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Speaker 1: This is Masters in Business with Barry Riddholds on Bloomberg Radio.

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Speaker 1: This week we have a special and unusual guest on

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Speaker 1: the podcast, somebody I'm pretty confident that most of you

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Speaker 1: have never heard of. His name is Nick Murray. He

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Speaker 1: is an author and consultants to the advisory industry. He's

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Speaker 1: often been called an advisor's advisor. He's written eleven books,

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Speaker 1: probably the most famous of which to the professional is

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Speaker 1: Behavioral Investment Counseling UH. Some of the other books he's

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Speaker 1: written have titles like Simple Wealth, Inevitable Wealth. He is

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Speaker 1: an extremely insightful person who has been working in the

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Speaker 1: financial services industry for nearly half a century. He began

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Speaker 1: his career early on you'll hear at a number of

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Speaker 1: well known brokerage firms, and found himself more and more

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Speaker 1: offering advice to other advisors and brokers rather too specific

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Speaker 1: individual clients, and that evolved, as he discusses, some thirty

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Speaker 1: plus years ago, into a full time career working as

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Speaker 1: an advisor to advisors. He has a very substantial and

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Speaker 1: loyal following amongst a certain group of people in the

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Speaker 1: financial industry. He preaches some very common sense things that

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Speaker 1: are a little counterintuitive. You might be surprised to learn

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Speaker 1: how important stock picking and market timing is to long

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Speaker 1: term returns. Uh. The answer is going to rock you

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Speaker 1: back on your heels. All those things matter much, much

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Speaker 1: less than your own behavior as an investor and your

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Speaker 1: own behavior as a financial advisor or broker. One of

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Speaker 1: the things I find really fascinating about Nick Murray is

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Speaker 1: that the average person has no idea who this guy is.

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Speaker 1: In fact, I would go so far as to say

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Speaker 1: the average investor has no idea that there is an

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Speaker 1: industry that exists helping advisors do their job. And I

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Speaker 1: don't just mean software and various mutual fund managers and

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Speaker 1: product creators, but someone who actually facilitates the process of

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Speaker 1: the ideal way, the optimal way for financial advisors to

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Speaker 1: interact with their clients. A lot of this is kind

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Speaker 1: of inside baseball. I suspect we're gonna have a lot

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Speaker 1: of people in the financial services industry finding about out

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Speaker 1: about this and listening to it. He speaks all over

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Speaker 1: the country, probably gives fifty plus speeches a year, and

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Speaker 1: commands a i um speaking fee because he is in

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Speaker 1: such demands. UH. For those of you who want to

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Speaker 1: know a little more about how the financial services industry works,

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Speaker 1: or those of you who are just interested in the

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Speaker 1: work that he does. Here is Nick Murray. This is

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Speaker 1: Masters in Business with Barry Ridholts on Bloomberg Radio. My

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Speaker 1: guest today is Nick Murray. You may not know who

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Speaker 1: he is, but if you're in the financial services industry,

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Speaker 1: you probably should. He is known as the Advisers Advisors,

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Speaker 1: one of the industry's premier resources for registered investment advisors

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Speaker 1: and others. He is the author of eleven books for

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Speaker 1: financial services professional, most famously Simple Wealth Inevitable Wealth, which

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Speaker 1: has been described as the most successful privately published book

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Speaker 1: of the last fifteen years. In two thousand and seven,

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Speaker 1: Nick was the recipient of the Malcolm S. Forbes Public

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Speaker 1: Awareness Award for Excellence in advancing Financial Understanding. Nick, welcome

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Speaker 1: to Bloomberg. It's very nice to be here. I would

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Speaker 1: point out that I've never claimed that Simple Wealth was

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Speaker 1: anything but one of the most successful privately published books

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Speaker 1: of the last fifteen years. We don't want to start

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Speaker 1: hyperbole this early in the Okay, we'll save it for

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Speaker 1: the latter second hyperbole in segment five. A. Alright, so

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Speaker 1: a little bit about your background. You went to Columbia

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Speaker 1: years and years. I went to Columbia seven years of

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Speaker 1: college wasted, just like Bluto, seven years of college down

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Speaker 1: the drain um, but always not lost because my major

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Speaker 1: was economics, and of course in the mid nineteen sixties

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Speaker 1: they were teaching Kanzie and economics still do, which I

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Speaker 1: would have had to go back and re learn all

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Speaker 1: over again anyway. So it wasn't, as we say, a

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Speaker 1: total loss. Okay. So so you come out of school

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Speaker 1: in nineteen sixty seven, you go to E. F. Hutton

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Speaker 1: and then you're at Shearson, ultimately ending up at Bear

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Speaker 1: Stearns before saying to yourself, I'm in demand by advisors

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Speaker 1: more so than anything else. Maybe that's the sort of

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Speaker 1: area I should focus my attention on. How how did

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Speaker 1: that transit? It was kind of it was kind of

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Speaker 1: a half step. In nineteen um years ago, about twenty

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Speaker 1: five years ago, now that you mentioned it, and now

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Speaker 1: that you mentioned it, in August, I published the book

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Speaker 1: called UM Serious Money, The Art of Marketing Mutual Funds

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Speaker 1: UM because there was no other book on the subject,

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Speaker 1: and you know, started to get a lot of requests

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Speaker 1: to to come to firms other than Bear sterns and

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Speaker 1: talk about this, and I it was just a collision

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Speaker 1: course and so I kind of took myself off was

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Speaker 1: an independent advisor, UM and also doing this whatever it

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Speaker 1: is that I do now, and then at the end

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Speaker 1: of the decade, at the turn of the century, I

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Speaker 1: kind of said both, Yeah, you better do one or

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Speaker 1: the other. So let me ask you a question. I've

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Speaker 1: heard other people ask this, and I actually rarely asked

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Speaker 1: this question, but for someone like yourself, it's a fascinating

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Speaker 1: way to frame this. When people ask you what do

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Speaker 1: you do? You know it's typical cocktail party chat or

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Speaker 1: how do you answer that question? I say that I'm

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Speaker 1: an advisor to other financial advisors, that I was for

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Speaker 1: a quarter of a century or more a financial advisor,

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Speaker 1: and now that I consult and and speak and write

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Speaker 1: to other financial advisors. And if they don't go to

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Speaker 1: completely to sleep, well, I'm still saying that. I just

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Speaker 1: kind of walk away. That's UM. I find myself in

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Speaker 1: an odd situation When people ask me what do I do?

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Speaker 1: The answer is always, well, what day you I It's

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Speaker 1: not like I have a nine to five. I can't

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Speaker 1: just say I'm an accountant or a doctor. It's much

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Speaker 1: more complicated, and once you see that glaze over the eyes,

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Speaker 1: it's like, all right, I think I'm I'm boring them

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Speaker 1: to death. My attitude is that's what you get for

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Speaker 1: asking me. That's right. So so from the financial services

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Speaker 1: industry as an advisor to actually helping advisors help their

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Speaker 1: own clients. You know, what was the motivational drive of that?

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Speaker 1: How did that come about? That? Was it strictly due

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Speaker 1: to demand from advisors? What what makes you say? You know,

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Speaker 1: I have a bunch of clients and I like them,

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Speaker 1: but these other advisors they're they're kicking my door down.

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Speaker 1: How do you make that transition? Well, first of all,

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Speaker 1: a lot of it's just getting older and making choices.

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Speaker 1: I mean, it's just you know, there come there came

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Speaker 1: a point where I didn't think that I could do

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Speaker 1: both with distinction. You couldn't be an advisor to clients

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Speaker 1: and an advisor to traveling all over the country and

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Speaker 1: writing in and doing all this other stuff. You speak frequently.

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Speaker 1: How many events do you speak out a year? I

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Speaker 1: guess it's running around four dozen. All right, so almost

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Speaker 1: weekly you're on the road somewhere. It bunches, but yes,

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Speaker 1: it averages out to once a week, and you have

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Speaker 1: about thirty subscribers to your newsletter. And what I want

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Speaker 1: to point out about your newsletter, Unlike just about every

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Speaker 1: other newsletter I've ever seen, yours is described as having

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Speaker 1: zero forecasts. Explain that, Um, it's funny. Nobody has ever

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Speaker 1: said that. I don't know anything about other newsletters, and

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Speaker 1: nobody's ever said that to me before. But I'll take

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Speaker 1: you at your word. I UM, I don't know how

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Speaker 1: anybody who's a counselor to advisors who are trying to

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Speaker 1: get their clients to think and act long term would

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Speaker 1: sully himself with a with a forecast of any kind.

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Speaker 1: I think could just Hey, I'm not qualified to forecast.

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Speaker 1: This doesn't bother me because no one else is either.

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Speaker 1: That was my next question. So you don't think that

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Speaker 1: the gold is going to five thousand this year? Is

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Speaker 1: that we are at some point? It is at some point?

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Speaker 1: But is that February? Is that Novary? When? Because that's

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Speaker 1: my favorite forecast I've I've seen that for now for

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Speaker 1: ten years. Gold goes up, gold goes down. The forecast

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Speaker 1: never changes. My favorite forecast is DW five thousand, which

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Speaker 1: you see about every ninety days from someone or other.

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Speaker 1: I'm Barry Ridhults. You're listening to Masters in Business on

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Speaker 1: Bloomberg Radio. My special guest today is Nick Murray. He

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Speaker 1: is the advisor to Advisors. And one of the things

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Speaker 1: that I really like about UM your various writings, especially

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Speaker 1: your regular newsletter, is your emphasis on out performance and

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Speaker 1: why we obsessively focus on it to our debt from it.

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Speaker 1: Describe that if you would well, it covers a lot

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Speaker 1: of ground. I mean it kind of depends on what

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Speaker 1: you mean by out performance, if you mean alpha. Jore.

