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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Masters in

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Speaker 1: Business with Barry Ritholts on Bloomberg Radio.

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Speaker 2: This week on the podcast what Can I Say? Rich Bernstein,

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Speaker 2: rock star, former chief strategist at Merrill Lynch, just an

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Speaker 2: incredibly storied career who has managed to put together such

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Speaker 2: a straightforward and intelligent way to approach asset management Rather

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Speaker 2: than me, Babbel, I'm just gonna say, this is a

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Speaker 2: fascinating conversation, with no further ado, my discussion with Rich

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Speaker 2: Bernstein Advisors. Rich Bernstein, Thanks.

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Speaker 3: Erry, great to be here, welcome the invitation.

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Speaker 2: Oh well, I'm thrilled to have you. I thought you

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Speaker 2: would be the perfect person to talk about what's been

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Speaker 2: going on these days. But before we get to that,

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Speaker 2: let's start with Bachelor's and Economic Mixed from Hamilton, MBA

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Speaker 2: from NYU. What was the career plan?

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Speaker 4: So the career plan was was kind of foiled I

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Speaker 4: would say six months after graduation. So oddly enough, when

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Speaker 4: I graduated Hamilton, I wanted to be a labor economist.

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Speaker 4: And people say, like today they go labor economists, Like,

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Speaker 4: what's that all about?

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Speaker 2: It? That was a big thing.

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Speaker 4: It One boy was a big deal, and so it was.

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Speaker 4: You got to remember, labor unions were very powerful in

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Speaker 4: the late seventies early eighties. There was rampant inflation, and

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Speaker 4: every company had a labor relations department. It was a

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Speaker 4: growth industry, and so I decided I wanted to be

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Speaker 4: a labor economist and got myself a job with a

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Speaker 4: prestigious economic consulting firm in their labor economics department, doing

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Speaker 4: all kinds of government related work, private sector, but government

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Speaker 4: related work. And we were consultants, which is very critical

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Speaker 4: because consultants bill by the hour and literally the day after.

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Speaker 4: So election day is Tuesday in nineteen eighty November nineteen

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Speaker 4: eighty Wednesday, fifty percent of our business basically went away.

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Speaker 2: Because Reagan took over, and everybody.

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Speaker 4: Called up and said, stop billing, we want to see

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Speaker 4: what's going to happen as with the Reagan administration. Now

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Speaker 4: I wasn't the smartest guy in the room, but it

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Speaker 4: was pretty clear to me that this was no longer

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Speaker 4: a growth industry. I had taught myself Fortran, dating myself

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Speaker 4: here quite a bit. I taught myself Fortran and was

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Speaker 4: a pretty good computer programmer, and a friend of mine

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Speaker 4: who had gotten fired from this economic consulting firm, got

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Speaker 4: a job at Chase Econometrics. I DC and said, you

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Speaker 4: have to come over here. You're a great programmer. You're

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Speaker 4: going to love this stuff. They had the largest set

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Speaker 4: of economic and financial databases in the world at the time.

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Speaker 4: You have to come here. I said, I what do

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Speaker 4: I want to go to Wall Street for? I mean, like,

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Speaker 4: I have no interest in Wall Street. Why I would

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Speaker 4: go to Wall Street? And he said, well, let's be honest.

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Speaker 4: Here the salary is twice what you're making. I said, well,

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Speaker 4: I'll go for the interview right now. I'll see what happens. Well,

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Speaker 4: I went for the interview the job. My biggest client

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Speaker 4: turned out to be the Merrill Lynch Investment Strategy Group.

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Speaker 2: Huh.

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Speaker 4: And that's how I got involved in Wall Street. And

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Speaker 4: I found through time that I really liked it, went

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Speaker 4: back and got my MBA and after a while, without

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Speaker 4: something stupid about this, I realized I knew more about

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Speaker 4: this stuff than many of my clients did. And so

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Speaker 4: I just worked my way through Wall Street and eventually,

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Speaker 4: you know, but if you had said to me when

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Speaker 4: I graduated at Hamilton that I was going to end

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Speaker 4: up being the chief investment strategist Meryll Lynch.

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Speaker 3: I would have said, you're.

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Speaker 2: Crazy, would have laughed. So I have to ask about Fortran.

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Speaker 2: You're undergraduate, your focus is economics, you get an MBA

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Speaker 2: in finance. Where did the computer programming skills so come from?

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Speaker 3: I am the.

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Speaker 4: Poster child for the liberal arts education. So I almost

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Speaker 4: double majored in philosophy.

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Speaker 3: I didn't. I was too lazy to.

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Speaker 4: Be perfectly frank and didn't want to take one of

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Speaker 4: the intro courses. But I took like, I don't know,

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Speaker 4: five six seven philosophy courses.

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Speaker 3: Something like that.

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Speaker 4: And for all the philosophy majors out there, I'm sure

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Speaker 4: they know that a good part of philosophy is symbolic

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Speaker 4: logic and symbolic logic.

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Speaker 3: What is computer programming? What's computer language?

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Speaker 2: Is?

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Speaker 4: It's just symbolic logic. So when I've got introduced to

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Speaker 4: Fortram the first day, I realized I could actually read

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Speaker 4: a lot of the code because it was just symbolic logic.

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Speaker 2: So it's so funny you say that philosophy is symbolic logic.

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Speaker 2: Study of law is a lot of symbolic logic. Absolutely,

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Speaker 2: obviously math, there's a ton of symbolic logic wherever you look,

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Speaker 2: that classic syllogism. Right, here's the fact pattern, here's the

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Speaker 2: applicable set of rules, programs, parameters like this seems to

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Speaker 2: be a very constant threat in a lot of areas.

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Speaker 2: How surprising was it to you that, Hey, philosophy has

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Speaker 2: been really helpful on Wall Street.

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Speaker 4: It's been amazing. In fact, in one of the books

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Speaker 4: I wrote, many many moons ago, I specifically thanked one

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Speaker 4: of my philosophy professors for you know, I took symbolic

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Speaker 4: logic with him. I think I took a course in

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Speaker 4: relative with him. You know, all these different things which

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Speaker 4: have definitely been influential in my career without a doubt.

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Speaker 2: All Right, So you end up at what could be

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Speaker 2: my favorite advertisement, which was the EF Hutton ads back

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Speaker 2: in the with that the nineteen eighties when I.

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Speaker 4: Think it was actually the seventies into the eighties.

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Speaker 2: When EF Hutton talks people listen like you can find

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Speaker 2: these ads all over YouTube. There's seminos. How did you

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Speaker 2: make your way to? E? F. Hutton from Chase econom Etriss.

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Speaker 4: So what happened was that at the time a lot

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Speaker 4: of people at Chase IDC were very in very high demand.

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Speaker 3: We were the beginning of the quant.

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Speaker 4: Movement on Wall Street, right, and so there were a

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Speaker 4: lot of people were getting hired away. One of my friends,

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Speaker 4: who was more an economist as opposed to a quant guy,

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Speaker 4: got hired by the chief economist at E. F. Hutton

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Speaker 4: at the time, and there was an opening in the

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Speaker 4: investment strategy group and he said similar like, why don't

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Speaker 4: you come and interview?

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Speaker 2: Come double your salary?

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Speaker 4: Yeah, well I didn't do that, but but it was.

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Speaker 4: It was an opportunity, so I grabbed at the opportunity.

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Speaker 4: I worked at the time with a wonderful guy named

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Speaker 4: Jeff Applegate, who unfortunately passed away recently. But Jeff was

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Speaker 4: a great role model in terms of how to make

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Speaker 4: Wall Street understandable to non Wall Street people.

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Speaker 2: H huh really really interesting. And then we get the

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Speaker 2: eighty seven crash, right, and then the following year you

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Speaker 2: join mother Meryll, tell us how you found your way

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Speaker 2: to Merrill Lynch.

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Speaker 4: So Meryll, you know, Hutton went out of business and

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Speaker 4: basically nineteen end of eighty seven, I think it was

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Speaker 4: December of eighties?

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Speaker 1: Was that?

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Speaker 2: Did they go out a bit? Wasn't it? Sheerson Leman

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Speaker 2: and Hotton American Express or something.

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Speaker 4: It was like it was became Sheerson Leman Hutton, the

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Speaker 4: irony of which I once worked at Shearson when they

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Speaker 4: merged with Lehman Brothers and I lost my job there.

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Speaker 4: And now Cherson Lehman was merging with Hutton, and I

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Speaker 4: lost my job again. So I was on the losing

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Speaker 4: into many many mergers of the nineteen eighties. But it

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Speaker 4: was getting to Merrill, was you know. I was out

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Speaker 4: of work for a while after Hutton went out of business.

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Speaker 4: I had met with a headhunter and the headhunter had

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Speaker 4: sent me up with an interview at Merrill, and Meryl

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Speaker 4: kind of passed on me, but then called me back

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Speaker 4: about four months later.

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Speaker 2: And so their first choice turned them down. Is that

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Speaker 2: what actually happened?

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Speaker 3: What actually happened.

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Speaker 4: I found my personnel file years later. I found my

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Speaker 4: personnel file, and this is actually kind of funny, and

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Speaker 4: in it was the headhunter letter to the hiring manager,

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Speaker 4: and it described me as being the cheapest of the

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Speaker 4: lot with the most potential. That was the way that

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Speaker 4: g described your value stock.

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Speaker 3: I was a value stock.

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Speaker 4: And so I think what happened was the everybody else

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Speaker 4: they were talking to you wanted too much money, and

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Speaker 4: they worked their way down and they found they got me.

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Speaker 2: That's that's UNBLI how did you get access to your personnel?

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Speaker 4: It was by accident, it was, I was, I was.

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Speaker 4: It was like switching managers type thing, and somehow it

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Speaker 4: got it got put into the wrong file, wrong set

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Speaker 4: of files, and there was mine.

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Speaker 3: So of course I read it.

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Speaker 2: So you were at Mayor for twenty years.

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Speaker 3: Yeah, almost twenty plus.

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Speaker 2: Yeah, wow, that's amazing. You were there right up into

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Speaker 2: the financial crisis. I was, what was Merrill Lynch like,

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Speaker 2: right in the middle of that storm.

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Speaker 4: So it was, you know, I think it was. It

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Speaker 4: was an interesting time and you know, I should say,

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Speaker 4: first of all, the Meryl was a fantastic place to work.

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Speaker 3: Oh it was.

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Speaker 4: You know, anybody out there who has worked at Meryll,

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Speaker 4: you know, knows the feeling that I have for the firm,

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Speaker 4: and because they feel it too, and.

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Speaker 3: It was a great place to work.

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Speaker 4: The corporate culture began to change in the few years

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Speaker 4: before the financial crisis, and we got a little bit

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Speaker 4: of ways from our roots. You know, our roots were

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Speaker 4: very much as a private client oriented firm that also

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Speaker 4: had great trading and investment banking, everything else, but the

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Speaker 4: heart of the firm was still on the private line.

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Speaker 4: So for any number of strategic reasons, the firm decided

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Speaker 4: that we wanted to change that emphasis. And I think,

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Speaker 4: you know, it's kind of dangerous to take a lot

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Speaker 4: risk when you don't really have the experience doing it, sure,

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Speaker 4: and so I think that's kind of what happened to Meryl.

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Speaker 2: You know, I mentioned the ef Hutton ads, But for

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Speaker 2: the people who are listening, who are younger, I want

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Speaker 2: to say, in the nineteen seventies, maybe even in the

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Speaker 2: nineteen sixties, Merrill Lynch ran a series of television ads

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Speaker 2: Merrill Lynch is Bullish on America, absolutely with the Thundering

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Speaker 2: Herd and the Big Bull. And it was pretty amazing.

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Speaker 2: When we talk about the democratization of investing that Meryll

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Speaker 2: is arguably the one of the first companies that absolutely

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Speaker 2: dove into that head first.

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Speaker 4: Yeah, if I'm not mistaken, Charlie Merrill was. His whole

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Speaker 4: philosophy was bringing Wall Street to main street. I think

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Speaker 4: he actually coined that free.

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Speaker 2: I think that's right. And later on we had a

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Speaker 2: number of the discount brokers had come out in places

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Speaker 2: like Schwab and Muriel Siebert, but I always felt they

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Speaker 2: had followed Merrill's lead to we're going to push into mainstream. Yeah,

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Speaker 2: so you start out essentially as an analyst, how do

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Speaker 2: you work your way up to market strategists and then

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Speaker 2: chief investment strategists for the thundering hurt?

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Speaker 4: It's you know, it's funny. One of the things I

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Speaker 4: always tell recent graduates of colleges is don't try to

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Speaker 4: plan out your future because when you're twenty one or

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Speaker 4: twenty two, you have no idea what you're going to do.

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Speaker 4: When you're twenty five or twenty seven or thirty, you know,

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Speaker 4: you really don't know. And my example of you know,

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Speaker 4: the changes after the Reagan Carter election are pretty clear

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Speaker 4: on that one. But the same thing was at Meryl.

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Speaker 4: You know, I came in as a quant analyst. I

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Speaker 4: was there not for any other reason, to be perfectly frank,

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Speaker 4: and I think the people involved at the time would

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Speaker 4: agree with this that in institutional Investor there was a

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Speaker 4: quantitative analysis slot. Merrill had nobody who was there. They thought, well,

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Speaker 4: let's get somebody who can maybe run for the slot.

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Speaker 4: We'll get another II vote and we'll see what happens.

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Speaker 4: And I was their choice to just kind of become

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Speaker 4: this quant guy.

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Speaker 3: I don't think they knew what to do with me.

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Speaker 4: I don't think they were thinking anything else other than like,

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Speaker 4: you know, go do your thing, and you know, hopefully

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Speaker 4: this will all work.

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Speaker 2: It is an empty desk, rich see what you can do.

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Speaker 4: Exactly right, And it was. It was actually kind of funny.

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Speaker 4: I truth be told, now, I can tell this. I

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Speaker 4: lied about my age to get the job.

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Speaker 2: Saying you were younger or saying you were older older because.

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Speaker 4: I was twenty nine when I was interviewing for this position. Yeah,

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Speaker 4: and I knew that and everybody and back then you

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Speaker 4: could ask people how old.

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Speaker 2: You were, right, and they couldn't google you and find out, right.

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Speaker 4: And they couldn't find out So there was all kinds

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Speaker 4: of all kinds of stuff that they could do back

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Speaker 4: then that you can't do network and do.

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Speaker 2: Now, did you really get an MBA from NYU? Did

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Speaker 2: you just pad your resume? No?

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Speaker 4: I'm that's legit, that's one hundred percent legit. But so

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Speaker 4: what was happening was I knew that if I went

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Speaker 4: into these interviews and I told people I was twenty nine, they.

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Speaker 2: Would think I was a kid, but thirty sounds thirty.

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Speaker 4: It's like twenty nine to ninety nine, right, like you

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Speaker 4: just wound up six month fib that's all.

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Speaker 2: It was.

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Speaker 4: Well, by the time I actually got the job and

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Speaker 4: showed up, but Merril, I was thirty. So I didn't

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Speaker 4: feel I've never felt bad about it because I was

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Speaker 4: asking every single like, why would they ask? They wouldn't

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Speaker 4: ask unless they thought maybe I was too young.

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Speaker 3: That would be the.

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Speaker 4: Impetus for asking. The was gonna ask a question, well,

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Speaker 4: how much.

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Speaker 2: Too much experience in seasoning?

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Speaker 4: I don't think that was the root of the question.

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Speaker 4: And because they had my resume, they knew exactly and

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Speaker 4: so it was really like how old is this guy?

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Speaker 3: You know, can he really do this? And so I lied,

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Speaker 3: So I told everybody I was thirty, and.

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Speaker 2: So that's hilarious.

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Speaker 3: Yeah, it is. It is kind of fun.

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Speaker 2: And nobody ever figured out, don't don't they when you're

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Speaker 2: filling out your paperwork and nobody took the time, nobody cared.

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Speaker 2: Nobody If you're a W two employee, they get your

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Speaker 2: data birth and your Social Security number. It's it's not

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Speaker 2: like the data isn't there.

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Speaker 4: But by the time I got to Merrill, I was thirty,

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Speaker 4: So he thought nobody nobody thought twice about it.

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Speaker 2: Yeah, that's that's really funny. So you're at Merrill for

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Speaker 2: twenty plus years, we have the financial crisis, and you

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Speaker 2: side to launch rich Bernstein Advisors in two thousand and nine.

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Speaker 2: So in hindsight, it turns out to be perfect timing.

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Speaker 2: What sort of pushback did you get when you're like,

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Speaker 2: I think I'm gonna stand up my own chop into

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Speaker 2: this mess.

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Speaker 3: Yeah, you know.

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Speaker 4: I left Meryl because I'd gotten burned out. I mean,

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Speaker 4: one of the things that people don't realize is as

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Speaker 4: a cell side analyst, the better you get at your job,

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Speaker 4: the demands on your time grow exponentially. And so I

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Speaker 4: was traveling all over the world. I was I was

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Speaker 4: non stop writing. I mean it was I had burned

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Speaker 4: out and I tried to leave Merril several years before,

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Speaker 4: and they had they convinced me to stay.

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Speaker 3: They said, you know, like, no, it's.

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Speaker 4: Okay, you know, well, you know, we'll take care of you.

