1 00:00:12,800 --> 00:00:16,160 Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly 2 00:00:16,200 --> 00:00:20,759 Speaker 1: markets podcast. I'm Sarah Ponzac, reporter on the Cross Asset team, 3 00:00:20,760 --> 00:00:23,520 Speaker 1: and I'm Mike Reagan, a senior editor on the Markets 4 00:00:23,520 --> 00:00:28,160 Speaker 1: team and Sarah's trusty sidekick. You didn't come up with 5 00:00:28,200 --> 00:00:31,960 Speaker 1: one this week, so you just We've gone through Hall 6 00:00:32,040 --> 00:00:36,040 Speaker 1: notes and Lavernon Shirlie. I'm I'm out. I guess what 7 00:00:36,240 --> 00:00:40,839 Speaker 1: three weeks with tops? Yeah? Four weeks. Maybe maybe we'll 8 00:00:40,840 --> 00:00:43,839 Speaker 1: get creative next time. Yeah, next week. But anyway, this 9 00:00:43,920 --> 00:00:46,400 Speaker 1: week on the show, worries of a so called second 10 00:00:46,479 --> 00:00:50,120 Speaker 1: coronavirus wave are growing, and questions over the pace of 11 00:00:50,120 --> 00:00:54,080 Speaker 1: the economic recovery abound. With stocks now trading at pretty 12 00:00:54,080 --> 00:00:57,680 Speaker 1: expensive levels, how worried should you be about a fast turnaround? 13 00:00:58,000 --> 00:01:00,840 Speaker 1: Our guest runs a tail risk et that game your 14 00:01:00,920 --> 00:01:03,800 Speaker 1: thirty percent back in March by investing in out of 15 00:01:03,800 --> 00:01:07,640 Speaker 1: the money put options. He share his thoughts, and as always, 16 00:01:07,680 --> 00:01:10,839 Speaker 1: will close out the episode with our tradition, the craziest 17 00:01:10,840 --> 00:01:14,360 Speaker 1: thing I saw in markets this week? Uh? And if 18 00:01:14,360 --> 00:01:16,880 Speaker 1: you saw something crazy by all means, give us a 19 00:01:16,920 --> 00:01:20,280 Speaker 1: call on the podcast hotline and leave a voicemail. The 20 00:01:20,360 --> 00:01:24,920 Speaker 1: number is six four six three two four three four nine. 21 00:01:25,080 --> 00:01:28,800 Speaker 1: Oh and maybe we'll play your voicemail on the show, Sarah. 22 00:01:28,880 --> 00:01:30,440 Speaker 1: I actually, I don't know if you realize this, but 23 00:01:30,480 --> 00:01:33,320 Speaker 1: you cut me off before my crazy thing last week, 24 00:01:33,840 --> 00:01:36,560 Speaker 1: Um because we were going we were all going too long. 25 00:01:36,600 --> 00:01:38,680 Speaker 1: I think you've droned on a little too long and 26 00:01:38,920 --> 00:01:41,959 Speaker 1: had to cut me off, which is fine, Which is fine. 27 00:01:42,400 --> 00:01:44,720 Speaker 1: So that means you have too this week. That just 28 00:01:44,720 --> 00:01:47,520 Speaker 1: fun because I couldn't find one this I saved up 29 00:01:47,600 --> 00:01:50,600 Speaker 1: last weeks for this week. Okay, well, I apologize about 30 00:01:50,600 --> 00:01:54,800 Speaker 1: cutting you off number one, but it betould be really good. 31 00:01:55,680 --> 00:01:58,680 Speaker 1: I think it was actually Cameron His craziest thing lasted 32 00:01:58,880 --> 00:02:01,000 Speaker 1: like it could have been its own podcast of talking 33 00:02:01,040 --> 00:02:05,960 Speaker 1: about the box options in in I'll have to go 34 00:02:06,000 --> 00:02:09,240 Speaker 1: back to listen to it. But anyway, very happy to 35 00:02:09,280 --> 00:02:11,679 Speaker 1: have uh the guests on the show this week. I 36 00:02:11,720 --> 00:02:14,359 Speaker 1: think a lot of listeners have probably heard of him. 37 00:02:14,400 --> 00:02:18,280 Speaker 1: He's a very prolific writer, has written several books on 38 00:02:18,320 --> 00:02:22,000 Speaker 1: the market, a lot of really interesting columns and blog posts. 39 00:02:22,760 --> 00:02:26,000 Speaker 1: On top of all that, he's actually the co founder 40 00:02:26,040 --> 00:02:32,000 Speaker 1: and chief investment officer of Cambria Investment Management. His name 41 00:02:32,080 --> 00:02:34,760 Speaker 1: is meb favor meb. Welcome to the show. Great to 42 00:02:34,760 --> 00:02:38,080 Speaker 1: be here, you're all thanks for having me, dad, fellow podcaster. 43 00:02:38,480 --> 00:02:41,240 Speaker 1: I know a little bit of competition here, uh in 44 00:02:41,320 --> 00:02:44,680 Speaker 1: podcast land. But Sarah met maybe smarter and better looking 45 00:02:44,720 --> 00:02:49,079 Speaker 1: than me, but he doesn't have a hit millennial charming 46 00:02:49,240 --> 00:02:53,040 Speaker 1: podcast co host like like me. So no, no pructure. 47 00:02:53,080 --> 00:02:54,440 Speaker 1: But I really need you to lay it on thick 48 00:02:54,520 --> 00:02:58,520 Speaker 1: this week. All right, well, we'll try it out. We'll 49 00:02:58,520 --> 00:03:02,200 Speaker 1: bring our best. Well, but let's let's start with talking 50 00:03:02,240 --> 00:03:04,919 Speaker 1: about that notion of tail risk and and the Cambria 51 00:03:05,280 --> 00:03:08,360 Speaker 1: tail risk ETF. Boy, this is the year, I think, 52 00:03:08,520 --> 00:03:11,680 Speaker 1: when a lot of people realize the value of tail 53 00:03:11,840 --> 00:03:14,760 Speaker 1: risk hedging. UM. So I'm curious just to hear sort 54 00:03:14,760 --> 00:03:18,440 Speaker 1: of how you develop that product. I know it relies 55 00:03:18,440 --> 00:03:23,000 Speaker 1: a lot on on options, uh put options on the market. Um. 56 00:03:23,080 --> 00:03:25,480 Speaker 1: And I'm surprised to read in one of your blog 57 00:03:25,480 --> 00:03:29,600 Speaker 1: posts recently, uh, how heavily you are allocated in at 58 00:03:29,680 --> 00:03:32,600 Speaker 1: least in your personal investments. So it's tail risk and 59 00:03:32,639 --> 00:03:34,800 Speaker 1: in Cambria as it Well, I correct me if I'm wrong, 60 00:03:34,880 --> 00:03:37,240 Speaker 1: but at as of that writing, it was something like 61 00:03:38,600 --> 00:03:42,120 Speaker 1: in your own portfolio and as far as the firm's cash. 62 00:03:42,160 --> 00:03:45,800 Speaker 1: It was it was something like, you know what, I'm wondering, 63 00:03:46,360 --> 00:03:48,839 Speaker 1: at what point, um, do you sort of balance back 64 00:03:48,880 --> 00:03:50,440 Speaker 1: down out of that? Do you sort of take the 65 00:03:50,480 --> 00:03:53,040 Speaker 1: profits on that? Or are we in the type of 66 00:03:53,160 --> 00:03:56,400 Speaker 1: environment where it makes sense to keep a pretty heavy 67 00:03:56,440 --> 00:03:59,400 Speaker 1: allocation to to sort of a tail risk strategy. So 68 00:03:59,720 --> 00:04:04,000 Speaker 1: coming into this discussion, had we been doing this, uh, 69 00:04:04,120 --> 00:04:07,880 Speaker 1: say in December, would have been much more theoretical than practical. 