Speaker 1: M. This is mesters in Business with very Results on
Speaker 1: Bloomberg Radio this week on the podcast Oh how much
Speaker 1: fun was this? I I can't begin to tell you
Speaker 1: what it's like to sit in a room with the
Speaker 1: Jeremy's Professor Jeremy Siegel, And I keep calling him Professor
Speaker 1: Jeremy Schwartz, but he's just Jeremy Schwartz, chief investment officer
Speaker 1: of the seventy billion dollar e t F and mutual
Speaker 1: fund company Wisdom Tree. I am just a fan of
Speaker 1: both of these guys. I have interviewed Professor Siegel several times.
Speaker 1: He's always fascinating. You'll hear um him sort of zip
Speaker 1: in and out of focus like this because he's sitting
Speaker 1: on the chair, spinning around, just having fun telling stories.
Speaker 1: So if you hear's audio cut in and out, he's
Speaker 1: he's all but spinning in circles. He's just charming as is.
Speaker 1: Jeremy Schwartz is one of the smartest people you'll meet
Speaker 1: in five and ance. Just a thoughtful, intelligent person who
Speaker 1: really understands what value is about, how to find investments
Speaker 1: that will outperform the broader markets with less risk, less volatility.
Speaker 1: He's been a big advocate along with Professor Siegel, of
Speaker 1: fundamental indexing, where you're focusing on things like earnings and
Speaker 1: diving and value, and they have some fascinating things to say.
Speaker 1: The latest version of Stocks for the Long Run has
Speaker 1: just come out. It's It's sold ungodly numbers of copies
Speaker 1: and is on everybody's Best Finance Books of All Time list.
Speaker 1: I found this conversation to be so much fun. We
Speaker 1: could have gone for another couple of hours, but I
Speaker 1: had to stop and send them off to the New
Speaker 1: York Stock Exchange, uh to do whatever they're gonna do there.
Speaker 1: I think you'll enjoy this conversation. I know I did
Speaker 1: with no further ado my sit down with the Jeremy's
Speaker 1: Professor Jeremy Siegel and Jeremy Schwartz. Professor Siegel, you be
Speaker 1: again at Wharton back in seventy six. Did you ever
Speaker 1: imagine a half a century later you're still teaching in
Speaker 1: the same place. That's well, I'm still associated. I'm meritus
Speaker 1: Professor Barry. I actually left active professor in July one
Speaker 1: after forty uh five years of teaching at Ward, and
Speaker 1: I had taught four years University of Chicago before that,
Speaker 1: so forty nine years of university teaching, I've been as
Speaker 1: busy as because finishing as we're going to talk about
Speaker 1: sixth edition of the book, and and conferences more than
Speaker 1: ever because now you can do him on zoom. So
Speaker 1: I can do San Diego at the nine am and
Speaker 1: at ten thirty, I can do New York, which of
Speaker 1: course never used to be possible modern technology and shorts.
Speaker 1: You went to Wharton, you had Professor Siegal as an instructor.
Speaker 1: Tell us what that experience was like, how was he
Speaker 1: as a professor? So I got to work in in
Speaker 1: ninety nine, which was the peak of the tech bubble.
Speaker 1: I was coming into my own seeing the tech bubble,
Speaker 1: living through it had been some experience investing into those
Speaker 1: tech stocks and watching them crash. And he was on
Speaker 1: I got to meet him through who's now the Philly
Speaker 1: Fed President, Patrick Harker. I was on the thing called
Speaker 1: the Dean's Advisory Board. We organized sessions with the professor
Speaker 1: and I got to meet him through that. And then
Speaker 1: he got me into his class. Didn'tven know he had
Speaker 1: to applied with his class. He got me into his class.
Speaker 1: And what do you think you just walking off the street,
Speaker 1: Professor see I'm here. It doesn't work. I didn't know that,
Speaker 1: but I was lucky to meet him. And then so
Speaker 1: oh one was when I was sitting in his class.
Speaker 1: So this is after, you know, March up two thousand,
Speaker 1: his famous outbed big cap tech socks are suckers. Bet
Speaker 1: I remember that vividly. So he's on CNBC all the
Speaker 1: time talk about this, and I needed something to do
Speaker 1: for the summer, and that was the third edition back
Speaker 1: in oh two, we helped. That was my first product
Speaker 1: with him, was the third edition of Stocks Long Run. Really,
Speaker 1: so you have a twenty year relationship with Stocks for
Speaker 1: the Long Run as well as with Professor Siegel. It's great.
Speaker 1: So the question for you is you come out of Wharton,
Speaker 1: how do you end up at Wisdom Trade? Well, Wisdom
Speaker 1: Tree now I've been there seventeen years. The professor we
Speaker 1: knew the founder, Johnathan Steinberg. He had a magazine. The
Speaker 1: professor was publishing for the magazine, and the Ceinberg family
Speaker 1: very involved in Wharton, so we're looking at their indexes.
Speaker 1: The second book, The Future for Investors, which we did,
Speaker 1: came out of five had a lot of work on
Speaker 1: dividend investing, value investing, and we helped validate their initial research,
Speaker 1: which got the company funded to know four. The professor
Speaker 1: invested and joined as an advisor, and they saw I
Speaker 1: did all his research and now the second longest employee
Speaker 1: and have been there from the very early days. Just
Speaker 1: you're right behind Jonah, who remains elusive and is a
Speaker 1: fantom figure who I can't get to the studio, but
Speaker 1: we'll talk about that later. So, so wisdom Tree goes
Speaker 1: public the two you affiliated with it. But I recall
Speaker 1: vividly Professor Siegel as a traditional market cap weighted index
Speaker 1: sort of guy. How did you find dividend waiting or
Speaker 1: valuating or other ways of looking at what some people
Speaker 1: terribly call smart data? But how did you find your
Speaker 1: way to those sort of indexing which is what wisdom
Speaker 1: True has become known for. And as Jeremy mentioned, the
Speaker 1: tech bubble itself was quite instrumental in saying just a minute,
Speaker 1: it's cap waiting the very best and what jonnod Steinberg
Speaker 1: had called me up and said, you know, we were
Speaker 1: thinking of fundamentally waiting instead of by a just market cap,
Speaker 1: which is the assumption of efficient market hypothesis, by either
Speaker 1: earnings or dividends would you do historical research on stocks
Speaker 1: to see whether it gives you a better risk return
Speaker 1: trade off? And that's where Jeremy came in, because he
Speaker 1: was my right hand man, to say the least in
Speaker 1: doing all this. We did it not only for the US,
Speaker 1: we did it internaturally. We wrote a white paper that
Speaker 1: was associated with it. And when we did it, I said,
Speaker 1: you know what, it is, significantly better risk return trade offs.
Speaker 1: It makes sense for me. I was formulating a theory
Speaker 1: called the noisy market hypothesis instead of the efficient market hypothesis,
Speaker 1: where this sort of fundamental indexing would do better. And
Speaker 1: John Oh asked me, and I said, you know, I've
Speaker 1: I've spoken for dozens of companies. I've never really taken
Speaker 1: any official position, but I said I would be willing
Speaker 1: to certainly consider being an advisor on wisdom Tree. And
Speaker 1: I am a senior investment strategy advisor to wisdom Tree
Speaker 1: since that beginning. So let's not bury the lead. If
Speaker 1: market cap isn't the most efficient way to organize an index,
Speaker 1: what is what is? Well? Fundamentals more specific more what
Speaker 1: we like dive it in and or earnings as the
Speaker 1: waiting procedure. So value with a dividend. Yes, and what
Speaker 1: it does give you is a is a value tilt.
Speaker 1: There's no question about that. And I remember telling dono Um,
Speaker 1: I'll go with you on this, but we have to
Speaker 1: be inexpensive. I don't want to to de charge a
Speaker 1: hunter basis points, and he said, I want as many
Speaker 1: people to use it. I want it to be and expanding.
Speaker 1: We came out with the lowest cost. Now became more
Speaker 1: competitive since then. But when we came out with really lowest,
Speaker 1: definitely lowest cost of all, I think the fundamental we
Speaker 1: waited indexes and you guys prefer the name fundamental as
Speaker 1: opposed to smart beta. I think kind of smart beta
Speaker 1: has fallen out of semantics and branding. We actually use
Speaker 1: the term modern alfa now modern alfa, so it's you know,
Speaker 1: more in mine with what you're trying to achieve. You're
Speaker 1: not just trying to be beta. You'r You can say
Speaker 1: you're being dumb beta, but that's just me, that's my preference.
Speaker 1: I don't it's so weird how these names sort of
Speaker 1: catch fire for a while and they go viral. We'll
Speaker 1: talk a little bit about your recent viral uh TV appearance,
Speaker 1: but before I get to that, I have to ask, so,
Speaker 1: how do you two guys meet. You're an undergraduate or
Speaker 1: a graduate student, undergraduate undergrad, so you're just pennsylvani walking around. Well,
Speaker 1: you know, I have to tell you. Actually he invited
Speaker 1: me to be a talk to an some student group,
Speaker 1: and I was so busy it slipped my mind. Um
Speaker 1: and I felt so embarrassed. And he came up with
Speaker 1: a smile and said, oh, professor, to say a weekend
Speaker 1: we schedule And I said, this is a truly wonderful
Speaker 1: I was worried. Okay, yeah he was. I was okay,
Speaker 1: but I would say, and I repeat this in the
Speaker 1: preface of this new edition. When he offered to work
Speaker 1: for me, we were working through some risk return type
Speaker 1: of analysis, and I said, listen, this is gonna take
Speaker 1: a little bit of time, but I want to get
Speaker 1: you familiar with the data. I know was a Friday,
Speaker 1: coming Monday, and you know, familiar stars with the data
Speaker 1: coming Monday, and we'll discuss how to do it to
Speaker 1: get the results. I know the answers to this keep going.
Speaker 1: I love the story, I mean. And so he came
Speaker 1: in on Monday and I said, probably Saturday, Yeah, Saturday,
Speaker 1: probably you know, you know, I was in on Saturdays.
Speaker 1: It was a Saturday, all right, Jeremy remembers better than I. Um,
Speaker 1: and you know, I said, okay, let's talk about it.