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Speaker 4: Everything will be fine, don't worry about it. But in

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Speaker 4: two thousand and eight and the financial crisis, I turned

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Speaker 4: fifty and so not lying about my age. I actually

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Speaker 4: did turn fifty and.

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Speaker 3: I was pretty burned out.

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Speaker 4: And then the financial crisis hit and I thought, you know,

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Speaker 4: it's a long time leave. It'd be irresponsible for the

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Speaker 4: chief strategist of Merrill Lynch to leave in the midst

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Speaker 4: of a crisis. That's that's just very unfair to our clients,

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Speaker 4: very unfair to the firm. You know, I rose to

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Speaker 4: this level. I have a certain amount of responsibility. I

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Speaker 4: can't be selfish on this. So I stuck it out

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Speaker 4: for a while. And then Bank of America bought Merrill

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Speaker 4: and they were great, and you know, everything was good,

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Speaker 4: but it was clear to me I wasn't going to

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Speaker 4: have more fun right that the burned out nature was

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Speaker 4: going to continue.

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Speaker 3: It was going to get worse.

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Speaker 4: So I just figured, like, why do this? So I

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Speaker 4: de thought it was leaving again. Merrill was fantastic. They

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Speaker 4: encouraged me to stay. I just had none, no, no thanks,

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Speaker 4: but I'm done.

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Speaker 3: You know, stick a fork in me. I'm done.

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Speaker 2: Hey, twenty years is a long time being a road warrior, Yeah, exactly.

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Speaker 4: And so then the question was what was I going

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Speaker 4: to do? I had toyed with the idea of opening

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Speaker 4: an independent research shop and that sort of thing, but

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Speaker 4: that was going to be equal amount of travel all

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Speaker 4: around the world, and I had just done that for

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Speaker 4: twenty years. Didn't sound like a lot of fun. But

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Speaker 4: then the idea came to me, well, maybe we should

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Speaker 4: put some of these things that we've developed through the year,

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Speaker 4: put it into practice and see if we can manage

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Speaker 4: money doing it. And we were kind of forming the firm,

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Speaker 4: and we were like really in its infancy, and then

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Speaker 4: all of a sudden, I remember exactly where I was.

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Speaker 4: I was in our dan Weekly initial jobbas claims had

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Speaker 4: just come out. This is like in July of two

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Speaker 4: thousand and nine, and the number came out and it

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Speaker 4: was a blowout good number. And I said to myself,

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Speaker 4: this is a rogue number. And then I said to myself, well,

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Speaker 4: wait a minute, why is it a rogue number? Maybe

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Speaker 4: things are just getting better, because I was listening to

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Speaker 4: all the talking heads and they were all negative as

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Speaker 4: all get out, and I said.

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Speaker 2: Let me stop you right there, because my next question

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Speaker 2: is I very vividly remember March O nine and saying, hey,

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Speaker 2: US equities down fifty percent usually pretty good entry point.

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Speaker 2: I think we finished down fifty six, and but the bearishness,

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Speaker 2: the negativity persisted, and it felt like people were really

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Speaker 2: suffering from a little post traumatic stress. It's I'm curious

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Speaker 2: exactly how as you were starting to tell us how

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Speaker 2: you were thinking around that, because everybody was so negative,

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Speaker 2: and yet the data was clearly improved.

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Speaker 3: It was definitely improving.

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Speaker 4: And so you know the way I described to people,

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Speaker 4: they said, like, you know, markets don't move on the

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Speaker 4: absolutes of good or bad. Markets move on better or worse.

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Speaker 4: And things were horrible in an absolute sense, but they

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Speaker 4: were getting better.

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Speaker 2: And certainly better than consensus.

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Speaker 4: Felt like I was, absolutely and so you know, I

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Speaker 4: just I remember exactly where I was, and I said, well, gee,

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Speaker 4: you know, this.

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Speaker 3: Could be like a big bull market.

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Speaker 4: And you know, I actually at one point said to

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Speaker 4: potential investors, I thought that we were entering the biggest

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Speaker 4: bull market of our careers, and so we're only.

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Speaker 2: Off by tiny little bit. It was, it was, oh,

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Speaker 2: of our careers, of our careers. Yeah, so if you

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Speaker 2: look at rolling, look at rolling today, Rolling fifteen year

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Speaker 2: periods from nine to four was sixteen percent a year.

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Speaker 2: From the fifteen year period ending in ninety nine was

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Speaker 2: seventeen percent a year, and you go to the fifteen

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Speaker 2: years after World War Two was eighteen a year, but

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Speaker 2: one of the best periods in modern.

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Speaker 3: History for sure.

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Speaker 2: Absolutely, So you're you're like, hey, this is gonna be good.

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Speaker 4: If you're going to start it on, if you're going

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Speaker 4: to start a firm, this is the time to start

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Speaker 4: for sure.

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Speaker 3: So that that's kind.

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Speaker 4: Of how it began, and the you know, I don't

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Speaker 4: want to say that everything went swimmingly at the beginning.

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Speaker 3: No, you're starting a firm.

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Speaker 4: You have you know, like any any startup you have,

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Speaker 4: you have pluses and minuses, and you you him at

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Speaker 4: hall and you do different things. But through time it's

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Speaker 4: worked out pretty well.

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Speaker 2: So what was you know, we stood up a firm

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Speaker 2: in twenty thirteen. I'm curious, and that experience was kind

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Speaker 2: of surprising. I'm curious, what was the most surprising things

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Speaker 2: about launching your own firm? What was like I didn't

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Speaker 2: expect to be doing this.

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Speaker 3: So two things.

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Speaker 4: One was that I was getting into an area that

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Speaker 4: I didn't know and I knew. I didn't know the

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Speaker 4: buyside the way I knew the cell side. I knew that,

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Speaker 4: and what I didn't know was how much I didn't know,

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Speaker 4: and so the early fits and starts were trying to

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Speaker 4: hire the right people. I didn't even know enough to

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Speaker 4: hire the right people. Eventually that did happen and we

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Speaker 4: hired a guy named John MacComb, who's still the president

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Speaker 4: of the firm.

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Speaker 3: But it was kind of, you know, off and on.

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Speaker 4: We were not doing all that well at the beginning

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Speaker 4: because largely because I didn't even know who to hire

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Speaker 4: and who not to hire, because I was so inexperienced

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Speaker 4: on the buyside. So that was surprise number one. Surprise

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Speaker 4: number two was that people would not invest with us

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Speaker 4: at the time because we were too bullish, and.

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Speaker 3: That was.

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Speaker 2: That just makes you more bullish.

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Speaker 3: Oh, it did, without a.

404
00:19:03,680 --> 00:19:07,000
Speaker 4: Doubt, I mean, but if it was, it was incredible.

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Speaker 4: We were, you know, at the time, people were very

406
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Speaker 4: cautious on the United States. If they wanted growth, whatever

407
00:19:12,440 --> 00:19:14,159
Speaker 4: they determined that was, it had to be in the

408
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Speaker 4: emerging markets. It could not be in the United States.

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Speaker 4: And we were bullish and we wanted to invest in

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Speaker 4: the United States, and people just couldn't deal with that.

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Speaker 2: I'm going to put a little flash on what you're describing.

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Speaker 2: I vividly recall writing a market commentary. I want to

413
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Speaker 2: say September, but maybe it was October nine and the

414
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Speaker 2: title was the most hated bull rally in the market history.

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Speaker 2: Same experience, absolutely, it was.

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Speaker 3: It was very frustrating.

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Speaker 4: If you look at our early marketing materials, you will

418
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Speaker 4: find thing comments about what we called fire extinguishers, right.

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Speaker 4: And fire extinguishers were positions we would take in the

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Speaker 4: portfolio that we could pull off the wall and put

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Speaker 4: out the fire in the portfolio, right, like having you know,

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Speaker 4: cash or gold or all these different things that we

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Speaker 4: would include in our the asset portfolios so that people

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Speaker 4: would feel more confident in what was going on.

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Speaker 3: No, they it worked, but it didn't really work because.

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Speaker 2: It worked in psychologically, but it didn't work performance wise.

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Speaker 3: No, it worked.

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Speaker 4: It worked for us fine, but it didn't get people

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Speaker 4: across the goal line. They would not They they were

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Speaker 4: too scared.

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Speaker 2: How long did it take before people started to say, oh,

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Speaker 2: maybe this Bunston guy is onto something.

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Speaker 4: Yeah, well, you know everybody talks about it being like

434
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Speaker 4: a hockey stick. You know, the raising assets is sort

435
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Speaker 4: of like a hockey stick where you're think if as

436
00:20:29,640 --> 00:20:31,879
Speaker 4: a turbocharger, where you're you're kind of going along and

437
00:20:31,880 --> 00:20:33,320
Speaker 4: all of a sudden, the turbo charger kicks in and

438
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Speaker 4: you start really accelerating.

439
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Speaker 3: That was the experience that we had in the firm.

440
00:20:36,600 --> 00:20:39,800
Speaker 4: We had we had people who knew us as a

441
00:20:39,800 --> 00:20:44,119
Speaker 4: group were reasonably willing to invest with us, but to

442
00:20:44,160 --> 00:20:46,760
Speaker 4: the broader audience, it was it was much more difficult.

443
00:20:46,800 --> 00:20:48,760
Speaker 4: And then as they got more confident. Yeah, of course,

444
00:20:48,800 --> 00:20:51,359
Speaker 4: the turbo charger started started revving up.

445
00:20:51,600 --> 00:20:54,240
Speaker 2: So it was that six months, twelve months.

446
00:20:54,800 --> 00:20:57,119
Speaker 3: I measure two years. I was measured in years.

447
00:20:57,160 --> 00:20:57,920
Speaker 2: I really Yeah.

448
00:20:57,960 --> 00:21:00,399
Speaker 4: I think I don't remember the date of when we

449
00:21:00,480 --> 00:21:04,000
Speaker 4: hit five billion, but I'm gonna say it probably took

450
00:21:04,080 --> 00:21:06,440
Speaker 4: us five or six years at least to get to

451
00:21:06,520 --> 00:21:07,119
Speaker 4: five billion.

452
00:21:07,240 --> 00:21:09,840
Speaker 2: And now you're over well of a fifteen billion, we're

453
00:21:09,880 --> 00:21:13,760
Speaker 2: abouts almost sixteen. Wow, So that's amazing. And this is

454
00:21:13,880 --> 00:21:17,080
Speaker 2: now fifteen years later, correct, right, So it took you

455
00:21:17,160 --> 00:21:20,800
Speaker 2: fifteen years to get to fifteen billion dollars, so a

456
00:21:20,840 --> 00:21:23,960
Speaker 2: billion a year, not to shay, right, No, not not

457
00:21:24,000 --> 00:21:27,600
Speaker 2: bad at all. So we were talking about launching the

458
00:21:27,640 --> 00:21:31,280
Speaker 2: firm in nine and there's a quote of yours that

459
00:21:31,560 --> 00:21:36,000
Speaker 2: has always stayed with me, which is quote. When the

460
00:21:36,119 --> 00:21:41,680
Speaker 2: cell side indicator turns positive, leaving the firm is preferable

461
00:21:41,920 --> 00:21:45,360
Speaker 2: to going on the call and telling everybody about it.

462
00:21:46,200 --> 00:21:50,280
Speaker 2: Explain that, because we were talking earlier about the sort

463
00:21:50,320 --> 00:21:57,760
Speaker 2: of bearish PTSD pushback to anything remotely positive your indicator,

464
00:21:57,760 --> 00:22:00,840
Speaker 2: this cell side indicator has a pretty long and story

465
00:22:01,080 --> 00:22:02,560
Speaker 2: track record, Merrill.

466
00:22:02,720 --> 00:22:03,240
Speaker 3: It does.

467
00:22:03,760 --> 00:22:06,320
Speaker 2: Hey, this turn positive, you guys have to change your views.

468
00:22:06,720 --> 00:22:07,760
Speaker 2: That carries no weight.

469
00:22:08,320 --> 00:22:09,800
Speaker 3: So let me explain what it is.

470
00:22:09,840 --> 00:22:13,600
Speaker 4: The sell side indicator is a sentiment indicator that's based

471
00:22:13,640 --> 00:22:18,920
Speaker 4: on Wall Street's consensus recommended asset allocation, so stock SPONNS cash,

472
00:22:18,960 --> 00:22:20,880
Speaker 4: how much has you put in stocks at any point

473
00:22:20,920 --> 00:22:23,199
Speaker 4: in time. I started that all the way back at

474
00:22:23,200 --> 00:22:26,240
Speaker 4: Eve Hutton you mentioned Hutton before, and we continue to

475
00:22:26,320 --> 00:22:29,440
Speaker 4: through Meryl and Meryl still runs it today. It really

476
00:22:29,480 --> 00:22:32,840
Speaker 4: just looks at the equity allocation and puts basically standard

477
00:22:32,840 --> 00:22:36,240
Speaker 4: deviation bands around that. And as you might expect from

478
00:22:36,280 --> 00:22:38,880
Speaker 4: Wall Street gets really bullish. That's a bearers sign. Wall

479
00:22:38,880 --> 00:22:40,840
Speaker 4: Street gets really bearish. That's a bullish sign.

480
00:22:41,280 --> 00:22:43,800
Speaker 2: So when you said this turn positive, it was because

481
00:22:43,840 --> 00:22:45,040
Speaker 2: the street was the street.

482
00:22:44,800 --> 00:22:49,200
Speaker 4: Got incredibly negative, incredibly negative. And so from my point

483
00:22:49,200 --> 00:22:51,480
Speaker 4: of view. And what you're referring to was that do

484
00:22:51,520 --> 00:22:54,399
Speaker 4: I stay at Meryll and try to convince everybody to

485
00:22:54,400 --> 00:22:55,480
Speaker 4: be more bullish, or do.

486
00:22:55,400 --> 00:22:56,720
Speaker 3: I go off and start my own firm.

487
00:22:56,760 --> 00:22:59,520
Speaker 4: And I just thought it'd be better, given all the

488
00:22:59,520 --> 00:23:02,399
Speaker 4: other things we discussed, it was better to start my own.

489
00:23:02,240 --> 00:23:05,560
Speaker 2: Firm, preferable to going on the call and telling it

490
00:23:06,800 --> 00:23:12,399
Speaker 2: like I could just imagine the sort of pushback Bernstein is.

491
00:23:12,440 --> 00:23:15,800
Speaker 2: He's now a permeable. He's crazy. How we just during

492
00:23:15,840 --> 00:23:18,240
Speaker 2: in the middle of this crisis, How on earth can

493
00:23:18,280 --> 00:23:21,399
Speaker 2: we recommend clients buy inequities. Yeah, that's the sort of stuff.

494
00:23:21,440 --> 00:23:24,000
Speaker 4: Yeah, And it was the kind of thing where, you know,

495
00:23:24,040 --> 00:23:26,000
Speaker 4: certainly on the private client side. For those of you

496
00:23:26,040 --> 00:23:29,520
Speaker 4: to remember, you know, in twentsyd and eight, nine, ten, eleven, twelve,

497
00:23:30,119 --> 00:23:32,679
Speaker 4: the story was all about bonds, bonds, bonds, bonds, bonds,

498
00:23:32,720 --> 00:23:35,639
Speaker 4: and nobody wanted the risk of equities. And if you

499
00:23:35,720 --> 00:23:39,760
Speaker 4: twisted their arm, maybe they would invest in large cap,

500
00:23:39,880 --> 00:23:43,680
Speaker 4: high quality, dividend paying stocks. But there was no way

501
00:23:43,760 --> 00:23:45,640
Speaker 4: that they were going to take any kind of beta risk.

502
00:23:46,119 --> 00:23:50,680
Speaker 2: So no technology, no growth firms, nothing, nothing with any

503
00:23:50,760 --> 00:23:52,760
Speaker 2: amount of potential volatility.

504
00:23:52,880 --> 00:23:56,280
Speaker 4: No volatility was terrible risk taking was terrible. They were

505
00:23:56,359 --> 00:23:57,560
Speaker 4: under their desk in the fetal position.

506
00:23:58,160 --> 00:24:00,879
Speaker 2: And in hindsight, was there a better time ever to

507
00:24:00,920 --> 00:24:02,520
Speaker 2: put money into those sort of stocks.

508
00:24:02,640 --> 00:24:04,800
Speaker 4: I'm not sure in our careers there has been. Maybe

509
00:24:04,800 --> 00:24:07,359
Speaker 4: maybe eighty two, right, if you think back to right

510
00:24:07,400 --> 00:24:09,399
Speaker 4: in the beginning, maybe maybe eighty.

511
00:24:09,160 --> 00:24:11,159
Speaker 3: Two was a time. And I do remember that.

512
00:24:11,240 --> 00:24:14,679
Speaker 4: I'm old enough where I do remember, you know, what

513
00:24:15,000 --> 00:24:17,280
Speaker 4: the sentiment was like, and certainly I was. I had

514
00:24:17,440 --> 00:24:19,760
Speaker 4: very little experience on Wall Street. I know what my

515
00:24:19,920 --> 00:24:21,919
Speaker 4: sentiment was like in eighty two. I couldn't believe that

516
00:24:21,960 --> 00:24:23,160
Speaker 4: the market would be going up.

