WEBVTT - Author Spencer Jakab on Book: 'Heads I Win, Tails I Win'(Audio) 0:00:03.080 --> 0:00:07.440 Broadcasting live to New York Bloomberg eleventh, Rio to Washington, 0:00:07.520 --> 0:00:11.920 d C. Bloomber to Boston, Bloomberg twelve hundred to San 0:00:11.960 --> 0:00:17.079 Francisco Bloomberg nine to the Country's Jam General one and 0:00:17.239 --> 0:00:21.040 around the globe the Bloomberg Radio Plus Athen Bloomberg got gone. 0:00:21.320 --> 0:00:25.560 This is taking stock. Coming up on taking stock, Sir 0:00:25.680 --> 0:00:29.080 John Templeton once said that there is only one long 0:00:29.200 --> 0:00:35.280 term investment objective, maximum total returns after tax. We're gonna 0:00:35.280 --> 0:00:38.280 be speaking with Spencer Jacob and his new book heads 0:00:38.320 --> 0:00:41.839 I Win Tales, I Win, Why smart investors fail, and 0:00:41.920 --> 0:00:44.760 how to tilt the odds in your favor. That's all 0:00:44.760 --> 0:00:47.159 coming up next. Right now, Let's go to Charlie Pellett 0:00:47.159 --> 0:00:49.520 in the Bloomberg news room, and I thank you, pim Fox. 0:00:49.520 --> 0:00:51.800 We're looking at an update here for the DAL, the SMP, 0:00:51.920 --> 0:00:55.160 and NEZDAK, the Dow Industrials and SMP five hundred index 0:00:55.480 --> 0:00:58.360 on track for records. This update is brought to you 0:00:58.400 --> 0:01:02.640 by National Realty for viders of one hundred percent satisfaction 0:01:02.680 --> 0:01:06.280 guaranteed New York City realty investments see them at n 0:01:06.480 --> 0:01:10.880 r i A. Dot net stocks are advancing quarterly numbers 0:01:10.920 --> 0:01:15.000 from Microsoft and Morgan Stanley, scurring optimism that corporate earnings 0:01:15.040 --> 0:01:18.440 can support further gains. We do have the SMP five 0:01:18.520 --> 0:01:22.160 hundred index up eight now two, a gain of four 0:01:22.200 --> 0:01:25.360 tenths of one percent. Morgan Stanley shares her up by 0:01:25.440 --> 0:01:29.440 one point four percent, Microsoft rallying six point one percent, 0:01:29.959 --> 0:01:33.560 and Heuser Busch InBev has won US antitrust approval for 0:01:33.640 --> 0:01:36.959 its takeover of s A. B. Miller after the maker 0:01:37.080 --> 0:01:39.800 of Budweiser agreed to give up ownership of the Miller 0:01:39.880 --> 0:01:44.560 brand and open the door to greater competition from craft beers. Well, 0:01:44.640 --> 0:01:48.040 as we mentioned, Morgan Stanley posted profit that beat analysts estimates. 0:01:48.120 --> 0:01:52.120 Is revenue from wealth management and bond trading exceeded expectations. 0:01:52.480 --> 0:01:55.720 Here's n y U Stern School of Business professor Brad 0:01:55.840 --> 0:01:59.920 Hints requartered and last quarter. But again, the d mbscent 0:02:00.000 --> 0:02:02.240 making cycle tends to be tied to GDP, so if 0:02:02.280 --> 0:02:04.840 you're if you don't have a booming economy, you're not 0:02:04.920 --> 0:02:08.280 going to get that. So they outlook remains let's keep 0:02:08.320 --> 0:02:12.519 the cost out. United Continental Holdings rising to its highest 0:02:12.600 --> 0:02:16.040 value in almost three months after chief executive officer Oscar 0:02:16.120 --> 0:02:19.640 Munio said he is reviewing all aspects of the airline's 0:02:19.720 --> 0:02:23.079 operations in an effort to boost profitability. U a l 0:02:23.320 --> 0:02:26.200 is up by nine tenths of one percent. Gold down 0:02:26.360 --> 0:02:29.720 fifteen ounce the thirteen sixteen, the drop there of one 0:02:29.760 --> 0:02:32.560 point two percent, the tenure down eight thirty seconds of 0:02:32.600 --> 0:02:36.680 the yield of one point five eight percent. Recapping stocks higher, 0:02:36.840 --> 0:02:39.160 SMP up nine, a gain of four tenths of one 0:02:39.240 --> 0:02:43.200 percent two on Wall Street. Now look at other stories 0:02:43.280 --> 0:02:47.000 making news. Thank you, Charlie from the Bloomberg News Room. 0:02:47.080 --> 0:02:49.600 I'm Jill Schneider. This news update is brought to you 0:02:49.720 --> 0:02:52.880 by the Jeep Grand Cherokee, the most awarded suv ever. 0:02:53.280 --> 0:02:56.080 The Grand Cherokee continues to raise the bar with its 0:02:56.160 --> 0:03:00.399 luxurious interior and legendary