --> 00:06:35,279 Speaker 1: of the ideas that you recommend well, if you're lagging 115 00:06:35,480 --> 00:06:38,600 Speaker 1: this year, UM, and you're adopting some principles. Let's say 116 00:06:38,640 --> 00:06:42,000 Speaker 1: you're not invested in the things that happened to be 117 00:06:42,080 --> 00:06:45,520 Speaker 1: doing well this year, but you're a passive investor, you're 118 00:06:45,560 --> 00:06:49,480 Speaker 1: not buying crazy names, then you have absolutely nothing to 119 00:06:49,520 --> 00:06:51,760 Speaker 1: worry about. As a matter of fact, I think that 120 00:06:51,920 --> 00:06:54,640 Speaker 1: the act of worrying about only making two percent with 121 00:06:54,720 --> 00:06:58,240 Speaker 1: the markets of six is exactly the sort of attitude 122 00:06:58,240 --> 00:07:01,040 Speaker 1: that gets people into trouble because you're always chasing performance, 123 00:07:01,040 --> 00:07:03,600 Speaker 1: You're always looking for a fund manager who has the 124 00:07:03,680 --> 00:07:07,240 Speaker 1: magic touch. You're jumping from person to person, stock to stock, 125 00:07:07,320 --> 00:07:10,280 Speaker 1: sector to sector, and that makes you a typical investor 126 00:07:10,320 --> 00:07:13,080 Speaker 1: and a typical investor. UM. Let's say you know you 127 00:07:13,200 --> 00:07:14,920 Speaker 1: you compare to people. Let's say PIM, you and I 128 00:07:15,080 --> 00:07:18,640 Speaker 1: both inherited a bunch of money thirty years ago, and uh, 129 00:07:19,080 --> 00:07:22,480 Speaker 1: I was a typical investor and you were a completely 130 00:07:22,640 --> 00:07:26,720 Speaker 1: robotic passive investor. Uh. After that period of thirty years, 131 00:07:27,520 --> 00:07:29,200 Speaker 1: given the same amount of money and not allowed to 132 00:07:29,240 --> 00:07:31,800 Speaker 1: touch it, you would have five to seven times as 133 00:07:31,880 --> 00:07:35,400 Speaker 1: much money as I I would And that's a reflection 134 00:07:35,440 --> 00:07:38,560 Speaker 1: of all the mistakes that people make that compounded over 135 00:07:38,600 --> 00:07:41,680 Speaker 1: that very long period of time. So I would say, um, 136 00:07:42,240 --> 00:07:45,800 Speaker 1: you know, be passive, be a robotic, be cheap, uh, 137 00:07:45,920 --> 00:07:48,760 Speaker 1: don't pay too much for uh, you know, for a 138 00:07:48,880 --> 00:07:51,240 Speaker 1: pool of passive investments, you really can't do much better. 139 00:07:51,560 --> 00:07:54,120 Speaker 1: And if you're tracking the market or something close to it, 140 00:07:54,200 --> 00:07:57,280 Speaker 1: you're doing better than eight or nine out of ten investors, 141 00:07:57,760 --> 00:08:00,880 Speaker 1: which is pretty good. So people don't want to except that, 142 00:08:01,280 --> 00:08:03,400 Speaker 1: you know, they can only sort of track the market 143 00:08:03,520 --> 00:08:06,160 Speaker 1: or come close to it. But it's you know, and 144 00:08:06,280 --> 00:08:08,800 Speaker 1: people are not aware of this, but it's far far 145 00:08:08,920 --> 00:08:13,640 Speaker 1: better than what most people do. Professional money managers are 146 00:08:13,720 --> 00:08:19,440 Speaker 1: professional money managers any better at selecting investments to produce 147 00:08:19,560 --> 00:08:21,880 Speaker 1: the kinds of returns that their customers want than the 148 00:08:21,960 --> 00:08:25,640 Speaker 1: customers themselves. No, I think that people who have heard 149 00:08:25,640 --> 00:08:28,200 Speaker 1: statistics on it actually assume that they must be worse. 150 00:08:28,320 --> 00:08:31,480 Speaker 1: Because you hear that in any given year, sevent of 151 00:08:31,720 --> 00:08:34,600 Speaker 1: fund managers will will lack the market. At any given decade, 152 00:08:35,080 --> 00:08:38,040 Speaker 1: over will lack the market. It isn't because they're bad. 153 00:08:38,240 --> 00:08:41,959 Speaker 1: They're actually, you know, maybe slightly better than than you 154 00:08:42,080 --> 00:08:45,040 Speaker 1: are at picking stocks. But when you tack their costs 155 00:08:45,120 --> 00:08:47,640 Speaker 1: onto it, all the costs of managing money, the cost 156 00:08:47,720 --> 00:08:50,800 Speaker 1: of holding some cash, the cost of their their um 157 00:08:51,120 --> 00:08:53,880 Speaker 1: you know, paying them, and the profits of their companies. 