70 00:04:08,320 --> 00:04:11,880 Speaker 1: And uh the SMP just finished one of the best 71 00:04:11,880 --> 00:04:14,440 Speaker 1: decades ever, put it in the top five or probably 72 00:04:14,440 --> 00:04:18,080 Speaker 1: the past dozen or so decades. Ended the decade at 73 00:04:18,120 --> 00:04:21,960 Speaker 1: a pretty lofty valuation. But if you rewind about three 74 00:04:22,000 --> 00:04:24,039 Speaker 1: years ago, we had written a paper called Worried about 75 00:04:24,040 --> 00:04:26,279 Speaker 1: the Market, It might be time for the strategy. A 76 00:04:26,320 --> 00:04:30,320 Speaker 1: little early. You had the first time in history the 77 00:04:30,320 --> 00:04:33,560 Speaker 1: stock market went up every single calendar month. But we 78 00:04:33,640 --> 00:04:36,640 Speaker 1: what we wrote about in this paper was thinking about 79 00:04:36,640 --> 00:04:38,960 Speaker 1: hedging risks, and we said the first way to think 80 00:04:39,000 --> 00:04:40,800 Speaker 1: about it, and the one that we most traditionally think 81 00:04:40,800 --> 00:04:44,120 Speaker 1: about is US stocks don't take the risk in the 82 00:04:44,160 --> 00:04:46,000 Speaker 1: first place. That's the best way to hedge it. So 83 00:04:46,040 --> 00:04:48,279 Speaker 1: if you have a hundred percent portfolio in stocks, maybe 84 00:04:48,320 --> 00:04:50,760 Speaker 1: you should have eight or sixty and the rest in 85 00:04:50,800 --> 00:04:53,880 Speaker 1: cash and bonds. Second, Uh, it's great to diverse by 86 00:04:53,920 --> 00:04:57,560 Speaker 1: into other sort of investment, traditional things like foreign socks 87 00:04:57,600 --> 00:05:00,080 Speaker 1: and bonds, real estate commodities. So in this paper we 88 00:05:00,200 --> 00:05:04,000 Speaker 1: looked at what historically hedged US stocks and their very 89 00:05:04,000 --> 00:05:07,240 Speaker 1: worst months when they were down like ten in a 90 00:05:07,279 --> 00:05:10,400 Speaker 1: month and during bear markets, and the things you expected 91 00:05:10,560 --> 00:05:15,440 Speaker 1: probably not hedge foreign stocks, real estate commodities didn't. Historically, 92 00:05:16,200 --> 00:05:19,880 Speaker 1: things you expected to help bonds did, but they didn't 93 00:05:19,880 --> 00:05:22,960 Speaker 1: have hugely strong returns. They're mostly flatish. Gold did a 94 00:05:23,000 --> 00:05:25,920 Speaker 1: good job, but not always one time it was down, 95 00:05:27,120 --> 00:05:29,239 Speaker 1: and then the best during the bad times, of course, 96 00:05:29,320 --> 00:05:32,919 Speaker 1: was buying puts. The problem with that is, uh, the 97 00:05:33,040 --> 00:05:35,800 Speaker 1: cost in the good times, right, Um, the same way 98 00:05:35,839 --> 00:05:39,719 Speaker 1: people think about car insurance or house insurance or anything else. 99 00:05:40,360 --> 00:05:43,400 Speaker 1: And so we looked at historically how that worked with 100 00:05:43,440 --> 00:05:49,799 Speaker 1: the portfolio. Now walk forward to it's been uh only 101 00:05:49,880 --> 00:05:53,040 Speaker 1: six months into the decade, but my god, it's felt 102 00:05:53,080 --> 00:05:56,360 Speaker 1: like an entire decade already with with six months and 103 00:05:57,080 --> 00:06:01,000 Speaker 1: you played out in real time, uh playbook from this 104 00:06:01,080 --> 00:06:07,080 Speaker 1: paper and the same exact strategies and ideas that helped historically, 105 00:06:07,120 --> 00:06:09,760 Speaker 1: going back fifty years helped again. And the things you 106 00:06:09,839 --> 00:06:13,600 Speaker 1: expected not to didn't. Foreign stocks, real estate commodities member 107 00:06:14,240 --> 00:06:16,479 Speaker 1: traded negative at one point, with the futures on on 108 00:06:16,520 --> 00:06:20,800 Speaker 1: the oil base and so um. This concept, though, is 109 00:06:22,520 --> 00:06:25,680 Speaker 1: I'm a quant and if you think about markets and 110 00:06:25,760 --> 00:06:28,880 Speaker 1: optimizations and the ideal portfolio, it's so easy to do 111 00:06:28,920 --> 00:06:33,120 Speaker 1: on paper, but when you play it out in real life, 112 00:06:33,200 --> 00:06:36,080 Speaker 1: the very real pain of losing money, waking up every 113 00:06:36,120 --> 00:06:40,640 Speaker 1: day to markets being up down, limit, watching overnight futures, 114 00:06:40,640 --> 00:06:42,520 Speaker 1: that's not something most of us want to spend any 115 00:06:42,560 --> 00:06:45,800 Speaker 1: time doing. And so this idea of adding something like 116 00:06:46,000 --> 00:06:50,039 Speaker 1: tail uh, you know, is almost more from the behavioral 117 00:06:50,200 --> 00:06:54,360 Speaker 1: or psychological standpoint. And you noted my own personal investments 118 00:06:54,360 --> 00:06:58,040 Speaker 1: that seem far skewed larger than than whatever makes sense 119 00:06:58,040 --> 00:07:00,600 Speaker 1: for anyone. In the opinis of the paper. We had 120 00:07:00,640 --> 00:07:07,400 Speaker 1: an interesting thought process experiment where we said, pretend you're 121 00:07:07,400 --> 00:07:10,640 Speaker 1: a financial advisor or an asset manager, anyone involved in 122 00:07:10,680 --> 00:07:14,000 Speaker 1: our world. Um, you're actually probably three or four times 123 00:07:14,080 --> 00:07:16,320 Speaker 1: leverage the stock market, whether you know it or not. 124 00:07:16,720 --> 00:07:19,600 Speaker 1: You have your own personal portfolio. If you're an investment 125 00:07:19,640 --> 00:07:23,600 Speaker 1: advisor or a financial planner. Your clients, uh, their main 126 00:07:23,800 --> 00:07:27,160 Speaker 1: investment is in US stocks. If you're revenue based, if 127 00:07:27,200 --> 00:07:32,200 Speaker 1: the stock market goes down, your revenue goes down. Clients 128 00:07:32,240 --> 00:07:34,720 Speaker 1: panic at the bottom and they tend to sell and 129 00:07:34,760 --> 00:07:36,920 Speaker 1: just can't take it anymore. And then on top of that, 130 00:07:36,960 --> 00:07:39,840 Speaker 1: if you don't work for your own company, uh, you're 131 00:07:39,920 --> 00:07:43,160 Speaker 1: subject to layoffs and downsizing and recessions. So you can 132 00:07:43,200 --> 00:07:46,600 Speaker 1: make the argument because of all your human, professional and 133 00:07:46,760 --> 00:07:49,760 Speaker 1: personal capital are invested in markets, and no one else 134 00:07:49,800 --> 00:07:52,000 Speaker 1: believes this, by the way, so to take that for 135 00:07:52,160 --> 00:07:55,280 Speaker 1: what it is. But the same way an airline company 136 00:07:55,280 --> 00:07:59,440 Speaker 1: would head fuel costs or a multinational company making cereal 137 00:07:59,480 --> 00:08:02,160 Speaker 1: hedgess we it makes total sense to hedge the number 138 00:08:02,160 --> 00:08:05,280 Speaker 1: one risk in our world, which is simply U S stocks, 139 00:08:05,480 --> 00:08:09,320 Speaker 1: and most don't. I do. I'm a little crazy, um, 140 00:08:09,320 --> 00:08:13,680 Speaker 1: but it's a way of if you can just get 141 00:08:13,720 --> 00:08:16,760 Speaker 1: to the finish line and sustain with the rest of 142 00:08:16,800 --> 00:08:20,160 Speaker 1: your portfolio, if some things help you get there, to me, 143 00:08:20,240 --> 00:08:23,480 Speaker 1: it's all worthwhile and the whole, the whole goal of 144 00:08:23,520 --> 00:08:26,200 Speaker 1: all this is to not get taken out of the game. 145 00:08:26,240 --> 00:08:28,320 Speaker 1: If you're at the casino and you lose your bankroll, 146 00:08:28,520 --> 00:08:31,040 Speaker 1: you can't bet, and that's the worst thing that can happen. 