four by four capability. I wanted 0:03:00.440 --> 0:03:03.959 your local Jeep dealer today. Meredith mcgivor, a staff writer 0:03:04.080 --> 0:03:07.880 for the Trump Organization, is taking responsibility for passages from 0:03:07.919 --> 0:03:12.799 Milania Trump's Republican Convention speech resembling Michelle Obama's two thousand 0:03:12.919 --> 0:03:16.600 eight Democratic Convention speech. McIvor posted a letter to Trump's 0:03:16.639 --> 0:03:19.880 campaign website. She says she offered her resignation to Donald 0:03:19.880 --> 0:03:23.440 Trump and his family, which they rejected. Cleveland Police Chief 0:03:23.480 --> 0:03:26.840 Calvin Williams says he's pleased that's so far. Demonstrations during 0:03:26.880 --> 0:03:29.160 the first few days of the convention have been peaceful 0:03:29.480 --> 0:03:31.400 for us in the city of Cleveland right now, the 0:03:31.480 --> 0:03:35.200 last three days have been um pre even uh, not 0:03:35.360 --> 0:03:38.120 too much going on, and when things have sparked up, 0:03:38.600 --> 0:03:41.720 our officers law enforcement partners were there to take care 0:03:41.760 --> 0:03:44.960 of it. Donor countries are pledging another round of humanitarian 0:03:45.040 --> 0:03:47.360 aid to Iraq. The funds will help build the war 0:03:47.480 --> 0:03:51.360 torn country and support displaced residents. Secretary of State John 0:03:51.400 --> 0:03:54.000 Kerry spoke at a meeting today with more than thirty 0:03:54.040 --> 0:03:57.280 other foreign ministers in Washington. I'm pleased to announce that 0:03:57.480 --> 0:04:00.640 by securing more than two billion dollars of pledges that 0:04:00.760 --> 0:04:05.280 we know will be forthcoming, we have exceeded our expectations. 0:04:05.840 --> 0:04:08.920 Kerry opened the event by saying Islamic state remains a threat. 0:04:09.320 --> 0:04:11.880 Beaches on Coney Island are open again today after a 0:04:12.000 --> 0:04:15.800 possible shark sighting shut down beaches yesterday. The city Department 0:04:15.840 --> 0:04:19.160 of Parks and Recreation was investigating reports of both sharks 0:04:19.279 --> 0:04:22.040 and sting rays in the water. Global News twenty four 0:04:22.080 --> 0:04:25.920 hours a day, powered by more than journalists and analysts 0:04:25.960 --> 0:04:28.640 in more than one d twenty countries. I'm Jil Schneider. 0:04:28.760 --> 0:04:31.960 This is Bloomberg, Charlie, and we thank you and again 0:04:32.040 --> 0:04:35.240 recapping stocks higher with the SMP five hundred index up 0:04:35.360 --> 0:04:38.440 nine points to seventy three, a gain of four tenths 0:04:38.480 --> 0:04:42.000 of one percent. I'm Charlie Pellett, and that's a Bloomberg 0:04:42.080 --> 0:04:46.480 business flash. You're listening to taking Stock with pim Box 0:04:46.520 --> 0:04:50.640 and Jatholne Hayes on Bloomberg Radio. If you buy the 0:04:50.760 --> 0:04:53.479 same securities as other people, you will have the same 0:04:53.600 --> 0:04:57.320 results as other people. It's impossible to produce a superior 0:04:57.400 --> 0:05:01.520 performance unless you do something different. I'm the majority, so 0:05:01.800 --> 0:05:05.240 says Sir John Templeton. One of the world's most famous 0:05:05.400 --> 0:05:09.280 and successful investors. Here to tell us more about how 0:05:09.320 --> 0:05:12.400 to tilt the odds in your favor is Spencer Jacob. 0:05:12.839 --> 0:05:14.919 He is the author of a new book entitled Heads 0:05:15.000 --> 0:05:18.480 I Win, Tales I Win, Why smart investors Fail and 0:05:18.600 --> 0:05:21.520 how to tilt the odds in your favor. Spencer Jacob, 0:05:21.600 --> 0:05:24.160 thanks for being with us. First question, why did you 0:05:24.240 --> 0:05:26.960 write this book? Well, the reason I wrote the book. 0:05:26.960 --> 0:05:29.720 I mean, I've got nearly a quarter century under my belt. Now, 0:05:30.279 --> 0:05:32.600 I was a top rated stock analyst that I became 0:05:32.600 --> 0:05:35.880 an investing columnist. And you know, in my line of work, 0:05:35.960 --> 0:05:38.080 you get asked all the time, what do you think 0:05:38.120 --> 0:05:40.040 I should buy? What do you think about Apple gold, 0:05:40.680 --> 0:05:42.640 or you know, go back fifteen years, what do you 0:05:42.680 --> 0:05:46.280 think about Cisco or pets dot Com? And you know 0:05:46.400 --> 0:05:49.640 that my advice, you know, has been I really don't know. 0:05:49.960 --> 0:05:51.840 I mean, despite the fact that I'm paid to to 0:05:51.960 --> 0:05:54.000 do this, there really is no one who can reliably 0:05:54.080 --> 0:05:56.359 tell you what to buy or what to sell tomorrow. 