517
00:24:23,800 --> 00:24:27,560
Speaker 2: And but you just had a sixteen year bear market. Yeah,

518
00:24:27,600 --> 00:24:30,480
Speaker 2: you finally got over a thousand on the Dow, which

519
00:24:30,520 --> 00:24:32,680
Speaker 2: I want to say, we first kissed in sixty six

520
00:24:32,840 --> 00:24:36,479
Speaker 2: something like that, right, and so it's sixteen years later. Again,

521
00:24:37,320 --> 00:24:40,159
Speaker 2: everybody seems to always be looking backward.

522
00:24:40,160 --> 00:24:42,960
Speaker 4: It's not absolutely, And so the lesson, the lesson from that,

523
00:24:43,080 --> 00:24:45,640
Speaker 4: you know, when I was a young pup was you know, gee,

524
00:24:45,640 --> 00:24:49,879
Speaker 4: I really know what I was talking about, and you know,

525
00:24:49,920 --> 00:24:52,560
Speaker 4: I learned that from from various people working on Wall Street,

526
00:24:52,640 --> 00:24:56,080
Speaker 4: and you know, so when it came to nine, I

527
00:24:56,200 --> 00:24:57,320
Speaker 4: was kind of determined not.

528
00:24:57,240 --> 00:24:58,399
Speaker 3: To make the same mistake again.

529
00:24:58,760 --> 00:25:02,240
Speaker 2: So it's funny because another quote of yours kind of

530
00:25:02,280 --> 00:25:06,080
Speaker 2: cracked me up that I always found this intriguing. You

531
00:25:06,160 --> 00:25:09,679
Speaker 2: suggest always have a ten percent annual target for the

532
00:25:09,720 --> 00:25:13,880
Speaker 2: S and P five hundred despite being bearish. I love

533
00:25:14,000 --> 00:25:18,840
Speaker 2: that that optimism, but how can you maintain that bullishness

534
00:25:19,040 --> 00:25:19,720
Speaker 2: when you're bare?

535
00:25:19,920 --> 00:25:22,159
Speaker 4: Yes, so what Barry is as I'm sure you know,

536
00:25:22,359 --> 00:25:26,200
Speaker 4: the cell site strategists are always pestered for their target.

537
00:25:26,640 --> 00:25:28,879
Speaker 4: That your target on the S and P. And I

538
00:25:28,960 --> 00:25:31,840
Speaker 4: used to think that was the most watched, least important

539
00:25:31,840 --> 00:25:34,920
Speaker 4: thing I ever did right, And so I would never

540
00:25:34,960 --> 00:25:37,280
Speaker 4: put a number out. I would never give people a

541
00:25:37,320 --> 00:25:40,800
Speaker 4: firm number, but I would always answer the question by saying, well,

542
00:25:40,920 --> 00:25:43,240
Speaker 4: we don't really have an official target, but we have

543
00:25:43,280 --> 00:25:47,240
Speaker 4: a ten percent expected return. And nobody ever noticed that

544
00:25:47,240 --> 00:25:49,880
Speaker 4: ten percent is roughly the long term return.

545
00:25:49,680 --> 00:25:53,439
Speaker 2: Of the SMB we dived and reinvest and change two percent.

546
00:25:53,560 --> 00:25:55,879
Speaker 4: So I used to always say ten percent, and that

547
00:25:55,880 --> 00:25:59,280
Speaker 4: would make everybody happy. And so regardless whether as bullish

548
00:25:59,359 --> 00:26:02,040
Speaker 4: or bearish, I always answer the question saying, I don't know,

549
00:26:02,080 --> 00:26:05,080
Speaker 4: we have a ten percent expective return, and and that

550
00:26:05,160 --> 00:26:08,719
Speaker 4: kept people satisfied. But I really don't think that the

551
00:26:08,760 --> 00:26:11,600
Speaker 4: notion of what is your target is an appropriate thing

552
00:26:11,640 --> 00:26:12,960
Speaker 4: to discuss as an investor.

553
00:26:13,280 --> 00:26:14,000
Speaker 3: Look, if you want to be.

554
00:26:14,000 --> 00:26:15,919
Speaker 4: A trader, and you want to, you want to, you know,

555
00:26:15,960 --> 00:26:17,720
Speaker 4: do a lot of short term trading. I get that,

556
00:26:17,800 --> 00:26:21,320
Speaker 4: and I understand it. For a true investor, I think

557
00:26:21,359 --> 00:26:22,600
Speaker 4: it's kind of a silly discussion.

558
00:26:22,880 --> 00:26:28,000
Speaker 2: Huh really really amusing on your website and elsewhere, I've

559
00:26:28,040 --> 00:26:33,840
Speaker 2: seen the phrase from you, pactive investment. Yes, define what

560
00:26:34,240 --> 00:26:35,240
Speaker 2: pactive investment?

561
00:26:35,320 --> 00:26:37,520
Speaker 3: Right? So pactive, which is a trademark term.

562
00:26:37,720 --> 00:26:41,480
Speaker 2: So literally my next question. I saw the registered trademark.

563
00:26:41,520 --> 00:26:42,520
Speaker 3: It is a trademark term.

564
00:26:43,240 --> 00:26:44,960
Speaker 2: You literally did that. That's why we did that.

565
00:26:45,160 --> 00:26:49,399
Speaker 4: And uh so pactive stands for the active use of

566
00:26:49,480 --> 00:26:53,639
Speaker 4: passive investors and investments. And what we're really referring to

567
00:26:53,720 --> 00:26:56,200
Speaker 4: here are a lot of ETFs And you know, we're

568
00:26:56,240 --> 00:26:59,000
Speaker 4: a macro firm. We claim to know nothing about coke

569
00:26:59,119 --> 00:27:03,200
Speaker 4: versus pepsi, but rather, you know, we look at size, style,

570
00:27:03,280 --> 00:27:06,240
Speaker 4: geography and you know, acid allocation, things like that and

571
00:27:06,320 --> 00:27:09,879
Speaker 4: ETF's are right in our wheelhouse. It's been a great

572
00:27:09,880 --> 00:27:13,439
Speaker 4: invention and we're very big users of ETFs. Jack Bogel

573
00:27:13,480 --> 00:27:15,240
Speaker 4: I met many times when he was alive, and I

574
00:27:15,280 --> 00:27:17,000
Speaker 4: always thought he was one of the smartest guys I

575
00:27:17,040 --> 00:27:20,360
Speaker 4: ever met in my career. But one of the things

576
00:27:20,400 --> 00:27:22,320
Speaker 4: that and Jack would always say, don't talk to an

577
00:27:22,359 --> 00:27:25,160
Speaker 4: active manager, just go buy an index. Right, okay, fine,

578
00:27:25,280 --> 00:27:27,600
Speaker 4: But what Jack would and that's an interesting discussion. We

579
00:27:27,600 --> 00:27:29,160
Speaker 4: can have the discussion all day long as to why

580
00:27:29,160 --> 00:27:31,440
Speaker 4: that happens or doesn't happen, whether he's right or wrong.

581
00:27:31,520 --> 00:27:33,480
Speaker 4: But the one thing that Jack would never tell anybody

582
00:27:33,760 --> 00:27:35,159
Speaker 4: is what index to buy.

583
00:27:34,960 --> 00:27:36,000
Speaker 3: And when right.

584
00:27:36,320 --> 00:27:39,200
Speaker 4: And you know, one may say, well, that sounds silly,

585
00:27:39,280 --> 00:27:41,720
Speaker 4: but there's been many times in the past where if

586
00:27:41,720 --> 00:27:44,800
Speaker 4: you had bought the wrong index at the wrong time,

587
00:27:45,320 --> 00:27:49,000
Speaker 4: your portfolio suffered dramatically for an extended period of time.

588
00:27:49,240 --> 00:27:52,560
Speaker 4: For instance, if you had bought Nasdaq or even the

589
00:27:52,680 --> 00:27:57,320
Speaker 4: S and P ETF in March of two thousand, for sure, right,

590
00:27:57,400 --> 00:28:01,159
Speaker 4: you then entered the Lost decade inequities, and your return

591
00:28:01,240 --> 00:28:04,560
Speaker 4: for a decade was slightly negative. If you had been

592
00:28:04,560 --> 00:28:08,280
Speaker 4: in other things like emerging markets or energy or you know,

593
00:28:08,359 --> 00:28:10,680
Speaker 4: all kinds of small caps, all these different things, you

594
00:28:10,720 --> 00:28:14,160
Speaker 4: would have done fabulously well, you know, if you bought

595
00:28:14,160 --> 00:28:16,040
Speaker 4: small caps at the peak of the small cap bull

596
00:28:16,119 --> 00:28:20,360
Speaker 4: market in nineteen eighty three, it took you seventeen years

597
00:28:20,800 --> 00:28:22,480
Speaker 4: to catch up to the S and P, so you

598
00:28:22,520 --> 00:28:25,320
Speaker 4: would have been neutral. So you know, everybody says, oh,

599
00:28:25,320 --> 00:28:27,000
Speaker 4: I'm a I'm a long term investor, I'm just going

600
00:28:27,040 --> 00:28:29,240
Speaker 4: to buy an index. If you buy the wrong index

601
00:28:29,240 --> 00:28:32,919
Speaker 4: at the wrong time, it can have a real detrimental effect.

602
00:28:32,920 --> 00:28:35,439
Speaker 4: And that's what pactive investing is supposed to be all about,

603
00:28:36,040 --> 00:28:40,280
Speaker 4: is the active decision making around these passive investments.

604
00:28:40,280 --> 00:28:44,080
Speaker 2: So let's delve into that decision making. How do you

605
00:28:44,240 --> 00:28:48,240
Speaker 2: decide which index is the one that you want to own?

606
00:28:48,800 --> 00:28:52,120
Speaker 2: What data are you looking at, how you're crunching numbers

607
00:28:52,120 --> 00:28:52,280
Speaker 2: for this.

608
00:28:52,600 --> 00:28:55,800
Speaker 4: So Barry I mentioned that we are macro investors. You know,

609
00:28:56,120 --> 00:28:59,400
Speaker 4: we're not looking at individual stocks. So everything we do

610
00:28:59,520 --> 00:29:01,680
Speaker 4: is going to fall there some macro umbrella of one

611
00:29:01,680 --> 00:29:03,760
Speaker 4: form or another. And the way to think about it is,

612
00:29:03,800 --> 00:29:05,920
Speaker 4: it's going to fall into three categories. Everything we look

613
00:29:05,920 --> 00:29:07,959
Speaker 4: at it's going to fall into three categories. Number one

614
00:29:08,200 --> 00:29:11,200
Speaker 4: would be corporate profits. One of the things that I

615
00:29:11,200 --> 00:29:13,400
Speaker 4: wrote about extensively even when I was at Maryland through

616
00:29:13,440 --> 00:29:16,560
Speaker 4: my entire careers. I've argued that equity investors spend too

617
00:29:16,640 --> 00:29:19,400
Speaker 4: much time worrying about the economy and not enough time

618
00:29:19,440 --> 00:29:22,480
Speaker 4: worrying about corporate profits. The stock market doesn't really care

619
00:29:22,480 --> 00:29:26,240
Speaker 4: about GDP. The stock market cares about corporate profits.

620
00:29:25,840 --> 00:29:28,280
Speaker 2: Because GDP is reflected in profits.

621
00:29:28,360 --> 00:29:31,360
Speaker 4: If it's right, GDP is going to be a contributor.

622
00:29:31,360 --> 00:29:34,560
Speaker 4: But a lot of other things contribute right to corporate profits.

623
00:29:34,760 --> 00:29:38,680
Speaker 4: We're looking at corporate profits and profit cycles, not economic cycles.

624
00:29:38,960 --> 00:29:43,000
Speaker 4: Number two category is going to be what we call liquidity.

625
00:29:43,560 --> 00:29:46,240
Speaker 4: And liquidity is going to be anything from central banks,

626
00:29:46,600 --> 00:29:52,280
Speaker 4: central bank actions, to lending standards from banks, anything that's

627
00:29:52,280 --> 00:29:56,520
Speaker 4: going to allow more leverage and greater liquidity and investable

628
00:29:56,520 --> 00:29:59,760
Speaker 4: assets in a stopworker. And then number three is going

629
00:29:59,800 --> 00:30:04,120
Speaker 4: to be sentiment and valuation. Now, sometimes people say, well,

630
00:30:04,320 --> 00:30:09,000
Speaker 4: sentiment and valuation, why are they together? And my answer, yeah,

631
00:30:09,000 --> 00:30:12,360
Speaker 4: My answer is that valuation is a reflection of sentiment. Yeah,

632
00:30:12,400 --> 00:30:15,400
Speaker 4: you can't have an overvalued asset that people hate or

633
00:30:15,440 --> 00:30:18,240
Speaker 4: an undervalued asset that people love. That that doesn't make

634
00:30:18,240 --> 00:30:21,800
Speaker 4: any sense. So valuation is going to reflect sentiment. And

635
00:30:21,880 --> 00:30:24,040
Speaker 4: so what we're basically looking for if you think about

636
00:30:24,040 --> 00:30:27,280
Speaker 4: those three categories I just mentioned. We're looking for situations

637
00:30:27,280 --> 00:30:31,640
Speaker 4: where fundamentals are improving, liquidity is adequate or getting better,

638
00:30:31,880 --> 00:30:36,760
Speaker 4: and everybody hates it, or vice versa, where fundamentals are deteriorating,

639
00:30:36,840 --> 00:30:39,280
Speaker 4: liquidity is drawing up and everybody loves it. We're going

640
00:30:39,360 --> 00:30:42,120
Speaker 4: to try and stay away from that. That's that's maybe

641
00:30:42,160 --> 00:30:45,120
Speaker 4: a gross simplification of what we do, but but that's

642
00:30:45,200 --> 00:30:45,880
Speaker 4: kind of what we do.

643
00:30:46,000 --> 00:30:50,240
Speaker 2: But that's pactive. That's how you're selecting from broad index

644
00:30:50,360 --> 00:30:52,920
Speaker 2: is just the right index at the right time and

645
00:30:52,960 --> 00:30:54,760
Speaker 2: avoiding the wrong index at the wrong time.

646
00:30:54,840 --> 00:30:56,200
Speaker 3: Correct. That's exactly what we're trying to.

647
00:30:56,520 --> 00:30:59,920
Speaker 2: Really interesting, one of the things that comes up when

648
00:31:00,120 --> 00:31:05,200
Speaker 2: we're talking about various style investing comes right from one

649
00:31:05,240 --> 00:31:10,520
Speaker 2: of your books, and it's about media noise. How do

650
00:31:10,560 --> 00:31:15,080
Speaker 2: you focus on the right index when there's so much

651
00:31:15,160 --> 00:31:18,800
Speaker 2: noise and so much stuff going on, and it's especially

652
00:31:18,960 --> 00:31:24,320
Speaker 2: with algorithmic social media, it's just a firehouse nonsense. How

653
00:31:24,320 --> 00:31:26,040
Speaker 2: do you separate the signal.

654
00:31:25,720 --> 00:31:26,280
Speaker 3: From the noise?

655
00:31:26,360 --> 00:31:30,080
Speaker 4: Yeah, so I wrote a book in twenty so twenty

656
00:31:30,080 --> 00:31:31,960
Speaker 4: five years ago I wrote a book that was called

657
00:31:32,040 --> 00:31:35,880
Speaker 4: Navigate the Noise. I remember investing in the New age

658
00:31:35,960 --> 00:31:38,640
Speaker 4: of media and hype. Twenty five years ago, I wrote

659
00:31:38,640 --> 00:31:39,720
Speaker 4: about the new age of.

660
00:31:39,760 --> 00:31:41,240
Speaker 2: Media and you were ahead of this.

661
00:31:41,680 --> 00:31:44,720
Speaker 4: You think it's gotten a bit worse since just twenty

662
00:31:44,720 --> 00:31:45,280
Speaker 4: five years.

663
00:31:45,360 --> 00:31:51,320
Speaker 2: So just as a reminder, this is pre Twitter, pre Facebook,

664
00:31:51,480 --> 00:31:56,760
Speaker 2: pre LinkedIn, forget Instagram, TikTok, Like, this was just like

665
00:31:56,920 --> 00:31:58,720
Speaker 2: message boards and websites.

666
00:31:58,920 --> 00:32:03,360
Speaker 4: Yeah, I mean you're just beginning to get websites in depth,

667
00:32:03,840 --> 00:32:06,800
Speaker 4: but we're really still talking about a period of hard

668
00:32:06,840 --> 00:32:09,200
Speaker 4: copy research reports and television.

669
00:32:09,360 --> 00:32:10,840
Speaker 3: Wow, that's really what, you know.

670
00:32:10,920 --> 00:32:14,440
Speaker 4: The main stay of what people were looking at the

671
00:32:14,480 --> 00:32:16,520
Speaker 4: point of the book was to say that building wealth

672
00:32:17,160 --> 00:32:19,560
Speaker 4: for an individual investor is actually not that difficult.

673
00:32:20,120 --> 00:32:22,400
Speaker 3: Why don't people do it? Why don't people do this

674
00:32:22,520 --> 00:32:23,880
Speaker 3: is kind of silly, and.

675
00:32:23,840 --> 00:32:27,800
Speaker 2: Well, wait, when you say it's not that difficult, we

676
00:32:28,440 --> 00:32:32,240
Speaker 2: intell actually understand. My friend Dave Nadig loves to say

677
00:32:32,840 --> 00:32:35,959
Speaker 2: investing is a problem that's been solved, but the problem

678
00:32:35,960 --> 00:32:39,240
Speaker 2: that has been solved is the human behavior around.