147 00:08:48,760 --> 00:08:51,880 Speaker 1: Well on this show, Mab, we really like crazy um. 148 00:08:51,880 --> 00:08:54,800 Speaker 1: But like you said, I mean has seriously felt like 149 00:08:54,840 --> 00:08:58,280 Speaker 1: a lifetime. It's as though we have experienced this mini 150 00:08:58,400 --> 00:09:01,199 Speaker 1: cycle in a way, and I've find it very interesting 151 00:09:01,200 --> 00:09:03,079 Speaker 1: at this point in time because I think the fragilities 152 00:09:03,080 --> 00:09:04,560 Speaker 1: in the market have been very clear. I mean, you 153 00:09:04,600 --> 00:09:07,960 Speaker 1: mentioned the days when every single day we were experiencing 154 00:09:08,000 --> 00:09:10,760 Speaker 1: limit up or limit down, and I will be totally 155 00:09:10,840 --> 00:09:15,520 Speaker 1: upfront last Thursday, it was when we got that about 156 00:09:15,559 --> 00:09:18,960 Speaker 1: six percent self in the SMP. I was made to 157 00:09:19,000 --> 00:09:20,800 Speaker 1: temple it out because that's what we do in the 158 00:09:20,840 --> 00:09:24,280 Speaker 1: news industry, a circuit breaker story just in case that happened, 159 00:09:24,280 --> 00:09:28,520 Speaker 1: because we're getting flashbacks of March. But even I mean, 160 00:09:28,559 --> 00:09:31,000 Speaker 1: if you look at different metrics, like the c boat 161 00:09:31,000 --> 00:09:34,079 Speaker 1: puts a call ratio, I'm I'm always so amazed at 162 00:09:34,080 --> 00:09:36,640 Speaker 1: how extreme it is to the downside that people don't 163 00:09:36,679 --> 00:09:39,439 Speaker 1: feel as though they have to protect it against downside loss, 164 00:09:39,480 --> 00:09:41,760 Speaker 1: that maybe people are a little bit scared of missing 165 00:09:41,800 --> 00:09:44,880 Speaker 1: out at this point in time. I mean, psychologically, how 166 00:09:45,160 --> 00:09:49,040 Speaker 1: difficult it is it to get people to grasp onto 167 00:09:49,080 --> 00:09:53,120 Speaker 1: the idea of hedging against downside risk, especially coming off 168 00:09:53,160 --> 00:09:56,959 Speaker 1: of such a forceful rally that we've now experienced. Well, 169 00:09:57,200 --> 00:09:59,560 Speaker 1: there's two points that I think you bring up that 170 00:09:59,600 --> 00:10:02,240 Speaker 1: are really important. The first is, you know, if you 171 00:10:02,360 --> 00:10:07,360 Speaker 1: have a portfolio. What we talk about on these podcasts 172 00:10:07,360 --> 00:10:10,679 Speaker 1: and about investments, it's the sexy part about investments. It's 173 00:10:10,720 --> 00:10:13,160 Speaker 1: talking about you know, what are stocks gonna do? Where's 174 00:10:13,200 --> 00:10:15,600 Speaker 1: gold going? What about inflation? What about the Fed? But 175 00:10:15,679 --> 00:10:18,520 Speaker 1: the whole point is you should have a plan ahead 176 00:10:18,520 --> 00:10:21,760 Speaker 1: of the time. Right, the football quarterback I'm a Broncos fan, 177 00:10:22,040 --> 00:10:24,720 Speaker 1: Peyton Manning goes the line of scrimmage. Uh, you know 178 00:10:24,800 --> 00:10:27,560 Speaker 1: back in the day, he knew all of his options 179 00:10:27,559 --> 00:10:29,800 Speaker 1: that were gonna happen when the defense lined up right, 180 00:10:29,840 --> 00:10:32,520 Speaker 1: and so not having a plan, and then last Thursday 181 00:10:32,520 --> 00:10:35,640 Speaker 1: comes along and all of a sudden, the markets down five, six, seven, 182 00:10:36,120 --> 00:10:39,520 Speaker 1: whatever it was. That's when people start to just totally 183 00:10:39,559 --> 00:10:41,040 Speaker 1: panic and use a different part of their brains. So 184 00:10:41,120 --> 00:10:43,199 Speaker 1: we tell all investors doesn't even matter. It could be 185 00:10:43,200 --> 00:10:44,840 Speaker 1: two bullet points, it could be ten pages like an 186 00:10:44,920 --> 00:10:48,200 Speaker 1: endowment policy portfolio. Have an investing plan, write it down, 187 00:10:48,360 --> 00:10:50,760 Speaker 1: share it with whatever your loved ones are neighbor to 188 00:10:50,800 --> 00:10:53,920 Speaker 1: try to keep you on plan and and and honest, 189 00:10:53,960 --> 00:10:57,840 Speaker 1: because otherwise there's so much um seduction to just do 190 00:10:57,960 --> 00:11:00,760 Speaker 1: really stupid things. And we'll talk about this more more 191 00:11:00,800 --> 00:11:03,880 Speaker 1: in a little bit um. But the challenge also is 192 00:11:03,920 --> 00:11:08,000 Speaker 1: that there is a pretty wide spread right now between 193 00:11:08,240 --> 00:11:10,679 Speaker 1: what most of us experiencing in the real world, in 194 00:11:10,720 --> 00:11:14,640 Speaker 1: the economy and markets. And I said recently, I said, look, 195 00:11:14,640 --> 00:11:16,680 Speaker 1: if you were to go back twelve months feels like 196 00:11:16,679 --> 00:11:19,960 Speaker 1: a lifetime ago last summer and say, look, I'm gonna 197 00:11:19,960 --> 00:11:21,400 Speaker 1: tell you what's going to happen the economy in the 198 00:11:21,400 --> 00:11:23,880 Speaker 1: next twelve months. Unemployment is going to go from four 199 00:11:23,920 --> 00:11:27,160 Speaker 1: to Gold is gonna be up thirty. Oil at some 200 00:11:27,200 --> 00:11:29,280 Speaker 1: point will trade negative in the futures market p M. 201 00:11:29,360 --> 00:11:32,080 Speaker 1: I will go from positive to negative. Interest rates, Oh, 202 00:11:32,120 --> 00:11:33,480 Speaker 1: by the way, the Fed go from two and a 203 00:11:33,520 --> 00:11:36,520 Speaker 1: half to zero. Where do you predict stocks will be 204 00:11:37,000 --> 00:11:39,600 Speaker 1: twelve months from now? And I guarantee you no one, 205 00:11:40,080 --> 00:11:43,240 Speaker 1: no one would have said up ten or about where 206 00:11:43,240 --> 00:11:45,880 Speaker 1: we are right even flat everyone who said down twenty down, 207 00:11:45,880 --> 00:11:49,079 Speaker 1: forty down, sixty down eight um. And so that disconnect, 208 00:11:49,120 --> 00:11:52,040 Speaker 1: I think is is very challenging for a lot of people. 209 00:11:52,160 --> 00:11:54,920 Speaker 1: But again going back to it, uh, the beginning of 210 00:11:54,920 --> 00:11:58,560 Speaker 1: the discussion, having a balanced portfolio and strategies that you 211 00:11:58,559 --> 00:12:02,439 Speaker 1: can at least simulate for last fifty hundred years. Despite 212 00:12:02,880 --> 00:12:05,640 Speaker 1: the velocity at which we had the down draft and 213 00:12:05,679 --> 00:12:08,360 Speaker 1: the bounce, most everything's looked, I hate to say it 214 00:12:08,720 --> 00:12:12,240 Speaker 1: kind of normal, you know. Remember I correct me if 215 00:12:12,240 --> 00:12:14,520 Speaker 1: I'm wrong. But I think is it's safe to call 216 00:12:14,559 --> 00:12:18,040 Speaker 1: you a value investor? Uh, if you were to sort 217 00:12:18,080 --> 00:12:21,079 Speaker 1: of you know, have to pick a real broadbrush type 218 00:12:21,080 --> 00:12:26,440 Speaker 1: of type of label. The two major foundational pillars that 219 00:12:26,720 --> 00:12:30,240 Speaker 1: UM we base most all of our investing strategies on 220 00:12:30,360 --> 00:12:32,959 Speaker 1: our value so again goes back to time at Ben 221 00:12:33,000 --> 00:12:35,240 Speaker 1: Graham and before so a hundred years old and also 222 00:12:35,280 --> 00:12:39,280 Speaker 1: trend following around the same time. Charles Dow been around 223 00:12:39,320 --> 00:12:41,200 Speaker 1: for a hundred years. Both of those are sort of 224 00:12:41,200 --> 00:12:44,240 Speaker 1: the yin and yang of our investment philosophy. We think 225 00:12:44,280 --> 00:12:47,959 Speaker 1: both are are equal contributors to a great portfolio. So 226 00:12:48,040 --> 00:12:52,880 Speaker 1: it seems like a good time to be bullish on value, UM, 227 00:12:53,000 --> 00:12:55,719 Speaker 1: especially you look at the US valuations are are are 228 00:12:55,720 --> 00:13:00,600 Speaker 1: pretty high. Once again, the foreign overseas by ouations look 229 00:13:00,600 --> 00:13:03,560 Speaker 1: a lot more attractive, but it almost seems to me 230 00:13:03,679 --> 00:13:06,960 Speaker 1: that in these times of turmoil that we saw this year, 231 00:13:07,360 --> 00:13:10,200 Speaker 1: it almost seems like growth and sort of large cap 232 00:13:10,320 --> 00:13:14,280 Speaker 1: us growth UM at least the main components of what 233 00:13:14,320 --> 00:13:16,160 Speaker 1: you think of is that cohort. You know, your your 234 00:13:16,160 --> 00:13:21,120 Speaker 1: big internet names, your alphabets, your Amazon's, your Facebook's. They 235 00:13:21,120 --> 00:13:24,960 Speaker 1: almost seemed like a haven, uh in these times. So 236 00:13:25,760 --> 00:13:27,920 Speaker 1: is it a good time to start looking for value 237 00:13:28,080 --> 00:13:30,760 Speaker 1: and looking overseas if there is a lot of uncertainty 238 00:13:30,760 --> 00:13:35,000 Speaker 1: about the macro backdrop or is there that risk that 239 00:13:35,000 --> 00:13:39,120 Speaker 1: that once again valuations be damned, people are gonna want 240 00:13:39,120 --> 00:13:43,000 Speaker 1: to be in those sort of mega cap growth names. 