0:05:57.080 --> 0:05:58.800 What I can tell you, though, is that your results 0:05:58.839 --> 0:06:01.360 are much worse than you wise. And people are really 0:06:01.400 --> 0:06:04.320 shocked when I tell them the numbers um that I 0:06:04.480 --> 0:06:06.719 m in my book. It's it's based. It's absolutely true. 0:06:06.760 --> 0:06:11.200 Though the average investor is way below the market averages. Uh. 0:06:11.800 --> 0:06:17.120 And it's it's quite easy to narrow the gap, or 0:06:17.279 --> 0:06:19.520 quite simple, I should say, but not easy. All right. 0:06:19.600 --> 0:06:23.600 So right now, looking at the SMP five year to date, 0:06:23.720 --> 0:06:27.800 the return is about six point three. If you're lagging 0:06:28.080 --> 0:06:32.160 that six point three in your portfolio, what are some 0:06:32.279 --> 0:06:35.279 of the ideas that you recommend well, if you're lagging 0:06:35.480 --> 0:06:38.600 this year, UM, and you're adopting some principles. Let's say 0:06:38.640 --> 0:06:42.000 you're not invested in the things that happened to be 0:06:42.080 --> 0:06:45.520 doing well this year, but you're a passive investor, you're 0:06:45.560 --> 0:06:49.480 not buying crazy names, then you have absolutely nothing to 0:06:49.520 --> 0:06:51.760 worry about. As a matter of fact, I think that 0:06:51.920 --> 0:06:54.640 the act of worrying about only making two percent with 0:06:54.720 --> 0:06:58.240 the markets of six is exactly the sort of attitude 0:06:58.240 --> 0:07:01.040 that gets people into trouble because you're always chasing performance, 0:07:01.040 --> 0:07:03.600 You're always looking for a fund manager who has the 0:07:03.680 --> 0:07:07.240 magic touch. You're jumping from person to person, stock to stock, 0:07:07.320 --> 0:07:10.280 sector to sector, and that makes you a typical investor 0:07:10.320 --> 0:07:13.080 and a typical investor. UM. Let's say you know you 0:07:13.200 --> 0:07:14.920 you compare to people. Let's say PIM, you and I 0:07:15.080 --> 0:07:18.640 both inherited a bunch of money thirty years ago, and uh, 0:07:19.080 --> 0:07:22.480 I was a typical investor and you were a completely 0:07:22.640 --> 0:07:26.720 robotic passive investor. Uh. After that period of thirty years, 0:07:27.520 --> 0:07:29.200 given the same amount of money and not allowed to 0:07:29.240 --> 0:07:31.800 touch it, you would have five to seven times as 0:07:31.880 --> 0:07:35.400 much money as I I would And that's a reflection 0:07:35.440 --> 0:07:38.560 of all the mistakes that people make that compounded over 0:07:38.600 --> 0:07:41.680 that very long period of time. So I would say, um, 0:07:42.240 --> 0:07:45.800 you know, be passive, be a robotic, be cheap, uh, 0:07:45.920 --> 0:07:48.760 don't pay too much for uh, you know, for a 0:07:48.880 --> 0:07:51.240 pool of passive investments, you really can't do much better. 0:07:51.560 --> 0:07:54.120 And if you're tracking the market or something close to it, 0:07:54.200 --> 0:07:57.280 you're doing better than eight or nine out of ten investors, 0:07:57.760 --> 0:08:00.880 which is pretty good. So people don't want to except that, 0:08:01.280 --> 0:08:03.400 you know, they can only sort of track the market 0:08:03.520 --> 0:08:06.160 or come close to it. But it's you know, and 0:08:06.280 --> 0:08:08.800 people are not aware of this, but it's far far 0:08:08.920 --> 0:08:13.640 better than what most people do. Professional money managers are 0:08:13.720 --> 0:08:19.440 professional money managers any better at selecting investments to produce 0:08:19.560 --> 0:08:21.880 the kinds of returns that their customers want than the 0:08:21.960 --> 0:08:25.640 customers themselves. No, I think that people who have heard 0:08:25.640 --> 0:08:28.200 statistics on it actually assume that they must be worse. 