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Speaker 1: My attitude is forget it. The the individual investor struggling

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Speaker 1: with everything else. He's got a struggle in his life

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Speaker 1: and and trying to make sense out of his long

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Speaker 1: term investments. The best way and the easiest way, in

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Speaker 1: the most fatal way that he can blow himself up

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Speaker 1: and will blow himself up, is chasing alpha. Is mistaking

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Speaker 1: out performance for a financial goal, which is not the

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Speaker 1: great task of the individual investment advisor. To me and

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Speaker 1: and particularly the holistic financial planner is keeping everybody on

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Speaker 1: their long term plan. And I think you can do

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Speaker 1: one or the other. You can sort of follow a

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Speaker 1: plan or you can chase performance, but I don't think

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Speaker 1: you can do both at the same time. One or

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Speaker 1: the other will will take you over. And if alpha

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Speaker 1: takes you over as opposed to outcomes, I think you're

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Speaker 1: dead in the marketplace. So I have a few quotes

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Speaker 1: of yours that I want to throw at you and

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Speaker 1: have you, um respond to, one of which was investor

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Speaker 1: behavior is far more important a determinant to someone's returns

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Speaker 1: than either stock picking or market timing. Explain that I

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Speaker 1: don't know that I ever said that, Um, Then no, no,

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Speaker 1: But here's what what I've said is even stronger than that,

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Speaker 1: which is word for word, the dominant determinant of long term,

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Speaker 1: real life financial outcomes is not investment performance, it's invest

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Speaker 1: or behavior. So so let's let's explore that a little bit.

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Speaker 1: So the total arns that a person is getting from

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Speaker 1: their portfolio matters less than what they do in response

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Speaker 1: to various inputs. Is that a fair way to describe that?

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Speaker 1: How How if at all they respond inappropriately to market stimuli.

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Speaker 1: So give us a few examples of inappropriate responses you

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Speaker 1: have of your portfolio and dot com. And we saw

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Speaker 1: plenty of that, And we saw plenty of that and

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Speaker 1: you have of your portfolio in gold and cash. In

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Speaker 1: the spring of two thousand and nine, and we certainly

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Speaker 1: saw a lot of people panicking out of the market

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Speaker 1: in March o nine it was ever thus and and

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Speaker 1: that's pretty much human behavior. There's not a whole lot

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Speaker 1: of that's that's fairly perennial or or everlasting. That's the

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Speaker 1: nature of how people react, isn't it. That's why the

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Speaker 1: financial adviser was sent into the world by God, because

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Speaker 1: it is essential to human nature. The the financial advisor

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Speaker 1: doesn't manage money, he manages people. And again this is

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Speaker 1: an either or choice. You you every advisor has to

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Speaker 1: comes to that fork in the road, I think, and

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Speaker 1: the good ones go down the road of of managing

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Speaker 1: investor behavior and sort of letting the portfolio as as

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Speaker 1: long as it's allocated to the right stuff in the

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Speaker 1: long run, leaving the portfolio alone. I'm I'm a firm believer.

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Speaker 1: This is a slightly different point, but it seems to

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Speaker 1: want to come up. I'm a firm believer that the

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Speaker 1: more often you change the portfolio for whatever reason, the

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Speaker 1: lower your return will go. That turnover is absolutely correlated

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Speaker 1: negatively too to return the way I heard that some

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Speaker 1: years ago was don't just do something? Sit there very much,

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Speaker 1: so I think it was Lewis rukais his last words.

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Speaker 1: So there is um. You've written many books, one of

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Speaker 1: which I have right here called Behavioral Investment Counseling, and

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Speaker 1: there is there is a section in it that has

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Speaker 1: some information that I had a double check because it

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Speaker 1: was so outrageous when you first read it. You you

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Speaker 1: have to say, let me make sure this is true.

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Speaker 1: So I'm gonna read this data over twenty years, the

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Speaker 1: average large cap equity mutual funds, and this is as

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Speaker 1: of oh seven, so it's before the crisis and before

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Speaker 1: the recovery, the average large cap mutual equity mutual funds,

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Speaker 1: according to Lipper Analytics, has returned ten point eight one

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Speaker 1: but the average investor in those funds have received only

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Speaker 1: four point four eight percent of those In other words,

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Speaker 1: they're retaining less than half of the gains of the

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Speaker 1: funds they own. How is it possible to underperform your

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Speaker 1: own investments by buying them and selling them at the

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Speaker 1: wrong times? And how those data which which you're quoting

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Speaker 1: from the book. That study is done every year and

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Speaker 1: every year it comes out the same there's been no

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Speaker 1: change post crisis, post recovery. By the way, the second

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Speaker 1: number is from dal Bar, which actually dal Bar does

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Speaker 1: the study. And that's my point that if you read

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Speaker 1: the twenty annual dal Bar studies, they basically cluster around

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Speaker 1: the same conclusion, which is that the average investor blows

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Speaker 1: about half the return of either the market or the

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Speaker 1: average fund. And that's not through picking this fund over

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Speaker 1: that fund. It's through their own behavior, switching funds, switching

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Speaker 1: from here to that. So they sell something at the

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Speaker 1: wrong time and swap into something at the wrong time. Well,

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Speaker 1: well sure, because what they do, what what I think

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Speaker 1: everybody is inclined to do, is switch out of something

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Speaker 1: that's gone cold into something that appears to be hot,

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Speaker 1: and and again. I think that's a very fundamental human behavior.

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Speaker 1: And if you stop for ten seconds, you realize that

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Speaker 1: what they're doing again and again and again is selling

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Speaker 1: low to buy high, which I read somewhere is about

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Speaker 1: the opposite of what you're supposed to do. I think

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Speaker 1: I've seen that as well, and it just it can

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Speaker 1: have no other outcome, So mean reversion not really something

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Speaker 1: that the average investor is thinking about. In other words,

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Speaker 1: buying something that's dipped and selling something that's rallied, they're

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Speaker 1: doing the opposite. They're left to their own devices that

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Speaker 1: they're they're doing the opposite, which is why, in my experience,

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Speaker 1: almost all of the great advisors are rebalancing annually. Hey,

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Speaker 1: they're coming back to the original plan. But in the

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Speaker 1: act of rebalancing, what you're doing is kicking out stuff

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Speaker 1: that shot out the lights and redeploying it into stuff

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Speaker 1: that's just waiting to go instead of the opposite, which

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Speaker 1: is what everybody does if you leave them to their

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Speaker 1: own device, And the research shows that's the closest thing

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Speaker 1: to a free lunch on Wall Street. There's no risk,

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Speaker 1: no cost, and you're actually adding a few basis points

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Speaker 1: of performance over a long time. Total no brainer. You're

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Speaker 1: listening to Masters in Business on Bloomberg Radio. My special

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Speaker 1: guest today is Nick Murray. He is the author of

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Speaker 1: eleven books on investing and how advisors should interact with clients.

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Speaker 1: Let's talk a little bit about that. So, so you

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Speaker 1: began in ninety seven. What was the role of the

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Speaker 1: advisor back then? Was that a very different era or

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Speaker 1: was it just the same thing? It was the it

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Speaker 1: was the neanderthal he it was. It was stockpicking still

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Speaker 1: just in seven, which was very very close to as

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Speaker 1: you know, the top of the great post World War

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Speaker 1: two bullmarket twenty years nifty fifty. Everybody was all excited

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Speaker 1: and then had really become a garbage market, really become

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Speaker 1: a garbage market. And it was it was really the

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Speaker 1: first great outbreak of mass uh performance mania since the twenties,

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Speaker 1: and no one had an adult memory of that, and

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Speaker 1: no one knew what it was about. And the market

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Speaker 1: had been going up for you know, two years, yeah,

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Speaker 1: and and it was it was allegedly a stock pickers market.

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Speaker 1: It was all about beating the market by individual stock selection.

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Speaker 1: Heaven helpless and and around the same time, you know,

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Speaker 1: you stop and think back to it. Yeah, you had

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Speaker 1: these short little recessions in these short little market corrections

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Speaker 1: in the fifties and early sixties, But overall, the long

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Speaker 1: term returns for most of people's adult life at that

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Speaker 1: point had been a one way trade, hadn't it be?

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Speaker 1: And And so that was doubt kissed a thousand and

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Speaker 1: nineteen sixty it did, and it wasn't over it on

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Speaker 1: a permanent basis again until that is exactly correct. So,

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Speaker 1: so how does somebody how does an advisor counsel clients three,

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Speaker 1: four or five years into that it looks like the

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Speaker 1: market is never going up again? Well, I hope that

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Speaker 1: um an advisor is counseling clients to be buying with

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Speaker 1: both hands, because that's when, that's when you're supposed to Now,

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Speaker 1: isn't what a lot of people do. I don't think

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Speaker 1: it is. But the narrow answer to the narrow question

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Speaker 1: what should a what should an advisor be counseling people

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Speaker 1: in a period like that, is is a continue to

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Speaker 1: work your plan, be you're getting some kind of a

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Speaker 1: big intermediate to longer term sale. You'll never see these

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Speaker 1: prices again. You had to know, uh, you know, nine

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Speaker 1: seventy four when the when the the pe was eight

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Speaker 1: or something, because the bonds were risk free and the

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Speaker 1: market had just fallen fifty from So so let me

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Speaker 1: So you said that was a narrow question, let me

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Speaker 1: ask this in a more general, broad set question. What

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Speaker 1: makes a successful financial advisor somebody who can make a

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Speaker 1: plan for his clients empathetically, bravely, smartly and keep them

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Speaker 1: on it and regardless of the fads or fears of

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Speaker 1: the moment, regardless of the fads or fears of the moment.

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Speaker 1: This brings us back to the behavioral issue. How significant

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Speaker 1: is what an advisor does in terms of managing the

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Speaker 1: poor impulses and emotional instincts of the average investor. Again,

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Speaker 1: that's what I think he was sent into the world

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Speaker 1: to do. So now let's let me ask you a

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Speaker 1: somewhat different question about that. What's the ideal client? Like,

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Speaker 1: So you just described what the role of the advisor is.

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Speaker 1: What's the role of the client in all this? The

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Speaker 1: role of the client is to come to an advisor,

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Speaker 1: realizing that he cannot make for himself a lifetime much

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Speaker 1: less multi generational investment plan, much less financial plan, and

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Speaker 1: find an advisor that he can trust, and sit down

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Speaker 1: with that advisor and make that plan and ask the

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Speaker 1: advisor to keep him on it even when he doesn't

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Speaker 1: want to stay on it. That's what the ideal client is.