158 00:08:54,480 --> 00:08:58,040 Speaker 1: That's when the lag comes in. So professional money managers 159 00:08:58,160 --> 00:09:01,400 Speaker 1: are not bad investors. They're probably slightly good investors compared 160 00:09:01,480 --> 00:09:04,360 Speaker 1: to the man on the street. But once you once 161 00:09:04,400 --> 00:09:08,079 Speaker 1: you pay them, the return is not too good. And people, 162 00:09:08,240 --> 00:09:11,240 Speaker 1: you know, it's it's surprising that that people will read 163 00:09:11,320 --> 00:09:14,480 Speaker 1: these reports and they'll read interviews with them. And I 164 00:09:14,679 --> 00:09:16,839 Speaker 1: know lots of money managers. I'm friends with many, and 165 00:09:17,000 --> 00:09:19,120 Speaker 1: they'll see someone who's rated four or five stars and 166 00:09:20,040 --> 00:09:21,839 Speaker 1: put money into their fund and take it out of 167 00:09:21,920 --> 00:09:25,920 Speaker 1: someone who's been lagging recently and statistically. Although I don't 168 00:09:25,960 --> 00:09:29,560 Speaker 1: recommend putting money with any active manager. Uh, that's actually 169 00:09:29,800 --> 00:09:32,319 Speaker 1: the worst thing you can do. Uh. It's it's like 170 00:09:32,400 --> 00:09:34,599 Speaker 1: the Sports Illustrated cover curse the guy who was on 171 00:09:34,720 --> 00:09:37,200 Speaker 1: the cover of a magazine because he's really hot. Bill 172 00:09:37,280 --> 00:09:39,719 Speaker 1: Miller when he was on his fifteen year streak is 173 00:09:39,800 --> 00:09:43,760 Speaker 1: likely to revert the mean and do poorly afterwards. As 174 00:09:43,800 --> 00:09:45,800 Speaker 1: people found out the hard way with Bill Miller after 175 00:09:45,880 --> 00:09:47,360 Speaker 1: the fifteen years streak ended, he was one of the 176 00:09:47,400 --> 00:09:49,800 Speaker 1: worst managers for a few years. What do you think 177 00:09:49,880 --> 00:09:52,240 Speaker 1: of the words of Charlie Munger. He says that the 178 00:09:52,320 --> 00:09:55,760 Speaker 1: academics have done a terrible disservice to intelligent investors by 179 00:09:55,840 --> 00:10:02,439 Speaker 1: glorifying the idea of diversification. Well, um, I think that 180 00:10:02,800 --> 00:10:04,720 Speaker 1: you don't put all of your eggs in one basket. 181 00:10:04,760 --> 00:10:06,480 Speaker 1: I think and if you're a Charlie Munger or you're 182 00:10:06,520 --> 00:10:10,920 Speaker 1: Warren Buffett, uh, and you have fifteen or twenty stocks, 183 00:10:11,040 --> 00:10:14,320 Speaker 1: and you're extremely patient like them, Uh, then you can 184 00:10:14,360 --> 00:10:16,719 Speaker 1: do quite well. You don't need to have five or 185 00:10:16,760 --> 00:10:19,520 Speaker 1: a thousand stocks. I think he's right about that. Would 186 00:10:19,559 --> 00:10:22,040 Speaker 1: Warren Bufetts say, you know, just you know, I don't 187 00:10:22,080 --> 00:10:23,679 Speaker 1: disagree with putting all your eggs in one basket. You 188 00:10:23,760 --> 00:10:26,720 Speaker 1: just need to really watch the basket. But what Charlie 189 00:10:26,760 --> 00:10:29,319 Speaker 1: Munger and Warren Buffett and a handful of people have 190 00:10:29,679 --> 00:10:32,959 Speaker 1: that most people don't have his patients For example, why 191 00:10:33,080 --> 00:10:35,400 Speaker 1: I point out techniques in my book that will actually 192 00:10:35,440 --> 00:10:37,800 Speaker 1: gain you an edge over the market, but people lack 193 00:10:37,920 --> 00:10:41,199 Speaker 1: the patients to adopt those techniques unfortunately. Well, I want 194 00:10:41,240 --> 00:10:43,319 Speaker 1: to thank you very much for shedding some light on this. 195 00:10:43,400 --> 00:10:46,000 Speaker 1: Spencer Jacob is the author of the new book heads 196 00:10:46,160 --> 00:10:50,679 Speaker 1: I Win, Tails, I Win, Why smart investors fail, and 197 00:10:50,840 --> 00:10:54,200 Speaker 1: how to tilt the odds in your favor. I'm Pim 198 00:10:54,280 --> 00:11:04,439 Speaker 1: Fox and this is Bloomberg, coming up on taking stock, metals, mining, 199 00:11:04,760 --> 00:11:08,280 Speaker 1: and commodities. We've got Gordon Johnson, the head of Alternative 200 00:11:08,520 --> 00:11:12,320 Speaker 1: Energy and a director of Axiom Capital Management. That's next.