241 00:13:42,800 --> 00:13:46,400 Speaker 1: It's always confusing to me or curious is a probably 242 00:13:46,440 --> 00:13:49,160 Speaker 1: a better description to listen to people talk about valuation, 243 00:13:49,360 --> 00:13:52,560 Speaker 1: because you always got to ask yourself what's the alternative? 244 00:13:53,240 --> 00:13:56,559 Speaker 1: And is the alternative just buying stocks without any regard 245 00:13:56,640 --> 00:14:00,560 Speaker 1: whatsoever to value UM. That seems like a really optimal 246 00:14:00,600 --> 00:14:02,600 Speaker 1: way to invest, And it turns out that's what market 247 00:14:02,600 --> 00:14:05,440 Speaker 1: cap waiting is. You just buy the entire market. The 248 00:14:05,520 --> 00:14:08,959 Speaker 1: problem with market cap waiting you get extremely exposed to 249 00:14:09,120 --> 00:14:13,199 Speaker 1: big booms and busts, and so a good example is UM. 250 00:14:13,280 --> 00:14:17,520 Speaker 1: We wrote a recent article called the best valuation spread 251 00:14:17,520 --> 00:14:20,480 Speaker 1: in over forty years. And if you look at market 252 00:14:20,520 --> 00:14:22,840 Speaker 1: cap waiting globally, the US is a percentage of the 253 00:14:22,880 --> 00:14:25,880 Speaker 1: world right now is about half. But if you go 254 00:14:25,920 --> 00:14:28,480 Speaker 1: back to the nineteen eighties, Japan was the biggest stock 255 00:14:28,520 --> 00:14:31,320 Speaker 1: market in the world and most peas we use a 256 00:14:31,360 --> 00:14:33,520 Speaker 1: long term tenure p ratio. We call it the KPE 257 00:14:33,600 --> 00:14:36,880 Speaker 1: ratio based on Rob Schiller's work going back to again 258 00:14:36,920 --> 00:14:39,520 Speaker 1: to the time at Ben Graham Um. It's a tenure 259 00:14:39,560 --> 00:14:43,160 Speaker 1: pe ratio adjust for inflation, but the average over time 260 00:14:43,200 --> 00:14:46,640 Speaker 1: is usually around seventeen mild inflation around twenty two. In 261 00:14:46,680 --> 00:14:48,680 Speaker 1: the U S. It's been as low as five and 262 00:14:48,720 --> 00:14:51,280 Speaker 1: as high as forty five in the late nineties. Massive 263 00:14:51,320 --> 00:14:53,800 Speaker 1: bubble in the late nineties. Japan hit a bubble of 264 00:14:53,880 --> 00:14:58,320 Speaker 1: almost a hundred in the eighties. For the older people 265 00:14:58,320 --> 00:15:01,320 Speaker 1: on this listening or the market historians out there that 266 00:15:01,560 --> 00:15:05,920 Speaker 1: recall every cover of magazines, every TV show, every book 267 00:15:06,000 --> 00:15:08,320 Speaker 1: was all about the Japanese business model is gonna take 268 00:15:08,360 --> 00:15:10,800 Speaker 1: over the world. And it's really just the biggest equity 269 00:15:10,840 --> 00:15:13,720 Speaker 1: bubble we've ever seen. We see a different flip flop 270 00:15:13,800 --> 00:15:15,880 Speaker 1: story now and the seesaw has kind of gone the 271 00:15:15,880 --> 00:15:19,000 Speaker 1: other way, where the U S stock market is trading 272 00:15:19,000 --> 00:15:23,000 Speaker 1: at a value of around thirty pe ratio UM, which 273 00:15:23,040 --> 00:15:25,080 Speaker 1: is high by historical stands. There just not a bubble. 274 00:15:25,080 --> 00:15:27,280 Speaker 1: It's not as crazy as the nineties, but it's high 275 00:15:27,400 --> 00:15:30,520 Speaker 1: and future returns expected to be low single digits. Even 276 00:15:31,200 --> 00:15:34,200 Speaker 1: John Bogel said this before he passed away, and so 277 00:15:34,400 --> 00:15:37,000 Speaker 1: it's more about expectations. The good news is the rest 278 00:15:37,080 --> 00:15:40,160 Speaker 1: of the world for and developed is down around the 279 00:15:40,240 --> 00:15:42,960 Speaker 1: high teens, for and emerging is in the low teens, 280 00:15:43,280 --> 00:15:47,760 Speaker 1: and the cheapest bucket is around ten and so um, 281 00:15:47,880 --> 00:15:51,720 Speaker 1: you have this major, major discount, these alligator jaws spread 282 00:15:52,040 --> 00:15:55,440 Speaker 1: between the US and foreign The biggest we've seen except 283 00:15:55,440 --> 00:15:58,000 Speaker 1: four years ago is US Japan. Now here's the funny thing. 284 00:15:58,880 --> 00:16:01,440 Speaker 1: I guarantee you there's a million people listening to this 285 00:16:01,480 --> 00:16:04,840 Speaker 1: that say, no, no, MeV the US deserves a premium. 286 00:16:04,880 --> 00:16:07,880 Speaker 1: It's it should trade it to higher multiple, to which 287 00:16:07,920 --> 00:16:10,280 Speaker 1: I usually respond, well, what do you think the historical 288 00:16:10,320 --> 00:16:14,120 Speaker 1: premium has been? And the answer is actually zero. Over 289 00:16:14,120 --> 00:16:17,320 Speaker 1: the past forty years, US has had no valuation premium 290 00:16:17,360 --> 00:16:20,040 Speaker 1: over the rest of the world um. And so it's 291 00:16:20,040 --> 00:16:23,360 Speaker 1: only really this period post financial crisis. And if you say, 292 00:16:23,400 --> 00:16:28,160 Speaker 1: what is uh US stocks have stomped foreign stocks over 293 00:16:28,160 --> 00:16:30,680 Speaker 1: this period? How much of that has come since two 294 00:16:30,720 --> 00:16:33,160 Speaker 1: thousand nine? And the answers all of it. So you 295 00:16:33,240 --> 00:16:36,520 Speaker 1: have this period it seems like it's lasted forever, but 296 00:16:36,600 --> 00:16:39,080 Speaker 1: really has only been a decade. But it's setting it's 297 00:16:39,160 --> 00:16:42,240 Speaker 1: this regime of US outperformance is setting the stage for 298 00:16:42,400 --> 00:16:45,280 Speaker 1: future underperformance at least the rest of the world. So 299 00:16:45,320 --> 00:16:47,720 Speaker 1: I'd say, yes, barish on large cap in the US. 300 00:16:48,280 --> 00:16:50,720 Speaker 1: Um the good news is the drubbing in Q one 301 00:16:51,680 --> 00:16:55,560 Speaker 1: small cap value, which at some point was down created 302 00:16:55,600 --> 00:16:57,880 Speaker 1: some wide disparities within the market, so you can now 303 00:16:58,000 --> 00:16:59,920 Speaker 1: you can at least find some opportunities within the U 304 00:17:00,240 --> 00:17:04,639 Speaker 1: s but certainly look beyond your shores to foreign particularly 305 00:17:04,680 --> 00:17:26,040 Speaker 1: emerging markets small cap value around the world. I love 306 00:17:26,119 --> 00:17:29,320 Speaker 1: the alligator jaws spread description. It really is a nice 307 00:17:29,400 --> 00:17:32,479 Speaker 1: visualization of what we've seen. But how do you actually 308 00:17:32,520 --> 00:17:36,679 Speaker 1: go ahead then and balance value investing with usage of 309 00:17:36,840 --> 00:17:39,199 Speaker 1: trend following as well? I mean, I would get the 310 00:17:39,240 --> 00:17:41,280 Speaker 1: sense that at least if you're thinking about one asset 311 00:17:41,280 --> 00:17:44,120 Speaker 1: class in particular, let's just use stocks because it's easiest. 