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Speaker 1: It's somebody who I'm not going to tell my lawyer

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Speaker 1: how to defend me. I'm not going to tell my

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Speaker 1: accountant how to do my taxes, and I'm sure I'm

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Speaker 1: not going to tell my doctor what to prescribe on

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Speaker 1: what theory if you think that's rational. Does someone go

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Speaker 1: to an investment advisor, much less a financial planner, and say,

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Speaker 1: this is what I want to do. You go to

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Speaker 1: a planet because you don't know what you want to do,

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Speaker 1: or you suspect that what you want to do is

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Speaker 1: wrong because you've tried it a bunch of times and

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Speaker 1: it hasn't worked. So that's to me. The ideal client

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Speaker 1: is the one who treats his financial planner the way

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Speaker 1: he does his attorney and his accountant and his doctor.

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Speaker 1: He goes and says, as nearly as I can tell,

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Speaker 1: this is my problem, tell me how to fix it.

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Speaker 1: That makes plenty sense. What about the client who goes

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Speaker 1: to an advisor and says, I just saw this guy

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Speaker 1: on TV and here's what he said. How should that

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Speaker 1: be handled? If you think he's right, go do what

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Speaker 1: he said. I'm Barry. What helps? You're listening to Master's

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Speaker 1: in Business Bloomberg Radio. My special guest today is Nick Murray.

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Speaker 1: He is the advisor to advisors and has spent the

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Speaker 1: better part of his adult lifetime trying to teach advisors

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Speaker 1: the proper way of interacting with their clients. And just

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Speaker 1: before the break, we were discussing a very typical error

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Speaker 1: that advisors make, which is placating clients when they're engaging

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Speaker 1: in bad behavior. Discuss what what the problem is with that? Well,

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Speaker 1: the problem is that you're taking money from people in

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Speaker 1: exchange for enabling them to do things that you know

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Speaker 1: are wrong. Hey, I think that's immoral. Be I don't

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Speaker 1: know how you look at yourself in the mirror and

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Speaker 1: see all you're doing is postponing the inevitable. If you're

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Speaker 1: helping people do the bad things that they want to do,

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Speaker 1: you're you're that's going to be a train wreck eventually.

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Speaker 1: And when it is a train wreck, they'll turn around

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Speaker 1: and blame you. I've seen it happen any number of

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Speaker 1: times where where advisors, you know, kept trying to get

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Speaker 1: the client on this on the straight and narrow, said Okay,

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Speaker 1: I'll let him do this, I'll let him buy gold,

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Speaker 1: I'll let him go to cash this, that and the

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Speaker 1: other thing, because he saw the only alternative as losing

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Speaker 1: the account, which he didn't realize what was what he

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Speaker 1: really wanted. And and when the client hit the wall,

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Speaker 1: he turned around and sued. The guy sued the advisor.

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Speaker 1: So so let's back up and I know you're talking

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Speaker 1: metaphorically and not any specific account, but you're a big

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Speaker 1: advocate of where there's not a good fit between a

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Speaker 1: client and an advisor, to terminate that relationship or fire

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Speaker 1: the client. I'm I'm not actually, I'm I'm a big

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Speaker 1: fan of not starting the relationship because you know in

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Speaker 1: the first twenty minutes, so you should never get I

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Speaker 1: don't think an advisor in a per efect world, and

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Speaker 1: I know this is not a perfect world, but I

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Speaker 1: don't think that the advisor should ever get to the

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Speaker 1: point where he's gotta fire a guy because he knows

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Speaker 1: he knew going in, you're going in. This is a

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Speaker 1: absolutely in the first twenty minutes. So what happens in

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Speaker 1: the real world where you think you're sympatico, you're you're

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Speaker 1: you know, especially if you're not promoting yourself as a Look,

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Speaker 1: I'm not a stock picker, I'm not a market time

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Speaker 1: or I'm a long term asset allocator, even with the

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Speaker 1: best of intentions, and where you think there's a fit

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Speaker 1: when you're six or seven years into a long term

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Speaker 1: bull market and people forget how they their buddies panicked

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Speaker 1: out in the in the bottom you know, you look

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Speaker 1: at their tenure returns. They're doing much much better than

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Speaker 1: the guy who's chasing returns at the top and panicking

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Speaker 1: out at the bottom. And now this guy discovers the

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Speaker 1: next great thing, gold nanotechnology, Netflix, Facebook, you, you name it,

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Speaker 1: whatever it is. How how do you deal with the

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Speaker 1: client who suddenly says, hey, listen, I'd like to juice

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Speaker 1: my returns. My neighbor told me that he bought the

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Speaker 1: Facebook I p O and it's now almost a hundred.

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Speaker 1: Why don't you get me the Facebook ip O. That's

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Speaker 1: a real world behavior. It's a very real world behavior.

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Speaker 1: So what's how should that be handled? How should that

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Speaker 1: be dealt with? I don't do individual stocks. I have

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Speaker 1: no understanding of Facebook's business model. In my own defense,

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Speaker 1: I don't think Warren Buffett does either. But I don't

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Speaker 1: want to. I don't want to do, you know, um,

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Speaker 1: anything by association. This is not a part of our plan.

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Speaker 1: This is not something that I would feel competent to

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Speaker 1: advise you on. I'm not going to do that. If

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Speaker 1: you if you want to take some money, um, that

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Speaker 1: is not essential to your long term plan and play

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Speaker 1: with it by all means, you know, be encouraged to

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Speaker 1: do that elsewhere. So you're a fan of the um

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Speaker 1: an account that acts as an emotional release so they

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Speaker 1: don't mess up their long term money. But here's a

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Speaker 1: small amount of money that if you lose it, it's

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Speaker 1: it's who cast. If that's the only way that you

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Speaker 1: can keep him from coming up the long term plan, sure,

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Speaker 1: and what about people who are just hell bent on

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Speaker 1: self destruction? Terminate that relationship again again. I think that

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Speaker 1: if you've been in the business for any length of

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Speaker 1: time and you're honest with yourself, and you're not just

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Speaker 1: looking at and saying, boy, this is a really big account,

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Speaker 1: and I hope I get it, and I'll say whatever

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Speaker 1: I have to say to get it. If you're honest

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Speaker 1: with yourself, you know in the first twenty minutes you

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Speaker 1: people who are seriously bent on self destruction confess that

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Speaker 1: to you without realizing they're doing it very very early

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Speaker 1: in the game, long before you're you're deep into the weeds.

430
00:27:59,119 --> 00:28:01,679
Speaker 1: We we have a couple of cfps in our office

431
00:28:01,800 --> 00:28:06,440
Speaker 1: and they have a list of knockout indicators, and it's

432
00:28:07,440 --> 00:28:10,280
Speaker 1: when we start when people start asking questions about sharp

433
00:28:10,440 --> 00:28:13,320
Speaker 1: ratios and things like that. We know, hey, you really

434
00:28:13,359 --> 00:28:15,320
Speaker 1: want a hedge fund. You're not looking for a long

435
00:28:15,440 --> 00:28:18,359
Speaker 1: term financial plan. You want a whole lot more juice,

436
00:28:18,400 --> 00:28:21,200
Speaker 1: and and that's not what we do. We're really boring.

437
00:28:21,720 --> 00:28:24,840
Speaker 1: You want you want a whole lot more cocktail party chatter.

438
00:28:25,400 --> 00:28:28,080
Speaker 1: And uh, it's amazing how many of those sort of

439
00:28:28,160 --> 00:28:31,399
Speaker 1: knockout indicators pop up. And you're absolutely right, it's in

440
00:28:31,400 --> 00:28:34,680
Speaker 1: the first ten minutes of the conversation. So so let's

441
00:28:34,720 --> 00:28:37,800
Speaker 1: talk a little bit about risk and reward, all right,

442
00:28:37,840 --> 00:28:39,760
Speaker 1: because risk is something that a lot of people have

443
00:28:39,840 --> 00:28:44,600
Speaker 1: a tendency to think about, sometimes incorrectly. Um, how should

444
00:28:44,600 --> 00:28:48,880
Speaker 1: retail investors think about risk? They should define it, first

445
00:28:48,920 --> 00:28:53,840
Speaker 1: of all. And retail investors can't the retail investor, and

446
00:28:53,880 --> 00:28:57,840
Speaker 1: this is a huge part of his his problem and

447
00:28:57,960 --> 00:29:03,200
Speaker 1: his desperate need for an advisor. The the individual investor

448
00:29:03,440 --> 00:29:06,680
Speaker 1: cannot distinguish between risk and volatility. I was gonna say,

449
00:29:06,680 --> 00:29:10,040
Speaker 1: if everybody uses volatility as a proxy, but volatility really

450
00:29:10,120 --> 00:29:14,160
Speaker 1: is not risk. Volatility has nothing to do with risk.

451
00:29:14,360 --> 00:29:18,400
Speaker 1: Risk is the chance of a permanent loss of capital.

452
00:29:19,120 --> 00:29:25,120
Speaker 1: Volatility is unpredictability, both high and low around a long

453
00:29:25,240 --> 00:29:29,920
Speaker 1: term trend line. One thing with the other got absolutely

454
00:29:29,960 --> 00:29:34,000
Speaker 1: nothing to do. And this is far out breaking news

455
00:29:34,720 --> 00:29:40,560
Speaker 1: for the American individual investor. Why does anybody get out

456
00:29:40,600 --> 00:29:43,280
Speaker 1: at the bottom of the market because he looks at

457
00:29:43,280 --> 00:29:47,240
Speaker 1: a temporary decline, because they're all temporary declines, and he

458
00:29:47,320 --> 00:29:50,840
Speaker 1: says I have lost ex per cent of my money.

459
00:29:50,880 --> 00:29:54,640
Speaker 1: In fact, he has not lost anything unless and until

460
00:29:54,800 --> 00:29:59,480
Speaker 1: he sells. This is a distinction that in my experience,

461
00:30:00,200 --> 00:30:07,360
Speaker 1: people cannot make without an advisor, basically standing athwart their portfolio,

462
00:30:07,960 --> 00:30:14,120
Speaker 1: go and stop. Don't do that. We're speaking with Nick Murray.