679
00:32:38,920 --> 00:32:41,920
Speaker 4: It, exactly exactly. And so what the book tries to

680
00:32:42,040 --> 00:32:45,360
Speaker 4: argue is that there's some very sound principles that everybody

681
00:32:45,360 --> 00:32:48,440
Speaker 4: should be following to build wealth, but yet there's a

682
00:32:48,480 --> 00:32:50,680
Speaker 4: siren song if you will, if you're into Greek mythology,

683
00:32:50,720 --> 00:32:55,360
Speaker 4: there's a siren song of things telling you of noise,

684
00:32:55,440 --> 00:32:58,360
Speaker 4: telling you that there's something newer, better get rich quick,

685
00:32:58,520 --> 00:33:00,480
Speaker 4: you know, all these kind of things that are going on,

686
00:33:00,920 --> 00:33:01,960
Speaker 4: and to continue with that.

687
00:33:02,080 --> 00:33:03,800
Speaker 3: Your portfolio it follows.

688
00:33:03,440 --> 00:33:05,440
Speaker 4: That sound and crashes on the rocks, if you want

689
00:33:05,480 --> 00:33:09,800
Speaker 4: to get the mythology example. And so what the book

690
00:33:09,840 --> 00:33:13,000
Speaker 4: says is the way to solve this problem of this

691
00:33:13,080 --> 00:33:18,640
Speaker 4: incessant noise is to hardcore follow a process and come

692
00:33:18,720 --> 00:33:21,760
Speaker 4: hell or high water, you're going to stick to that process.

693
00:33:21,880 --> 00:33:23,680
Speaker 2: That's the mass. You tie yourself to.

694
00:33:23,800 --> 00:33:26,080
Speaker 4: That exactly right, and put the wax in your ears,

695
00:33:26,120 --> 00:33:30,520
Speaker 4: the whole routine right. And and that's that's what we do.

696
00:33:30,520 --> 00:33:31,000
Speaker 3: As a firm.

697
00:33:31,040 --> 00:33:33,640
Speaker 4: We have a very hard core process. It's macro driven,

698
00:33:33,960 --> 00:33:36,000
Speaker 4: but we're going to follow that process, come hell or

699
00:33:36,080 --> 00:33:36,480
Speaker 4: high water.

700
00:33:37,640 --> 00:33:37,840
Speaker 2: You know.

701
00:33:37,880 --> 00:33:38,760
Speaker 3: It's it's funny.

702
00:33:39,680 --> 00:33:42,320
Speaker 4: People understand that, and they understand what we do, We

703
00:33:42,400 --> 00:33:45,320
Speaker 4: understand why they do. They understand the notion of the book,

704
00:33:46,520 --> 00:33:49,080
Speaker 4: but yet they get very angry when we're not following

705
00:33:49,080 --> 00:33:52,040
Speaker 4: the siren song of what's the newest, baddest, you know.

706
00:33:52,280 --> 00:33:56,840
Speaker 2: Shiniest object that's out there, so walk us through the process.

707
00:33:57,200 --> 00:33:59,640
Speaker 2: I know you have a couple of core beliefs in

708
00:33:59,680 --> 00:34:01,400
Speaker 2: your tell us about it.

709
00:34:01,800 --> 00:34:04,520
Speaker 4: So I mentioned profit cycles. I think for us that

710
00:34:04,800 --> 00:34:08,560
Speaker 4: is the most important part of our process. And as

711
00:34:08,600 --> 00:34:11,040
Speaker 4: I said before, people spend too much time worrying about

712
00:34:11,080 --> 00:34:14,680
Speaker 4: economic cycles and not enough time worrying about profit cycles.

713
00:34:14,840 --> 00:34:18,080
Speaker 2: To find profit cycle. And because we are all familiar

714
00:34:18,160 --> 00:34:21,160
Speaker 2: with the business cycle and the economic cycle, what is

715
00:34:21,200 --> 00:34:22,080
Speaker 2: a profit cycle?

716
00:34:22,120 --> 00:34:25,120
Speaker 4: So you know whereas people look at GDP growth or

717
00:34:25,120 --> 00:34:27,800
Speaker 4: industrial production growth and they say, this is the economic cycle,

718
00:34:28,080 --> 00:34:30,640
Speaker 4: Well we're looking at is corporate profits growth? Now let's

719
00:34:30,680 --> 00:34:32,719
Speaker 4: just as an example, we look at profit cycles all

720
00:34:32,760 --> 00:34:35,360
Speaker 4: around the world. But let's take for example, the S

721
00:34:35,400 --> 00:34:39,000
Speaker 4: and P five hundred, the US profit cycle. What happens

722
00:34:39,040 --> 00:34:41,760
Speaker 4: is the difference between an economic cycle and a profit cycle.

723
00:34:41,840 --> 00:34:44,160
Speaker 4: Number one is that profit cycles tend.

724
00:34:44,080 --> 00:34:44,960
Speaker 3: To boom and bust.

725
00:34:45,880 --> 00:34:48,200
Speaker 4: Fortunately, the overall economy does not do that on a

726
00:34:48,239 --> 00:34:52,200
Speaker 4: regular basis. And secondly, profit cycles have a shorter periodicity,

727
00:34:52,239 --> 00:34:55,800
Speaker 4: so you can get multiple profit cycles in one economic cycle.

728
00:34:55,880 --> 00:34:59,399
Speaker 4: Periodicity meaning the amount of time, right, got it right?

729
00:34:59,480 --> 00:35:01,799
Speaker 4: So where's an economic cycle? Maybe it's going to take

730
00:35:01,840 --> 00:35:05,040
Speaker 4: four or eight years. You could have multiple profit cycles

731
00:35:05,040 --> 00:35:07,600
Speaker 4: in that four eight year period.

732
00:35:07,040 --> 00:35:09,520
Speaker 2: So how do you define the peak and the troth

733
00:35:09,600 --> 00:35:10,480
Speaker 2: of profit size?

734
00:35:10,520 --> 00:35:12,680
Speaker 4: So what happens is, you know, if you look at

735
00:35:12,719 --> 00:35:15,040
Speaker 4: the growth rate of corporate profits, you will see it

736
00:35:15,080 --> 00:35:19,560
Speaker 4: follows a pretty normal cycle through time, and our challenge

737
00:35:19,719 --> 00:35:24,000
Speaker 4: as investors is to find indicators that will allow us

738
00:35:24,000 --> 00:35:27,760
Speaker 4: to effectively forecast that profit cycle. Now, we don't really

739
00:35:27,800 --> 00:35:30,880
Speaker 4: care whether the profit cycle, whether earning strowth is going

740
00:35:30,920 --> 00:35:33,680
Speaker 4: to be seven percent or eight percent or ten percent,

741
00:35:33,680 --> 00:35:36,120
Speaker 4: which is a very common question people get asked, or

742
00:35:36,200 --> 00:35:39,120
Speaker 4: minus five or minus six or minus seven. We kind

743
00:35:39,120 --> 00:35:41,319
Speaker 4: of want to know is it getting better or is

744
00:35:41,320 --> 00:35:42,040
Speaker 4: it getting worse?

745
00:35:42,040 --> 00:35:43,520
Speaker 2: Scending up exactly?

746
00:35:43,560 --> 00:35:46,520
Speaker 4: So if profits go thus five percent, what's the probability

747
00:35:46,520 --> 00:35:49,080
Speaker 4: of going to ten percent as opposed to going to zero.

748
00:35:50,000 --> 00:35:51,719
Speaker 4: So we spend an awful lot of time with a

749
00:35:51,719 --> 00:35:54,880
Speaker 4: lot of indicators that look at that. What are the

750
00:35:54,880 --> 00:35:55,839
Speaker 4: indicators look at?

751
00:35:55,880 --> 00:35:56,120
Speaker 2: Well?

752
00:35:56,120 --> 00:36:00,000
Speaker 4: Look, profitability is a pretty simple formula. It's how much

753
00:36:00,000 --> 00:36:03,080
Speaker 4: what stuff are you selling? And what's your margin per item?

754
00:36:03,440 --> 00:36:05,319
Speaker 4: I mean, that's really all profitability is.

755
00:36:05,520 --> 00:36:07,600
Speaker 2: Well, but there's a couple of factors that go in.

756
00:36:07,680 --> 00:36:11,560
Speaker 2: What is the cost of capital and credit exact inflation rates.

757
00:36:11,640 --> 00:36:13,359
Speaker 4: But that would be in your margin, right, I mean,

758
00:36:13,440 --> 00:36:16,920
Speaker 4: and so which affects profits, which affects produits. So all

759
00:36:16,960 --> 00:36:18,959
Speaker 4: our indicators are either going to try to figure out

760
00:36:19,000 --> 00:36:22,160
Speaker 4: how much stuff is. Let's take the SMP of one

761
00:36:22,200 --> 00:36:23,920
Speaker 4: hundred or s and p F one hundred companies going

762
00:36:24,000 --> 00:36:26,560
Speaker 4: to sell, and what's going to be their margin p products.

763
00:36:26,600 --> 00:36:28,960
Speaker 4: So margin, as you point out, could be interest rates,

764
00:36:29,280 --> 00:36:32,160
Speaker 4: it could be labor costs, it could be pricing power

765
00:36:32,200 --> 00:36:35,680
Speaker 4: because of inflation. People forget inflation isn't bad for a

766
00:36:35,680 --> 00:36:37,839
Speaker 4: lot of corporate profits, right.

767
00:36:37,800 --> 00:36:40,480
Speaker 2: But you can currently learn that during the pandemic exactly.

768
00:36:40,680 --> 00:36:42,799
Speaker 4: So those are the type of things that we're looking

769
00:36:42,840 --> 00:36:43,880
Speaker 4: at in terms of profitsycle.

770
00:36:43,960 --> 00:36:44,919
Speaker 3: And as I said, we look at.

771
00:36:44,800 --> 00:36:47,480
Speaker 4: Profit cycles all around the world. We look at them

772
00:36:47,520 --> 00:36:51,319
Speaker 4: by region, by country, we look at by sectors. You know,

773
00:36:51,360 --> 00:36:54,120
Speaker 4: we look at profit cycles for say the tech sector,

774
00:36:54,160 --> 00:36:56,719
Speaker 4: for the consumer staples sector or something like that as well.

775
00:36:56,800 --> 00:37:01,799
Speaker 2: So profit cycle is one of the I try, it's

776
00:37:01,840 --> 00:37:04,440
Speaker 2: the key, all right, what are the other elements that

777
00:37:04,480 --> 00:37:06,560
Speaker 2: you're considering in addition to the profit side.

778
00:37:06,760 --> 00:37:10,239
Speaker 4: So next would be liquidity, okay, And liquidity is a

779
00:37:10,280 --> 00:37:14,080
Speaker 4: function of several different things. It's obviously a function of

780
00:37:14,120 --> 00:37:19,120
Speaker 4: monetary policy. We follow monetary policy in forty three countries

781
00:37:19,160 --> 00:37:22,040
Speaker 4: around the world. You know that sounds silly, and obviously

782
00:37:22,080 --> 00:37:23,719
Speaker 4: in the G seven or G ten you get a

783
00:37:23,760 --> 00:37:25,680
Speaker 4: lot more information than that would in but you know,

784
00:37:26,080 --> 00:37:29,920
Speaker 4: some weird emerging market country. But we do follow central

785
00:37:29,920 --> 00:37:33,040
Speaker 4: bank policy. We follow yield curves, the slope of the

786
00:37:33,080 --> 00:37:36,759
Speaker 4: yel curves, right, whether you've got a bullish steepening of

787
00:37:36,800 --> 00:37:39,479
Speaker 4: the curve in other words, or interest rates coming down,

788
00:37:39,520 --> 00:37:41,800
Speaker 4: but the curve of steepening, interest rates going up, but

789
00:37:41,880 --> 00:37:44,680
Speaker 4: the curve of steepening, or is the curve inverting. I mean,

790
00:37:44,680 --> 00:37:46,760
Speaker 4: we look at all these different things. They have different

791
00:37:46,760 --> 00:37:49,720
Speaker 4: implications for sector rotation and things like that as well.

792
00:37:50,280 --> 00:37:53,200
Speaker 4: So and then we follow things like bank lending standards.

793
00:37:53,239 --> 00:37:54,680
Speaker 4: Now that's obviously you can only get that in the

794
00:37:54,680 --> 00:37:58,600
Speaker 4: most developed countries, right, But that's an important consideration as well,

795
00:37:58,600 --> 00:38:02,640
Speaker 4: our banks tightening credit or easing credit. People say, well,

796
00:38:02,760 --> 00:38:05,000
Speaker 4: doesn't doesn't the central bank control that?

797
00:38:05,160 --> 00:38:07,000
Speaker 3: Well not really.

798
00:38:07,040 --> 00:38:08,840
Speaker 4: You can kind of lead a horse to water, but

799
00:38:08,880 --> 00:38:12,799
Speaker 4: you can't make it lend and and so so you

800
00:38:12,840 --> 00:38:15,200
Speaker 4: want to look at both central bank policies and the

801
00:38:15,239 --> 00:38:16,319
Speaker 4: willingness of banks to learn.

802
00:38:16,440 --> 00:38:20,600
Speaker 2: How how does the role of fiscal stimulus and spending

803
00:38:20,719 --> 00:38:22,400
Speaker 2: play into liquidity issues?

804
00:38:22,640 --> 00:38:26,919
Speaker 4: Yeah, so to some extent it does, and uh, it's

805
00:38:26,960 --> 00:38:28,840
Speaker 4: going to affect more. It's going to feed into ours

806
00:38:28,880 --> 00:38:31,080
Speaker 4: more to the corporate profit side in terms of how

807
00:38:31,160 --> 00:38:34,720
Speaker 4: much stuff are you going to sell? Right, because fiscal

808
00:38:34,760 --> 00:38:38,680
Speaker 4: stimulus is trying to stimulate consumption or aggregate demand if

809
00:38:38,719 --> 00:38:41,239
Speaker 4: you prefer to be a real economist here, it's going

810
00:38:41,320 --> 00:38:44,960
Speaker 4: to try and stimulate aggregate demand and that'll show up

811
00:38:45,000 --> 00:38:47,080
Speaker 4: in our stuff type type.

812
00:38:47,640 --> 00:38:50,279
Speaker 2: All right, So, so we have the profit cycle, we

813
00:38:50,400 --> 00:38:52,520
Speaker 2: have liquidity, and what's the third.

814
00:38:52,360 --> 00:38:56,600
Speaker 4: The third is sentiment and valuation, right, Okay, so obviously

815
00:38:56,920 --> 00:39:01,239
Speaker 4: we want we prefer to look at more under valued situations.

816
00:39:01,800 --> 00:39:05,280
Speaker 4: Sentiment we're trying to look for, basically, assets that people hate.

817
00:39:05,480 --> 00:39:08,680
Speaker 4: Valuation will reflect that, you know, if something's really undervalued,

818
00:39:08,760 --> 00:39:12,520
Speaker 4: something's really cheap, it reflects that people don't like it,

819
00:39:13,120 --> 00:39:15,320
Speaker 4: you know, And it's just like any other good in

820
00:39:15,400 --> 00:39:19,160
Speaker 4: any other market. If something's really expensive, it means people

821
00:39:19,239 --> 00:39:19,520
Speaker 4: like it.

822
00:39:19,960 --> 00:39:23,640
Speaker 2: So two questions from that. The first is how do

823
00:39:23,680 --> 00:39:26,120
Speaker 2: you distinguish and I already know the answer to this,

824
00:39:26,200 --> 00:39:30,560
Speaker 2: But how do you distinguish between a stock that is

825
00:39:30,719 --> 00:39:35,239
Speaker 2: disliked and cheap and a stock that's cheap because it's

826
00:39:35,239 --> 00:39:35,760
Speaker 2: in trouble.

827
00:39:35,920 --> 00:39:38,160
Speaker 4: Yeah, so what you're referring to, you know, we wouldn't

828
00:39:38,160 --> 00:39:40,120
Speaker 4: do this for individual stock, so we would do it

829
00:39:39,920 --> 00:39:43,040
Speaker 4: for for regions or sectors or whatever you know commonly

830
00:39:43,080 --> 00:39:45,719
Speaker 4: called the value trap. Yes, the value trap is something

831
00:39:45,760 --> 00:39:48,960
Speaker 4: that's cheap for good reason. And so what we do.

832
00:39:49,000 --> 00:39:53,960
Speaker 4: We have models that try to look at various industry, sectors, countries, whatever,

833
00:39:54,400 --> 00:39:56,480
Speaker 4: that are trying to look for it not only cheapness,

834
00:39:56,640 --> 00:40:00,239
Speaker 4: but some acceleration of corporate profits. Right, And and we

835
00:40:00,239 --> 00:40:02,920
Speaker 4: won't invest anything just because it's cheap. That doesn't mean

836
00:40:02,920 --> 00:40:03,840
Speaker 4: anything to us.

837
00:40:03,920 --> 00:40:05,960
Speaker 2: It's cheap plus some other indicators.

838
00:40:06,000 --> 00:40:06,360
Speaker 3: Correct.