0:08:28.320 --> 0:08:31.480 Because you hear that in any given year, sevent of 0:08:31.720 --> 0:08:34.600 fund managers will will lack the market. At any given decade, 0:08:35.080 --> 0:08:38.040 over will lack the market. It isn't because they're bad. 0:08:38.240 --> 0:08:41.959 They're actually, you know, maybe slightly better than than you 0:08:42.080 --> 0:08:45.040 are at picking stocks. But when you tack their costs 0:08:45.120 --> 0:08:47.640 onto it, all the costs of managing money, the cost 0:08:47.720 --> 0:08:50.800 of holding some cash, the cost of their their um 0:08:51.120 --> 0:08:53.880 you know, paying them, and the profits of their companies. 0:08:54.480 --> 0:08:58.040 That's when the lag comes in. So professional money managers 0:08:58.160 --> 0:09:01.400 are not bad investors. They're probably slightly good investors compared 0:09:01.480 --> 0:09:04.360 to the man on the street. But once you once 0:09:04.400 --> 0:09:08.079 you pay them, the return is not too good. And people, 0:09:08.240 --> 0:09:11.240 you know, it's it's surprising that that people will read 0:09:11.320 --> 0:09:14.480 these reports and they'll read interviews with them. And I 0:09:14.679 --> 0:09:16.839 know lots of money managers. I'm friends with many, and 0:09:17.000 --> 0:09:19.120 they'll see someone who's rated four or five stars and 0:09:20.040 --> 0:09:21.839 put money into their fund and take it out of 0:09:21.920 --> 0:09:25.920 someone who's been lagging recently and statistically. Although I don't 0:09:25.960 --> 0:09:29.560 recommend putting money with any active manager. Uh, that's actually 0:09:29.800 --> 0:09:32.319 the worst thing you can do. Uh. It's it's like 0:09:32.400 --> 0:09:34.599 the Sports Illustrated cover curse the guy who was on 0:09:34.720 --> 0:09:37.200 the cover of a magazine because he's really hot. Bill 0:09:37.280 --> 0:09:39.719 Miller when he was on his fifteen year streak is 0:09:39.800 --> 0:09:43.760 likely to revert the mean and do poorly afterwards. As 0:09:43.800 --> 0:09:45.800 people found out the hard way with Bill Miller after 0:09:45.880 --> 0:09:47.360 the fifteen years streak ended, he was one of the 0:09:47.400 --> 0:09:49.800 worst managers for a few years. What do you think 0:09:49.880 --> 0:09:52.240 of the words of Charlie Munger. He says that the 0:09:52.320 --> 0:09:55.760 academics have done a terrible disservice to intelligent investors by 0:09:55.840 --> 0:10:02.439 glorifying the idea of diversification. Well, um, I think that 0:10:02.800 --> 0:10:04.720 you don't put all of your eggs in one basket. 0:10:04.760 --> 0:10:06.480 I think and if you're a Charlie Munger or you're 0:10:06.520 --> 0:10:10.920 Warren Buffett, uh, and you have fifteen or twenty stocks, 0:10:11.040 --> 0:10:14.320 and you're extremely patient like them, Uh, then you can 0:10:14.360 --> 0:10:16.719 do quite well. You don't need to have five or 0:10:16.760 --> 0:10:19.520 a thousand stocks. I think he's right about that. Would 0:10:19.559 --> 0:10:22.040 Warren Bufetts say, you know, just you know, I don't 0:10:22.080 --> 0:10:23.679 disagree with putting all your eggs in one basket. You 0:10:23.760 --> 0:10:26.720 just need to really watch the basket. But what Charlie 0:10:26.760 --> 0:10:29.319 Munger and Warren Buffett and a handful of people have 0:10:29.679 --> 0:10:32.959 that most people don't have his patients For example, why 0:10:33.080 --> 0:10:35.400 I point out techniques in my book that will actually 0:10:35.440 --> 0:10:37.800 gain you an edge over the market, but people lack 0:10:37.920 --> 0:10:41.199 the patients to adopt those techniques unfortunately. Well, I want 0:10:41.240 --> 0:10:43.319 to thank you very much for shedding some light on this. 0:10:43.400 --> 0:10:46.000 Spencer Jacob is the author of the new book heads 0:10:46.160 --> 0:10:50.679 I Win, Tails, I Win, Why smart investors fail, and 0:10:50.840 --> 0:10:54.200 how to tilt the odds in your favor. I'm Pim 0:10:54.280 --> 0:11:04.439 Fox and this is Bloomberg, coming up on taking stock, metals, mining, 0:11:04.760 --> 0:11:08.280 and commodities. We've got Gordon Johnson, the head of Alternative 0:11:08.520 --> 0:11:12.320 Energy and a director of Axiom Capital Management. That's next.