Speaker 1: And he said, well, professor to go, I do have
Speaker 1: I think all the answers that you want. I've done
Speaker 1: this and you do. And we looked. I looked him
Speaker 1: over and said this looks right. And I said, okay,
Speaker 1: I've got someone special here. Um. And I did you know,
Speaker 1: I know, I have a lot of business professors who
Speaker 1: listened to this podcast and assigned specific ones to their students.
Speaker 1: But that should be a lesson to somebody who says, hey,
Speaker 1: how do I stand out for the crowd? When the
Speaker 1: professor says, come in, we'll talk about the assignment, and
Speaker 1: you come in and say, I've already crunched the number,
Speaker 1: here's the data. Most of what you've written previously is right.
Speaker 1: Here's a couple of little mistakes I caught that has
Speaker 1: to impress you, right, Uh, definitely, it definitely impressed me.
Speaker 1: I mean all through our relationship, you know, you know,
Speaker 1: I mean it's amazing because he you know, travels back
Speaker 1: and forth, you know, living in Philadelphia and and working
Speaker 1: in New York, although he doesn't sertily have to do
Speaker 1: it as much now because of you know, how much
Speaker 1: are you splitting your time? So we with some treaty
Speaker 1: went to be a fully remote first organization. And you
Speaker 1: talked about John, he was the most New york In person.
Speaker 1: I mean I tried to move to Miami called twelve
Speaker 1: thirteen years ago. He said, no, you can't move to Miami.
Speaker 1: That's where I grew up. And we're now completely remote first.
Speaker 1: We find it to be very productive. We are you know,
Speaker 1: we have a global team of a team in Europe.
Speaker 1: My research is almost thirty people and almost half you know,
Speaker 1: half them in Europe, and we can be more interconnected
Speaker 1: doing talking to them weekly in a different format resoom
Speaker 1: or teams that were on you know, it's it's a
Speaker 1: so I don't come up as much, but you do
Speaker 1: find the benefits that I was in the office yesterday
Speaker 1: we had six our team members in the opposite You
Speaker 1: do find little things. There is the benefit of the
Speaker 1: collaboration that you find things you wouldn't have found on
Speaker 1: a zoom call because you're bantering. That's the keyword those collaboration.
Speaker 1: To have everybody slep into the office to sit and
Speaker 1: stare at a computer or worse, do zoom calls from
Speaker 1: the office is kind of pointless. But when you could
Speaker 1: get together face to face and have conversations, that's a
Speaker 1: very different experience. So let's talk a little bit about
Speaker 1: this book, which is really become a classic. The really
Speaker 1: the first question I gotta ask is how do you
Speaker 1: go about updating and editing a book that really has
Speaker 1: stood the test of time. For jeez, it's it's almost
Speaker 1: thirty years. It's on everybody's must have list, top ten
Speaker 1: finance book, best investment books of all time. Do you
Speaker 1: roach updating this with a little bit of trepidation? What's
Speaker 1: the experience? Well, you're right, the first edition came out
Speaker 1: in May of using data up through two, so we
Speaker 1: have thirty years more so now it's really stucks for them.
Speaker 1: And now, of course it is the sixth edition, but
Speaker 1: it's also the fifth edition was written just after the
Speaker 1: Financial christ a couple of years after the financial crisis,
Speaker 1: and a lot of things have gone. I'm in a
Speaker 1: huge bull market. UM the COVID, which is a whole
Speaker 1: chapter on UM. It's very up to date. I mean,
Speaker 1: it even includes some data on the recent bear market,
Speaker 1: which most general books can get as far as as
Speaker 1: we got bear marks. A little bit is in there, Yeah,
Speaker 1: a little bit is in there. Um, you know, we
Speaker 1: don't know if it's exactly over yet. We'll certainly talk
Speaker 1: about that later, but um, Jeremy, yeah, we'll nail We'll
Speaker 1: try to nail that. But there was so much more.
Speaker 1: I had to say. This is the biggest revision and
Speaker 1: the most new material of any of them. There's there's
Speaker 1: been almost five new chapters that have been added, and
Speaker 1: there's been parts that have been added of others. I mean,
Speaker 1: obviously I deal with cryptocurrencies and bitcoin, which was not
Speaker 1: an issue ten years ago. You can feel how heavy
Speaker 1: it is. I know, this is this is vaccinated and
Speaker 1: boost days. This is really uh not that the other
Speaker 1: books were skimpy, but you could tell this has a
Speaker 1: little bit of a he to it. So we have
Speaker 1: we were for instance, um, in the past, I had
Speaker 1: one chapter basically on value and growth. There's four chapters
Speaker 1: that are directly related to value and growth really, I
Speaker 1: mean and other factors investing, which became very popular in
Speaker 1: the last ten years. Uh. One section I added to
Speaker 1: another one was on real estate I've never had anything
Speaker 1: on real estate returns before. I mean, and these are
Speaker 1: just some of the changes that I wanted to put
Speaker 1: in to make it more complete. So let's talk about
Speaker 1: some of these additions that you added. We'll start with
Speaker 1: real estate. Yeah, your friend, professor Bob Schiller over Yale
Speaker 1: puts out the case Shiller Housing Index, and I believe
Speaker 1: if you look at housing for the long run, doesn't
Speaker 1: do much better than inflation, does it. So this is
Speaker 1: the interesting thing. The price doesn't do much better than inflation,
Speaker 1: but there's a return. Well, you gotta live somewhere. Start.
Speaker 1: First of all, there's two types. First of all, your
Speaker 1: it's your own house residential. And then we now have
Speaker 1: and this is the research we have. We have fifty
Speaker 1: years of reat data that we never had before. So
Speaker 1: I felt it was long enough. I mean, it's not
Speaker 1: the two twenty years of stock market data, but fifty
Speaker 1: years is still a good time. So I did a
Speaker 1: very complete analysis on that, and let me just summarize.
Speaker 1: I think the most interesting part. The return on the
Speaker 1: read index is virtually exact. Wait, the same as the
Speaker 1: S and P five. Most people, Oh my god, it's
Speaker 1: the same. And it's so much more stable. No, this
Speaker 1: is the interesting thing people think were the state is
Speaker 1: more stable than the stock market in every recession except one,
Speaker 1: and that was the tech bust of two thousands. The
Speaker 1: draw down of reeds was greater than the SNP. That's
Speaker 1: really interesting. You know, people don't get a print on
Speaker 1: their house everything every second, so it feels stable because
Speaker 1: you're not seeing prices. But in reality, any day you
Speaker 1: want to put your house up for sale, you might
Speaker 1: get a different if you I mean, you know, if
Speaker 1: if the times are bad and then you say I
Speaker 1: got to sell it in the next five minutes, you
Speaker 1: don't want to look at that Price's so you mentioned
Speaker 1: you have a couple of new chapters on value and growth.
Speaker 1: Up until this year, values seem to have been struggling
Speaker 1: against growth, certainly in growth wildly up page. That's euphemism,
Speaker 1: very struggling. I'm being played. Well you know, okay, so
Speaker 1: I could say that, right, yeah, it is my it
Speaker 1: is mightily struggled. Why do you think that is given
Speaker 1: the historical advantage of value over everything and and and
Speaker 1: and you know, I mean, I mean everyone has has
Speaker 1: said this way before me, and it was the worst
Speaker 1: ten years. Um. Actually, the worst fifteen years in history,
Speaker 1: and when we we have value and growth back to
Speaker 1: there's never been anything that has has approached the underperformance.
Speaker 1: And I would say the major reason for that was
Speaker 1: the boom of the giant tech firms. So it's Apple,
Speaker 1: it's Amazon, mean, it used to be called fangs. Some
Speaker 1: have gone out of favor obviously with the bear market,
Speaker 1: or or have shifted, and arguably they went from an
Speaker 1: under priced position in two thousand and UM four I'd
Speaker 1: say UM or two thousand six seven eight, they were
Speaker 1: under priced probably at that time given their tremendous further growth,
Speaker 1: and as as usual, they got overpriced at the top.
Speaker 1: But that I'm not gonna say the word hijack the
Speaker 1: market because that sounds like they did something illegal. They
Speaker 1: had they had a lot of a lot more minds,
Speaker 1: you know, the percent that was wrapped up in that,
Speaker 1: and then of course we were recapuated index you were
Speaker 1: there in that, and UM it's been virtually impossible for
Speaker 1: any value strategy to have overcome the great bull market
Speaker 1: of the big tech companies of the last fifteen years,
Speaker 1: which probably ended when you know, early twenty late. So
Speaker 1: so the obvious question for both of you is what
Speaker 1: does this suggest about near term future performance? And by
Speaker 1: near time I mean the next decade because I'm talking
Speaker 1: to you guys, which normally we're talking about centuries. But
Speaker 1: for the rest of the ties, what does this say
Speaker 1: about value versus growth? Interestingly, this year you've had a
Speaker 1: big correction and a lot of the mega growth stocks,
Speaker 1: the unprofitable tech stocks collapse the hardest. It's interesting, unprofitable text,
Speaker 1: unprofitable tech. What's interesting. Even within value there's been a
Speaker 1: big dispersion, so values being growth by like in the
Speaker 1: Russell value versus growth they call it almost two thousand
Speaker 1: basis points, but that's giant. But there's even still high
Speaker 1: dividend stocks versus the traditional price to book value has
Speaker 1: got like another thousand basis points. It's it's so high
Speaker 1: diving stocks are definitely doing well relatives, so some of
Speaker 1: that is, well, what is the high divent stock that's
Speaker 1: not in the price to book indexes? Overweight energy stocks
Speaker 1: which have been the past year, and then S and
Speaker 1: PA got down to three percent, right, it was double
Speaker 1: digits fifty. This is the challenges of cap waiting. It
Speaker 1: rides things down, will never add to the weight. But
Speaker 1: high divn stocks. You know, in one of our baskets
Speaker 1: of high divns DHS is eighteen to twenty percent energy
Speaker 1: and that restorts rebalances every December. It's going to stay
Speaker 1: that way. So a high dividend index, how has it
Speaker 1: something like that done in It's up about two thousand
Speaker 1: bases points ahead of the SMP. I mean, it's basically large,
Speaker 1: meaning if it down depending on and still where you say,
Speaker 1: well have you have you had all your performance? And
Speaker 1: so what it's at eleven times earnings and nine percent earnings,
Speaker 1: so it's still cheap nine percent earnings before rebalancing and
Speaker 1: a few you know, and nine that's a that's a
Speaker 1: pretty substantial earnings shield, isn't versus the one pe and
Speaker 1: a half percent tips rate with a real yield bond
Speaker 1: yield almost an eight percent equity probably eight percent equity
Speaker 1: premium on this basket. And so for the volatility of
Speaker 1: the markets, I do think it is still you know,
Speaker 1: you can say decade ahead, all right, but the next
Speaker 1: three to five years I think it is a very
Speaker 1: attractive place to So the product that focuses on high
Speaker 1: dividend yielding value stocks at Wisdom Tree, which funds would
Speaker 1: be covered by that. DHS is the US version, there's
Speaker 1: a whole family. DHS is the U S, d t
Speaker 1: H is the international, d e M is the emerging
Speaker 1: you know, you go to the emerging markets, which has
Speaker 1: been way out of favor for years and years and year.