839
00:40:06,719 --> 00:40:12,560
Speaker 2: And then the other question is consumer sentiment seems to

840
00:40:12,640 --> 00:40:15,919
Speaker 2: have gone off the rails post pandemic if you look

841
00:40:16,000 --> 00:40:19,480
Speaker 2: at where and I suspect this is a measurement problem,

842
00:40:19,480 --> 00:40:21,719
Speaker 2: but I want to get your sense. So if you

843
00:40:21,920 --> 00:40:25,520
Speaker 2: look at the University of Michigan consumer sentiment data for

844
00:40:25,600 --> 00:40:28,800
Speaker 2: the better part of the past five years, it's worse

845
00:40:28,880 --> 00:40:31,239
Speaker 2: than the worst part of the pandemic, worse than the

846
00:40:31,239 --> 00:40:35,120
Speaker 2: financial crisis, the eighty seven crash, like on and on,

847
00:40:35,360 --> 00:40:38,160
Speaker 2: it's shocking, worse than nine to eleven in the dot

848
00:40:38,200 --> 00:40:41,239
Speaker 2: com implosion, Like, wait, things aren't that bad.

849
00:40:41,320 --> 00:40:42,600
Speaker 3: No, they're not that bad at all.

850
00:40:42,760 --> 00:40:45,719
Speaker 2: What's going on with that sort of sentiment? And what

851
00:40:46,000 --> 00:40:49,800
Speaker 2: how do you use sentiment when you're trying to manage

852
00:40:49,840 --> 00:40:50,239
Speaker 2: around this?

853
00:40:50,719 --> 00:40:54,000
Speaker 4: You're asking, I think a more complicated question, maybe even

854
00:40:54,080 --> 00:40:56,799
Speaker 4: you think you're asking. But you know, everybody knows that

855
00:40:56,840 --> 00:41:00,200
Speaker 4: we're in a very uncertain environment, and I think that

856
00:41:00,480 --> 00:41:06,560
Speaker 4: those consumer sentiment readings right now reflect that immense uncertainty.

857
00:41:06,600 --> 00:41:09,239
Speaker 4: If you were to ask normal people, they might not

858
00:41:09,320 --> 00:41:11,560
Speaker 4: use the word uncertainty. They might use the word chaos,

859
00:41:11,560 --> 00:41:13,560
Speaker 4: they might use there's all kinds of different words that

860
00:41:13,560 --> 00:41:16,239
Speaker 4: people would use. I think that's what's being reflected in

861
00:41:16,280 --> 00:41:20,320
Speaker 4: those consumer sentiment numbers right now, is the uncertainty of

862
00:41:20,360 --> 00:41:23,879
Speaker 4: the impact that's having. You know, there's other surveys out

863
00:41:23,880 --> 00:41:27,920
Speaker 4: there that are showing similar type levels of uncertainty or

864
00:41:27,960 --> 00:41:31,239
Speaker 4: concern that aren't related to consumer but I think it's

865
00:41:31,239 --> 00:41:34,719
Speaker 4: a reflection of this. It's become a hackneyed word uncertainty.

866
00:41:35,120 --> 00:41:36,080
Speaker 4: I think that's what you're.

867
00:41:35,880 --> 00:41:38,880
Speaker 2: Saying I prefer the lack of clarity to uncertainty. But

868
00:41:39,000 --> 00:41:42,360
Speaker 2: let me bring this back to your book, Navigate the noise.

869
00:41:43,280 --> 00:41:47,120
Speaker 2: How much of this is a function of algorithmic social media,

870
00:41:47,640 --> 00:41:51,080
Speaker 2: which there was recently a study I want to say

871
00:41:51,080 --> 00:41:54,640
Speaker 2: it was Oxford Reuters that said Americans now get more

872
00:41:54,640 --> 00:41:57,239
Speaker 2: of their news from social media than anywhere else. Ye,

873
00:41:58,000 --> 00:42:03,239
Speaker 2: big issue. And then secondly, it seems like in the

874
00:42:03,280 --> 00:42:09,600
Speaker 2: world of clickbait crazy headlines, the media itself, if not

875
00:42:09,920 --> 00:42:14,239
Speaker 2: the news stories or columns, but the headlines certainly seem

876
00:42:14,280 --> 00:42:16,319
Speaker 2: to be more and more extreme, unbelievable.

877
00:42:16,400 --> 00:42:19,440
Speaker 4: So you know, I don't know how to answer that

878
00:42:19,480 --> 00:42:21,359
Speaker 4: from a societal point of view, but I can answer

879
00:42:21,400 --> 00:42:24,680
Speaker 4: it from my point of view as sort of a

880
00:42:24,680 --> 00:42:28,399
Speaker 4: fiduciary and an investor of other people's money. I think

881
00:42:28,440 --> 00:42:31,919
Speaker 4: it is my obligation to things. Is my obligation number one,

882
00:42:32,600 --> 00:42:36,080
Speaker 4: to be as dispassionate about my politics as I possibly can.

883
00:42:36,440 --> 00:42:37,640
Speaker 4: I mean, if you want to go have a beer,

884
00:42:37,680 --> 00:42:39,239
Speaker 4: we can talk politic that's fine, But I'm saying when

885
00:42:39,239 --> 00:42:41,680
Speaker 4: I'm investing, you have to be as dispassionate as you

886
00:42:41,719 --> 00:42:45,920
Speaker 4: can possibly be. And number two, I think it's incumbent

887
00:42:46,040 --> 00:42:51,080
Speaker 4: of all of us who manage money to search for

888
00:42:51,400 --> 00:42:55,279
Speaker 4: truly unbiased sources. Not who's going to give us the

889
00:42:55,320 --> 00:42:58,760
Speaker 4: most frequent news, but who's going to give us news

890
00:42:58,840 --> 00:43:01,680
Speaker 4: that is unbiased. I think it's incumbent on all of

891
00:43:01,760 --> 00:43:05,560
Speaker 4: us to do that. And I have found that in

892
00:43:05,600 --> 00:43:11,200
Speaker 4: the last year or so that my choices of news

893
00:43:11,480 --> 00:43:13,920
Speaker 4: media and what I read and what I pay attention

894
00:43:14,000 --> 00:43:15,040
Speaker 4: to has changed.

895
00:43:15,080 --> 00:43:15,600
Speaker 3: Because of that.

896
00:43:18,360 --> 00:43:19,600
Speaker 2: Feel free to name names.

897
00:43:20,200 --> 00:43:21,719
Speaker 4: You know a lot of people. I think one of

898
00:43:21,719 --> 00:43:23,239
Speaker 4: the questions you would plan to ask me was what

899
00:43:23,239 --> 00:43:24,800
Speaker 4: are you reading these days? And my answer is I

900
00:43:24,840 --> 00:43:28,799
Speaker 4: don't read an awful lot of these days because there's

901
00:43:28,800 --> 00:43:31,000
Speaker 4: so much going on. But what I what I have

902
00:43:31,160 --> 00:43:36,719
Speaker 4: begun to do is listen to podcasts. Okay, go on,

903
00:43:37,120 --> 00:43:40,840
Speaker 4: tell me about like this podcast, Like no, I'm buttering

904
00:43:40,840 --> 00:43:45,520
Speaker 4: you up here, but go on. There's three that I

905
00:43:45,560 --> 00:43:48,680
Speaker 4: would I would recommend to everybody. One is actually right

906
00:43:48,680 --> 00:43:53,040
Speaker 4: here at Bloomberg Bloomberg Law. And you'd say, like, why.

907
00:43:52,640 --> 00:43:55,560
Speaker 2: June Grasso, Yeah, yeah, yeah, why would you listen?

908
00:43:55,760 --> 00:43:57,080
Speaker 3: Why would you listen to Bloomberg?

909
00:43:57,400 --> 00:43:58,239
Speaker 2: It's fascinating?

910
00:43:58,320 --> 00:44:02,480
Speaker 3: And my answer is because everything these days is ending

911
00:44:02,560 --> 00:44:03,280
Speaker 3: up in the courts.

912
00:44:03,880 --> 00:44:06,719
Speaker 4: Have we ever had more issues with government in the

913
00:44:06,719 --> 00:44:08,000
Speaker 4: courts than ever before.

914
00:44:08,239 --> 00:44:09,480
Speaker 3: So I'm not a lawyer.

915
00:44:10,080 --> 00:44:14,680
Speaker 4: I don't know squat about you know, constitutional theory and everything,

916
00:44:15,280 --> 00:44:17,160
Speaker 4: and I'm sure most people don't either, but they're gonna

917
00:44:17,160 --> 00:44:20,200
Speaker 4: listen to some wack adoodle guy talk about this. I'd

918
00:44:20,280 --> 00:44:23,600
Speaker 4: rather listen to people who have our well granded opinions

919
00:44:24,040 --> 00:44:27,440
Speaker 4: and understand the history of law in terms of doing that.

920
00:44:27,520 --> 00:44:30,200
Speaker 2: So I'm so glad you brought that up because we

921
00:44:30,280 --> 00:44:34,760
Speaker 2: went through a run starting in twenty twenty where every

922
00:44:34,800 --> 00:44:40,000
Speaker 2: talking pundit Yahoo. First they were an epidemiologist exactly. Then

923
00:44:40,040 --> 00:44:44,400
Speaker 2: they were a virologist, then they were a constitutional scholar,

924
00:44:44,680 --> 00:44:47,640
Speaker 2: then they were a military strategist. You know, when someone

925
00:44:47,840 --> 00:44:52,680
Speaker 2: asked you was COVID from the wet lab or wet

926
00:44:52,719 --> 00:44:55,600
Speaker 2: wet market or escape from the lab, It's okay to say,

927
00:44:55,640 --> 00:44:58,399
Speaker 2: how the hell why I have no expertise in that,

928
00:44:58,480 --> 00:44:59,360
Speaker 2: why are you asking me?

929
00:44:59,760 --> 00:45:02,080
Speaker 4: Every But he had an opinion, so it seemed right,

930
00:45:02,280 --> 00:45:03,520
Speaker 4: exactly exactly.

931
00:45:03,600 --> 00:45:05,359
Speaker 3: And so yeah.

932
00:45:05,360 --> 00:45:06,920
Speaker 4: The other thing along with that that I love is

933
00:45:06,960 --> 00:45:10,799
Speaker 4: a well known epidemiologists or idiots. But the guy down

934
00:45:10,800 --> 00:45:13,600
Speaker 4: at GNC who sells me protein powder, he's a genius,

935
00:45:13,600 --> 00:45:15,240
Speaker 4: and he knows my health better than anybody.

936
00:45:15,560 --> 00:45:16,839
Speaker 3: I mean, it's just like, come on.

937
00:45:17,080 --> 00:45:20,400
Speaker 2: There was a New Yorker cartoon that I vividly remember,

938
00:45:20,640 --> 00:45:23,760
Speaker 2: right in the middle of the pandemic. It's the body

939
00:45:23,760 --> 00:45:26,200
Speaker 2: of an airplane and there's a guy standing up in

940
00:45:26,280 --> 00:45:31,320
Speaker 2: row seventeen b right, saying, we're tired of these pilots

941
00:45:31,320 --> 00:45:34,120
Speaker 2: telling us what to do. Who's with me? And it

942
00:45:34,200 --> 00:45:36,680
Speaker 2: was like that just sort of let the pilots fly

943
00:45:36,800 --> 00:45:38,160
Speaker 2: the plane, just sit down.

944
00:45:38,440 --> 00:45:42,240
Speaker 4: So Bloomberg Law is one that I listened to. I'm

945
00:45:42,280 --> 00:45:44,560
Speaker 4: not gonna say regularly because I don't have the time

946
00:45:44,600 --> 00:45:46,480
Speaker 4: to listen to every single one all the time. Yeah,

947
00:45:46,640 --> 00:45:48,840
Speaker 4: I thought, if I get a chance, I listened to it.

948
00:45:49,120 --> 00:45:52,839
Speaker 2: That's a fascinating show. Like you're you're surprising me because

949
00:45:52,840 --> 00:45:55,640
Speaker 2: I do the same as you. I listened to a

950
00:45:55,680 --> 00:45:56,799
Speaker 2: lot of them. Tell us the other two?

951
00:45:56,920 --> 00:46:00,520
Speaker 4: Yeah, so the other two are actually on in which

952
00:46:00,520 --> 00:46:03,960
Speaker 4: I realize people now suddenly decided I'm a wide eyed liberally.

953
00:46:04,040 --> 00:46:06,160
Speaker 2: Can I tell you my wife every time I get

954
00:46:06,160 --> 00:46:09,520
Speaker 2: into the car and she's been driving my car. It's

955
00:46:09,560 --> 00:46:13,000
Speaker 2: on NPR on Saturday Light Radio. And I had the

956
00:46:13,000 --> 00:46:15,839
Speaker 2: same thought until you listen to a few of them,

957
00:46:16,400 --> 00:46:17,719
Speaker 2: and they're fascinating.

958
00:46:17,800 --> 00:46:18,120
Speaker 3: They are.

959
00:46:18,160 --> 00:46:20,480
Speaker 4: And there's two shows in particular that I would recommend.

960
00:46:20,520 --> 00:46:22,960
Speaker 4: Two podcasts in particular I would recommend from MPR. One

961
00:46:23,040 --> 00:46:26,040
Speaker 4: is called Left, Right and Center, which is the name

962
00:46:26,080 --> 00:46:29,680
Speaker 4: implies you have three people talking about issues, one from

963
00:46:29,719 --> 00:46:31,280
Speaker 4: the left, one to the right, and one from the center.

964
00:46:31,520 --> 00:46:34,400
Speaker 2: Wait, they're gonna give us all views who could have imagined?

965
00:46:34,440 --> 00:46:38,040
Speaker 4: Who imagine that exactly? And they pick a topic and

966
00:46:38,360 --> 00:46:40,480
Speaker 4: sometimes I'm really interested in the topic, sometimes I'm not.

967
00:46:40,719 --> 00:46:43,520
Speaker 4: But whatever, the fact that you've got Left, Right and

968
00:46:43,560 --> 00:46:47,719
Speaker 4: Center in the same podcast is extraordinarily rare.

969
00:46:48,320 --> 00:46:51,000
Speaker 3: You don't get that a lot. So that's number one.

970
00:46:51,040 --> 00:46:53,480
Speaker 4: And the other one is another MPR podcast called Open

971
00:46:53,480 --> 00:46:57,240
Speaker 4: to Debate, which is very similar. They pick a topic

972
00:46:57,520 --> 00:47:01,040
Speaker 4: and this is more like a traditional debate where they

973
00:47:01,040 --> 00:47:01,960
Speaker 4: have debating.

974
00:47:01,640 --> 00:47:02,600
Speaker 3: Rules and all kinds of thing.

975
00:47:02,680 --> 00:47:06,160
Speaker 4: But it's a debate and you're gonna hear two sides

976
00:47:06,200 --> 00:47:07,040
Speaker 4: of an issue.

977
00:47:07,040 --> 00:47:07,239
Speaker 3: Now.

978
00:47:07,360 --> 00:47:10,080
Speaker 4: Look, sometimes the issues you don't care about. Sometimes they're

979
00:47:10,160 --> 00:47:11,480
Speaker 4: very important. Sometimes they're really cool.

980
00:47:11,520 --> 00:47:12,200
Speaker 3: Sometimes they're not.

981
00:47:12,239 --> 00:47:16,799
Speaker 4: I get that, but I think it's incumbent on us

982
00:47:16,880 --> 00:47:21,640
Speaker 4: as a class of money managers and fiduciaries to search

983
00:47:21,840 --> 00:47:25,880
Speaker 4: out those kind of shows. I would argue, if you

984
00:47:25,960 --> 00:47:29,719
Speaker 4: are a fiduciary and you are constantly listening to MSNBC

985
00:47:29,920 --> 00:47:33,839
Speaker 4: or Fox or Newsmags or whatever right you're you're doing

986
00:47:33,920 --> 00:47:36,080
Speaker 4: a disservice to your clients for sure.

987
00:47:36,200 --> 00:47:39,640
Speaker 2: So there are two things I have to share with

988
00:47:39,680 --> 00:47:45,200
Speaker 2: you because you're right in my favorite space. One is

989
00:47:45,960 --> 00:47:51,680
Speaker 2: planet money on NPR is something that they take this obscure,

990
00:47:52,400 --> 00:47:57,440
Speaker 2: fascinating little topic and we'll do a whole like way

991
00:47:57,480 --> 00:48:00,360
Speaker 2: down the rabbit hole deep dive. I don't know if

992
00:48:00,400 --> 00:48:03,440
Speaker 2: you recall during the Clinton administration, Hey, we're having problems

993
00:48:03,440 --> 00:48:06,759
Speaker 2: with wealth inequality, and so we're going to cap how

994
00:48:06,840 --> 00:48:09,560
Speaker 2: much we can pay CEOs in cash. If you want

995
00:48:09,560 --> 00:48:12,560
Speaker 2: to give them risky stock options, you can. And the

996
00:48:12,640 --> 00:48:16,799
Speaker 2: unintended consequences is it tenext the wealth gap and just

997
00:48:16,880 --> 00:48:20,560
Speaker 2: stories like that that are fascinating. The other thing is

998
00:48:20,640 --> 00:48:24,120
Speaker 2: you raise a point. I know you're not a lawyer,

999
00:48:24,520 --> 00:48:29,120
Speaker 2: but I'm a recovering attorney, and the most applicable thing

1000
00:48:29,160 --> 00:48:33,680
Speaker 2: to investing you learn in law school is you have

1001
00:48:33,800 --> 00:48:37,680
Speaker 2: to be able to not just argue your case, you

1002
00:48:37,800 --> 00:48:40,239
Speaker 2: need to know the other site's case. Better than they do.