312 00:17:44,320 --> 00:17:46,520 Speaker 1: If you're thinking of yourself as a value investor, but 313 00:17:46,600 --> 00:17:49,639 Speaker 1: you also want to employ methods of trend following that 314 00:17:49,720 --> 00:17:53,760 Speaker 1: at times that may be flashing different signals. Okay, there's 315 00:17:53,760 --> 00:17:55,520 Speaker 1: a lot on that question. So let's start with what 316 00:17:55,560 --> 00:17:57,800 Speaker 1: we call the global market portfolio. If you just went 317 00:17:57,840 --> 00:18:00,600 Speaker 1: out and bought the entire world of public assets, what 318 00:18:00,640 --> 00:18:04,240 Speaker 1: does that look like. It's roughly half stocks, half bonds. 319 00:18:04,280 --> 00:18:07,320 Speaker 1: Of that, it's roughly half US and half foreign. If 320 00:18:07,320 --> 00:18:10,840 Speaker 1: you look at most US investors portfolios, it's dominated by 321 00:18:10,840 --> 00:18:14,000 Speaker 1: the US. The stock allocation is up around the bond 322 00:18:14,040 --> 00:18:17,800 Speaker 1: allocation is almost always a percent US, almost no foreign bonds, 323 00:18:17,840 --> 00:18:20,359 Speaker 1: despite the fact foreign bonds are the largest asset class 324 00:18:20,359 --> 00:18:23,800 Speaker 1: in the world. So at least getting back to the 325 00:18:23,840 --> 00:18:27,520 Speaker 1: index starting point, the Vanguard die hard. You know, if 326 00:18:27,520 --> 00:18:29,760 Speaker 1: you're a die hard index or, you should have half 327 00:18:30,280 --> 00:18:33,200 Speaker 1: in foreign stocks and half bonds, and almost no one does. 328 00:18:33,280 --> 00:18:36,960 Speaker 1: That's particularly problematic right now because the US is the 329 00:18:37,000 --> 00:18:39,119 Speaker 1: largest stock market in the world, but it's also what 330 00:18:39,280 --> 00:18:41,760 Speaker 1: the out of forty five countries we track, the second 331 00:18:41,840 --> 00:18:44,359 Speaker 1: most expensive. So you're putting most of your money in 332 00:18:44,480 --> 00:18:47,119 Speaker 1: US stocks, and many people in US are putting so 333 00:18:47,200 --> 00:18:51,160 Speaker 1: being valuation mindful, I think is important, and we tell 334 00:18:51,200 --> 00:18:54,320 Speaker 1: people that are crazy like me, you can tilt even 335 00:18:54,359 --> 00:18:57,320 Speaker 1: further away from the global market portfolio into value, but 336 00:18:57,400 --> 00:19:00,679 Speaker 1: at least get back to the global index because the 337 00:19:00,720 --> 00:19:04,160 Speaker 1: same problem, this home country bias happens everywhere. My friends 338 00:19:04,160 --> 00:19:08,399 Speaker 1: in Japan, Israel, UK, Australia everywhere put most of their 339 00:19:08,400 --> 00:19:10,480 Speaker 1: money in their own markets and it's a really foolish idea. 340 00:19:11,119 --> 00:19:13,359 Speaker 1: Now you've got a second topic, which is a little 341 00:19:13,359 --> 00:19:15,879 Speaker 1: more esoteric, which is trend falling. And it shouldn't be 342 00:19:15,880 --> 00:19:20,520 Speaker 1: that esoteric because every single index that's market cap weighted 343 00:19:20,520 --> 00:19:23,399 Speaker 1: in the world already is a trend falling index. The 344 00:19:23,440 --> 00:19:26,920 Speaker 1: only variable they're doing price of the stock, time shares outstanding, 345 00:19:26,960 --> 00:19:29,399 Speaker 1: So you own more of Apple and Amazon as they 346 00:19:29,440 --> 00:19:31,760 Speaker 1: hit a trillion, you own less as they go down, 347 00:19:31,800 --> 00:19:34,320 Speaker 1: So you're already a trend far. Most people just don't 348 00:19:34,320 --> 00:19:37,760 Speaker 1: know it. Um, But trend falling as a methodology has 349 00:19:37,800 --> 00:19:41,800 Speaker 1: been around again as long as value has, and there 350 00:19:41,800 --> 00:19:44,160 Speaker 1: tends to be a lot of misinformation when it comes 351 00:19:44,200 --> 00:19:47,440 Speaker 1: to to be investing in trend falling and so UM 352 00:19:47,640 --> 00:19:49,600 Speaker 1: we've written a lot of papers on this and books, 353 00:19:49,600 --> 00:19:51,560 Speaker 1: but basically, you want to be invested in markets as 354 00:19:51,560 --> 00:19:54,280 Speaker 1: they're going up and have some sort of systematic exit 355 00:19:54,320 --> 00:19:56,600 Speaker 1: as they're going down. It's not going to protect you 356 00:19:56,640 --> 00:19:58,680 Speaker 1: in the five or ten percent moves, but it will. 357 00:19:59,000 --> 00:20:02,320 Speaker 1: It's sort of the forty six moves which we've seen 358 00:20:02,400 --> 00:20:05,280 Speaker 1: in markets in history. I shouldn't say it will, it 359 00:20:05,359 --> 00:20:09,199 Speaker 1: should and so um. But that's very much a different 360 00:20:09,200 --> 00:20:13,119 Speaker 1: psychological approach than just buy and hold buy and hold. 361 00:20:13,119 --> 00:20:15,560 Speaker 1: The problem. The biggest problem with buy and hold it's 362 00:20:15,600 --> 00:20:20,879 Speaker 1: totally fine investing strategy is that everything bad happens at once. 363 00:20:20,960 --> 00:20:23,760 Speaker 1: You've gotta buy a whole portfolio. It gets smoked in 364 00:20:23,800 --> 00:20:27,040 Speaker 1: the financial crisis. It got for the most part, very 365 00:20:27,119 --> 00:20:30,520 Speaker 1: challenged in Q one, So it's very high, highly correlated 366 00:20:30,560 --> 00:20:34,199 Speaker 1: to the economic environment with people losing their jobs, everything 367 00:20:34,200 --> 00:20:37,120 Speaker 1: else going south, and so you're sort of doubling up 368 00:20:37,119 --> 00:20:39,920 Speaker 1: on what's going on in the world. Trend following usually 369 00:20:39,920 --> 00:20:42,320 Speaker 1: does well during those periods, and for most part did 370 00:20:42,359 --> 00:20:44,840 Speaker 1: a good job this year. Problem with trend following is 371 00:20:44,880 --> 00:20:47,120 Speaker 1: the other periods um for the most of the two 372 00:20:47,160 --> 00:20:52,240 Speaker 1: thousand the ads that are sorry. UM. Trend falling wasn't 373 00:20:52,280 --> 00:20:55,000 Speaker 1: great fantastic during the financial crisis. The biggest problem with 374 00:20:55,040 --> 00:20:58,200 Speaker 1: trend falling is you look different, and usually it's it's 375 00:20:58,240 --> 00:21:01,159 Speaker 1: not um great or fear, you know. Buffett says that 376 00:21:01,280 --> 00:21:04,240 Speaker 1: really drives markets, it's envy. And so when the markets 377 00:21:04,280 --> 00:21:07,400 Speaker 1: up thirty percent last year, uh, and all your neighbors 378 00:21:07,440 --> 00:21:10,520 Speaker 1: are talking about vacations and buying new cars and houses, etcetera. 379 00:21:11,320 --> 00:21:13,720 Speaker 1: A strategy like trend folling that may have lagged is 380 00:21:13,760 --> 00:21:16,520 Speaker 1: hard to keep up with, particularly because those can go 381 00:21:17,000 --> 00:21:20,639 Speaker 1: I don't know, two, three, four, or five ten years uh, 382 00:21:20,760 --> 00:21:23,080 Speaker 1: with some disparity in return. So we like to have both. 383 00:21:23,280 --> 00:21:25,320 Speaker 1: It's sort of a guineyang. We probably put more in 384 00:21:25,359 --> 00:21:28,000 Speaker 1: trend folling than any adviser in the country, but we 385 00:21:28,119 --> 00:21:30,480 Speaker 1: like to go half and half technical term. We we 386 00:21:30,600 --> 00:21:34,480 Speaker 1: like to call going have these to use the jargon, 387 00:21:34,760 --> 00:21:37,359 Speaker 1: to use the industry jargon. So you are a true 388 00:21:37,440 --> 00:21:40,560 Speaker 1: Florida woman for picking up on that alligator reference there, 389 00:21:40,600 --> 00:21:42,760 Speaker 1: I I uh, your true color is coming out there. 