Speaker 1: This is like a five five pe type stocks. Now
Speaker 1: this is now you're going to China, China banks, You're
Speaker 1: going to energy, materials, commodities, cyclical stocks. But you're getting
Speaker 1: close to double digit yields and what is the dividendal
Speaker 1: now on something like the average yields of the stocks.
Speaker 1: I mean, you wanted stock to look at Petro brass
Speaker 1: in Brazil almost at dividend. The problem is it's in
Speaker 1: Brazil and people are nervous. But energy is you know,
Speaker 1: they're paying out a big percentage of their earnings is dividends.
Speaker 1: This is a well covered it is. You know, it's
Speaker 1: a very interesting dynamic. Yeah, I think what is the
Speaker 1: pe of Brazil like six or seven? And whose curritty
Speaker 1: is up on the year. It's it's, it's it's and
Speaker 1: it looks like I think Ja Silva is gonna win.
Speaker 1: Who's uh? I mean, you know we could have opinion
Speaker 1: Bossonaro versus da Silva. I mean they both have deficiencies, obviously,
Speaker 1: but I mean, you know, DeSilva was UH president for
Speaker 1: quite a long time, and although he was considered a
Speaker 1: socialist at one point, let the markets work and evaluations
Speaker 1: were much higher under da Silva than they were in
Speaker 1: their Bolson Arrow um on On. I mean, I'm not
Speaker 1: advocating Brazil. I'm just kind of commenting on what, you know,
Speaker 1: commenting on Brazil. But I mean we could talk about
Speaker 1: other countries. The countries I mean, I mean what we
Speaker 1: were forced to mark wall Russia down to zero is yeah, correct.
Speaker 1: But we're with a few index providers and actually your
Speaker 1: Bloomberg colleagues like love me talking about this, but we're
Speaker 1: the only index ruder hasn't kicked Russia out of the index,
Speaker 1: and we're going through the index rebounds this week. Actually,
Speaker 1: and I'm still not kicking out the index. I'm marking
Speaker 1: it at zero. What's the downside, It's already marked at zero,
Speaker 1: so the investment downside, it's the political fallout. But my
Speaker 1: my point, I'm trying to run these funds in the
Speaker 1: best interests of shareholders. I mean, not that you could
Speaker 1: sell your Russian holdings anyway, there's no more. But so
Speaker 1: the day that you're allowed to sell it, should I
Speaker 1: sell it to day? The government requirement? Was that an
Speaker 1: sec requirement? It's all a political statement, right, So there's
Speaker 1: now it's a very There is no place to sell that,
Speaker 1: so you market it to zero market zero. We keep
Speaker 1: it in the index, and if it ever has value,
Speaker 1: we can recoup the value for shareholders. But you know,
Speaker 1: we're not forcing it out right today because there's no
Speaker 1: real point to doing that. Why why, I mean, we
Speaker 1: don't love Russia or Putin's it's horrendous, no one does.
Speaker 1: But at that particular point, the Russian stocks will probably
Speaker 1: be re allowed into the index. Once Putin has gone,
Speaker 1: Russian stocks become attractive. Is that a fair state? Well,
Speaker 1: smart money would maybe be snatching them up before that.
Speaker 1: I don't know if they could. You can't get executed,
Speaker 1: and you can't trade in anything, you know what. I
Speaker 1: don't know if you can trade and derivatives to get
Speaker 1: there and do private transactions. But but throughout the entire
Speaker 1: emerging markets, not with the dollars so high, with interest
Speaker 1: rates going up, fear the the debt, I mean you're
Speaker 1: getting what is the average P ten of the emerging
Speaker 1: markets so well, in this high divn is five, but
Speaker 1: in the in the broad in the broad end, so
Speaker 1: pretty reasonable. Don't forget. I mean, up until very recently
Speaker 1: and even today, the GDP growth of those countries is
Speaker 1: higher than the United States in the developed world, I
Speaker 1: mean still several points higher, even with all the problems
Speaker 1: that they have. Not that that always, you know, means
Speaker 1: the difference. We talk a little bit about not not
Speaker 1: paying that much attention to GDP growth, you know, in
Speaker 1: in the book. But um, I also want to say,
Speaker 1: because you you started out on value and growth, and
Speaker 1: we point this out in one of the chapters. But
Speaker 1: a couple of things that come to mind right now.
Speaker 1: We have had these growth spurts of over evaluation through history,
Speaker 1: and it appears, at least in the post World War
Speaker 1: two period had come about every twenty five years. Uh,
Speaker 1: the nifty fifties, which was a period where institutions a
Speaker 1: pension fund spot just growth stocks late sixties, yeah, late
Speaker 1: sixty seventies, no matter what their pe ratio were. I mean,
Speaker 1: they bought such beauties as poloid at ninety times or
Speaker 1: any smith Kodacs, hears in robot and and they paid
Speaker 1: astronomical price. They all collapse later. Some did better, IBM
Speaker 1: was on thes and a few others, but many did not.
Speaker 1: Then twenty five years after that, in two thousand, well
Speaker 1: we all know the dot com burst and then bust.
Speaker 1: Then we had one another, not quite twenty five years,
Speaker 1: but two years. I mean, it seems like I'm not
Speaker 1: gonna say in five or fifty we'll get another one.
Speaker 1: But it seems like there's a cycle where people investors
Speaker 1: get over enthusiastic about a group a group of stocks
Speaker 1: that have been growing fast, and then inevitably overpriced them all.
Speaker 1: I'm gonna take that bet with you. When they're their thirties,
Speaker 1: they're gonna be getting their capital. Well, I'd be very
Speaker 1: thankful to be around there that tell you what I got.
Speaker 1: I got a hundred bucks, says you're wrong, and I'll
Speaker 1: pay you in how about that? So one of the
Speaker 1: things you bring up in this that is so interesting
Speaker 1: is if we have these speculative excesses and they seem
Speaker 1: to come along once a generation or so, is it
Speaker 1: really just a question of the new folks coming through
Speaker 1: the system just haven't read their history, and maybe it's
Speaker 1: a generational thinking. You're right, once it is a generation
Speaker 1: usually considered I need to twenty five years. I've been
Speaker 1: through several so maybe I have more institutional memory or
Speaker 1: whatever of going through what we went through. But in
Speaker 1: the postwar period, we've added these cycles. Um. Now, what
Speaker 1: interestingly enough is that oftentimes the bust brings them to undervaluation. Eventually,
Speaker 1: when I look back at two thousand five, six seven, Yeah,
Speaker 1: those growth stocks that collapse from way too high probably
Speaker 1: were too low. I mean, the growth index and the
Speaker 1: value index ten years ago were almost the same multiple
Speaker 1: they made compressed, and the high dividend stocks had a
Speaker 1: PRATIO higher than the market. There's a lot of people
Speaker 1: writing about that back in that they started selling it
Speaker 1: a premium multiple to the market, which is very obviously
Speaker 1: not the case today. So here's the question about and
Speaker 1: we could talk a little bit about the pandemic. When
Speaker 1: you have an event from outside the market sort of
Speaker 1: feels less like the dot coms and evaluation issue and
Speaker 1: more like the meteor that killed the dinosaurs. It's totally
Speaker 1: outside of the system, right, But a lot of these
Speaker 1: things were building before the pandemic. The pandemic probably accelerated
Speaker 1: because people said, okay, it's technology, you know um and
Speaker 1: and then they fell in love even why not. Now
Speaker 1: there was the Pelotons and the docu signs, I mean
Speaker 1: all the work from home stuff. Yeah, that they were
Speaker 1: the work from home stocks, many of them using technology,
Speaker 1: some of them less than some of them more. That
Speaker 1: really took the boost. But the surge I mean you
Speaker 1: know a Netflix, Facebook, Meta, I mean they took root
Speaker 1: and began soaring before the pandemic, but that seemed to
Speaker 1: accelerated because people said, oh well no, no, no, face
Speaker 1: to face technology is going to be the way of
Speaker 1: the future. And with all the money that was created
Speaker 1: by the Federal Reserve, it just could go right to
Speaker 1: those stocks. And stocks are becoming value stock. I was
Speaker 1: going to say, number them are getting added to value
Speaker 1: indexes that number of them and are earning zick Tex
Speaker 1: are being overweighted. Now Meta as an example, Well, Facebook
Speaker 1: is cut in half. Netflix even though they had a
Speaker 1: good quarter their way off their lows. Peloton got Shelac,
Speaker 1: Docus signed Telehealth. You could go through all these Yeah,
Speaker 1: that's many of them. Talked about them. I mean the
Speaker 1: ones that are really significant like Apple and Microsoft that much.
Speaker 1: They were too high, but they were not They were
Speaker 1: not crazy, you know. And I mean some people consider
Speaker 1: Apple to be the conservative one, um, although you know
Speaker 1: years yeah, I mean, yeah, Warren Buffoot his first real
Speaker 1: tech stock it was was Apple, and he still looks
Speaker 1: at it as a more conservative and they're multiple has
Speaker 1: been all the time, I mean, and it never got
Speaker 1: up to be fifty six seventy. Ever, even at at
Speaker 1: the height of enthusiasm for it, were not quite a
Speaker 1: value played more reasonable Before we digress back to stocks
Speaker 1: for the long run. You recently were on TV where
Speaker 1: you had quite the rant about the FED. And not
Speaker 1: only was it a bit of what is the FED doing?