1003
00:48:40,800 --> 00:48:45,120
Speaker 2: And that translates into equities as you can't be bullish

1004
00:48:45,200 --> 00:48:49,040
Speaker 2: unless you can really state the bearish case and vice versa.

1005
00:48:49,280 --> 00:48:51,880
Speaker 2: Correct you want to be bearish, you better know what

1006
00:48:51,880 --> 00:48:55,279
Speaker 2: what are the best arguments for being bullish here? And

1007
00:48:55,480 --> 00:48:59,320
Speaker 2: I can't tell you how many people fail that test,

1008
00:48:59,440 --> 00:49:02,800
Speaker 2: and I bet you see it back to post nine

1009
00:49:03,239 --> 00:49:06,360
Speaker 2: if you're super bearished. The only question I have for

1010
00:49:06,440 --> 00:49:09,719
Speaker 2: those people, give me what the bulk case is and

1011
00:49:09,840 --> 00:49:12,719
Speaker 2: if they can't even imagine it, well, now I'm going

1012
00:49:12,840 --> 00:49:18,319
Speaker 2: leverage long because that failure of imagination means everybody's too baish.

1013
00:49:18,360 --> 00:49:20,960
Speaker 4: And it's interesting you said that there are times we

1014
00:49:21,000 --> 00:49:22,719
Speaker 4: don't do this regularly, but there are times that where

1015
00:49:22,719 --> 00:49:26,960
Speaker 4: we do point counterpoint in our investment committee meetings exactly for.

1016
00:49:26,960 --> 00:49:31,120
Speaker 2: That reason, just so you're making both so we're being seen.

1017
00:49:31,480 --> 00:49:34,719
Speaker 2: It's one of these things that until you go through

1018
00:49:34,719 --> 00:49:38,800
Speaker 2: the exercise, it like if you have an extreme position

1019
00:49:38,840 --> 00:49:40,960
Speaker 2: and you come out the other side of that discussion

1020
00:49:41,400 --> 00:49:46,200
Speaker 2: and you still have that extreme position. Either someone wasn't

1021
00:49:46,440 --> 00:49:50,520
Speaker 2: making the argument well, or hey, maybe the world really

1022
00:49:50,560 --> 00:49:53,600
Speaker 2: is coming to an end. But most so far that's

1023
00:49:53,640 --> 00:49:58,040
Speaker 2: been losing. The losing bad So, given what's going on

1024
00:49:58,120 --> 00:50:03,760
Speaker 2: with technology and AI and automation and all the latest greatest,

1025
00:50:03,840 --> 00:50:09,640
Speaker 2: newfangled things, is anybody today a better investor than they

1026
00:50:09,640 --> 00:50:13,640
Speaker 2: were ten, twenty, thirty years ago, fifty years ago. Has

1027
00:50:13,719 --> 00:50:19,280
Speaker 2: the bar Since Charles down launched Barons in eighteen ninety,

1028
00:50:19,760 --> 00:50:22,360
Speaker 2: has anything improved for the average investor?

1029
00:50:22,560 --> 00:50:25,839
Speaker 4: I think I think the amount of information that an

1030
00:50:25,840 --> 00:50:29,440
Speaker 4: investor can get obviously has gotten greater, right, I mean

1031
00:50:29,440 --> 00:50:30,680
Speaker 4: even if you think probably.

1032
00:50:30,400 --> 00:50:32,840
Speaker 2: But it's all public, it's reg FD, So does it

1033
00:50:32,920 --> 00:50:33,399
Speaker 2: help them?

1034
00:50:33,560 --> 00:50:34,680
Speaker 3: No? I don't think it does.

1035
00:50:34,719 --> 00:50:38,160
Speaker 4: And I think I think that you know, the notion

1036
00:50:38,239 --> 00:50:42,680
Speaker 4: that somehow we have evolved and we are smarter, better

1037
00:50:42,719 --> 00:50:45,839
Speaker 4: investors than ever before. I think that's hogwash. I think

1038
00:50:45,880 --> 00:50:49,480
Speaker 4: that's complete hogwashed. People are still underperforming like they always did.

1039
00:50:50,040 --> 00:50:54,360
Speaker 2: So it's not it's not the strategies, it's not the vehicles.

1040
00:50:54,360 --> 00:50:57,879
Speaker 2: Although we get great tax and cost benefits with ETFs,

1041
00:50:59,080 --> 00:51:01,239
Speaker 2: how much of this is just simply comes down to

1042
00:51:01,360 --> 00:51:05,320
Speaker 2: human behavior and human nature, and people are still people,

1043
00:51:05,360 --> 00:51:07,400
Speaker 2: and we're still making the same mistakes over and over

1044
00:51:07,440 --> 00:51:07,919
Speaker 2: and over again.

1045
00:51:08,000 --> 00:51:09,480
Speaker 4: Yeah, I mean, there is something to be said for

1046
00:51:09,520 --> 00:51:13,320
Speaker 4: behavioral finance and the biases that we bring to the table.

1047
00:51:13,600 --> 00:51:15,600
Speaker 4: It's pretty hard to not be human.

1048
00:51:16,920 --> 00:51:20,759
Speaker 2: It very much is. So let's bring this back to

1049
00:51:21,440 --> 00:51:23,560
Speaker 2: where we are in the market today and what's going on.

1050
00:51:24,239 --> 00:51:26,640
Speaker 2: We just made new ald time highs in the SMP

1051
00:51:26,920 --> 00:51:30,600
Speaker 2: and in the Nasdaq. I always learned that old time

1052
00:51:30,680 --> 00:51:34,920
Speaker 2: highs are the most bullish thing you can see. Perhaps

1053
00:51:35,000 --> 00:51:38,399
Speaker 2: not the very last one, but the hundred before it

1054
00:51:38,920 --> 00:51:41,640
Speaker 2: are super bullish. How do you look at the market

1055
00:51:41,719 --> 00:51:45,240
Speaker 2: and say, everybody seems to dislike this market, and yet

1056
00:51:45,280 --> 00:51:46,760
Speaker 2: we made fresh old time highs.

1057
00:51:46,800 --> 00:51:50,960
Speaker 4: Yeah, So I think, Barry, I think that we've said

1058
00:51:50,960 --> 00:51:53,319
Speaker 4: a number of times that we think it is a

1059
00:51:53,360 --> 00:51:57,200
Speaker 4: mistake right now. Do you think of the market sort

1060
00:51:57,239 --> 00:52:01,520
Speaker 4: of in quotes that that's what people are very very

1061
00:52:01,520 --> 00:52:03,160
Speaker 4: focused on right now, and we think that's a mistake.

1062
00:52:03,200 --> 00:52:04,399
Speaker 3: Why is it a mistake.

1063
00:52:04,440 --> 00:52:07,759
Speaker 4: Because the market is dominated by seven or ten or

1064
00:52:07,800 --> 00:52:12,720
Speaker 4: fifteen companies and we really have an extraordinarily bifurcated market

1065
00:52:12,760 --> 00:52:14,520
Speaker 4: in that respect. And I'm not saying anything that people

1066
00:52:14,520 --> 00:52:17,640
Speaker 4: don't know. Of course, everybody everybody knows about the Magnificent seven.

1067
00:52:17,640 --> 00:52:21,439
Speaker 2: Who doesn't although they even think that they've the mag

1068
00:52:21,520 --> 00:52:24,520
Speaker 2: seven have been the lag seven for most of this year.

1069
00:52:24,640 --> 00:52:25,000
Speaker 3: Correct.

1070
00:52:25,000 --> 00:52:29,680
Speaker 4: Correct, Now that's where I was going, exactly right. But

1071
00:52:29,800 --> 00:52:34,680
Speaker 4: the enthusiasm surrounding those seven stocks is not changing. And

1072
00:52:35,880 --> 00:52:37,719
Speaker 4: our view has been did okay, you want to go

1073
00:52:37,760 --> 00:52:39,840
Speaker 4: play those seven stocks, go play the seven stocks. You

1074
00:52:39,840 --> 00:52:43,640
Speaker 4: don't need us. We're looking at everything else in the world.

1075
00:52:43,840 --> 00:52:46,880
Speaker 4: And I've just I've said to our investors many times,

1076
00:52:46,880 --> 00:52:49,920
Speaker 4: are there really only seven growth stories in the entire

1077
00:52:49,960 --> 00:52:51,000
Speaker 4: global equity market?

1078
00:52:51,080 --> 00:52:52,319
Speaker 3: Of course not, There's tons of them.

1079
00:52:52,480 --> 00:52:55,400
Speaker 4: And we've shown people how many companies are actually growing

1080
00:52:55,440 --> 00:52:57,879
Speaker 4: earnings twenty five percent or more, and how the MAG

1081
00:52:57,920 --> 00:53:00,160
Speaker 4: seven doesn't really even fit into that group that our

1082
00:53:00,200 --> 00:53:03,239
Speaker 4: companies that are growing, you know, much faster and with

1083
00:53:03,520 --> 00:53:08,080
Speaker 4: with you know, similar consistency. And so I think if

1084
00:53:08,080 --> 00:53:12,520
Speaker 4: you're invested in an S and P index fund, or

1085
00:53:12,560 --> 00:53:16,240
Speaker 4: you were invested solely in the MAG seven, were solely

1086
00:53:16,280 --> 00:53:19,520
Speaker 4: in Nascac, I think the next three, five, ten years

1087
00:53:19,640 --> 00:53:20,839
Speaker 4: might be very disappointing.

1088
00:53:21,400 --> 00:53:22,040
Speaker 3: Huh.

1089
00:53:22,120 --> 00:53:24,959
Speaker 4: I think if you're in everything else and we could

1090
00:53:24,960 --> 00:53:26,960
Speaker 4: define you know, that's I'll leave it to everybody else

1091
00:53:26,960 --> 00:53:31,200
Speaker 4: to define how they define everything else. But but I

1092
00:53:31,200 --> 00:53:33,040
Speaker 4: think if you're in everything else, I think you're gonna

1093
00:53:33,080 --> 00:53:35,040
Speaker 4: do just fine. I think you're gonna have a great time.

1094
00:53:35,160 --> 00:53:40,120
Speaker 2: So let's talk about not everything else, but one of

1095
00:53:40,160 --> 00:53:44,839
Speaker 2: the else things, which has been international stops. When we

1096
00:53:44,880 --> 00:53:49,799
Speaker 2: look at either developed x US or emerging markets, these

1097
00:53:49,800 --> 00:53:54,360
Speaker 2: are areas that have underperformed the US for ten fifteen years, absolutely,

1098
00:53:54,400 --> 00:53:58,799
Speaker 2: and over the past year we've started to see signs that, hey,

1099
00:53:59,400 --> 00:54:02,920
Speaker 2: maybe this under performance isn't it to persist? Persist? X

1100
00:54:03,040 --> 00:54:06,360
Speaker 2: US stocks have been doing much better than US, certainly

1101
00:54:06,440 --> 00:54:09,960
Speaker 2: year to date in twenty twenty five, and we're recording

1102
00:54:09,960 --> 00:54:12,640
Speaker 2: this late June, maybe it's been about a year or more.

1103
00:54:12,680 --> 00:54:16,000
Speaker 2: About performance, How do you look at the world of

1104
00:54:16,040 --> 00:54:19,200
Speaker 2: international stocks? What parts of the world look interesting to you?

1105
00:54:19,320 --> 00:54:22,080
Speaker 4: So I will twist your question a little bit, and

1106
00:54:22,120 --> 00:54:24,600
Speaker 4: I will say that one of the things, one of

1107
00:54:24,640 --> 00:54:27,240
Speaker 4: the aspects, one of the segments of the global equity

1108
00:54:27,239 --> 00:54:31,040
Speaker 4: markets that we are very bullish on is what I

1109
00:54:31,080 --> 00:54:34,759
Speaker 4: will call international quality non US quality stocks. That's not

1110
00:54:34,800 --> 00:54:37,560
Speaker 4: a stocks' well, I'm just saying as opposed to a country, right,

1111
00:54:37,640 --> 00:54:39,120
Speaker 4: something people like to talk about countries.

1112
00:54:39,160 --> 00:54:40,080
Speaker 3: But I think.

1113
00:54:41,360 --> 00:54:44,400
Speaker 4: The reason I say this is that the median projected

1114
00:54:44,400 --> 00:54:48,120
Speaker 4: growth rate among high quality non US stocks is actually

1115
00:54:48,760 --> 00:54:51,040
Speaker 4: equal maybe even a touch higher than the median growth

1116
00:54:51,120 --> 00:54:54,560
Speaker 4: rate among the Magnificent seven, so we'll talk basically similar

1117
00:54:54,640 --> 00:54:55,320
Speaker 4: type growth.

1118
00:54:56,400 --> 00:54:57,640
Speaker 3: They offer dividend.

1119
00:54:57,360 --> 00:55:00,399
Speaker 4: Yields of three four maybe a little pers even four

1120
00:55:00,400 --> 00:55:02,360
Speaker 4: and a half percent, depending on how you look at this,

1121
00:55:02,640 --> 00:55:05,839
Speaker 4: but let's say three to four percent dividend yell and

1122
00:55:06,320 --> 00:55:08,480
Speaker 4: they sell for a third to a half of the

1123
00:55:08,560 --> 00:55:11,880
Speaker 4: valuation of the Magnificent Seven. So the way I describe

1124
00:55:11,920 --> 00:55:14,480
Speaker 4: it to people is if somebody came to you and

1125
00:55:14,560 --> 00:55:17,880
Speaker 4: offered you a Maserati for the price of a Chevy,

1126
00:55:18,640 --> 00:55:21,800
Speaker 4: or to be fair here, if somebody offered you Manolo

1127
00:55:21,880 --> 00:55:26,000
Speaker 4: Bloonnis for the price of hush puppies. I think we

1128
00:55:26,040 --> 00:55:28,520
Speaker 4: would all say, yes, I will do that. By the way,

1129
00:55:28,520 --> 00:55:31,000
Speaker 4: can I have two? But when we get to the

1130
00:55:31,040 --> 00:55:34,959
Speaker 4: stock market, this is like unimportant to people. They don't

1131
00:55:35,040 --> 00:55:38,360
Speaker 4: understand that there's a value assessment made in everything we

1132
00:55:38,480 --> 00:55:41,200
Speaker 4: do all the time, but for some reason stocks it

1133
00:55:41,600 --> 00:55:43,839
Speaker 4: doesn't appear. So the the way I describe it, as

1134
00:55:43,960 --> 00:55:46,120
Speaker 4: you know, the Blonnics and the Maseratis are on sale,

1135
00:55:47,120 --> 00:55:48,400
Speaker 4: we think that's a great thing to do.

1136
00:55:48,480 --> 00:55:49,400
Speaker 3: We'll take two, thank you.

1137
00:55:49,520 --> 00:55:57,799
Speaker 2: So you're naming two Italian I just chose them. But

1138
00:55:57,840 --> 00:56:01,920
Speaker 2: the reason I bring that up is you're not stock pickers.

1139
00:56:02,120 --> 00:56:08,520
Speaker 2: Your geography, sector cor style selectors. So if someone says,

1140
00:56:08,840 --> 00:56:12,680
Speaker 2: hey that Rich Bernstein is onto something, I want exposure

1141
00:56:12,760 --> 00:56:18,600
Speaker 2: to fast growing, high quality, inexpensive companies, what sectors are

1142
00:56:18,800 --> 00:56:20,799
Speaker 2: looking So for us, I.

1143
00:56:20,840 --> 00:56:23,480
Speaker 4: Will I will name the ETF that we hold with

1144
00:56:23,600 --> 00:56:28,200
Speaker 4: all do legal disclaimers here that we hold this CTF,

1145
00:56:28,280 --> 00:56:30,440
Speaker 4: we have held it, we still hold it, blah blah blah.

1146
00:56:30,719 --> 00:56:33,879
Speaker 4: You know, however, I can alert people that we I'm

1147
00:56:33,920 --> 00:56:38,560
Speaker 4: talking my book a little bit here. It's it's the

1148
00:56:38,719 --> 00:56:43,040
Speaker 4: IQLT is the ticker symbol the International Quality ETF, and

1149
00:56:43,960 --> 00:56:47,240
Speaker 4: it's a great way. It's actually I believe EPHA based.

1150
00:56:47,960 --> 00:56:49,400
Speaker 4: So you're getting multiple countries.

1151
00:56:49,560 --> 00:56:52,960
Speaker 2: But that's about Europe in the far far Eastern Asia.

1152
00:56:53,080 --> 00:56:55,560
Speaker 4: Correct, it's probably going to be Australia. It's probably going

1153
00:56:55,600 --> 00:56:59,480
Speaker 4: to be about sixty to seventy percent of Europe. I

1154
00:56:59,480 --> 00:57:01,200
Speaker 4: don't have this stats in front of me, but something

1155
00:57:01,239 --> 00:57:03,600
Speaker 4: like that, so I think, you know, that's that's an

1156
00:57:03,640 --> 00:57:06,040
Speaker 4: area that people aren't thinking about at all.