390 00:21:43,359 --> 00:21:46,080 Speaker 1: We had an alligator behind our house supposedly the other week. 391 00:21:46,240 --> 00:21:48,960 Speaker 1: So alligators are in front of mine, top of mind 392 00:21:49,000 --> 00:21:51,240 Speaker 1: for me because I don't want to run into it. 393 00:21:51,400 --> 00:21:53,800 Speaker 1: So i'd widger you have one behind your house probably 394 00:21:53,880 --> 00:21:58,840 Speaker 1: right now if it's Uh, I wouldn't be surprised. Uh. 395 00:21:59,000 --> 00:22:02,480 Speaker 1: You had a really interesting hosts recently talking about how 396 00:22:02,520 --> 00:22:05,240 Speaker 1: you invest your own money, and I think this is 397 00:22:05,560 --> 00:22:06,639 Speaker 1: you know a lot of I've seen a lot of 398 00:22:06,680 --> 00:22:09,280 Speaker 1: these pie charts of masset allocation. I think yours is 399 00:22:09,320 --> 00:22:13,640 Speaker 1: my favorite I've ever seen because there's some small slivers. 400 00:22:13,640 --> 00:22:18,760 Speaker 1: They're like comic books, less than one percent. I guess, um, crypto, 401 00:22:18,920 --> 00:22:21,159 Speaker 1: and your rational for for awning crypto is I think 402 00:22:21,200 --> 00:22:25,080 Speaker 1: the best rationale ever. It's basically basically so that your 403 00:22:25,119 --> 00:22:27,760 Speaker 1: your crypto friends don't don't badge to you to death 404 00:22:27,800 --> 00:22:31,119 Speaker 1: about owning crypto. And and I tend to agree with that, 405 00:22:31,160 --> 00:22:33,000 Speaker 1: you know a little little bit in case it goes 406 00:22:33,080 --> 00:22:36,960 Speaker 1: up a million percent. But the really interesting thing to 407 00:22:37,000 --> 00:22:39,520 Speaker 1: me is the farm land at thirty six percent. And 408 00:22:39,560 --> 00:22:41,480 Speaker 1: I know you've talked about this on your own show 409 00:22:41,480 --> 00:22:46,320 Speaker 1: a little bit, and you've written about the rationale for it. Um. Obviously, 410 00:22:46,359 --> 00:22:48,199 Speaker 1: for those of us out there who can't go and 411 00:22:48,240 --> 00:22:51,080 Speaker 1: buy a farm, is there a way to sort of 412 00:22:51,160 --> 00:22:55,000 Speaker 1: get invested or what is the optimal way in public 413 00:22:55,040 --> 00:22:58,159 Speaker 1: markets to sort of get exposure to farm land in 414 00:22:58,200 --> 00:23:01,920 Speaker 1: the US? So um as everyone thinks about their portfolio 415 00:23:01,920 --> 00:23:04,720 Speaker 1: and this is what people spend like of their time 416 00:23:04,800 --> 00:23:07,400 Speaker 1: on UM. We wrote a book called Global ASTs Allocaction. 417 00:23:07,480 --> 00:23:10,080 Speaker 1: It's free to download on our website. Check it out UM. 418 00:23:10,119 --> 00:23:12,560 Speaker 1: And we did a fun study where we looked at 419 00:23:12,600 --> 00:23:15,520 Speaker 1: all the different Guru ASCID allocations and down at risk 420 00:23:15,560 --> 00:23:19,720 Speaker 1: parity UM permanent portfolio all the way out right, and 421 00:23:19,760 --> 00:23:21,360 Speaker 1: we took them back to the seventies and we did 422 00:23:21,359 --> 00:23:25,080 Speaker 1: a horse race and saw said, how do these portfolios perform? Well, 423 00:23:25,080 --> 00:23:27,480 Speaker 1: it turns out they're all pretty darn similar, And it 424 00:23:27,520 --> 00:23:30,320 Speaker 1: actually doesn't even really matter how much you have in 425 00:23:30,359 --> 00:23:32,439 Speaker 1: these allocations, as long as you have some of the 426 00:23:32,440 --> 00:23:36,119 Speaker 1: main ingredients, some global stocks, some global bonds, some global 427 00:23:36,200 --> 00:23:39,639 Speaker 1: real assets. The exact percentages didn't matter. And over time, 428 00:23:40,119 --> 00:23:42,800 Speaker 1: actually what mattered with that portfolio the most was how 429 00:23:42,880 --> 00:23:44,920 Speaker 1: much you paid to implement it. So if you paid 430 00:23:44,960 --> 00:23:49,960 Speaker 1: really high fees like mutual funds, really tax inefficient h fees, 431 00:23:50,080 --> 00:23:54,000 Speaker 1: you you removed any possible spread between the performance of 432 00:23:54,080 --> 00:23:56,720 Speaker 1: the best and worst performing allocations. So the whole goal 433 00:23:56,720 --> 00:23:59,399 Speaker 1: with your allocation on the public side, put that baby 434 00:23:59,400 --> 00:24:01,840 Speaker 1: on autopo isot. Let it be rules based. Let it 435 00:24:01,880 --> 00:24:03,640 Speaker 1: we're in the background, be done with it and spend 436 00:24:03,640 --> 00:24:05,520 Speaker 1: no time on it. And I know a lot of 437 00:24:05,560 --> 00:24:07,680 Speaker 1: people that's not something they want to do. But in 438 00:24:08,080 --> 00:24:11,200 Speaker 1: my view, it's reality. And so mine is actually modeled 439 00:24:11,320 --> 00:24:14,760 Speaker 1: on a two thousand year old investing strategy and it 440 00:24:14,800 --> 00:24:16,680 Speaker 1: was in the Talmud and it said, let every man 441 00:24:16,880 --> 00:24:19,320 Speaker 1: put a third of their money in business, a third 442 00:24:19,400 --> 00:24:22,120 Speaker 1: keeping reserve, and a third in land. And so that's 443 00:24:22,160 --> 00:24:25,679 Speaker 1: what mine actually looks like. And so farmland, you know, again, 444 00:24:25,720 --> 00:24:31,040 Speaker 1: that's something UM it's it's more from from my family. Uh, 445 00:24:31,080 --> 00:24:32,840 Speaker 1: my old man side of the family grew up in 446 00:24:32,920 --> 00:24:35,520 Speaker 1: Kansas and Nebraska, so it's more of a connection to 447 00:24:35,600 --> 00:24:37,800 Speaker 1: that part of the world. It has been an actual 448 00:24:38,000 --> 00:24:42,679 Speaker 1: fantastic performing asset class over the years, highly non correlated 449 00:24:42,680 --> 00:24:45,480 Speaker 1: to everything else going on. The problem. As you alluded to, 450 00:24:45,560 --> 00:24:49,320 Speaker 1: it's really hard to allocate to UM. It's probably the 451 00:24:49,520 --> 00:24:54,679 Speaker 1: single largest asset that's not included in the global market 452 00:24:54,680 --> 00:24:58,560 Speaker 1: portfolio through public securities, the other being single family housing 453 00:24:58,600 --> 00:25:02,120 Speaker 1: around the world. Uh, although that's starting to get securitized 454 00:25:02,160 --> 00:25:04,200 Speaker 1: a little more. I think it's a big business opportunity. 455 00:25:04,200 --> 00:25:05,920 Speaker 1: By the way, if you're listening to h to come 456 00:25:05,960 --> 00:25:09,040 Speaker 1: up with some farmland ideas. There's a few portals we 457 00:25:09,160 --> 00:25:12,240 Speaker 1: featured on the podcast that that talk about investing in 458 00:25:12,320 --> 00:25:15,840 Speaker 1: farms and in smaller chunks as well as private funds. UM. 459 00:25:16,000 --> 00:25:17,840 Speaker 1: I would love to see a lot more development there. 