Speaker 1: They're late, they missed inflation and start, they missed the
Speaker 1: peak of inflation, they're overtightening. It went totally viral, Um.
Speaker 1: I think not just because people agreed with you, but
Speaker 1: you were very passionate, you were very excited about it.
Speaker 1: Tell us a little bit about what led to that
Speaker 1: and what your thoughts are on where we are with
Speaker 1: the federal result by it. You know you I interviewed
Speaker 1: me how many months ago I forgot it was, Yeah, No,
Speaker 1: that was right after the pen and I told you
Speaker 1: that they're gonna be huge amount of inflation. You said,
Speaker 1: you said, both fiscal and monetary. We're gonna cause this, sir. Yeah,
Speaker 1: And um, and I was youlling about it through all
Speaker 1: one And the fact that they didn't begin to pivot
Speaker 1: until the November of one, and he didn't start doing
Speaker 1: anything until I'm still getting excited about this until March
Speaker 1: is unforgivable my opinion. Um, it's gross negligence as the
Speaker 1: steward of our monetary system. And uh that it makes
Speaker 1: me emotional because I've taught this subject for half a
Speaker 1: century and UM, I'm not saying that anyone that's at
Speaker 1: the FED now was a student of mine, but I talked,
Speaker 1: but we would have been better off if they were
Speaker 1: maybe well they I hate to say it, but the
Speaker 1: answer is yes they were. So I had a chance
Speaker 1: that put him as part of the FED, and they
Speaker 1: didn't take them up on that. Well, it's a very
Speaker 1: interesting I mean actually under Bush I was nominated as
Speaker 1: the FED, and then I got we started the process
Speaker 1: and then they got a call and say, um, Jeremy,
Speaker 1: the Democrats gonna hold it up because it's gonna be
Speaker 1: a presidential election. They think they're gonna take over, and
Speaker 1: you know, so let's wait and see what happens. You've
Speaker 1: done more good from your post at war, Yeah, six
Speaker 1: year persons, And you know, it's just it's it often.
Speaker 1: It's like Milton Friedman who refused to take a post
Speaker 1: in Washington. He said, it just compromises you. I'd rather
Speaker 1: be a critic from the outside. And he was from
Speaker 1: the outside and an effective and an effective critic from
Speaker 1: the outside to do that. But so I was yelling
Speaker 1: and screaming. I said, is um J Pow behind the curve?
Speaker 1: I said, he's so far behind the curve? Is he's
Speaker 1: up in the bleachers the pictures throwing the catcher at
Speaker 1: home plate? That's how far behind the Curby was. So.
Speaker 1: The FED has a giant research departments. They have wonderful economists,
Speaker 1: really smart. Well, I don't know how wonderful they are, Barry.
Speaker 1: I'm they're not so wonderful. I don't know. I mean,
Speaker 1: because they were the ones that kept on saying this
Speaker 1: is temporary inflation. They fed that, I'm sure to power
Speaker 1: and the others, and they bought it hook line and sinker. Uh.
Speaker 1: And you know what also upsets me is the FED
Speaker 1: was designed nineteen four. It only has eighteen members of
Speaker 1: the Federal Open Market Committee, and it's supposed to be
Speaker 1: diverse opinions. Uh, there is virtually no diversity opinion. You
Speaker 1: would think that, you know, at least out of those eighteen,
Speaker 1: three or four would say, hey, we're just way over
Speaker 1: stimulating here. We're gonna have trouble if we don't stop.
Speaker 1: Not a word that upsets me too. They're not being constituted.
Speaker 1: It's group think. It's group think that's totally dominating the FED.
Speaker 1: All these things are happening at once, and that's why
Speaker 1: I gazed around. But let's go on. So before before
Speaker 1: you move on from that, I just have to point
Speaker 1: out that this isn't hindsight bias. You were saying this
Speaker 1: in early a year before inflation really started to rear
Speaker 1: its head. You were lots of fiscal stimulus, lots of
Speaker 1: monetary stimulus. Guess what happens? Yeah, and I knew it
Speaker 1: was going to be inflation. And as you know, I said,
Speaker 1: the increase of the money supply in was the greatest
Speaker 1: in history. Um. I mean, we have a chapter in
Speaker 1: the book on COVID I point out the long history.
Speaker 1: I talk a lot about what should have happened, but
Speaker 1: the facts should have done what it did wrong? And
Speaker 1: why what happened happened. Um And I was really in
Speaker 1: a way when I started thinking about the book. This
Speaker 1: was before COVID, so I there was no such thing
Speaker 1: as a COVID chapter. But once COVID hit, I wanted
Speaker 1: to put there's a chapter on the Great Financial Crisis
Speaker 1: now that was put in on the last edition, and
Speaker 1: there had to be a chapter on COVID and the
Speaker 1: monetary response that came from that. So here we are.
Speaker 1: The Federal Reserve is belatedly recognizing inflation. They've they've raised
Speaker 1: rates several times bis at a time. We're now three
Speaker 1: and a quarter on our way, if you believe consensus
Speaker 1: to the November meeting taking us to four to four
Speaker 1: and a quarter or whatever that ranges, and arguable another
Speaker 1: seventy after that, so we'll be at five. So two
Speaker 1: questions and funds So five percent funds rate? What does
Speaker 1: that do to the economy? And are we already sufficiently
Speaker 1: passed peak inflation? Like they say, that's that's the thing.
Speaker 1: They're looking just at the interest rates. They say, well,
Speaker 1: I gotta get interest rates way above inflation. They're failing
Speaker 1: to look at a number of other indicators that show
Speaker 1: how tight they are. Look at the dour starring to
Speaker 1: all time highs. Look at the money supply, and that's
Speaker 1: something that is you know, I've been looking at for
Speaker 1: fifty years, and the money supply has shrunk since March.
Speaker 1: Now that is unpressed, almost unprecedented, mean gone back. I
Speaker 1: think there's only one other episode in the post war
Speaker 1: period where over the next five months we've had the
Speaker 1: money supply. Is that because of the end of quantitative
Speaker 1: easing or there it's more I wanted to know, it's
Speaker 1: actually because the rise of interest rates has slowed down
Speaker 1: credit and it's moved funds out of banks so much
Speaker 1: that the liquidity is actually declining in the system. And
Speaker 1: that that was the first thing that said, whoa you
Speaker 1: know I've written and in fact in the chapter I
Speaker 1: talked about what is consistent with a two percent inflation
Speaker 1: rate is five percent money growth. Now, they grew at
Speaker 1: twenty five percent in twenty and about eighteen percent in
Speaker 1: twenty one, but doesn't mean now you slam on the
Speaker 1: brakes and go to zero, because that could really precipitate
Speaker 1: a recession. I want them to go back to a
Speaker 1: five percent growth. I think that interest ration. By the way,
Speaker 1: there's a whole new chapter on interest rates and stock
Speaker 1: prices and the downward trend of interest rates over the
Speaker 1: last five years. Something we talk about forty years from
Speaker 1: from Vulgar in nineteen forty years. Yes, and and and
Speaker 1: real interest rates. I mean the early part was a
Speaker 1: lot of reduction of inflation. Inflation has remained pretty good.
Speaker 1: It's been a reduction of those real rates. I mean
Speaker 1: tips in the ten year tip was nearly four and
Speaker 1: a half percent. At the beginning of this year was
Speaker 1: minus one. Now it's ratched up to one and a
Speaker 1: half because of the FED tightening. But this long we
Speaker 1: talked about this long decline, but it's caused by a
Speaker 1: lot of people think it's caused only because the FED
Speaker 1: has been easy. That's not true. There's a lot of
Speaker 1: very fundamental reasons that I discussed in that chapter why
Speaker 1: these real interest rates are declining. What that means there's stocks,
Speaker 1: and what that means for the fat and what that
Speaker 1: means for the markets. So let's talk about that, because
Speaker 1: we've previously discussed things like how much more productive we
Speaker 1: are in the impact of globalization and software and technology.
Speaker 1: What does that mean for the long term interest rate?
Speaker 1: Once we get through whatever's going on post COVID with
Speaker 1: with this inflation spike, do you expect us to return
Speaker 1: back to, if not zero, a historically low. This has
Speaker 1: been the biggest surprise of all. I actually thought we
Speaker 1: would have a spurt of technology. I mean, I think
Speaker 1: zoom does replace a lot of things that don't need
Speaker 1: to be face to face and other things, you know,
Speaker 1: docu sign not. I mean, we can go on and on.
Speaker 1: The biggest shock has been that productivity has collapsed. The
Speaker 1: first two quarters of this year has been the slowest
Speaker 1: productivity growth we've had since World War Two, and not
Speaker 1: only by a small amount, by nearly twice as great
Speaker 1: as any other collapse of productivity. And I'm rather upset
Speaker 1: the FED has not addressed this. You know, what does
Speaker 1: this mean for the markets? Are people saying they're working
Speaker 1: at home and not working at home? Did you did
Speaker 1: you see the Liberty Street Economics research paper. So previously
Speaker 1: a lot of data was showing during the pandemic work
Speaker 1: from home. People weren't commuting, they were working longer hours
Speaker 1: they were they had substituted their commute for more work time.
Speaker 1: This recent paper at Liberty Street Economics Blog, which is
Speaker 1: the New York Fed research blog, said, Oh, it turns
Speaker 1: out that people have adjusted to work from home, and
Speaker 1: they're not only are they not working more hours, they're
Speaker 1: working less hours. They're spending more time with the family,
Speaker 1: and they're actually sleeping more, which is unprecedented. Fort But
Speaker 1: are they putting out what they need to put out?
Speaker 1: Profits are still doing well. So the profits are are
Speaker 1: still doing well, but real wages aren't doing probably because
Speaker 1: don't forget a lot of people have been locked into
Speaker 1: a lower real wage situation. Don't forget a lot of
Speaker 1: firms that locked in their dead two percent too and
Speaker 1: a half and three. I mean, this is golden for them.