463
00:30:14,200 --> 00:30:17,720
Speaker 1: He is the author of eleven different books on finance

464
00:30:17,760 --> 00:30:22,360
Speaker 1: and an advisor to the advisor community. So let's go

465
00:30:22,480 --> 00:30:26,320
Speaker 1: over some of the worst mistakes that investors make. You

466
00:30:26,480 --> 00:30:29,000
Speaker 1: hinted at a few of them. They end up getting

467
00:30:29,080 --> 00:30:32,520
Speaker 1: enamored by things like I P O S. They get

468
00:30:32,560 --> 00:30:36,000
Speaker 1: aggressive at the top, they panic at the bottom. Really,

469
00:30:36,040 --> 00:30:39,160
Speaker 1: a lot of this just comes down to emotions, doesn't it. Sure,

470
00:30:39,200 --> 00:30:42,200
Speaker 1: it all comes down to emotions. They give into emotions,

471
00:30:42,240 --> 00:30:46,000
Speaker 1: they get excited, they get enthusiastic, or they get terrified.

472
00:30:46,320 --> 00:30:48,920
Speaker 1: Um where they get greedy. So let's talk a little

473
00:30:48,960 --> 00:30:52,400
Speaker 1: bit about greed. What what about private equity and venture

474
00:30:52,440 --> 00:30:56,560
Speaker 1: investing and hedge funds. They sound so sexy and sophisticated.

475
00:30:57,320 --> 00:31:00,520
Speaker 1: We've been anecdotally hearing more and more question is about

476
00:31:00,560 --> 00:31:03,280
Speaker 1: that from different people. What what are your thoughts on

477
00:31:03,280 --> 00:31:07,280
Speaker 1: on those areas of investment. I have really studied those areas.

478
00:31:07,280 --> 00:31:14,160
Speaker 1: But if you find one that has outperformed mainstream equities

479
00:31:14,280 --> 00:31:20,240
Speaker 1: over the long term with anything remotely like the volatility

480
00:31:20,240 --> 00:31:23,720
Speaker 1: of mainstream equities, I'll be interested to learn about it.

481
00:31:23,800 --> 00:31:29,760
Speaker 1: I haven't found one yet. Um, the things that you're

482
00:31:29,800 --> 00:31:36,360
Speaker 1: talking about, basically are very subject, in my experience, to vogues,

483
00:31:37,560 --> 00:31:40,400
Speaker 1: And so you know, you would you would have you

484
00:31:40,400 --> 00:31:44,480
Speaker 1: would go into the crash of two thousand seven, two

485
00:31:44,520 --> 00:31:48,280
Speaker 1: thousand and nine with maybe two hundred million, two hundred

486
00:31:48,320 --> 00:31:55,040
Speaker 1: and fifty million dollars in total in in commodity futures funds,

487
00:31:55,120 --> 00:31:57,560
Speaker 1: and you would come out of the crash with two

488
00:31:57,640 --> 00:32:02,440
Speaker 1: and a half billion because momentarily that stuff had held

489
00:32:02,520 --> 00:32:06,480
Speaker 1: up better than mainstream equities. So what did everybody do?

490
00:32:06,920 --> 00:32:10,120
Speaker 1: They took all of their money out of mainstream equities

491
00:32:10,520 --> 00:32:14,680
Speaker 1: somewhere near the bottom and invested it in whatever you

492
00:32:14,760 --> 00:32:18,640
Speaker 1: call these things, futures managed futures. I don't even know

493
00:32:18,680 --> 00:32:22,800
Speaker 1: the terminology at at at a time when there was

494
00:32:22,840 --> 00:32:25,560
Speaker 1: so much money coming into these things that they could

495
00:32:25,600 --> 00:32:30,480
Speaker 1: not possibly perform, and and it was ever Thus so

496
00:32:30,760 --> 00:32:34,520
Speaker 1: I you know, I don't manage money today. But if

497
00:32:34,560 --> 00:32:37,840
Speaker 1: somebody came to me and said I want to put

498
00:32:37,880 --> 00:32:42,680
Speaker 1: a third of my money in managed futures and and

499
00:32:43,240 --> 00:32:46,520
Speaker 1: private equity and all this other stuff that you that

500
00:32:46,680 --> 00:32:50,280
Speaker 1: you mentioned, I would say, these are not areas that

501
00:32:50,360 --> 00:32:53,960
Speaker 1: I know anything about. They're not areas that I'm interested

502
00:32:53,960 --> 00:32:59,840
Speaker 1: in knowing anything about. Deep down, without adopting the you

503
00:33:00,000 --> 00:33:03,280
Speaker 1: of the burdener proof, I suggest to you that I

504
00:33:03,320 --> 00:33:09,280
Speaker 1: have never seen evidence that these things consistently outperform mainstream

505
00:33:09,320 --> 00:33:13,360
Speaker 1: equities over the long term. But it is your money,

506
00:33:13,440 --> 00:33:17,120
Speaker 1: and you're the client, and you should go find somebody

507
00:33:17,160 --> 00:33:20,680
Speaker 1: who is good at, or you think is good at

508
00:33:20,720 --> 00:33:24,320
Speaker 1: counseling you in in these areas, because I will never

509
00:33:24,400 --> 00:33:27,240
Speaker 1: be We've been speaking with Nick Murray. He is the

510
00:33:27,240 --> 00:33:31,640
Speaker 1: author of eleven separate books on investing and well known

511
00:33:31,720 --> 00:33:35,400
Speaker 1: as an advisor to advisers. If you enjoy this conversation,

512
00:33:35,480 --> 00:33:38,120
Speaker 1: be sure and check out our podcast extras, where we

513
00:33:38,200 --> 00:33:41,800
Speaker 1: keep the tape rolling and continue our conversation. Be sure

514
00:33:41,800 --> 00:33:44,920
Speaker 1: and check out my daily column on Bloomberg View dot com.

515
00:33:45,040 --> 00:33:48,800
Speaker 1: Follow me on Twitter at Ridhults. You can see Nick

516
00:33:48,880 --> 00:33:53,360
Speaker 1: Murray's writings and subscribe to his newsletters at either Nick

517
00:33:53,480 --> 00:33:57,440
Speaker 1: Murray dot com or Nick Murray Newsletters dot com. I'm

518
00:33:57,520 --> 00:34:01,240
Speaker 1: Barry Ridhults. You're listening to Masters in Business. I'm Bloomberg Radio.

519
00:34:01,600 --> 00:34:05,320
Speaker 1: Welcome to the podcast portion of our show. Our special

520
00:34:05,400 --> 00:34:09,760
Speaker 1: guest today, Nick Murray. Who this is a little inside baseball.

521
00:34:09,800 --> 00:34:14,160
Speaker 1: If you're a registered investment advisor or if you work

522
00:34:14,840 --> 00:34:19,040
Speaker 1: in asset management, you probably have heard the name Nick Murray. UH.

523
00:34:19,200 --> 00:34:22,560
Speaker 1: For for you civilians out there who may not know

524
00:34:22,680 --> 00:34:27,359
Speaker 1: the name UM, he is the person who is essentially

525
00:34:28,160 --> 00:34:33,200
Speaker 1: helping advisors help you and has a legendary history and

526
00:34:33,200 --> 00:34:37,279
Speaker 1: the legendary UH following amongst the advisor community. And if

527
00:34:37,320 --> 00:34:39,600
Speaker 1: I haven't said this previously, Nick, thank you so much

528
00:34:39,600 --> 00:34:43,000
Speaker 1: for doing this. It was a pleasure UM inviting you,

529
00:34:43,040 --> 00:34:45,560
Speaker 1: and I've been reading you for a long time and

530
00:34:45,560 --> 00:34:49,000
Speaker 1: I'm certainly familiar, um with a number of your books,

531
00:34:49,040 --> 00:34:51,719
Speaker 1: some of which I actually brought with me for you

532
00:34:51,800 --> 00:34:54,000
Speaker 1: to sign. I will be happy to do that. Thank

533
00:34:54,040 --> 00:34:57,560
Speaker 1: you for the opportunity to have the conversation. So, so

534
00:34:57,640 --> 00:35:00,880
Speaker 1: let's talk a little bit about some of the things

535
00:35:00,920 --> 00:35:03,759
Speaker 1: that you So we have no time constraints here, so

536
00:35:03,880 --> 00:35:08,520
Speaker 1: don't feel like you have to give me short broadcast answers. Um.

537
00:35:08,560 --> 00:35:10,279
Speaker 1: That's the whole beauty of this is that we can

538
00:35:10,320 --> 00:35:15,560
Speaker 1: sort of wax eloquent as long as long as you like. Um.

539
00:35:15,680 --> 00:35:18,120
Speaker 1: Before we were talking a little bit about risk, and

540
00:35:18,200 --> 00:35:21,880
Speaker 1: some of the questions I didn't get to, but we

541
00:35:22,000 --> 00:35:26,480
Speaker 1: hinted at. So, so the flip side of risk is reward.

542
00:35:27,200 --> 00:35:33,040
Speaker 1: What is it about reward that makes investors lose their minds?

543
00:35:33,160 --> 00:35:35,960
Speaker 1: How is it that you know, in the midst of

544
00:35:35,960 --> 00:35:39,560
Speaker 1: a downturn you see one type of investor behavior, and

545
00:35:39,600 --> 00:35:41,800
Speaker 1: then after a market has run up for a couple

546
00:35:41,800 --> 00:35:45,240
Speaker 1: of years, you start to see another type of investor behavior.

547
00:35:45,360 --> 00:35:47,919
Speaker 1: I don't know how to answer that other than by

548
00:35:48,000 --> 00:35:51,719
Speaker 1: copying out to human nature. That's not a cop out.