460 00:25:17,840 --> 00:25:20,199 Speaker 1: Ours is really just because you can go right around 461 00:25:20,240 --> 00:25:24,400 Speaker 1: on a on a a TV and shoot guns and 462 00:25:24,600 --> 00:25:28,360 Speaker 1: I don't know play, but you'd think there'd be more 463 00:25:28,400 --> 00:25:31,280 Speaker 1: reats farm reats. I don't know, there's only like one 464 00:25:31,359 --> 00:25:34,040 Speaker 1: or two, uh, and would love to see people developed that. 465 00:25:34,119 --> 00:25:36,560 Speaker 1: I think it's a billion dollar idea for the right 466 00:25:36,680 --> 00:25:40,280 Speaker 1: enterprising person. Who would have known that the TOMLA had 467 00:25:40,320 --> 00:25:43,280 Speaker 1: such great investing strategies. Right, Oh, that's great. That's uh. 468 00:25:43,560 --> 00:25:47,040 Speaker 1: I hadn't heard about that. That's pretty awesome. Well, one 469 00:25:47,040 --> 00:25:48,560 Speaker 1: more paper of yours, mat, I want to ask you 470 00:25:48,600 --> 00:25:51,400 Speaker 1: about before we get to sharing the craziest thing in markets, 471 00:25:51,800 --> 00:25:54,320 Speaker 1: and that is one of your white papers that you 472 00:25:54,359 --> 00:25:57,080 Speaker 1: wrote called all time Highs A good time to invest, no, 473 00:25:57,760 --> 00:26:00,439 Speaker 1: a great time. And you started off with this Beatles 474 00:26:00,440 --> 00:26:07,040 Speaker 1: analogy about UH one Records executive who basically turned down 475 00:26:07,080 --> 00:26:09,439 Speaker 1: the chance to sign the Beatles because he said that 476 00:26:09,480 --> 00:26:12,800 Speaker 1: groups were going out, especially for man groups with guitars. 477 00:26:13,200 --> 00:26:16,000 Speaker 1: UM and saying, well, the Beatles obviously did great. You 478 00:26:16,040 --> 00:26:18,040 Speaker 1: can kind of apply that to the stock market as well, 479 00:26:18,080 --> 00:26:20,159 Speaker 1: and I think it's a really interesting concept that I 480 00:26:20,200 --> 00:26:22,520 Speaker 1: was hoping you can kind of just briefly walk us 481 00:26:22,520 --> 00:26:26,120 Speaker 1: through the findings of that study and how people can 482 00:26:26,160 --> 00:26:29,480 Speaker 1: actually apply that to their psychology and they're thinking when 483 00:26:29,480 --> 00:26:33,200 Speaker 1: they're thinking about making investments, So what does that strategy, 484 00:26:33,680 --> 00:26:37,359 Speaker 1: what would that stay to do right now in these conditions, Well, 485 00:26:37,760 --> 00:26:39,520 Speaker 1: you can kind of walk around the world on all 486 00:26:39,560 --> 00:26:43,439 Speaker 1: the different assets, but foreign stocks you would certainly be 487 00:26:43,480 --> 00:26:46,880 Speaker 1: in cash US stocks depending on the index in day 488 00:26:47,040 --> 00:26:49,159 Speaker 1: and time of day. I don't even know what markets 489 00:26:49,200 --> 00:26:52,280 Speaker 1: are doing today, but this only looked at it once 490 00:26:52,280 --> 00:26:55,480 Speaker 1: a month, you know, so it would be uh um, 491 00:26:55,520 --> 00:26:58,080 Speaker 1: you know, I would be much more predisposed to the 492 00:26:58,119 --> 00:27:01,639 Speaker 1: twelve month in the all time highs like I mentioned, um, 493 00:27:01,720 --> 00:27:05,080 Speaker 1: and then others like real estate and and commodities. Depends 494 00:27:05,080 --> 00:27:08,560 Speaker 1: on the commodity. But again it has a high correlation 495 00:27:08,600 --> 00:27:11,120 Speaker 1: with our old paper, which just used simple moving averages. 496 00:27:11,480 --> 00:27:13,240 Speaker 1: So to be as usual, it's a mixed bag. But 497 00:27:13,280 --> 00:27:15,159 Speaker 1: you want to be invested in most markets most of 498 00:27:15,160 --> 00:27:17,719 Speaker 1: the time. But again, the problem with this system is 499 00:27:17,760 --> 00:27:23,080 Speaker 1: not uh really the system itself, it's can someone follow it? 500 00:27:23,560 --> 00:27:26,040 Speaker 1: And the same thing with buying hole being so hard 501 00:27:26,240 --> 00:27:29,600 Speaker 1: is people are so tempted just to fiddle around and 502 00:27:29,680 --> 00:27:32,560 Speaker 1: muck with it and and uh try to turn the 503 00:27:32,600 --> 00:27:35,320 Speaker 1: dials that they end up destroying any potential benefit of 504 00:27:35,359 --> 00:27:39,320 Speaker 1: it in the in the first place. To follow you 505 00:27:39,400 --> 00:27:43,359 Speaker 1: follow your own rules, I guess is the bottom line? Sarry. 506 00:27:43,480 --> 00:27:46,160 Speaker 1: You know, the one rule we have on this podcast 507 00:27:46,320 --> 00:27:49,680 Speaker 1: is you have to deliver the craziest thing you saw 508 00:27:49,720 --> 00:27:52,560 Speaker 1: in markets this week. So man, let's start with you. 509 00:27:52,640 --> 00:27:54,800 Speaker 1: What is the I know it's been a very irrational 510 00:27:54,800 --> 00:27:58,160 Speaker 1: samee market these days. Hard to find anything crazy. Um, 511 00:27:58,640 --> 00:28:00,119 Speaker 1: I don't know if people can hear the start has 512 00:28:00,240 --> 00:28:02,600 Speaker 1: in my voice over that, But what's the craziest thing 513 00:28:02,600 --> 00:28:05,720 Speaker 1: you've seen these days? As usual? I'm not a great 514 00:28:05,760 --> 00:28:09,959 Speaker 1: rule followers. I'm gonna give you at least two. The 515 00:28:10,000 --> 00:28:13,600 Speaker 1: one was this story, um, Buddy Jason's wide had written 516 00:28:13,600 --> 00:28:17,000 Speaker 1: at the Journal where he said, the last person to 517 00:28:17,080 --> 00:28:21,400 Speaker 1: receive a Civil War era pension, her name is Irene Triplet, 518 00:28:21,600 --> 00:28:24,880 Speaker 1: just passed away and it was for her father's service 519 00:28:25,000 --> 00:28:28,600 Speaker 1: in the Union Army, which seems like such a um 520 00:28:28,840 --> 00:28:33,760 Speaker 1: impossible scenario. But just as a reminder that you know, history, 521 00:28:34,080 --> 00:28:37,200 Speaker 1: particularly here in the US, uh isn't it is as 522 00:28:37,200 --> 00:28:41,040 Speaker 1: long as most of us um typically think about. Second, 523 00:28:41,720 --> 00:28:45,840 Speaker 1: that's amazing bananas right, um, you know. On and then 524 00:28:45,880 --> 00:28:49,560 Speaker 1: on the uplifting side, uh, we recently had a dive 525 00:28:49,640 --> 00:28:53,480 Speaker 1: in the ocean to the deepest and longest dive ever, 526 00:28:53,840 --> 00:28:55,840 Speaker 1: which is cool, it gets lost in the noise of 527 00:28:55,840 --> 00:28:58,880 Speaker 1: everything else going on. And then on the really depressing side, 528 00:28:59,800 --> 00:29:05,800 Speaker 1: uh was we saw Fidelity publish some statistics about how 529 00:29:05,880 --> 00:29:09,320 Speaker 1: their customers behave during Q one and there was some 530 00:29:09,440 --> 00:29:13,560 Speaker 1: really depressing realizations and one that was the worst to 531 00:29:13,600 --> 00:29:17,160 Speaker 1: me was that, uh, their investors that were aged mid 532 00:29:17,240 --> 00:29:22,000 Speaker 1: sixties sixty sixty nine, almost a third of them sold 533 00:29:22,120 --> 00:29:26,400 Speaker 1: all their stocks in February to May. And you know, 534 00:29:26,560 --> 00:29:31,120 Speaker 1: that just illustrates so clearly why you have to have 535 00:29:31,280 --> 00:29:36,560 Speaker 1: some sort of plan um, you know, and and approach 536 00:29:36,880 --> 00:29:40,840 Speaker 1: because otherwise it when things start to go insane, it's 537 00:29:40,960 --> 00:29:44,240 Speaker 1: a you know, these these sort of behaviors are are 538 00:29:44,280 --> 00:29:48,239 Speaker 1: hard to recover from. That's atually, and you know, and 539 00:29:48,280 --> 00:29:51,040 Speaker 1: Fidelity gives you that sort of granular data of what 540 00:29:51,080 --> 00:29:53,400 Speaker 1: their customers are doing to an extent, you know, the 541 00:29:53,400 --> 00:29:55,920 Speaker 1: the whole narrative we've heard and Stay's already written a 542 00:29:55,960 --> 00:29:57,840 Speaker 1: lot of actually written a lot about this is how 543 