Speaker 1: They've been raising prices, their debt prices are there saying
Speaker 1: they're only now are they're beginning to get the pressure
Speaker 1: on the employee prices. They've got a lot of left ridge. Uh.
Speaker 1: So profits are are doing okay. Although profits in the
Speaker 1: first half of this year we're pretty sluggish. But we
Speaker 1: had negative GDP growth. Um, you know, I keep on
Speaker 1: going on and asking, how did we have four million
Speaker 1: new people hired in the payroll reports this year and
Speaker 1: have negative GDP grow well, negative real GDP but in
Speaker 1: in nominal terms. Yeah, but negative real right, I mean
Speaker 1: you're more more, more hours. I mean, we've got four
Speaker 1: million new workers that are producing less real goods. So
Speaker 1: that's telling us the negative numbers the role inflation driven. Yeah,
Speaker 1: but why are firms hiring? What are these people doing?
Speaker 1: I mean, I'm arguably they're they're the real numbers strip
Speaker 1: away inflation. It's so we're producing less goods now with
Speaker 1: four million people than we did in December. Is that right?
Speaker 1: Because when I we look at consumer spending, no, real
Speaker 1: real GDP is lower. Not now, We're gonna get g
Speaker 1: d P at the end of this quarter for which
Speaker 1: is likely to be positive. Yes, so two percent, but
Speaker 1: we were negative first two. So we're basically unchanged four million. Yeah,
Speaker 1: I mean, man, maybe slightly digat four million new workers
Speaker 1: the same number of goods. So Care's Act one was
Speaker 1: two trillion dollars, the second Cares Act was another trillion,
Speaker 1: The third one that one under Biden, the first two
Speaker 1: one the Trump was another trillion. You give can give
Speaker 1: Americans four to five trillion dollars. We're gonna go out
Speaker 1: and spend it. Well, they did, and that produces the inflation.
Speaker 1: And the game measures GDP measures the amount of goods
Speaker 1: that are produced, so it has always been linked with
Speaker 1: the amount of labor because labor is the three quarters
Speaker 1: of the value of input. We hired four million more,
Speaker 1: we have the same capital as before, four million more,
Speaker 1: and the only thing that we then record is a
Speaker 1: drop of activity. We've hired four million more, but they're
Speaker 1: just not working. So how much of this is just
Speaker 1: the velocity of the money moving through the system are
Speaker 1: we seeing We're seeing faster money or slower money with
Speaker 1: all this fiscal stimulus? You know, is the montage whom
Speaker 1: is responsible for the inflation. GDP strips out the inflation
Speaker 1: and says, how much goods are you producing? Why are
Speaker 1: we producing less goods with four million more people only
Speaker 1: because people are not working as hard. It is not
Speaker 1: as productive. Now we could get a bounce back of productivity.
Speaker 1: And if we get a bounce back, Wow, that will
Speaker 1: put downward pressure on prices because what will replenish the
Speaker 1: supply chain? Uh, And that will put downward pressure on prices.
Speaker 1: If we get a bounce back. It's it's very interesting
Speaker 1: to see like this question of what are these workers doing?
Speaker 1: When we posted that question on our podcast to Don Cone,
Speaker 1: the former FED vice chair, and Don that maybe we're
Speaker 1: under counting GDP. Well, future revisions revised GDP higher. Isn't
Speaker 1: it affair him to say our measurement of productivity has
Speaker 1: always been terrible. We wildly undercount productivity. And what's the
Speaker 1: old joke the computer advantages are everywhere but the productivity. Yeah,
Speaker 1: well it was it was actually Robert Solo who who
Speaker 1: said I might see computers everywhere except in the productivity statistic.
Speaker 1: That was his quote. But I want to follow up
Speaker 1: on what Jeremy was saying because we did interview Don Commune.
Speaker 1: He said, oh, I expect him to the revision. Well,
Speaker 1: believe it or not, we did get the revision and
Speaker 1: it didn't change. So what does that We did get
Speaker 1: that a revision, and believe it or not, it actually
Speaker 1: moved one measure of GDP, which is called gross national
Speaker 1: income right and going down to product another way of
Speaker 1: measuring it down. So it did not at all eliminate
Speaker 1: the puzzle of why was this productivity collapse in the
Speaker 1: first half. So again we might get a bounce back.
Speaker 1: Let's hope it is. Because the standard of living depends
Speaker 1: on productivity. Productivity is the measure of standard of living.
Speaker 1: It's output per unit our work. So it's like your
Speaker 1: real wage drip away from inflation, and um, you know,
Speaker 1: real wages are down, productivity is down. What is going on?
Speaker 1: I've positive this question to a number of economists, fed researchers,
Speaker 1: and others because I have consistently said, I feel like myself,
Speaker 1: my firm has just gotten more and more productive. We
Speaker 1: put out more and more output with the same we're
Speaker 1: marginally more people. And the pushback was, you're in a
Speaker 1: white collar content and creative business that you get to
Speaker 1: take full advantage of every new tech innovation. Most of
Speaker 1: the non white collar jobs don't have that same You've
Speaker 1: got to go to the bus and drive. You can't
Speaker 1: do that remotely not Yeah, and there's no productivity gains
Speaker 1: taking place with that. What about industry our industry not
Speaker 1: manufacturing that Well, they're both. I mean we you know,
Speaker 1: we've always divided new machines that do things faster and better,
Speaker 1: I mean, go through you know what it is, and
Speaker 1: that has been productivity. In fact, productivity and the goods
Speaker 1: producing sector historically has been much better than the service
Speaker 1: because the services, are you ever going to be more productive? Really,
Speaker 1: like you know, a haircut and the barbershop, I mean
Speaker 1: it takes what it does, or that they say the orchestra.
Speaker 1: There's no productivity in the orchestra. You know, back to
Speaker 1: the barbershop once since the pandemic, although there's creaking up everywhere,
Speaker 1: these fancy barbershops haircut So here's like you could use
Speaker 1: a flow by, right. But but here's the real question
Speaker 1: is have we been mismeasuring productivity or do we genuinely
Speaker 1: have a problem with slackers and people working from high
Speaker 1: Like yeah, I think economists, I mean, this is very
Speaker 1: new data. Don't forget the first two quarters was a
Speaker 1: shocking drop. We're gonna see the third quarter looks like
Speaker 1: mediocre productivity at past two percent GDP growth, maybe zero protein.
Speaker 1: It's not going to be as bad as it. But
Speaker 1: I think as we collect more data, it's going to
Speaker 1: be a major topic, and I think in three will
Speaker 1: have a better handle on this situation. I've just been
Speaker 1: a little bit surprised that the FED, etcetera. Has not
Speaker 1: been trying to address this, because how has it become
Speaker 1: so vigorous on pressing monetary policy when what is really
Speaker 1: happening in the real economy. I want to just mention
Speaker 1: and ask you about some of just the key points
Speaker 1: within the book that through all these editions have not changed,
Speaker 1: they have been consistent. Starting with what is the long
Speaker 1: run return for stocks, both the nominal and real inflation
Speaker 1: adjusted terms. Well, I mean that was the first edition
Speaker 1: data through from de biding in nineteenth century six point
Speaker 1: seven percent. That's real real dividend to return six point
Speaker 1: seven percent stocks compound annual. You add thirty years, and
Speaker 1: we went through to June of this year to make
Speaker 1: sure we got the recession in six point seven percent
Speaker 1: changed the same exchange. Given everything that's happened in thirty years,
Speaker 1: the financial crisis, the COVID crisis, the dot com boom,
Speaker 1: uh yeah, and bust, I mean, through all of that,
Speaker 1: the real returns remain the same. And bonds were about
Speaker 1: half the lawns were half, but are much less now.
Speaker 1: I mean the real returns on well, when bonds interest
Speaker 1: rates peaked in two thousand, it was a great twenty
Speaker 1: thirty year period for bonds, and I remember saying on
Speaker 1: all the networks that the forty year bowl market, because
Speaker 1: it started the peak Throe was over and all that's
Speaker 1: over with a vengeance, even more of a vengeance than
Speaker 1: I thought it was gonna be over with with a vengeance.
Speaker 1: And the real return on bond has been absolutely terrible,
Speaker 1: as we know, on a comparative basis, even worse than
Speaker 1: stocks since it actually um not since the bullmarket ended,
Speaker 1: but at that point, but from the low point in
Speaker 1: so I said something at an event where um I
Speaker 1: had sent to a group of young people, Hey, if
Speaker 1: you're in your twenties, thirties, forties, you really don't need
Speaker 1: bonds in your portfolio. You have such a long horizon
Speaker 1: you don't need that ballast. You go even further than
Speaker 1: that and say most portfolios could be fine if they're
Speaker 1: equity only. Yeah, I mean, you know what we show.
Speaker 1: I mean, and that's hasn't changed over thirty year periods.
Speaker 1: In real terms after inflation, stocks are less valuable than bonds.
Speaker 1: That's wild. So now you have the tenuere four percent
Speaker 1: or so depending on when this broke out, At what
Speaker 1: points are we with Tina there is no alternative two stocks?
Speaker 1: At what point do bonds get cheap enough where they
Speaker 1: start to look attractive. Well, a lot of people, it's interesting,
Speaker 1: are talking today and they say, look at four percent,
Speaker 1: I can lock that in for well even two years
Speaker 1: to a four half. I said, yes, you can lock
Speaker 1: that in. But you know after two years, I mean
Speaker 1: the stock park is gonna be higher than is Really
Speaker 1: that's a bold move from me. Holding let me just
Speaker 1: see if I could buy some out of the money
Speaker 1: call off the street. It has to be two years.
Speaker 1: You can get out years. And by the way, when
Speaker 1: people tell me four and a half percent is good,
Speaker 1: it certainly is good. Zero zero, But let me ask you.
Speaker 1: That's before inflation, and when the long run on stocks
Speaker 1: is six after inflation, tell me how you're gonna be
Speaker 1: better off in the long run. It sounds like you're not.
Speaker 1: You should write a book about that's right. So the
Speaker 1: one question I always forget to ask, and I wrote
Speaker 1: it down, so I'm not going to forget to ask.