549
00:35:51,800 --> 00:35:56,480
Speaker 1: That's it's it's permanent, it's forever, it's you know. One

550
00:35:56,560 --> 00:36:00,600
Speaker 1: of my favorite investing books, this this will go right

551
00:36:00,640 --> 00:36:04,480
Speaker 1: to your point is UM, How I Trade Stocks and

552
00:36:04,560 --> 00:36:09,920
Speaker 1: Bonds was written in nine four by uh Wykoff is

553
00:36:09,960 --> 00:36:12,680
Speaker 1: his name, And if you went through this book, and

554
00:36:13,760 --> 00:36:17,520
Speaker 1: substituted where where he says railroads, you put in airlines,

555
00:36:17,560 --> 00:36:20,800
Speaker 1: and when he says telephone and telegraph, you put Internet.

556
00:36:21,239 --> 00:36:25,000
Speaker 1: I defy anybody to tell the difference between that book

557
00:36:25,040 --> 00:36:28,480
Speaker 1: written almost a century ago, Richard Wykoff's book, and a

558
00:36:28,520 --> 00:36:32,799
Speaker 1: book written a year ago. They're almost identical where they'd

559
00:36:32,840 --> 00:36:37,000
Speaker 1: have to be, because human nature is immutable, if you um.

560
00:36:37,360 --> 00:36:43,640
Speaker 1: My favorite book about the Ties and the crash intellectually

561
00:36:43,840 --> 00:36:49,839
Speaker 1: is more Kleines Rainbow's End, and one of the great

562
00:36:49,840 --> 00:36:51,960
Speaker 1: beauties of that book is that it came out in

563
00:36:52,040 --> 00:36:58,360
Speaker 1: two thousand and one, halfway down the great implosion of

564
00:36:58,520 --> 00:37:02,440
Speaker 1: dot com, and to pick up that book and read

565
00:37:02,840 --> 00:37:08,160
Speaker 1: about the mania and then the complete collapse at a

566
00:37:08,239 --> 00:37:11,920
Speaker 1: moment when you were living through a mania and a

567
00:37:12,000 --> 00:37:17,880
Speaker 1: complete collapse, all you could do uh reading it was

568
00:37:17,960 --> 00:37:21,080
Speaker 1: to say, I'm watching that movie all over again. It's funny,

569
00:37:21,120 --> 00:37:24,280
Speaker 1: I should pick this book up. It's a it's a cliche,

570
00:37:24,360 --> 00:37:26,520
Speaker 1: but it's true. The one thing we learned from history

571
00:37:26,600 --> 00:37:29,239
Speaker 1: is that nobody learns anything from history, and that, in

572
00:37:29,320 --> 00:37:34,920
Speaker 1: my opinion, is why God sent the behavioral investment counselor

573
00:37:34,960 --> 00:37:39,120
Speaker 1: into the world. So more important than performance, more important

574
00:37:39,160 --> 00:37:45,720
Speaker 1: than stock picking. Having someone facilitate your emotional well being

575
00:37:45,920 --> 00:37:48,920
Speaker 1: or prevent you from doing the things that we know

576
00:37:49,160 --> 00:37:51,840
Speaker 1: people tend to do well, not as an abstraction, but

577
00:37:51,920 --> 00:37:55,319
Speaker 1: in service to a plan. So describe that a little bit,

578
00:37:55,360 --> 00:37:57,840
Speaker 1: because you've you've referenced it in my mind, I know

579
00:37:57,880 --> 00:38:00,400
Speaker 1: what a plan is, but perhaps someone listens thing is

580
00:38:00,440 --> 00:38:04,840
Speaker 1: not that clued into what you mean by a financial plan. Well,

581
00:38:04,880 --> 00:38:07,319
Speaker 1: I'm not sure that I mean anything specific by it.

582
00:38:07,400 --> 00:38:10,640
Speaker 1: But what I mean is that you're you're fifty two

583
00:38:10,680 --> 00:38:12,920
Speaker 1: years old and your wife is fifty two years old,

584
00:38:13,400 --> 00:38:15,759
Speaker 1: and suddenly you realize you have not saved enough for

585
00:38:15,840 --> 00:38:19,239
Speaker 1: retirement and you and suddenly you realize that you have

586
00:38:19,400 --> 00:38:21,879
Speaker 1: said all along, the two of you to each other,

587
00:38:22,440 --> 00:38:26,319
Speaker 1: sixty two and out. And so one day, you know,

588
00:38:26,440 --> 00:38:29,080
Speaker 1: you go to sleep one night thinking about the Mercedes

589
00:38:29,080 --> 00:38:31,319
Speaker 1: and the trip to Europe, and you wake up the

590
00:38:31,360 --> 00:38:35,359
Speaker 1: next morning saying, we have less than ten years to go.

591
00:38:35,840 --> 00:38:40,439
Speaker 1: And that's that's kind of a jolt for a lot

592
00:38:40,480 --> 00:38:43,520
Speaker 1: of people. And and and believe me, I'm sure you

593
00:38:43,560 --> 00:38:48,040
Speaker 1: know a lot of people show up in Advisor's offices

594
00:38:48,560 --> 00:38:52,000
Speaker 1: at the point where they got that jolt. Now, what's

595
00:38:52,040 --> 00:38:54,480
Speaker 1: what's going to be the next thing that happens. The

596
00:38:54,520 --> 00:38:57,959
Speaker 1: advisor is going to say, Okay, ten years from now,

597
00:38:58,840 --> 00:39:02,720
Speaker 1: what is the sum of capital that will produce as

598
00:39:02,800 --> 00:39:07,200
Speaker 1: some reasonable withdrawal rate that will produce what you need

599
00:39:07,239 --> 00:39:11,799
Speaker 1: to live on for the rest of your life. And

600
00:39:12,000 --> 00:39:17,680
Speaker 1: out of that, you would assume, comes a written date specific,

601
00:39:17,800 --> 00:39:23,640
Speaker 1: dollar specific retirement accumulation plan, and out of that comes

602
00:39:23,719 --> 00:39:27,360
Speaker 1: an asset allocation model. What rate of return will it

603
00:39:27,440 --> 00:39:30,279
Speaker 1: take to get you from where we are now to

604
00:39:30,520 --> 00:39:33,880
Speaker 1: that amount of money at age sixty two? When we

605
00:39:33,920 --> 00:39:36,359
Speaker 1: know that rate of return, we have backed into an

606
00:39:36,360 --> 00:39:40,120
Speaker 1: asset allocation model, haven't we. If it's nine, welcome to

607
00:39:40,160 --> 00:39:43,719
Speaker 1: the wonderful world of being an equity investor, because it

608
00:39:43,840 --> 00:39:46,719
Speaker 1: did no other there's no other known way to get

609
00:39:46,760 --> 00:39:50,799
Speaker 1: there um consistently. So now we get up from that

610
00:39:50,920 --> 00:39:56,319
Speaker 1: conversation and we have a we have a goal, We

611
00:39:56,440 --> 00:39:59,800
Speaker 1: have presumably a plan for reaching that goal. The folks

612
00:39:59,800 --> 00:40:01,719
Speaker 1: that and I have to put in a number of

613
00:40:01,760 --> 00:40:05,160
Speaker 1: dollars every one of the hundred and twenty months from

614
00:40:05,239 --> 00:40:08,320
Speaker 1: age fifty two to age sixty two, and they're going

615
00:40:08,400 --> 00:40:12,080
Speaker 1: to have to realize a rate of return of why

616
00:40:12,800 --> 00:40:16,600
Speaker 1: on that that's a plan. Now, what are we asking

617
00:40:16,640 --> 00:40:19,040
Speaker 1: the plan to do. I don't think we're asking the

618
00:40:19,680 --> 00:40:21,960
Speaker 1: I wouldn't be asking the plan to do anything but

619
00:40:22,080 --> 00:40:27,359
Speaker 1: produce um long term trendline returns, that's all. But let's

620
00:40:27,400 --> 00:40:30,560
Speaker 1: make sure that we don't foul those up. Let's let's

621
00:40:30,600 --> 00:40:33,759
Speaker 1: make sure that during those hundred and twenty months when

622
00:40:33,760 --> 00:40:38,200
Speaker 1: the market goes down, which is gonna do once or twice,

623
00:40:38,960 --> 00:40:41,840
Speaker 1: isn't it, that we don't panic out and go to

624
00:40:41,880 --> 00:40:45,799
Speaker 1: cash or gold coins or something insane like that. And

625
00:40:45,800 --> 00:40:50,240
Speaker 1: and the once during the ten years um that the

626
00:40:50,280 --> 00:40:54,319
Speaker 1: that the SMP five hundred suddenly goes from you know,

627
00:40:54,440 --> 00:40:58,560
Speaker 1: two thousand to five thousand because of nanotechnology, that we

628
00:40:58,600 --> 00:41:01,320
Speaker 1: don't junk the plan and take eight of the assets

629
00:41:01,320 --> 00:41:05,080
Speaker 1: and throw a limit at nanotechnology. That's what I'm That's

630
00:41:05,080 --> 00:41:10,719
Speaker 1: what I mean by not not managing behavior in the abstract,

631
00:41:11,120 --> 00:41:14,640
Speaker 1: but managing it in service to the plan. The plan

632
00:41:14,760 --> 00:41:17,720
Speaker 1: doesn't the Plan doesn't want you to do that stuff.

633
00:41:18,480 --> 00:41:21,960
Speaker 1: So let me ask you about two different types of clients.

634
00:41:22,400 --> 00:41:25,160
Speaker 1: And again some of this is anecdotal, but I'm sure

635
00:41:25,680 --> 00:41:30,560
Speaker 1: what I'm about to tell you isn't anything radically different

636
00:41:30,640 --> 00:41:33,600
Speaker 1: from what other people have experienced. One is the client

637
00:41:33,960 --> 00:41:38,600
Speaker 1: that has a substantial pile of wealth, but they're afraid

638
00:41:38,640 --> 00:41:41,440
Speaker 1: that they're going to outlive their money, right, you know,

639
00:41:41,480 --> 00:41:43,840
Speaker 1: and you could show them, Look, there's only three inputs.

640
00:41:44,080 --> 00:41:46,640
Speaker 1: What you start with, how much you contribute, how much

641
00:41:46,680 --> 00:41:50,240
Speaker 1: time you have, And we're assuming a reasonable rate of return.