00:29:57,880 --> 00:30:00,800 Speaker 1: these Robin hood uh and through seemed to have been 544 00:30:00,840 --> 00:30:03,840 Speaker 1: the world's greatest market timers. But that really goes to 545 00:30:03,840 --> 00:30:07,120 Speaker 1: show you that that's not shown the entire situation of 546 00:30:07,200 --> 00:30:10,400 Speaker 1: sort of the individual retail investor that is said, I'd 547 00:30:10,440 --> 00:30:12,600 Speaker 1: love to know what that union army pension fund was 548 00:30:12,640 --> 00:30:17,000 Speaker 1: invested in the talk about no pension crisis. They're right, yeah, 549 00:30:17,040 --> 00:30:19,720 Speaker 1: well they should have bought a few stocks. It's would 550 00:30:19,720 --> 00:30:21,840 Speaker 1: be uh, people with a lot of money right now, 551 00:30:22,840 --> 00:30:26,080 Speaker 1: all those old railroad stocks you bought back then with uh, 552 00:30:26,160 --> 00:30:28,320 Speaker 1: all right, all right, I'll give you mine. Mine's uh. 553 00:30:28,520 --> 00:30:30,520 Speaker 1: We're giving a lot of props to the journal this 554 00:30:30,720 --> 00:30:35,000 Speaker 1: week mind minds from a journal story last week actually too, 555 00:30:35,480 --> 00:30:39,360 Speaker 1: and it's talking about this research done by some professors 556 00:30:39,360 --> 00:30:43,200 Speaker 1: that uh U, C l A and TAL Berkeley, and 557 00:30:43,240 --> 00:30:49,040 Speaker 1: they looked at the performance of analysts earnings estimates when 558 00:30:49,080 --> 00:30:52,440 Speaker 1: the analyst shares her first name with the CEO of 559 00:30:52,440 --> 00:30:56,280 Speaker 1: the company, and crazily enough, if the analyst shares the 560 00:30:56,360 --> 00:31:00,720 Speaker 1: first name the CEO of the company they're earning estimates 561 00:31:00,760 --> 00:31:06,520 Speaker 1: are more more accurate um than someone without the same name. 562 00:31:06,560 --> 00:31:09,680 Speaker 1: And I think one of the theories was that, uh, 563 00:31:10,160 --> 00:31:13,520 Speaker 1: if the CEO shares a name with an analyst, maybe 564 00:31:13,560 --> 00:31:16,920 Speaker 1: he's gonna be uh more likely to to take his 565 00:31:17,040 --> 00:31:18,760 Speaker 1: calls and give him some heads up. I don't know 566 00:31:18,800 --> 00:31:20,520 Speaker 1: how that all works with regg f D. I don't. 567 00:31:20,840 --> 00:31:23,840 Speaker 1: I don't know how that maybe this this study predates 568 00:31:23,840 --> 00:31:27,440 Speaker 1: regg FD. But Mad, if you, uh you find it's funny, 569 00:31:28,560 --> 00:31:30,600 Speaker 1: that's a problem I would never have. I don't run 570 00:31:30,640 --> 00:31:33,320 Speaker 1: into too many other maps. So I was gonna say, 571 00:31:33,360 --> 00:31:35,280 Speaker 1: if you can find a company with the CEO named 572 00:31:35,360 --> 00:31:37,320 Speaker 1: mav I, I gotta be a lot of mics out there. 573 00:31:37,360 --> 00:31:39,840 Speaker 1: I should. I should really get my cf A and 574 00:31:39,880 --> 00:31:45,040 Speaker 1: get into this. Uh all right, Sarah, I think men 575 00:31:45,240 --> 00:31:49,040 Speaker 1: gave us some stiff competition here with a less Civil 576 00:31:49,040 --> 00:31:52,520 Speaker 1: war pensioneer being paid. But let's hear what you have. 577 00:31:53,040 --> 00:31:55,920 Speaker 1: What's your craziest thing for the week. So I'll stay 578 00:31:56,000 --> 00:31:57,520 Speaker 1: right off the top. I don't. I don't think I 579 00:31:57,560 --> 00:31:59,520 Speaker 1: can keep up with that, so Mad, I'll give it 580 00:31:59,520 --> 00:32:03,040 Speaker 1: to you. Uh. But a little bit of self promotion. 581 00:32:03,200 --> 00:32:05,000 Speaker 1: I wrote a story this past week on the website 582 00:32:05,040 --> 00:32:08,880 Speaker 1: robin track dot net um. Really interesting story but also 583 00:32:08,960 --> 00:32:12,280 Speaker 1: just a little bit crazy. Um, the amount of interest 584 00:32:12,400 --> 00:32:15,200 Speaker 1: this site that tracks Robin Hood users is seeing. So 585 00:32:15,240 --> 00:32:17,560 Speaker 1: before this year I spoke with the creator of it 586 00:32:18,000 --> 00:32:20,920 Speaker 1: um side story. He's twenty three, he built it while 587 00:32:20,920 --> 00:32:23,760 Speaker 1: he was in college. Robin Hood actually flew him out 588 00:32:23,760 --> 00:32:25,360 Speaker 1: to interview and he didn't get the job. Now all 589 00:32:25,360 --> 00:32:28,120 Speaker 1: of a sudden his websites blowing up. But he said 590 00:32:28,480 --> 00:32:31,360 Speaker 1: that before this year, on average day get like two 591 00:32:31,440 --> 00:32:34,160 Speaker 1: or to four thousand users day. Now he's getting up 592 00:32:34,160 --> 00:32:36,240 Speaker 1: to fifty thousand users a day. He says that we 593 00:32:36,280 --> 00:32:39,440 Speaker 1: could check um the I p s of websites visiting 594 00:32:39,440 --> 00:32:42,520 Speaker 1: and scraping his site, and he said there's evidence that 595 00:32:42,600 --> 00:32:45,240 Speaker 1: hedge funds like d E Show and Points seventy two 596 00:32:45,560 --> 00:32:49,560 Speaker 1: are all scraping his data. Uh so this pretty crazy 597 00:32:49,800 --> 00:32:53,720 Speaker 1: the amount of interest there is in what retail investors 598 00:32:53,720 --> 00:32:56,800 Speaker 1: are doing right now. Um. But also that he's twenty 599 00:32:56,840 --> 00:33:00,000 Speaker 1: three year old guy who built this website in college. Uh, 600 00:33:00,000 --> 00:33:02,000 Speaker 1: didn't get a job with Brodhead and now all of 601 00:33:02,040 --> 00:33:05,120 Speaker 1: a sudden he's like blowing up. Alright, sir, that is 602 00:33:05,160 --> 00:33:07,920 Speaker 1: the the self promoting nest thing of and craziest thing 603 00:33:07,920 --> 00:33:10,200 Speaker 1: of the week. I'll take it. I'll take good pretty good, 604 00:33:10,480 --> 00:33:12,320 Speaker 1: and it was a really good story. I recommend everyone 605 00:33:12,880 --> 00:33:17,920 Speaker 1: checking checking that one out. Um, but boy, I think 606 00:33:17,920 --> 00:33:19,440 Speaker 1: we do got to get headed to MEB with the 607 00:33:19,560 --> 00:33:23,360 Speaker 1: Civil War pensioneer. That's a pretty good one with that 608 00:33:23,440 --> 00:33:26,400 Speaker 1: side MeV. We will absolutely give you the w this week. 609 00:33:26,680 --> 00:33:28,720 Speaker 1: But Mad Favor, thanks so much for joining the show 610 00:33:28,760 --> 00:33:31,240 Speaker 1: this week. It's been great. Let's do it again, guys. 611 00:33:31,280 --> 00:33:43,000 Speaker 1: Thanks absolutely What Goes Out. We'll be back next week. 612 00:33:43,320 --> 00:33:45,920 Speaker 1: Until then, you can find us on the Bloomberg Terminal, 613 00:33:46,040 --> 00:33:49,600 Speaker 1: website and app, or wherever you get your podcasts. We 614 00:33:49,720 --> 00:33:51,560 Speaker 1: love it if you took the time to rate interview 615 00:33:51,640 --> 00:33:54,800 Speaker 1: the show on Apple podcast so more listeners can find us. 616 00:33:55,200 --> 00:33:57,720 Speaker 1: And you can find us on Twitter, follow me at 617 00:33:58,120 --> 00:34:01,680 Speaker 1: Sarah pont Sack. Mike is that Reaganonymous. Our guest med 618 00:34:01,760 --> 00:34:05,080 Speaker 1: Favor is at med Favor, and you can also follow 619 00:34:05,120 --> 00:34:09,080 Speaker 1: Bloomberg Podcasts at Podcasts. What Goes Up is produced by 620 00:34:09,200 --> 00:34:12,799 Speaker 1: Jordan Gospore and the head of Bloomberg podcast is Francesco Levie. 621 00:34:13,120 --> 00:34:14,919 Speaker 1: Thanks for listening, See you next time.