Speaker 1: Is gold? Yeah, tell me your thoughts on the long
Speaker 1: run on gold is less than one percent above inflation,
Speaker 1: so it's basically an inflation hedge long run. Now, what's
Speaker 1: happened with gold? It hasn't as it is failed so
Speaker 1: to speak, as an inflation hedge. I mean, does that
Speaker 1: surprise you? You would have thought two should have been
Speaker 1: the year gold exploded. But I think the big difference
Speaker 1: is I mean, I think that in the early part
Speaker 1: of this inflation, bitcoined usurped the role of gold, millennial
Speaker 1: digital gold, digital millennial gold. They wanted to go to that,
Speaker 1: and it was sold as an inflation hedge. And that's
Speaker 1: another thing that made it go up too high. Um
Speaker 1: you know what bitcoin, bitcoin, But bitcoin ran up when
Speaker 1: inflation was under two, right, yeah, But that was the
Speaker 1: innovation and all the rest, and then it was being
Speaker 1: sold as the inflation hed because the truth is there
Speaker 1: is going to be a limited number of bitcoins, is
Speaker 1: not a limited number of dours. So there was some
Speaker 1: logic to that. Now it shouldn't go up as much
Speaker 1: as it did, But the logic was it is the
Speaker 1: new inflation hedge, the bitcoin it serves as the gold.
Speaker 1: Where in in nineteen seventy eight, seventy nine and eighty
Speaker 1: people rushed to god there was no bitcoin. People, now
Speaker 1: we're rushing to bitcoin and the younger people don't care
Speaker 1: about gold. Um uh. And it wasn't driving them, and
Speaker 1: we need to do a disclosure on this because my
Speaker 1: firm and your firm, Wisdom Tree and Retals Wealth Management
Speaker 1: worked together on the tell us Jeremy, give us the
Speaker 1: full an r w M Wisdom Tree Crypto Index or
Speaker 1: the basket of we bogalized crypto which he would size
Speaker 1: anything more diverse fight exposure than just bitcoin or so
Speaker 1: so full disclosure that's out there. But you're gonna say
Speaker 1: something about bitcoin, I wouldn't say something about gold. Also,
Speaker 1: I think golden dollar terms has been a big failure.
Speaker 1: Golden end terms has been great. Golden euros are now.
Speaker 1: I hate that argument. You know why because people always
Speaker 1: tell me you should have gone back in time and
Speaker 1: bought golden fill in the blank two years ago. Well,
Speaker 1: nobody said that back then. It's easy to look after
Speaker 1: the fact. Isn't that just a currency beat? Well, the
Speaker 1: point is our team does a lot of work on
Speaker 1: gold because we're big commodity players in Europe and we
Speaker 1: have some modeling on what drives gold prices and certainly
Speaker 1: negative interest rates. Like you know, gold had this cost
Speaker 1: of carrier, had to compete with bonds. Then you had
Speaker 1: all this negative interest rate debt in Europe, and that
Speaker 1: was obviously a positive carry versus negative rate that went away.
Speaker 1: That was one of the things drives. So real rates
Speaker 1: was a big factor in gold. So the fact that
Speaker 1: real rates went up two or fifty basis points, that's
Speaker 1: a big headwind to gold. The dollar surging, big head
Speaker 1: head So in other words, it's not just inflation, it's
Speaker 1: inflation this rates, real rates being from negative point, moving
Speaker 1: real rates, you could say, wow, gold is really doing
Speaker 1: much better then then stocks and bonds. I mean it is, well,
Speaker 1: it's only down nine percent this year, but not what
Speaker 1: I would have expected given and the moving real rates.
Speaker 1: It's actually it's surprisingly doing even better than that, giving
Speaker 1: for the modeling. Yeah. Yeah, And we talk about inflation,
Speaker 1: and I do want to get this in out inflation
Speaker 1: because it's part of what we were talking about in
Speaker 1: earlier about the rant on being too tight. I have
Speaker 1: maintained and now there's finely papers and talk about this
Speaker 1: that the inflation data that we're getting today, particularly core inflation,
Speaker 1: is over overestimated and inflated. And so to speak, on
Speaker 1: the services side versus the good side of owners and
Speaker 1: equivalent rent is probably not owners equivalent rent and housing
Speaker 1: costs and rental and even not owners equivalent, just the
Speaker 1: rental part of that. We basically, because of the way
Speaker 1: the Bureau Labor Statistics computes it, it's very lagged in
Speaker 1: housing prices. So we didn't record enough inflation for the
Speaker 1: last two years, and now we're overgoing to overrecord inflation
Speaker 1: and are today in the next couple of years. Something
Speaker 1: very similar had happened heading into the financial crisis, like
Speaker 1: oh four, oh five, oh six BLS was behind on
Speaker 1: the inflation reporting because it was embedded in housing, and
Speaker 1: then once people flipped from buying to renting, suddenly they
Speaker 1: overshone on the other way, which raises an interesting question.
Speaker 1: If the FOMC is raising their rates, which is helping
Speaker 1: to drive mortgage rates higher, which is sending all these
Speaker 1: people to rent, is the Fed indirectly making inflation higher?
Speaker 1: First of all, they are responsible for the inflation. They
Speaker 1: are responsible for the fact that the case Shower housing
Speaker 1: indicts from the month of the pandemic through the spring
Speaker 1: of this year was up forty percent. That's a big number,
Speaker 1: isn't it. Yes, for now that's off the pandemic lows,
Speaker 1: or is that this is from March and then it
Speaker 1: went down a bit during the pandemic. So but I'm
Speaker 1: taking it from March before the pandemic brought it down.
Speaker 1: National housing index, rental indexes, and this is before the
Speaker 1: FED tightened. We're up thirty percent. What is the core
Speaker 1: BLS never Yes, the government's inflation housing index is up
Speaker 1: like eleven or twelve percent, So they're way behind. And
Speaker 1: they're still showing an accelerating while the real housing press
Speaker 1: are going down. Now even with the limited inventory, prices
Speaker 1: are gown over, their discounts are are people are now
Speaker 1: really worried if they have to sell? So the question
Speaker 1: is is the FIT aware of the fact how behind
Speaker 1: the curve their housing data is? I hope. So they're
Speaker 1: writing some papers on it, but they reflect these department
Speaker 1: in the FOMC don't seem to communicate. I mean, I hope, so,
Speaker 1: I mean, you know, but and then second, if they
Speaker 1: are aware of this, at what point do they should
Speaker 1: be pivoting? And now we're at what point do they
Speaker 1: declare victory and say should be saying I say, maybe
Speaker 1: do another fifty but they won't November and then stop
Speaker 1: and see what happens. Um now Boward is talking about
Speaker 1: and waiting. I think that's too aggressive and we'll accelerate
Speaker 1: the downside too much. That's my position. I think a
Speaker 1: lot of people agree with you, and I think that's
Speaker 1: part of the reason. If you live in the real
Speaker 1: world and you look at copper, you look at lumber,
Speaker 1: you look at gasoline prices, what do we have nine
Speaker 1: consecutive days of falling gas prices and gases now below
Speaker 1: where it was a decade ago. I think a lot
Speaker 1: of people agree with you. The fetch of declare victory
Speaker 1: and go home. Well, you know you're always on alert,
Speaker 1: but pause. And you know what surprising me bury is
Speaker 1: that you know they exploded the money supply in twenty
Speaker 1: When did we start really seeing inflation? And now all
Speaker 1: of a sudden, we're we only are six months into
Speaker 1: this signing cycle. And there said, oh my god, I'm
Speaker 1: not seeing the results. Iiwana what tighten time? Well, it
Speaker 1: doesn't happen in six months, and in fact you are
Speaker 1: seeing if you're goods, good prices are way down and
Speaker 1: service prices take even longer. So this idea, oh my god,
Speaker 1: it's not working, it's not working. We gotta keep on hiking,
Speaker 1: is to me. I'm flabber gassed. I mean, it's it's
Speaker 1: totally different from what they were just saying on the
Speaker 1: other side when inflation was building, and they say, oh,
Speaker 1: we don't see any inflation despite the fact of floating
Speaker 1: credit and and uh easy money policies that we petitioning
Speaker 1: Siegal for the FED or just j Pal have have
Speaker 1: Professor Siegel show up, and I would be happy to
Speaker 1: debate him. No, no, no, not. I want to send
Speaker 1: you to the FED and you school them. Hey, here's
Speaker 1: what you guys seem to have forgotten. Since I wish
Speaker 1: there were another voice there, and I'm doing my best
Speaker 1: to bring some voices there. If it isn't me, maybe
Speaker 1: I can convince some of the FED governors or presidents
Speaker 1: bring that argument to FED governors. I'm not a FED watcher.
Speaker 1: I don't feel the need to hang on every speech
Speaker 1: on everything. But the two FED governors that seemed to
Speaker 1: be closest to making that pivot, the one you just
Speaker 1: mentioned earlier, and then Lyle Brainerd also seems to be saying, well,
Speaker 1: you know, we're beginning to make some noises, but most
Speaker 1: of them are saying we're gonna be tough through car Yeah,
Speaker 1: I mean crazy. Yeah, I mean to keep at these
Speaker 1: rates three will cause the second worst collapse of the
Speaker 1: housing market in the post war period. I actually think
Speaker 1: housing prices from their peak are going to go down
Speaker 1: ten to still leaves them up. Remember they were at
Speaker 1: But if they continue this up higher, you know it, Uh,
Speaker 1: it's going to get even worse. And it's not just
Speaker 1: how far they fall, but it's how long If they're
Speaker 1: down ten percent and there's no improvement over five or
Speaker 1: ten years on on a real basis, to go down
Speaker 1: and uh, you know, it'll crimp the housing industry, which
Speaker 1: is one of the most important industries. And you can
Speaker 1: see that in the auto industry, and the loan situations
Speaker 1: are going to get very hard to get alone on
Speaker 1: on that credit cards. In general, we haven't seen it
Speaker 1: in the real statistics, not yet, so are you how
Speaker 1: saying it in some of the statistics. The housing statistics
Speaker 1: are absolutely terror right. I just showed in the middle
Speaker 1: of October the prospective homebuyers traffic is almost as bad
Speaker 1: as the worstern Art Association of home Buyers and is
Speaker 1: one of the biggest collapses we've ever seen. Yeah, it's
Speaker 1: almost as bad as the middle of the pandemic, the
Speaker 1: early parts of the pandemic. So I I hate asking
Speaker 1: the recession question, but I feel I have to ask you.