642
00:41:50,239 --> 00:41:53,480
Speaker 1: We're not assuming we're not assuming two percent. He is

643
00:41:53,480 --> 00:41:56,439
Speaker 1: a mixed portfolio. What do you say to people who

644
00:41:56,680 --> 00:42:00,359
Speaker 1: what do you say to either investors or advisors where

645
00:42:00,360 --> 00:42:04,359
Speaker 1: there is a reasonable sum of wealth to begin with,

646
00:42:04,920 --> 00:42:07,760
Speaker 1: where people continue to be concerned, they have a little

647
00:42:08,120 --> 00:42:11,080
Speaker 1: post traumatic stress disorder from the crisis from the O

648
00:42:11,239 --> 00:42:14,399
Speaker 1: eight oh nine crash. They're afraid that something's gonna happen

649
00:42:14,480 --> 00:42:18,080
Speaker 1: that's going to interfere with their ability to retire on

650
00:42:18,160 --> 00:42:21,200
Speaker 1: a timely basis, or they're not gonna be able to

651
00:42:21,440 --> 00:42:25,000
Speaker 1: they're gonna run out of money, um and outlive it. Well,

652
00:42:25,040 --> 00:42:27,640
Speaker 1: that's two different things. Okay, So let's take the outlive

653
00:42:27,680 --> 00:42:29,840
Speaker 1: the money first, because I seem to be hearing a

654
00:42:29,920 --> 00:42:32,600
Speaker 1: lot of that letter. Well, the outlive the money is

655
00:42:32,600 --> 00:42:35,840
Speaker 1: actually the big risk, and it's and it's the silent

656
00:42:36,040 --> 00:42:40,120
Speaker 1: risk I think because people don't focus on it. People say,

657
00:42:40,320 --> 00:42:45,120
Speaker 1: if I had X number of dollars at retirement and

658
00:42:45,239 --> 00:42:49,960
Speaker 1: I could withdraw from that, why number of dollars in retirement,

659
00:42:50,080 --> 00:42:53,440
Speaker 1: I would be fine, And of course they wouldn't. Because

660
00:42:54,080 --> 00:42:57,960
Speaker 1: modern two person retirement is now thirty years long, and

661
00:42:58,120 --> 00:43:01,520
Speaker 1: a trend line inflation, the cost of living goes up

662
00:43:01,560 --> 00:43:04,880
Speaker 1: two and a half times. That's the thing that's the

663
00:43:05,000 --> 00:43:09,759
Speaker 1: big risk um people going off the reservation. Okay, that's

664
00:43:09,840 --> 00:43:14,279
Speaker 1: always a risk in fads and fears. We always have

665
00:43:14,400 --> 00:43:16,920
Speaker 1: to live with that. But I think year in and

666
00:43:17,080 --> 00:43:20,279
Speaker 1: year out, decade in and decade out, people have to

667
00:43:20,400 --> 00:43:26,120
Speaker 1: be looking at the modern retirement as essentially a problem

668
00:43:26,239 --> 00:43:29,359
Speaker 1: of purchasing power. And I think most people still look

669
00:43:29,400 --> 00:43:32,719
Speaker 1: at it essentially as a problem of principle. So let's

670
00:43:32,800 --> 00:43:37,160
Speaker 1: let's talk about that, because that's a fascinating um descriptor.

671
00:43:37,600 --> 00:43:42,680
Speaker 1: We currently live in a low inflation environment. History tells

672
00:43:42,760 --> 00:43:49,239
Speaker 1: us that this is somewhat temporary. How significant is retaining

673
00:43:49,360 --> 00:43:54,720
Speaker 1: purchase power purchasing power ten twenty thirty years into the future,

674
00:43:55,400 --> 00:43:59,600
Speaker 1: especially as lifespans just keep getting longer and longer and longer.

675
00:44:00,160 --> 00:44:02,840
Speaker 1: As I say, it's the issue, most important issue for

676
00:44:03,719 --> 00:44:07,120
Speaker 1: financial plan well for a retirement plan. By the way,

677
00:44:07,160 --> 00:44:09,600
Speaker 1: how often do you ever hear anybody in the news

678
00:44:09,680 --> 00:44:15,160
Speaker 1: media or television news say your biggest threat is inflation

679
00:44:16,000 --> 00:44:18,279
Speaker 1: years from now because you're going to outlive your money.

680
00:44:18,440 --> 00:44:22,239
Speaker 1: Never never, that's again, I mean, I keep coming back

681
00:44:22,320 --> 00:44:26,080
Speaker 1: to this, but that's why God sent the behavioral investment

682
00:44:26,160 --> 00:44:30,120
Speaker 1: counselor into the world, because no one will say the truth.

683
00:44:30,520 --> 00:44:34,919
Speaker 1: How many times is somebody going to turn on CNBC

684
00:44:35,800 --> 00:44:39,040
Speaker 1: to hear somebody say, you know, the big problem is

685
00:44:39,080 --> 00:44:42,560
Speaker 1: not loss of principle, it's erosion to purchasing power. The

686
00:44:42,719 --> 00:44:47,600
Speaker 1: ninth time that media say the truth, people will will

687
00:44:47,680 --> 00:44:50,000
Speaker 1: no longer turn on the media. They'll they'll either get

688
00:44:50,080 --> 00:44:52,400
Speaker 1: it or they won't want to hear it anymore. And

689
00:44:52,560 --> 00:44:55,279
Speaker 1: that's why you can never get truth from media. You

690
00:44:55,360 --> 00:44:58,000
Speaker 1: can only get news. You can say that again. Let's

691
00:44:58,000 --> 00:45:01,880
Speaker 1: say you can never get truth from media because people

692
00:45:01,920 --> 00:45:04,239
Speaker 1: are either bored with it or don't believe it is.

693
00:45:04,400 --> 00:45:06,480
Speaker 1: You know, they either get bored with it or they

694
00:45:06,560 --> 00:45:08,839
Speaker 1: get it. They get it, and it's old news at

695
00:45:08,880 --> 00:45:13,160
Speaker 1: that poa. People say, okay, I got this. Now I've

696
00:45:13,239 --> 00:45:17,480
Speaker 1: just heard this for the ninth time. It's starting to

697
00:45:17,680 --> 00:45:21,200
Speaker 1: sound familiar to me. I'm going to go to my

698
00:45:21,360 --> 00:45:27,160
Speaker 1: financial planner and plan out a retirement during which my

699
00:45:27,680 --> 00:45:29,840
Speaker 1: course of living goes up two and a half times,

700
00:45:30,440 --> 00:45:34,320
Speaker 1: and make awful, awful sure that I own things whose

701
00:45:34,440 --> 00:45:37,600
Speaker 1: income is going up at at least that rate. And honey,

702
00:45:37,640 --> 00:45:40,880
Speaker 1: don't forget to turn off the television set before we

703
00:45:40,960 --> 00:45:43,200
Speaker 1: get in the car to go to the financial planner.

704
00:45:43,600 --> 00:45:48,040
Speaker 1: This is what media cannot abide. It can't allow it,

705
00:45:49,120 --> 00:45:53,439
Speaker 1: and so it cannot tell the great truth. It's it's

706
00:45:53,480 --> 00:45:57,640
Speaker 1: focused on capturing eyeballs, not winning hearts and minds, so

707
00:45:57,760 --> 00:46:02,000
Speaker 1: to speak. Headlines not history, headlines not history. I really

708
00:46:02,080 --> 00:46:06,719
Speaker 1: like that. It's uh an era of distraction that we

709
00:46:06,880 --> 00:46:11,759
Speaker 1: live in. There's a never ending stream of things. We

710
00:46:11,880 --> 00:46:16,000
Speaker 1: mentioned Facebook earlier, but between Facebook and Twitter and a

711
00:46:16,120 --> 00:46:20,320
Speaker 1: million channels and everything else, what is then impact of

712
00:46:20,920 --> 00:46:26,359
Speaker 1: all of these various streams of of snippets of news

713
00:46:26,440 --> 00:46:30,319
Speaker 1: and data and information. Well, I think inside the media themselves,

714
00:46:30,719 --> 00:46:35,279
Speaker 1: it's the The effect is that they go crazier and

715
00:46:35,440 --> 00:46:39,920
Speaker 1: crazier and crazier trying to capture eyeballs. They there's no

716
00:46:40,160 --> 00:46:43,960
Speaker 1: thought anymore. There's just trying to flag you down and

717
00:46:44,200 --> 00:46:47,879
Speaker 1: in the and and of course in the the poor

718
00:46:48,000 --> 00:46:52,360
Speaker 1: American household, what's going on is they're getting submerged in noise.

719
00:46:52,400 --> 00:46:56,359
Speaker 1: They're getting completely inundated with noise. And there's so much

720
00:46:56,520 --> 00:47:00,359
Speaker 1: noise that you can't really analyze anything anymore or think

721
00:47:00,400 --> 00:47:04,680
Speaker 1: about anything anymore. And what the normal mind does is

722
00:47:04,760 --> 00:47:08,840
Speaker 1: it goes to data mining. It takes out of the

723
00:47:08,960 --> 00:47:12,000
Speaker 1: noise what it wanted to hear, all the selective perception

724
00:47:12,280 --> 00:47:15,359
Speaker 1: information bias. Oh, I kind of like that. I'm gonna

725
00:47:15,719 --> 00:47:19,879
Speaker 1: grab onto it. That to me is the big, big

726
00:47:20,040 --> 00:47:26,360
Speaker 1: outcome of the tsunami of noise. So you we have

727
00:47:26,520 --> 00:47:29,000
Speaker 1: a retirement system in the United States. We don't have

728
00:47:29,520 --> 00:47:32,400
Speaker 1: very much left in terms of pension funds. We're not

729
00:47:32,560 --> 00:47:36,560
Speaker 1: like Europe with a guaranteed retirement that leaves people with

730
00:47:37,040 --> 00:47:39,759
Speaker 1: an ira H some sort of four oh one k

731
00:47:39,960 --> 00:47:43,200
Speaker 1: if if they're fortunate enough to have their company offer

732
00:47:43,320 --> 00:47:46,680
Speaker 1: that and then whatever other savings uh they can do.