1157
00:57:06,160 --> 00:57:08,759
Speaker 2: So here's the macro pushback. And I'm not saying this

1158
00:57:08,800 --> 00:57:13,560
Speaker 2: is let me just play Devil's advocate. Europe has structural problems.

1159
00:57:13,640 --> 00:57:17,680
Speaker 2: Brexit is an issue now with the Trump administration, Europe's

1160
00:57:17,720 --> 00:57:20,120
Speaker 2: gonna have to step up and fund more of their

1161
00:57:20,160 --> 00:57:24,880
Speaker 2: own military and defense. Europe is has problems, and they're

1162
00:57:24,960 --> 00:57:26,760
Speaker 2: not going to be clear these for decades.

1163
00:57:27,200 --> 00:57:29,800
Speaker 4: And that could be true or that might not be true.

1164
00:57:29,920 --> 00:57:31,040
Speaker 2: Okay, but is it really?

1165
00:57:31,080 --> 00:57:33,640
Speaker 4: But notice, notice what I said was that they offer

1166
00:57:33,760 --> 00:57:38,080
Speaker 4: earnings growth that is comparable to that of the mag seven.

1167
00:57:38,720 --> 00:57:40,560
Speaker 4: And I think that's the point that I'm trying to

1168
00:57:40,600 --> 00:57:43,439
Speaker 4: make that despite all these problems that everybody is well

1169
00:57:43,480 --> 00:57:47,800
Speaker 4: familiar with, somehow these companies are putting, you know, or

1170
00:57:47,920 --> 00:57:51,360
Speaker 4: have earnings growth projected earnings growth that's roughly similar a

1171
00:57:51,360 --> 00:57:53,520
Speaker 4: little bit more than the Magnificent seven.

1172
00:57:54,160 --> 00:57:57,640
Speaker 2: And these are quality companies and their x us xus

1173
00:57:57,760 --> 00:58:00,520
Speaker 2: W and so if you have a huge home country

1174
00:58:00,560 --> 00:58:03,800
Speaker 2: bias and you want a little diversification, you can look

1175
00:58:03,840 --> 00:58:07,160
Speaker 2: overseas to reasonably priced, quality comp And if you think

1176
00:58:07,160 --> 00:58:09,640
Speaker 2: the dollar is going to weaken, it's right. But we

1177
00:58:09,720 --> 00:58:11,280
Speaker 2: down eight eight and a half percent of year to

1178
00:58:11,360 --> 00:58:15,440
Speaker 2: date something like that. So I know you're not a

1179
00:58:15,560 --> 00:58:18,640
Speaker 2: currency analyst and you don't make those sort of calls.

1180
00:58:19,080 --> 00:58:23,840
Speaker 2: How do you look at what happens post April second

1181
00:58:24,640 --> 00:58:29,080
Speaker 2: Liberation Day and the ongoing weakness and the dollar. Does

1182
00:58:29,120 --> 00:58:31,560
Speaker 2: this come into your calculus or is this just more

1183
00:58:32,200 --> 00:58:33,640
Speaker 2: noise that nobody is.

1184
00:58:33,680 --> 00:58:37,040
Speaker 4: It does not in terms of you know, the short

1185
00:58:37,120 --> 00:58:39,520
Speaker 4: inter media turn the way most people would think. But

1186
00:58:39,600 --> 00:58:42,080
Speaker 4: we think there are structural issues in the United States

1187
00:58:42,120 --> 00:58:45,960
Speaker 4: that transcend the current politics, transcend the current politics, and

1188
00:58:46,360 --> 00:58:48,680
Speaker 4: have been around for longer than people think, and are

1189
00:58:48,760 --> 00:58:52,160
Speaker 4: detrimental to the US economy. And we find that very

1190
00:58:52,160 --> 00:58:54,520
Speaker 4: interesting that. You know, you hear all the time about

1191
00:58:54,840 --> 00:58:58,040
Speaker 4: debt and deficits and there's some day of reckoning coming.

1192
00:58:58,240 --> 00:59:00,280
Speaker 2: My entire adult life, I've been here.

1193
00:59:00,200 --> 00:59:04,520
Speaker 4: Yeah, and I love that because the speaker usually is

1194
00:59:04,520 --> 00:59:07,280
Speaker 4: saying I have some insight and for some reason, the

1195
00:59:07,320 --> 00:59:11,240
Speaker 4: markets don't appreciate my insight. And I love that, Like,

1196
00:59:11,560 --> 00:59:13,880
Speaker 4: you know, we're all so smart and the market's stupid. No,

1197
00:59:14,000 --> 00:59:17,080
Speaker 4: it's actually the other way around. The markets have figured

1198
00:59:17,080 --> 00:59:19,720
Speaker 4: this out over the past ten to fifteen years. And

1199
00:59:19,800 --> 00:59:21,360
Speaker 4: what I'm talking about is if you look at the

1200
00:59:21,400 --> 00:59:26,439
Speaker 4: spread between treasuries and triple A rated sovereign debt through time,

1201
00:59:26,480 --> 00:59:28,120
Speaker 4: what you will find is when the United States was

1202
00:59:28,200 --> 00:59:32,120
Speaker 4: rated triple A, our yields were roughly in line with

1203
00:59:32,200 --> 00:59:35,560
Speaker 4: other triple A rated sovereign debt. Since the initial downgrade

1204
00:59:35,560 --> 00:59:39,560
Speaker 4: in twenty eleven, and since then non stop, we have

1205
00:59:39,720 --> 00:59:42,040
Speaker 4: sold at a risk premium yield. In other words, we're

1206
00:59:42,080 --> 00:59:45,400
Speaker 4: trading more like a lower quality bond relative to triple

1207
00:59:45,400 --> 00:59:46,440
Speaker 4: A rated sovereigns.

1208
00:59:46,720 --> 00:59:49,600
Speaker 2: Meaning all this negativity is in the price.

1209
00:59:50,320 --> 00:59:52,800
Speaker 4: It's there. The markets have been well aware of it.

1210
00:59:52,800 --> 00:59:54,960
Speaker 4: There's no day of reckoning. It's like a slow bleed.

1211
00:59:55,720 --> 00:59:58,040
Speaker 4: And so what's been If you think about how everything

1212
00:59:58,120 --> 01:00:01,720
Speaker 4: in the United States priced off the ten year mortgages, munis,

1213
01:00:01,920 --> 01:00:04,560
Speaker 4: corporate bonds, everything's probably off the tenure. The fact that

1214
01:00:04,600 --> 01:00:07,520
Speaker 4: we're paying it at you know, right now it's just

1215
01:00:07,600 --> 01:00:11,400
Speaker 4: under two hundred basis points of extra yield because of

1216
01:00:11,440 --> 01:00:14,640
Speaker 4: our lack of fiscal discipline. That's translating through to higher

1217
01:00:14,680 --> 01:00:17,560
Speaker 4: interest costs throughout the entire economy. It's not just the government,

1218
01:00:17,840 --> 01:00:21,440
Speaker 4: it's through the entire economy. Why don't people Why aren't

1219
01:00:21,440 --> 01:00:23,880
Speaker 4: people aware of this? Well, because over the past five

1220
01:00:23,920 --> 01:00:28,720
Speaker 4: to ten years we've had low absolute rates of interest.

1221
01:00:29,040 --> 01:00:31,000
Speaker 4: The point I'm trying to make is we've still been

1222
01:00:31,080 --> 01:00:35,240
Speaker 4: penalized relative to other countries despite that absolute low rate

1223
01:00:35,280 --> 01:00:38,440
Speaker 4: of interest, and people haven't realized that. So we're already

1224
01:00:38,480 --> 01:00:42,680
Speaker 4: being penalized. And I think there's there's a real I

1225
01:00:42,680 --> 01:00:45,240
Speaker 4: think everybody should be concerned about that. It's clear that

1226
01:00:46,280 --> 01:00:49,280
Speaker 4: neither party has a real interest in fiscal discipline right now.

1227
01:00:49,880 --> 01:00:53,920
Speaker 4: So we should assume that that that penalty against the

1228
01:00:54,000 --> 01:00:58,480
Speaker 4: United States is going to continue to exist, if not expand.

1229
01:00:58,720 --> 01:01:00,680
Speaker 2: So let me push back in and play a little

1230
01:01:00,720 --> 01:01:05,560
Speaker 2: Devil's advocate about that. Hey, Uncle Sam was borrowing it

1231
01:01:05,680 --> 01:01:08,440
Speaker 2: next to nothing. We've been running up deficits for one

1232
01:01:08,520 --> 01:01:14,040
Speaker 2: hundred years. COVID happens. Everybody's stuck at home. CARES Act

1233
01:01:14,040 --> 01:01:16,800
Speaker 2: one is the biggest fiscal stimulus at least as a

1234
01:01:16,840 --> 01:01:20,120
Speaker 2: percentage of GDP since World War Two. Then you add

1235
01:01:20,520 --> 01:01:23,240
Speaker 2: the second Cares Act under Trump, the third Kars Act

1236
01:01:23,280 --> 01:01:27,480
Speaker 2: under Biden, to say nothing of the other tenure fiscal

1237
01:01:27,560 --> 01:01:31,920
Speaker 2: stimulus plans passed under Biden. And that pig working its

1238
01:01:31,920 --> 01:01:35,720
Speaker 2: way through the Python caused a giant spike in inflation

1239
01:01:36,000 --> 01:01:39,640
Speaker 2: plus supply chains blah blah blah. And now that that's

1240
01:01:39,680 --> 01:01:41,960
Speaker 2: come out the other end. So the Fed had to respond.

1241
01:01:42,920 --> 01:01:46,400
Speaker 2: Whether whether the FED brought inflation down or it was

1242
01:01:46,440 --> 01:01:52,560
Speaker 2: simply unwinding naturally is another debate. But once the FED

1243
01:01:52,600 --> 01:01:56,200
Speaker 2: brings rates back down, this penalty will go away. If

1244
01:01:56,240 --> 01:01:58,240
Speaker 2: and when the FED finally does that, well.

1245
01:01:58,800 --> 01:02:01,480
Speaker 4: That's important because remember in the period i'm talking about,

1246
01:02:01,520 --> 01:02:05,720
Speaker 4: which is almost fifteen years now, you've got periods, you've

1247
01:02:05,760 --> 01:02:11,240
Speaker 4: got multiple, multiple presidents, you've got multiple FED regimes, and

1248
01:02:11,560 --> 01:02:12,840
Speaker 4: the penalty doesn't go away.

1249
01:02:13,480 --> 01:02:14,400
Speaker 3: And I think that's so.

1250
01:02:14,360 --> 01:02:16,640
Speaker 2: No matter even at zero, we were paying a penalty

1251
01:02:16,640 --> 01:02:19,960
Speaker 2: because other countries had negative had negative, so there was

1252
01:02:20,000 --> 01:02:20,680
Speaker 2: still the penalty.

1253
01:02:20,760 --> 01:02:23,439
Speaker 3: We were still being penalized. It's crazy, and.

1254
01:02:23,360 --> 01:02:25,360
Speaker 4: That that, I think is something that's lurking in the

1255
01:02:25,360 --> 01:02:28,439
Speaker 4: background that people are not paying attention to. Especially people

1256
01:02:28,520 --> 01:02:30,520
Speaker 4: say that a day of reckoning is coming.

1257
01:02:31,000 --> 01:02:33,880
Speaker 2: You're saying it came, and it's still here ongoing.

1258
01:02:33,920 --> 01:02:34,600
Speaker 3: It's ongoing.

1259
01:02:34,640 --> 01:02:36,880
Speaker 4: It's just not big enough for anybody to notice. It's

1260
01:02:37,000 --> 01:02:39,080
Speaker 4: it's like it's as I say, it's like water torture.

1261
01:02:39,200 --> 01:02:41,880
Speaker 2: Ah, the slow bleed, the slow blade. That's really that's

1262
01:02:41,920 --> 01:02:46,680
Speaker 2: really fascinating. Let's jump to our favorite questions, starting with

1263
01:02:46,840 --> 01:02:49,520
Speaker 2: you mentioned some of the podcast you're listening to what

1264
01:02:49,520 --> 01:02:52,840
Speaker 2: what else are you streaming? What's keeping you entertain these days?

1265
01:02:52,880 --> 01:02:55,760
Speaker 4: So streaming, I'm I'm I'm in a little bit of

1266
01:02:55,840 --> 01:02:58,760
Speaker 4: a rut instagra right now. Yeah, I'm having everybody, you know,

1267
01:02:58,800 --> 01:03:02,280
Speaker 4: like everybody's got their favorite, uh, you know, streaming show

1268
01:03:02,320 --> 01:03:04,800
Speaker 4: that they like, and if you ask anybody, people come

1269
01:03:04,840 --> 01:03:06,200
Speaker 4: up with like four of them. Oh you gotta watch this,

1270
01:03:06,240 --> 01:03:07,800
Speaker 4: you gotta watch this, And all of a sudden, it's

1271
01:03:07,800 --> 01:03:09,760
Speaker 4: like it all blends together and you can't keep it together.

1272
01:03:10,920 --> 01:03:13,200
Speaker 3: So I'm a touch lost right now.

1273
01:03:13,320 --> 01:03:17,680
Speaker 4: In terms of streaming, I won't say give me suggestions

1274
01:03:17,720 --> 01:03:18,880
Speaker 4: because I won't remember it.

1275
01:03:18,880 --> 01:03:21,160
Speaker 2: It's just like I'm just gonna give you one because

1276
01:03:21,200 --> 01:03:24,520
Speaker 2: it's quirky and interesting. Okay, it's called Department Q.

1277
01:03:25,080 --> 01:03:25,680
Speaker 3: Department Q.

1278
01:03:26,200 --> 01:03:31,880
Speaker 2: Right, So this is a limited nine episode series on Netflix.

1279
01:03:34,520 --> 01:03:40,960
Speaker 2: Detective is shot, his partner is injured, the third person

1280
01:03:41,120 --> 01:03:48,000
Speaker 2: is killed at the site, and he basically is appointed

1281
01:03:48,120 --> 01:03:52,720
Speaker 2: head of the cold case division. Just they're just standing up.

1282
01:03:52,840 --> 01:03:53,560
Speaker 4: That's kind of stuff.

1283
01:03:53,920 --> 01:03:58,240
Speaker 2: And it's in Scottish and I normally don't love police procedurals. Yeah,

1284
01:03:58,760 --> 01:04:02,200
Speaker 2: this is kind of fast name. It's it's it's sort

1285
01:04:02,240 --> 01:04:05,520
Speaker 2: of builds slowly over time. Like I could give you

1286
01:04:05,560 --> 01:04:08,720
Speaker 2: one hundred others that you wouldn't care about, but I

1287
01:04:08,920 --> 01:04:13,320
Speaker 2: kind of know the sort of stuff good you like.

1288
01:04:13,440 --> 01:04:17,600
Speaker 2: But it's quirky and weird but really interesting. If the

1289
01:04:17,760 --> 01:04:19,720
Speaker 2: if you're going to have any complaint over it, and

1290
01:04:19,760 --> 01:04:22,880
Speaker 2: I don't think this is a complaint, but the complaints

1291
01:04:22,920 --> 01:04:26,600
Speaker 2: I can imagine are, well, this builds slowly. I'm like, yeah,

1292
01:04:26,640 --> 01:04:28,800
Speaker 2: it's not just you know, if you want to open

1293
01:04:28,840 --> 01:04:32,640
Speaker 2: with a chasing James Bond and mission impossible, you know

1294
01:04:32,640 --> 01:04:35,120
Speaker 2: where to go find. This is a little a little

1295
01:04:35,160 --> 01:04:38,960
Speaker 2: more okay. So well, I'm curious to seem Department Q

1296
01:04:39,200 --> 01:04:42,600
Speaker 2: such a such an odd Let's talk about mentors. You

1297
01:04:42,680 --> 01:04:44,760
Speaker 2: reference one of them, who were the folks who helped

1298
01:04:45,320 --> 01:04:46,320
Speaker 2: shape your career?

1299
01:04:46,520 --> 01:04:48,960
Speaker 4: So I would say there were there were several. One

1300
01:04:49,000 --> 01:04:52,760
Speaker 4: that hand an immense uh impact on me was the

1301
01:04:52,760 --> 01:04:55,680
Speaker 4: person who hired me at Merrill, Chuck Clough. Chuck Clough

1302
01:04:55,720 --> 01:04:57,440
Speaker 4: at the time was Merrill's chief strategist.

1303
01:04:57,560 --> 01:04:59,600
Speaker 2: He's he knows that name from way back when.

1304
01:04:59,800 --> 01:05:02,120
Speaker 4: Yeah, yeah, yeah, he was the chief strategist at at

1305
01:05:02,160 --> 01:05:05,560
Speaker 4: Merrill from eighty seven to two thousand something like that.

1306
01:05:05,640 --> 01:05:08,560
Speaker 3: Wow, And Chuck gave me two.

1307
01:05:08,480 --> 01:05:12,840
Speaker 4: Pieces of advice, which he claims he doesn't remember that

1308
01:05:12,880 --> 01:05:15,160
Speaker 4: he gave me, but I'm sure he does. The first

1309
01:05:15,280 --> 01:05:17,440
Speaker 4: was my first day when I walked in at Merrill

1310
01:05:18,160 --> 01:05:20,640
Speaker 4: and I kind of said, like, what do you think

1311
01:05:20,680 --> 01:05:23,560
Speaker 4: I should be focusing on? And he said to me,

1312
01:05:23,840 --> 01:05:25,960
Speaker 4: I don't really care, just don't make a fool of yourself.