Speaker 1: Do you feel that if the Fed continues on this path,
Speaker 1: we will find ourselves into recession? And how bad potentially
Speaker 1: could it get? Well, it could. The longer they continue
Speaker 1: on this payoff the way keep on hiking or stay
Speaker 1: We're gonna stay high for longer, I think the recession
Speaker 1: becomes a real possibility. I still think they have a
Speaker 1: chance to avoid one, but the right now and we
Speaker 1: avoid or or or or you know, if they just
Speaker 1: put a ceiling for the market and saying we're seeing
Speaker 1: progress and we can soon begin to pause, you know,
Speaker 1: that is what the market it is looking at. What
Speaker 1: the market is so scared about is there seems to
Speaker 1: be no limit to their talk. Hi kai kai kai,
Speaker 1: Because if they're gonna wait for that core rate to
Speaker 1: go down to two percent a year, given the distortion
Speaker 1: of statistics, we are in for big trush. So you
Speaker 1: raise a really interesting point there, which is some people
Speaker 1: believe that Jerome pal thinks markets are too high and
Speaker 1: he won't be happy until he sees markets TA can
Speaker 1: talk about that. I mean, what do you think about that.
Speaker 1: He's like the anti green span, and well, you know
Speaker 1: used talk about green Span. Put if there's disruption in
Speaker 1: the market, which I don't expect, um, then you know
Speaker 1: he will step in. I mean that's what the central
Speaker 1: bank really disruption of the market. Something really bad happens,
Speaker 1: and he wills having But if the market goes down
Speaker 1: another ten percent, because how you're not coming in, And
Speaker 1: if the market goes down another ten percent, I suspect
Speaker 1: you're a buyer. I'm definitely a buyer. Well, I'll tell you,
Speaker 1: when the Fed pivots look at you, you'll see a
Speaker 1: thousand point you're saying this because we were just talking
Speaker 1: about this. It feels like the risks are very asymmetric.
Speaker 1: That the Fed could overtighten, that we can miss earnings,
Speaker 1: that we could have a recession, and we could grind
Speaker 1: five tent lower. But heaven forbid the war in the
Speaker 1: Ukraine ends, we get some decent earnings, or the FED says, okay,
Speaker 1: we you know, we see a five hand weight, we
Speaker 1: can do one more and wait, um, look out, look
Speaker 1: out above, look out above. As I say, I think
Speaker 1: stocks are quite undervalued, not that they've been the most
Speaker 1: undervalued by history. Obviously we have had worse, but I
Speaker 1: would say in the if you buy stocks in a
Speaker 1: couple of years, you're going to be very happy. Today's
Speaker 1: special edition of Masters and Business is brought to you
Speaker 1: by confirmation bias Barries. Confirmation bias what this show is
Speaker 1: all about. You're you're just talking my game. Everything you're
Speaker 1: saying is what I want to hear. And oh, I
Speaker 1: feel like I have no objectivity and I'm just like
Speaker 1: ready to stand up and start waving a flag. Jeremy
Speaker 1: Schwartz tell tell us why the professor is wrong. Well,
Speaker 1: I mean it's interesting. Twent percent valued even with the
Speaker 1: fear that the fag keeps doing what they're doing. And
Speaker 1: we talk about the S and P at sixteen and
Speaker 1: a half times earnings items pretty reasonable. Yet some of
Speaker 1: these international marks we're talking about the emerging markets at
Speaker 1: single digit ps, but even broad developed markets get at
Speaker 1: half the valuation of the US too. Europe has looked
Speaker 1: terrible for a long time. Europe is telling a ten right,
Speaker 1: and and yes, with a fundamental screen, it's gonna have
Speaker 1: even lower number even I mean that's unbelievable. I mean,
Speaker 1: you know, aren't on a fundamental screen. If you do
Speaker 1: fundament we waited and we just tilting under value divator. Yeah,
Speaker 1: you can get very low. So the pushback to that is, well,
Speaker 1: Europe is a mess and the Russian gas and the
Speaker 1: threat of war. US small caps at nine to ten
Speaker 1: times earnings, and we have three different small cap btfs
Speaker 1: David and based earnings based all of them are nine
Speaker 1: to ten times earnings. That small cap discount. Well, cap
Speaker 1: value is as cheap as we've seen a long time. Right,
Speaker 1: small caps generally have been cheap relative to large caps.
Speaker 1: You're at sort of the bottom that you know, bottom
Speaker 1: few percent in the last thirty years. And and Fords
Speaker 1: have been very good from these levels because I mean,
Speaker 1: you can't get worse. But if you're looking out at
Speaker 1: five years or ten years, so when you when you
Speaker 1: get these prices and dividing yields and earnings deals so high,
Speaker 1: you don't even need much appreciation to get great returns
Speaker 1: because earnings real is a real yield prices and even
Speaker 1: if ten years from now they're ten you're getting ten
Speaker 1: percent after inflation in the meeting, it's amazing. So I mean,
Speaker 1: you know, you don't even need them to move up
Speaker 1: on evaluation if you hold on to stuff that. So
Speaker 1: before I get some of my favorite questions, I gotta
Speaker 1: ask one last question about the book. So you know,
Speaker 1: hundreds of thou and a half a million copies of
Speaker 1: this have sold. It's the sixth edition. We now have
Speaker 1: a with with Jeremy Schwartz. Are we gonna continue to
Speaker 1: see future updates every what? What has this been updated times?
Speaker 1: Over thirty years? Six times? So it's not every five
Speaker 1: years though, I mean this was the longest period I
Speaker 1: said eight or nine years. I think his wife thinks
Speaker 1: this is his last she is she looking for you
Speaker 1: to kick back and slow down a little bit, Slow
Speaker 1: down a little bit. Why do I sense going to happen?
Speaker 1: Are we passing the torches? The next edition going to
Speaker 1: be Jeremy Schwartz with Jeremy Season? Is that what's going
Speaker 1: to That's a possibility. We actually have not had any
Speaker 1: formal discussion. Um, we don't need one right now. But
Speaker 1: Stocks for the long run is gonna be here for
Speaker 1: the long run. This is going to continue. I think
Speaker 1: it's going to continue. Stocks for the long run for
Speaker 1: the long run. Is that is that? It? So? Let
Speaker 1: me just try and touch so some of my favorite
Speaker 1: questions that I ask all my guests, but I'm going
Speaker 1: to ask them to you both at the same time
Speaker 1: because I want to see how that works, having never
Speaker 1: done this before, out of curiosity. During the lockdown, when
Speaker 1: you weren't ranting about the FED, what were you guys doing?
Speaker 1: What were you watching? What was keeping you busy? What
Speaker 1: were you streaming on Netflix or Amazon? Wow? What were
Speaker 1: we doing? Yeah? I mean we began obviously watching a
Speaker 1: lot more than I did before. Right, you know, I
Speaker 1: love The Crown. I loved um Succession, but are not
Speaker 1: People say, do you really watched The yellow Stone? I said, yeah,
Speaker 1: I know people who love Yellows. I love it. It's
Speaker 1: it's like the Western version of Succession. What were you doing?
Speaker 1: I'm gonna say, like, I'm not that good with pop culture?
Speaker 1: You have girls? Three girls? Right? I have two girls,
Speaker 1: two girls. Um, I would say I'm one who took
Speaker 1: the work. I was working more from home. My podcast
Speaker 1: consumption went way down, actually, which is was That's one
Speaker 1: of the things I missed because I did it all
Speaker 1: on the plane in the commute. It's funny you say
Speaker 1: that because I watched our numbers go up and I
Speaker 1: was the opposite what I was expecting, because on the
Speaker 1: train is when I listen to podcasts, and so I
Speaker 1: my my personal went down a lot. But as we
Speaker 1: start geting back into it, I'm getting back. What did
Speaker 1: you watch with the girls? I honestly, they do their
Speaker 1: own thing. My my seven year olds on YouTube, like
Speaker 1: you can't get her off YouTube. My ten year old
Speaker 1: is less on all that. So they're on their own
Speaker 1: little devices. And when one thing we did, we kind
Speaker 1: of formed. You know, we stayed away from each other
Speaker 1: from March until a Memorial Day, and then we decided
Speaker 1: to listen. We formed a pod of the family and
Speaker 1: and we started spending a lot of time together, um,
Speaker 1: go outdoors and and we said, you know, believe it
Speaker 1: or not, I've been in four international trips then too
Speaker 1: to family trips abroad. Um since then, so uh, you
Speaker 1: know we've Yeah, I mean a lot of people are surprised,
Speaker 1: but we decided, hey, you know, we're all pretty healthy,
Speaker 1: and you know, you know, we all got vaccinated, and
Speaker 1: you know we're gonna get it. It's gonna be mild
Speaker 1: and hopeful. Who knows how many years you have left
Speaker 1: advantage of right, you can't you can't hide. You cannot
Speaker 1: forever because there's dangerous everywhere everywhere. And he does go
Speaker 1: out and travel even way more than I do. But
Speaker 1: the I mean the work from home. I guess the
Speaker 1: other thing that we did, I mean I got to
Speaker 1: be more involved with the girls, like I was able
Speaker 1: to coach my ten year olds basketball team. We did
Speaker 1: it in No Kid Hungry, or Michael uh and and
Speaker 1: and Ben did their n f T for No Kid Hungry.
Speaker 1: We've all come around. That organization raised a lot of money.
Speaker 1: That was our team raised the most of our basketball
Speaker 1: league as well. If we got to go play in
Speaker 1: the Sixers court because our team for in the Forum, well,
Speaker 1: well what is it called these days? To me, it's
Speaker 1: the Philadelphia Forum. But that's old spectrum spectrum, that's right. Um.
Speaker 1: So normally I asked this question right here, which is
Speaker 1: who were your mentors? But I this is the first
Speaker 1: time I've actually asked somebody that question with their mentor.