733
00:47:47,160 --> 00:47:48,920
Speaker 1: What are your thoughts on things like for oh one

734
00:47:49,040 --> 00:47:55,000
Speaker 1: case iras and tax deferred retirement accounts, Well, my bias

735
00:47:55,160 --> 00:48:00,200
Speaker 1: is to think that you should fund any protected harm

736
00:48:00,320 --> 00:48:02,480
Speaker 1: and fund that you can, even though you're given up

737
00:48:02,520 --> 00:48:06,920
Speaker 1: capital gains treatment on the other end, for the compounding effect,

738
00:48:07,000 --> 00:48:11,040
Speaker 1: you are um and there are people who who agree

739
00:48:11,080 --> 00:48:14,960
Speaker 1: with that, in people who don't, I guess, um net net.

740
00:48:15,000 --> 00:48:18,480
Speaker 1: If you're putting money in pre tax, aren't you essentially

741
00:48:18,600 --> 00:48:21,600
Speaker 1: leaving yourself that much more money to invest? Well? I

742
00:48:22,120 --> 00:48:24,840
Speaker 1: think you are, and I'm not oversimplifying that one. I

743
00:48:24,920 --> 00:48:27,680
Speaker 1: don't think so, all right? And then I had a

744
00:48:27,760 --> 00:48:32,120
Speaker 1: reader who when when they said, oh, you're interviewing Nick Murray,

745
00:48:32,200 --> 00:48:35,439
Speaker 1: ask him what he thinks about annuities? And so I'll

746
00:48:35,440 --> 00:48:37,480
Speaker 1: ask you, what do you think about annuities? You have

747
00:48:37,600 --> 00:48:40,360
Speaker 1: to refine the question. You have to narrow the question.

748
00:48:40,600 --> 00:48:43,120
Speaker 1: What do you think about annuities for a person who's

749
00:48:43,120 --> 00:48:47,400
Speaker 1: already maxed out all their other tax deferred accounts? It depends.

750
00:48:47,880 --> 00:48:50,520
Speaker 1: First of all, are we talking about fixed annuities? Are

751
00:48:50,640 --> 00:48:55,360
Speaker 1: variable annuities? And let's let's go let's let's go into that.

752
00:48:56,080 --> 00:48:59,440
Speaker 1: Most of what I see advertise these days are variable

753
00:48:59,480 --> 00:49:03,040
Speaker 1: a nuity. But what do you think about fixed annuities?

754
00:49:03,600 --> 00:49:07,280
Speaker 1: I think that their cancer, the same as all bonds

755
00:49:07,320 --> 00:49:11,160
Speaker 1: are cancer. All fixed income is cancer. It's death on

756
00:49:11,239 --> 00:49:15,560
Speaker 1: the installment plan, it's the planned liquidation of purchasing power.

757
00:49:15,680 --> 00:49:19,879
Speaker 1: Within your lifetime, the planned liquidation of purchasing well, death

758
00:49:19,960 --> 00:49:23,479
Speaker 1: securities are the planned liquidation of purchasing powers. So what's

759
00:49:23,520 --> 00:49:27,040
Speaker 1: the role of fixed income into a broad asset allocation model?

760
00:49:27,760 --> 00:49:30,320
Speaker 1: I didn't know that it had one. No, So you

761
00:49:30,600 --> 00:49:35,240
Speaker 1: you prefer an all equity portfolio for long term investors?

762
00:49:35,320 --> 00:49:39,080
Speaker 1: For long term investors, yes, for money that has more

763
00:49:39,160 --> 00:49:42,520
Speaker 1: than and I and I confess this is arbitrary, more

764
00:49:42,600 --> 00:49:45,680
Speaker 1: than a five year horizon. For capital that has more

765
00:49:45,760 --> 00:49:51,600
Speaker 1: than a five year horizon, I cannot after some provision

766
00:49:51,920 --> 00:49:55,440
Speaker 1: for an emergency fund. And what I've always said for

767
00:49:55,600 --> 00:49:59,239
Speaker 1: retirees was two years living expenses in a in a

768
00:49:59,320 --> 00:50:03,359
Speaker 1: money market fund. But two full years, well, yeah, that's

769
00:50:03,560 --> 00:50:06,920
Speaker 1: that's a substantial sum. How how realistic is that for

770
00:50:07,040 --> 00:50:11,480
Speaker 1: many people? Because we often see preached while you're working

771
00:50:12,200 --> 00:50:17,279
Speaker 1: six months emergency funds and getting people to do that

772
00:50:17,760 --> 00:50:20,360
Speaker 1: is a challenge. Yes it is, but look at it,

773
00:50:20,920 --> 00:50:24,560
Speaker 1: and I don't gainsay the challenge. Again, that's the job

774
00:50:24,680 --> 00:50:28,359
Speaker 1: of the advisor. But but if I'm going to get

775
00:50:28,800 --> 00:50:31,239
Speaker 1: if I'm going to try to get people to put

776
00:50:31,920 --> 00:50:38,640
Speaker 1: substantially all of their retirement assets in equities for the

777
00:50:38,800 --> 00:50:41,480
Speaker 1: third for the next thirty years, which I'm sure going

778
00:50:41,520 --> 00:50:45,040
Speaker 1: to try to do. I'm gonna err on the side

779
00:50:45,080 --> 00:50:51,279
Speaker 1: of caution with maybe a bigger, you know, emergency fund

780
00:50:51,360 --> 00:50:54,759
Speaker 1: than you need, not for financial reasons, but for for

781
00:50:55,040 --> 00:50:58,160
Speaker 1: emotional reasons that you that you know that you could

782
00:50:58,200 --> 00:51:02,320
Speaker 1: turn off your withdrawal for two whole years and you're okay,

783
00:51:02,400 --> 00:51:06,200
Speaker 1: and you're okay. That makes perfect sense. Let's talk a

784
00:51:06,280 --> 00:51:10,600
Speaker 1: little bit about some of the new technologies that are

785
00:51:10,640 --> 00:51:14,960
Speaker 1: out there, um, and some of the new investment fads,

786
00:51:15,560 --> 00:51:18,080
Speaker 1: knowing in advance what you're gonna say about most of these.

787
00:51:18,560 --> 00:51:20,960
Speaker 1: What are your thoughts on smart data? I have no

788
00:51:21,040 --> 00:51:25,120
Speaker 1: idea what to do. I was expecting something along those lines,

789
00:51:25,520 --> 00:51:29,799
Speaker 1: you know, beta that's smarter than regular beta. That would

790
00:51:29,800 --> 00:51:32,239
Speaker 1: be a wonderful, wonderful thing, I think if it were.

791
00:51:33,640 --> 00:51:37,359
Speaker 1: And and then the next thing, um, I know your

792
00:51:37,360 --> 00:51:42,000
Speaker 1: answer to what what are your thoughts on robo advisors? Well,

793
00:51:42,680 --> 00:51:46,000
Speaker 1: I think robo advisor is a contradiction in terms. It's

794
00:51:46,200 --> 00:51:50,200
Speaker 1: it's an oxymoron. So either you're doing it yourself or

795
00:51:50,280 --> 00:51:52,600
Speaker 1: you have an advisor doing it for you. But having

796
00:51:53,120 --> 00:51:56,000
Speaker 1: software do it doing it for you doesn't really accomplish much,

797
00:51:56,040 --> 00:51:58,680
Speaker 1: does it. No, it doesn't, because what it does is

798
00:52:00,040 --> 00:52:04,200
Speaker 1: it it asks you a lot of questions which you

799
00:52:04,400 --> 00:52:09,239
Speaker 1: have virtually no equipment to answer. What is your risk tolerance?

800
00:52:09,320 --> 00:52:13,920
Speaker 1: Does anybody, any sentient being, on any given moment, know

801
00:52:14,040 --> 00:52:17,160
Speaker 1: what is risk tolerance is? And is it any less

802
00:52:17,280 --> 00:52:20,000
Speaker 1: labile than blood pressure? I mean, if the market goes

803
00:52:20,080 --> 00:52:23,120
Speaker 1: up for a week, his risk tolerance goes down if

804
00:52:23,160 --> 00:52:24,719
Speaker 1: it goes you know what I mean. You know where

805
00:52:24,760 --> 00:52:26,920
Speaker 1: I'm going with this. When you ask people the risk tolerance,

806
00:52:27,000 --> 00:52:28,719
Speaker 1: what you're really asking is what has the market been

807
00:52:28,719 --> 00:52:32,960
Speaker 1: doing for the past six months? Absolutely so, the machine

808
00:52:33,320 --> 00:52:38,400
Speaker 1: asks people questions that they have only the vaguus idea

809
00:52:38,520 --> 00:52:43,120
Speaker 1: how to answer. It takes those questions and and hands

810
00:52:43,239 --> 00:52:49,879
Speaker 1: back a canned portfolio. When the canned portfolio goes down

811
00:52:51,080 --> 00:52:54,759
Speaker 1: every five years, whether it needs to or not, uh,

812
00:52:55,160 --> 00:52:58,480
Speaker 1: you know, the client calls up the robot and says,

813
00:52:59,120 --> 00:53:03,520
Speaker 1: open the pod. The Doris How and How says, I'm

814
00:53:03,560 --> 00:53:06,800
Speaker 1: afraid I can't do that, Dave. You know, I just it.

815
00:53:07,320 --> 00:53:11,560
Speaker 1: I can't hold the concept of robot and the concept

816
00:53:11,640 --> 00:53:14,600
Speaker 1: of advisor in my mind at the same time. Something

817
00:53:14,800 --> 00:53:19,279
Speaker 1: is one or the other. There was and I think

818
00:53:19,320 --> 00:53:22,680
Speaker 1: it's starting to abate because people like you have have

819
00:53:23,120 --> 00:53:26,720
Speaker 1: made these kinds of arguments. But there was a period

820
00:53:26,760 --> 00:53:29,800
Speaker 1: of I want to say about two or three quarters

821
00:53:30,239 --> 00:53:36,240
Speaker 1: where the advisor community was genuinely distressed over the coming robots,

822
00:53:37,239 --> 00:53:41,480
Speaker 1: and UM, that seems to be starting to abate a

823
00:53:41,560 --> 00:53:45,759
Speaker 1: little bit. What what's your read on that? Well, my

824
00:53:45,920 --> 00:53:49,879
Speaker 1: selfish read on that is none of my subscribers were

825
00:53:50,600 --> 00:53:54,680
Speaker 1: victims of that. I if if a real, honest to

826
00:53:54,760 --> 00:53:59,680
Speaker 1: goodness advisor was worried about a robot, he was really

827
00:54:00,080 --> 00:54:03,240
Speaker 1: fessing that he had no value proposition at all. Let's

828
00:54:03,440 --> 00:54:06,239
Speaker 1: let's talk about the value proposition, because that's the question

829
00:54:06,320 --> 00:54:08,879
Speaker 1: I have teed up a little further down the road.