1313
01:05:27,200 --> 01:05:30,160
Speaker 2: By the way, that's good advice for anybody, anywhere, anytime.

1314
01:05:30,200 --> 01:05:32,280
Speaker 4: It was, And at first I was very put off,

1315
01:05:32,360 --> 01:05:34,160
Speaker 4: like this guy doesn't care about me, Like what is

1316
01:05:34,200 --> 01:05:34,680
Speaker 4: this all about?

1317
01:05:34,720 --> 01:05:34,880
Speaker 2: You know?

1318
01:05:35,200 --> 01:05:37,480
Speaker 4: But what he was saying was you're a grown up,

1319
01:05:37,960 --> 01:05:41,400
Speaker 4: right right, Like yeah, exactly, you don't need me to

1320
01:05:41,440 --> 01:05:44,320
Speaker 4: tell you what you should do, but be aware, don't make.

1321
01:05:44,200 --> 01:05:46,320
Speaker 3: A fool of yourself. Don't do stupid things.

1322
01:05:47,120 --> 01:05:50,080
Speaker 4: Second thing he told me, which I live by to

1323
01:05:50,160 --> 01:05:52,400
Speaker 4: this day and I tell this to people all the time,

1324
01:05:52,720 --> 01:05:55,360
Speaker 4: he said, make sure you're a star and not a

1325
01:05:55,440 --> 01:05:59,320
Speaker 4: Roman candle. Huh, which I thought, I still think to

1326
01:05:59,360 --> 01:06:01,400
Speaker 4: this day is fantastic advice.

1327
01:06:01,720 --> 01:06:04,720
Speaker 2: So persistency, not don't just flame out.

1328
01:06:04,800 --> 01:06:07,440
Speaker 4: Don't flame out, don't be the ten minute you know thing,

1329
01:06:07,840 --> 01:06:10,680
Speaker 4: be be the star. That to be a star is

1330
01:06:10,720 --> 01:06:13,880
Speaker 4: harder than you think. And but be a star, don't

1331
01:06:13,880 --> 01:06:16,680
Speaker 4: be a Roman candle that I still to my day

1332
01:06:16,800 --> 01:06:18,280
Speaker 4: live my professional career that way.

1333
01:06:18,640 --> 01:06:21,720
Speaker 2: I think. I think that's great. You said you don't

1334
01:06:21,720 --> 01:06:24,520
Speaker 2: read a lot, but you've written several books. I know

1335
01:06:24,560 --> 01:06:28,160
Speaker 2: there are books that have influenced you. What are some

1336
01:06:28,200 --> 01:06:30,840
Speaker 2: of your favorites? You read anything on vacation.

1337
01:06:30,840 --> 01:06:32,560
Speaker 3: So I did what I tend to read.

1338
01:06:33,360 --> 01:06:35,360
Speaker 4: I don't have any one book that I would give you,

1339
01:06:35,400 --> 01:06:37,520
Speaker 4: but I will tell you I tend to read a

1340
01:06:37,560 --> 01:06:43,040
Speaker 4: lot of espionage. Spy and espionage type stuff, okay. And

1341
01:06:43,080 --> 01:06:47,520
Speaker 4: the reason why is that as these things progress and

1342
01:06:47,560 --> 01:06:49,600
Speaker 4: as the stories progressed, not not like as you said,

1343
01:06:49,640 --> 01:06:50,920
Speaker 4: not like James Bond type.

1344
01:06:50,760 --> 01:06:53,760
Speaker 3: Stuff, but it's it's almost.

1345
01:06:53,560 --> 01:06:58,120
Speaker 4: Like solving a puzzle or or completing you completing a

1346
01:06:58,160 --> 01:07:01,680
Speaker 4: puzzle and in some way, and I find that fascinating.

1347
01:07:01,840 --> 01:07:03,840
Speaker 4: I find you know, I was always in high school

1348
01:07:03,880 --> 01:07:07,480
Speaker 4: my favorite math was was geometry because everything was a

1349
01:07:07,480 --> 01:07:09,480
Speaker 4: puzzle to me. There was like we had different tools,

1350
01:07:09,520 --> 01:07:11,520
Speaker 4: how do you solve the problem? And that's kind of

1351
01:07:11,520 --> 01:07:15,960
Speaker 4: the way I view spies and espionages that there's different tools,

1352
01:07:16,400 --> 01:07:17,120
Speaker 4: but how do you.

1353
01:07:17,080 --> 01:07:17,640
Speaker 3: Solve the problem?

1354
01:07:17,680 --> 01:07:18,880
Speaker 4: And how do you get where you want to go?

1355
01:07:19,240 --> 01:07:22,280
Speaker 2: I got I have another recommendation for you.

1356
01:07:23,200 --> 01:07:24,200
Speaker 3: This is why I came today.

1357
01:07:24,280 --> 01:07:27,040
Speaker 2: It was a charming It was one of these films

1358
01:07:27,040 --> 01:07:31,040
Speaker 2: that like, oh, this looks interesting, Netflix recommend let's try this.

1359
01:07:31,480 --> 01:07:35,160
Speaker 2: Black Back, also set in the UK, and six husband

1360
01:07:35,200 --> 01:07:40,240
Speaker 2: and wife work together, and there's a mole somewhere in

1361
01:07:40,400 --> 01:07:47,680
Speaker 2: MI six and people somehow each of them are led.

1362
01:07:47,760 --> 01:07:50,160
Speaker 2: I want to say, it's is a Kate Winslet. It's

1363
01:07:50,200 --> 01:07:54,320
Speaker 2: one of the Kates, and I forget who's the lead husband,

1364
01:07:54,400 --> 01:07:58,000
Speaker 2: the man, the husband, but each of them begin to

1365
01:07:58,080 --> 01:08:05,920
Speaker 2: suspect the other. Oh interesting and shockingly interesting, Like normally

1366
01:08:05,960 --> 01:08:08,360
Speaker 2: you go into a movie you have no idea about. Yeah,

1367
01:08:08,440 --> 01:08:11,040
Speaker 2: let's see how this is. And we both are like, wow,

1368
01:08:11,080 --> 01:08:15,760
Speaker 2: this was surprisingly good. So again, I know your wheelhouse,

1369
01:08:16,320 --> 01:08:19,759
Speaker 2: black bag, and Department Q. You have now a film,

1370
01:08:19,800 --> 01:08:23,000
Speaker 2: a series and a book. I've taken care of your

1371
01:08:23,000 --> 01:08:29,120
Speaker 2: summer's entertainment. So anything else you want to mention that

1372
01:08:29,160 --> 01:08:29,639
Speaker 2: you're reading?

1373
01:08:30,720 --> 01:08:33,559
Speaker 3: No, there's not, you know, I No, I haven't.

1374
01:08:33,640 --> 01:08:36,320
Speaker 4: I have been reading a lot recently for fun, I

1375
01:08:36,360 --> 01:08:39,240
Speaker 4: have to admit, but what I do read, you know,

1376
01:08:39,280 --> 01:08:42,040
Speaker 4: pretty religiously is getting back to the whole issue of

1377
01:08:42,640 --> 01:08:45,160
Speaker 4: of being dispassionate. I do read the Financial Times, I

1378
01:08:45,200 --> 01:08:47,519
Speaker 4: do read the Economist. To me, that's that's a must

1379
01:08:47,560 --> 01:08:48,120
Speaker 4: read for people.

1380
01:08:48,240 --> 01:08:53,760
Speaker 2: I have found the British papers generally like what we

1381
01:08:53,840 --> 01:08:58,439
Speaker 2: think of as left of center is sort of dead

1382
01:08:58,600 --> 01:09:02,760
Speaker 2: middle to them, and they look their right is kind

1383
01:09:02,760 --> 01:09:06,479
Speaker 2: of our middle, like it's not like our spectrum feels

1384
01:09:06,520 --> 01:09:10,240
Speaker 2: wider our political range, and they everybody seems to be

1385
01:09:10,280 --> 01:09:13,639
Speaker 2: clustered somewhere around. It's either center right or center left,

1386
01:09:13,840 --> 01:09:15,679
Speaker 2: not extreme right or extreme left.

1387
01:09:15,880 --> 01:09:16,880
Speaker 3: And I actually don't.

1388
01:09:16,960 --> 01:09:20,040
Speaker 4: I don't care whether people are right or left as

1389
01:09:20,040 --> 01:09:22,000
Speaker 4: long as I can figure that out. What I care

1390
01:09:22,040 --> 01:09:26,920
Speaker 4: for is factual content right right. Fact fact checking has

1391
01:09:26,960 --> 01:09:29,040
Speaker 4: to be has to be good these days.

1392
01:09:29,360 --> 01:09:32,200
Speaker 2: So our final two questions, what sort of advice would

1393
01:09:32,240 --> 01:09:34,680
Speaker 2: you give to a recent college grad interested in a

1394
01:09:34,720 --> 01:09:40,040
Speaker 2: career and either investing or asset management or quantitative strategy.

1395
01:09:40,160 --> 01:09:43,320
Speaker 4: So I mentioned this briefly before. The advice I do

1396
01:09:43,360 --> 01:09:48,800
Speaker 4: give recent college graduates or or seniors or whatever is

1397
01:09:49,160 --> 01:09:54,200
Speaker 4: not to pigeonhole yourself early in your career. Don't say

1398
01:09:54,200 --> 01:09:57,120
Speaker 4: this is what I have to do, and this is

1399
01:09:57,160 --> 01:09:59,280
Speaker 4: what I'm going to do. You know, if you're a doctor,

1400
01:09:59,280 --> 01:10:00,439
Speaker 4: if you want to be a doctor, if you want

1401
01:10:00,439 --> 01:10:02,240
Speaker 4: to be a lawyer, you have some of that.

1402
01:10:02,160 --> 01:10:02,880
Speaker 3: You have to do.

1403
01:10:03,040 --> 01:10:06,120
Speaker 4: I get that, right, But if you want to go

1404
01:10:06,160 --> 01:10:10,400
Speaker 4: into the financial services industry in any format you have

1405
01:10:10,479 --> 01:10:12,759
Speaker 4: to be you have to enter that with an immense

1406
01:10:12,760 --> 01:10:18,040
Speaker 4: amount of flexibility. Our industry changes so dramatically and so

1407
01:10:18,240 --> 01:10:22,280
Speaker 4: quickly that what seems super interesting to you as a

1408
01:10:22,320 --> 01:10:26,000
Speaker 4: college graduate could be obsolete in two or three years later. Right,

1409
01:10:26,040 --> 01:10:28,080
Speaker 4: And you don't want to paint yourself into a corner

1410
01:10:28,080 --> 01:10:30,479
Speaker 4: where that's all you know, and that's all you're willing

1411
01:10:30,520 --> 01:10:32,560
Speaker 4: to do, when you're willing to do other things or

1412
01:10:32,680 --> 01:10:35,360
Speaker 4: willing to learn other things. I think if you're coming

1413
01:10:35,400 --> 01:10:37,920
Speaker 4: into financial services, you should. You should be one who

1414
01:10:38,080 --> 01:10:41,639
Speaker 4: likes to learn and likes to morph through time.

1415
01:10:42,280 --> 01:10:45,160
Speaker 2: Really really interesting. And our final question, what do you

1416
01:10:45,160 --> 01:10:48,080
Speaker 2: know about the world of investing today that might have

1417
01:10:48,120 --> 01:10:50,680
Speaker 2: been helpful to know forty years or so ago when

1418
01:10:50,720 --> 01:10:51,599
Speaker 2: you again it started?

1419
01:10:51,680 --> 01:10:55,200
Speaker 4: Oh man, I mean, I will tell you I have

1420
01:10:55,280 --> 01:10:59,240
Speaker 4: gone back and rid reports that I wrote twenty years

1421
01:10:59,280 --> 01:11:01,920
Speaker 4: ago or twenty five years ago, and I read them

1422
01:11:01,920 --> 01:11:05,080
Speaker 4: today and I say, like, what I'm more on, I'm

1423
01:11:05,120 --> 01:11:07,800
Speaker 4: amazed at my own stupidity, and and so.

1424
01:11:08,200 --> 01:11:10,880
Speaker 2: Let me I'm gonna interrupt you right here to say so.

1425
01:11:11,040 --> 01:11:15,400
Speaker 2: Professor David Dunning of University of Michigan, he of the

1426
01:11:15,439 --> 01:11:19,479
Speaker 2: famous Dunning Kruger effect, said, if you look at work

1427
01:11:19,560 --> 01:11:21,960
Speaker 2: that's five years old and you don't think it's awful,

1428
01:11:22,240 --> 01:11:25,479
Speaker 2: you're not progressing. Is that right? I said it right

1429
01:11:25,720 --> 01:11:28,920
Speaker 2: right sitting what you were saying, and said, if you're

1430
01:11:29,080 --> 01:11:32,160
Speaker 2: not if you don't hate what you did ten years ago,

1431
01:11:32,280 --> 01:11:36,000
Speaker 2: you haven't grown it all. Actually, I how fantastic is that?

1432
01:11:36,320 --> 01:11:38,000
Speaker 4: I mean, some of the some of the ideas I

1433
01:11:38,040 --> 01:11:40,640
Speaker 4: wrote about we still use and there there's still the

1434
01:11:40,680 --> 01:11:42,120
Speaker 4: crux of what it. But I'm just saying I look

1435
01:11:42,160 --> 01:11:44,639
Speaker 4: at my writing, I look at how I expressed myself.

1436
01:11:44,680 --> 01:11:46,240
Speaker 3: I looked at how I thought something was.

1437
01:11:46,160 --> 01:11:48,719
Speaker 4: So important that type of thing, and I cringed today,

1438
01:11:48,760 --> 01:11:50,800
Speaker 4: I absolutely cringe. And the moral of the story there

1439
01:11:51,560 --> 01:11:54,800
Speaker 4: is I've come to grips with the fact that no

1440
01:11:54,800 --> 01:11:56,840
Speaker 4: matter how smart I think I am, I'm really not

1441
01:11:57,080 --> 01:11:59,720
Speaker 4: very smart. And there's a lot more to learn. And

1442
01:12:00,040 --> 01:12:04,080
Speaker 4: so I think as I've gotten older, I've wanted to

1443
01:12:04,200 --> 01:12:07,320
Speaker 4: learn more through time, I kind of immerse myself. And

1444
01:12:07,520 --> 01:12:10,040
Speaker 4: it's funny because my friends react to me down there,

1445
01:12:10,120 --> 01:12:12,080
Speaker 4: You're like, how did you know that? And it's only

1446
01:12:12,120 --> 01:12:14,519
Speaker 4: because I'm reading all kinds of different things and doing

1447
01:12:14,560 --> 01:12:16,320
Speaker 4: all kinds of different things, and paying attention to different

1448
01:12:16,360 --> 01:12:18,800
Speaker 4: thing because I kind of think of myself as a

1449
01:12:18,840 --> 01:12:22,120
Speaker 4: perpetual moron. I don't know how else to describe it,

1450
01:12:22,160 --> 01:12:23,599
Speaker 4: but that's really how I view myself.

1451
01:12:23,680 --> 01:12:25,880
Speaker 2: All I know is that I know nothing. I will

1452
01:12:26,000 --> 01:12:30,840
Speaker 2: go back to philosophy. What is that Aristotle? So will

1453
01:12:31,000 --> 01:12:33,160
Speaker 2: end where we began. Rich. Thank you for being so

1454
01:12:33,320 --> 01:12:38,040
Speaker 2: generous with your time. We have been speaking with Rich Bernstein, Founder,

1455
01:12:38,200 --> 01:12:42,679
Speaker 2: chief investment officer of Rich Berstein Associates. If you enjoy

1456
01:12:42,760 --> 01:12:45,080
Speaker 2: this conversation, we'll be sure and check out any of

1457
01:12:45,120 --> 01:12:48,519
Speaker 2: the five hundred and fifty we've done over the past

1458
01:12:49,040 --> 01:12:55,240
Speaker 2: eleven years. You can find those at Bloomberg, iTunes, Spotify, YouTube,

1459
01:12:55,439 --> 01:12:59,000
Speaker 2: wherever you feed your podcast fix. Be sure and check

1460
01:12:59,040 --> 01:13:03,280
Speaker 2: out my new book How Not to Invest The ideas, numbers,

1461
01:13:03,280 --> 01:13:06,639
Speaker 2: and behaviors that destroy wealth and how to avoid them

1462
01:13:07,040 --> 01:13:10,200
Speaker 2: How Not to Invest wherever you find your favorite books.

1463
01:13:10,720 --> 01:13:12,479
Speaker 2: I would be remiss if I do not thank our

1464
01:13:12,479 --> 01:13:15,519
Speaker 2: cracked team that helps put these conversations together each week.

1465
01:13:15,840 --> 01:13:19,080
Speaker 2: Anna Luke is my producer. Sage Bauman is the head

1466
01:13:19,080 --> 01:13:22,840
Speaker 2: of Podcasts at Bloomberg. Sean Russo is my researcher. Peter

1467
01:13:22,920 --> 01:13:27,679
Speaker 2: Nicolino is my engineer. I'm Barry Ridholts. You've been listening

1468
01:13:27,720 --> 01:13:34,639
Speaker 2: to Masters in Business on Bloomberg Radio.