Speaker 1: So I'm gonna flip the question on Professor Siegal and say,
Speaker 1: tell us about some of your mentees and who helped
Speaker 1: shape your career. Well, clearly I would mention Professor Milton
Speaker 1: Freedman at the University's card, and I also mentioned Professor
Speaker 1: Paul Samuelson from m I T where I got my PhD.
Speaker 1: And I yeah, I mean I regarded those as probably
Speaker 1: the two. I mean, I was honored to be able
Speaker 1: to be able to be so close to them, and
Speaker 1: Protestor Samuelson was on my thesis committee. Professor Freedman was
Speaker 1: a colleague of mine My first four years of teaching,
Speaker 1: was his last four years before he retired. We became
Speaker 1: very close friends. I saw him a lot after he retired.
Speaker 1: He lived in San Francisco, whenever my wife and I
Speaker 1: went there. Uh, they've really made a tremendous difference. That's
Speaker 1: some combination. And then I always feel like I have
Speaker 1: to bring this up when I speak with you, is
Speaker 1: that you and Professor Schiller are buddies, and you guys
Speaker 1: socialized and out together. It's amazing. Is tomorrow I'm going
Speaker 1: to the Poconos and Bob Shiller and his wife Jenny
Speaker 1: are going to go down there. We used to do
Speaker 1: that every summer. This is the first time in probably
Speaker 1: thirty years that we're going to be spending the weekend together.
Speaker 1: We've we've been friends for fifty five years. It's fifty
Speaker 1: five years. Five years. I met him as a first
Speaker 1: year graduate student nineteen sixty seven at M I T
Speaker 1: I've got a story about their vacation. That's a pretty
Speaker 1: good one. Go ahead. Let's say the first year I'm
Speaker 1: working for the professors the summer of a and the
Speaker 1: New York Times was coming to do a profile of
Speaker 1: the two professors, and it was a great cover. David Leonheard,
Speaker 1: I think, was the author. And I just started dating
Speaker 1: my now wife, Bonnie, and she had in her class
Speaker 1: in economics, she had to write a contrast irrational exuberance
Speaker 1: with stocks for the long run. She had to take
Speaker 1: off to go to a barbecue with them, and we,
Speaker 1: uh the professor could come and uh so anyway, she
Speaker 1: she got to go to the barbecue with them in
Speaker 1: the Ocean City. They're doing it at Ocean City to
Speaker 1: rent a place all the time. We now own it
Speaker 1: to short but you know, near Ocean City, but at
Speaker 1: that time we rented and he came over to spend
Speaker 1: the weekend and and um, you mentioned my poker playing.
Speaker 1: But she actually in her paper she got an A
Speaker 1: plus on the paper. I would hope she I hope
Speaker 1: there's a photo everybody to get there's a contrast of
Speaker 1: We actually went to Atlantic City and Bob didn't want
Speaker 1: to play blackjack, and the professor was playing cards, and
Speaker 1: she used that as an analogy of the risk christ conversion. Oh,
Speaker 1: come on, Bob, you know, let's let's let's play. Yeah,
Speaker 1: he's very much It's just the difference in the psychology
Speaker 1: is very much more risk converse. So it's funny, love
Speaker 1: we we we have so much in common. We get together.
Speaker 1: We just talked about so many issues. So when I
Speaker 1: had Bob here for the show and he had his
Speaker 1: next appointment was a speaking event across town, it was
Speaker 1: the same direction I was heading. So I'm thinking, well,
Speaker 1: here's Bob Schiller. I'm not going to stick him in
Speaker 1: the subway to go downtown. Hey, listen, we'll get a
Speaker 1: car and I'll have a car take you to your
Speaker 1: next event. So we were getting this, you know, a cab,
Speaker 1: and he puts on his seat belt in the back seat,
Speaker 1: and I'm like, well, Bob Schiller, hang on a seat belt.
Speaker 1: Maybe he's done the math. Maybe I should be wearing
Speaker 1: a seat belt in the back of the car. And uh,
Speaker 1: he's very queeous. I remember when I love heights. And
Speaker 1: I remember once it was a bridge and it was
Speaker 1: alleged that you could walk on it was wide enough,
Speaker 1: and he said, Jeremy, don't go up there, and said, oh,
Speaker 1: top hob and I walked across. And now he's you know,
Speaker 1: he was. He was so scared of doing that. He said, oh,
Speaker 1: you might trip, you might fall, you might fall un
Speaker 1: And you guys still spend that much time with each
Speaker 1: other on a regular basis. We just love each other. Um. Alright,
Speaker 1: So down to my last couple of questions. Let's talk
Speaker 1: about books. What are you reading now and what are
Speaker 1: some of your favorites. This has really dominated so much
Speaker 1: of what I've done and recently. And there is one
Speaker 1: book that I have read recently, and I'm sorry that
Speaker 1: it's really quite interesting because it has nothing to do
Speaker 1: with finance. Russ stuff Out's book from the Times. From
Speaker 1: the Times, and he wrote about his journey into a
Speaker 1: severe lime disease situation. And you know, I've had some
Speaker 1: medical issues myself in the past, and I was fascinating
Speaker 1: how he dealt with it and how the medical establishment
Speaker 1: felt with it. And he had written several articles about
Speaker 1: how that affected his feelings about medicine and the government
Speaker 1: and all the rest the deep places, deep places, you've
Speaker 1: got it. That's very interesting, and so I it's a
Speaker 1: fast read. He moves to Connecticut because it's something he
Speaker 1: loved all the time, and within like two weeks he
Speaker 1: gets it and no one can cure it, and it
Speaker 1: gets worse, and he goes to all these extremes and
Speaker 1: what he learns and thinks about. I thought it was
Speaker 1: a fascinating book, and it was, you know, I tried
Speaker 1: to read a couple of things that aren't just economics,
Speaker 1: but that was that was. There was one other book,
Speaker 1: but I can't think of that one either, But I'll
Speaker 1: say like it's a sort of a similar story to
Speaker 1: my podcasting. I used to do more audible because I
Speaker 1: got into podcasting and that was how so I actually
Speaker 1: have twelve audible credits to my point on it. It's
Speaker 1: been a while since I've been doing a lot. But
Speaker 1: the last one I read was Hot Commodities from Jim Rogers,
Speaker 1: which people I remember he wrote investment Biker didn't and
Speaker 1: I remember reading that of many people, commodities were coming
Speaker 1: back for the first time in fifteen years. His book
Speaker 1: was about fifteen years early. But like everything he was
Speaker 1: talking about, it's coming together more today. There's another very
Speaker 1: interest I like history, in particular story about the war.
Speaker 1: And yes, the book was entitled The Newspaper X and
Speaker 1: it had to do with both in the United States
Speaker 1: and in Britain. Some of the most major newspapers were
Speaker 1: big supporters of Adolph Hitler and made excuses for him
Speaker 1: and all the rest. Um and and mentioned some of
Speaker 1: the biggest editors. Some of it might be people who
Speaker 1: supported Trump today, but it was. It wasn't just a
Speaker 1: right wing media. These were dominating media's that were very sympathetic.
Speaker 1: It was a pretty shocking book. What was this a
Speaker 1: unction of who owned those papers? Yeah, I mean it
Speaker 1: was the editors of the McCormick and the Chicago Tribune,
Speaker 1: beaver Brook. Was it the Guardian or the Telegraph in London?
Speaker 1: Who was an amer of Hitler although once the war
Speaker 1: started he really went to the side of the British.
Speaker 1: The newspaper access six press barons who enabled Hitler is
Speaker 1: the title. And that's another one. Um, what sort of
Speaker 1: advice would you give to a recent college grad who
Speaker 1: was interested in the career in investing in finance? Where
Speaker 1: the investment bigs. Go find something of your passion. Everybody
Speaker 1: thinks they got to go to the investment bank. So
Speaker 1: don't don't start a Goldman or Morgan Stanley because such
Speaker 1: a routine. And I obviously followed a different path. I
Speaker 1: found the professor. We found more interesting things. Um, I mean,
Speaker 1: certainly the world is getting quant So python as like
Speaker 1: the language program, get into data data sciences where the
Speaker 1: financial engineering program s are hys and demand people from
Speaker 1: from my son and I would say, you know, a
Speaker 1: more general thing, and everyone said to do what you love. Um,
Speaker 1: do what you're good at. You know what you're really good,
Speaker 1: you think better than others, you know a lot of
Speaker 1: Oh yeah, I think about that really well, pursue your
Speaker 1: comparative advantage, as an economist would say, and do what
Speaker 1: you feel good about, not what someone else, your parents
Speaker 1: or others are saying. You got to find your own thing.
Speaker 1: But also know what you're good at. You know, Hey,
Speaker 1: I'm pretty good at that, and that's where you should go.
Speaker 1: And our final question, what do each of you know
Speaker 1: about the world of investing that you wish you knew
Speaker 1: fifty years ago? Well, I probably would have not had
Speaker 1: any bonds in my t I a craft University account,
Speaker 1: no bonds at all, you know, I had I started,
Speaker 1: They always said, oh Jeremy, you gotta be fifty fifty okay,
Speaker 1: back then, you know I was even yeah, I mean, uh,
Speaker 1: you know I wasn't you know when I started. Don't
Speaker 1: forget I started an economist. I getting gone finance. Actually
Speaker 1: later so and until I studied myself and I said,
Speaker 1: what am I doing this for? Um? You know, I
Speaker 1: started shifting away. But uh, you know, if you got
Speaker 1: that long arizon and you're young, and you're young today,
Speaker 1: this is a golden time. I mean, you're not buying
Speaker 1: at the top, you're buying near the bottom. You are
Speaker 1: going to be guaranteed great returns when you retire, not
Speaker 1: a bunch just just to make self. Jeremy Schwartz, what
Speaker 1: what do you know today that would have been helpful
Speaker 1: years ago? The remote first world, if I would have
Speaker 1: known how remote it was going, might have moved into
Speaker 1: different places. There you go, that's really interesting. We have
Speaker 1: been speaking with Professor Jeremy Siegel of the Wharton School
Speaker 1: of Business and Jeremy Schwartz of Wisdom Triosset Management. Thank
Speaker 1: you guys, for being so generous with your time. If
Speaker 1: you enjoy this conversation, be sure and check out any
Speaker 1: of our previous four hundred and twenty five conversations we've
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