830
00:54:08,960 --> 00:54:12,319
Speaker 1: And this is something UH for listeners that Nick has

831
00:54:12,440 --> 00:54:19,520
Speaker 1: written about extensively. What is the value proposition of advisors

832
00:54:19,719 --> 00:54:23,880
Speaker 1: who are essentially managing the behavior of their clients? So

833
00:54:24,120 --> 00:54:28,640
Speaker 1: so how would you define that? Well, the any value

834
00:54:28,680 --> 00:54:34,160
Speaker 1: proposition is the relationship between what somebody is giving you

835
00:54:34,840 --> 00:54:37,560
Speaker 1: and what he's charging you for it. Right, So there's

836
00:54:37,640 --> 00:54:41,920
Speaker 1: there's there's two variables in a value proposition, what you

837
00:54:42,000 --> 00:54:46,879
Speaker 1: get and what it costs. And so um, an advisor

838
00:54:47,120 --> 00:54:52,000
Speaker 1: has a positive value proposition when his client says, the

839
00:54:52,080 --> 00:54:55,360
Speaker 1: advice I'm getting here is much more valuable to me

840
00:54:55,480 --> 00:54:58,400
Speaker 1: and my family than what I am being charged for it.

841
00:54:58,840 --> 00:55:01,400
Speaker 1: The converse is also true at the moment that a

842
00:55:01,760 --> 00:55:05,239
Speaker 1: that a a poor American client wakes up and says,

843
00:55:05,360 --> 00:55:07,960
Speaker 1: you know what, I'm paying this guy all this money

844
00:55:08,719 --> 00:55:12,120
Speaker 1: and I'm underperforming the S and P five. Why am

845
00:55:12,200 --> 00:55:16,800
Speaker 1: I doing that? At that moment, the advisor has lost

846
00:55:16,920 --> 00:55:21,360
Speaker 1: his value proposition. It's gone negative. And why because the

847
00:55:21,440 --> 00:55:27,240
Speaker 1: advisor hasn't made the points of what his value propersy.

848
00:55:27,480 --> 00:55:30,880
Speaker 1: What is it that of that an advisor does that

849
00:55:31,080 --> 00:55:37,239
Speaker 1: it is worth palpably an order of magnitude more than

850
00:55:37,880 --> 00:55:41,320
Speaker 1: the one percent or so that we're charging in the

851
00:55:41,400 --> 00:55:44,879
Speaker 1: industry for for asset management. To me, there are three things.

852
00:55:45,040 --> 00:55:47,800
Speaker 1: One is planning, which we know they can't do on

853
00:55:47,920 --> 00:55:52,040
Speaker 1: their own. One is a long term historical perspective, which

854
00:55:52,120 --> 00:55:54,880
Speaker 1: we know they can't get out of the noise. And

855
00:55:55,040 --> 00:55:57,880
Speaker 1: the third, and of course the monster for me, is

856
00:55:58,120 --> 00:56:02,680
Speaker 1: behavioral coaching in periods of stress. If if it isn't

857
00:56:02,760 --> 00:56:07,840
Speaker 1: intuitive to somebody that the value of those three things

858
00:56:08,160 --> 00:56:13,560
Speaker 1: must be far greater than a point, then ay, there's

859
00:56:13,600 --> 00:56:19,040
Speaker 1: either something wrong with him or his advisers a stumble bump,

860
00:56:19,040 --> 00:56:23,080
Speaker 1: because if you couldn't make those points clearly and compelling

861
00:56:23,160 --> 00:56:25,680
Speaker 1: lee and have a reasonable person sit there and say

862
00:56:26,000 --> 00:56:29,839
Speaker 1: I got it, I see why. That's in total, those

863
00:56:29,960 --> 00:56:32,759
Speaker 1: three things have got to be worth more and and

864
00:56:32,920 --> 00:56:36,279
Speaker 1: at critical inflection points, and much more than the point

865
00:56:36,360 --> 00:56:39,640
Speaker 1: that you're charging me. Well, using the study that you

866
00:56:39,880 --> 00:56:44,400
Speaker 1: mentioned in behavioral investment coaching, if people are under performing

867
00:56:44,440 --> 00:56:48,719
Speaker 1: their own investments by six and you could prevent them,

868
00:56:49,200 --> 00:56:51,759
Speaker 1: let's go at half and you could prevent them from

869
00:56:51,840 --> 00:56:55,640
Speaker 1: doing that for a point, your five points ahead. That's

870
00:56:55,800 --> 00:56:59,160
Speaker 1: compounded as an enormous thing compounded, it's off the page

871
00:56:59,360 --> 00:57:02,680
Speaker 1: that that's before we even start talking about By the way,

872
00:57:02,800 --> 00:57:08,000
Speaker 1: here's an intelligent rational asset allocation that avoids the fads

873
00:57:08,120 --> 00:57:12,200
Speaker 1: and the whatever is in vogue and and basically keeps

874
00:57:12,200 --> 00:57:14,880
Speaker 1: you on the straight and narrow. That that sounds like

875
00:57:15,040 --> 00:57:20,800
Speaker 1: the value proposition there? Well, I hope so, so I

876
00:57:20,920 --> 00:57:23,200
Speaker 1: know I only have you for a limited amount of time.

877
00:57:23,280 --> 00:57:26,520
Speaker 1: You're heading uh two part south. It's not hot enough

878
00:57:26,560 --> 00:57:29,640
Speaker 1: in New York today at ninety degrees and humid. You

879
00:57:29,680 --> 00:57:34,080
Speaker 1: want to Kentucky and hit but it's a but it's

880
00:57:34,080 --> 00:57:36,600
Speaker 1: a wet heat, so it's not it's not that bad.

881
00:57:36,640 --> 00:57:38,400
Speaker 1: So let me let me go through some of my

882
00:57:38,560 --> 00:57:43,240
Speaker 1: favorite questions that that I asked that I ask of

883
00:57:43,960 --> 00:57:46,800
Speaker 1: all of my guests. And some of these you've either

884
00:57:46,920 --> 00:57:50,040
Speaker 1: hinted at or alluded to, and and feel free to

885
00:57:50,280 --> 00:57:53,560
Speaker 1: to be as as brief or as worthy as you

886
00:57:53,680 --> 00:57:56,720
Speaker 1: like on any of these. So we haven't one of

887
00:57:56,760 --> 00:57:58,600
Speaker 1: the things I speak to people about all the time,

888
00:57:58,760 --> 00:58:04,280
Speaker 1: or our mentors. And you've kind of said, you know,

889
00:58:04,560 --> 00:58:07,400
Speaker 1: I don't really know how to describe mentors because I've

890
00:58:07,560 --> 00:58:11,320
Speaker 1: cut my own path and and done something different. But

891
00:58:12,000 --> 00:58:16,440
Speaker 1: who are the people that influenced your approach to helping

892
00:58:16,520 --> 00:58:22,120
Speaker 1: investors manage their clients? Well, they're mostly people I've read

893
00:58:22,440 --> 00:58:26,720
Speaker 1: rather than people that I interacted with personally. So then

894
00:58:26,840 --> 00:58:30,360
Speaker 1: let me ask you that same question differently, what are

895
00:58:30,440 --> 00:58:35,600
Speaker 1: some of your favorite books on investing behavior and related subjects?

896
00:58:36,320 --> 00:58:40,880
Speaker 1: And I'll put up Fortunately for me, as far as

897
00:58:40,960 --> 00:58:44,440
Speaker 1: I know, there is no other book about investor behavior

898
00:58:44,600 --> 00:58:49,200
Speaker 1: managing investor behavior than mine. But you know that the

899
00:58:49,400 --> 00:58:58,320
Speaker 1: two big books that philosophically were important to me um

900
00:58:58,880 --> 00:59:05,480
Speaker 1: I mean of critical importance to merit are high X,

901
00:59:05,880 --> 00:59:10,840
Speaker 1: The Road to Serfdom and of course closer to home

902
00:59:12,000 --> 00:59:16,120
Speaker 1: um Stocks for the Long Run by Jeremy Siegan, which

903
00:59:16,160 --> 00:59:22,160
Speaker 1: I regard as definitive. Really yeah, yeah, and it just

904
00:59:22,280 --> 00:59:26,600
Speaker 1: gets better by the way each um it's on the

905
00:59:26,760 --> 00:59:29,320
Speaker 1: fourth or fifth edition, now it's been and it just

906
00:59:29,560 --> 00:59:32,720
Speaker 1: gets better. And before people send me emails saying why

907
00:59:32,720 --> 00:59:35,400
Speaker 1: don't you get Jeremy Siegel on the answer is he

908
00:59:35,520 --> 00:59:37,480
Speaker 1: will be on. I just have to wait for him

909
00:59:37,520 --> 00:59:41,880
Speaker 1: to come to New York from Philly. Always worth listening to,

910
00:59:42,680 --> 00:59:47,960
Speaker 1: but much more worth reading. What I find fascinating about Seagull.

911
00:59:48,600 --> 00:59:50,160
Speaker 1: And I don't know if a lot of people know this.

912
00:59:50,920 --> 00:59:54,040
Speaker 1: Him and Bob Schiller of Yale. So Siegel's at Wharton,

913
00:59:54,120 --> 01:00:00,520
Speaker 1: Schiller's at Yale. They're longstanding friends and colleagues. They're family's

914
01:00:00,600 --> 01:00:03,440
Speaker 1: vacation together. They know each other. The two of them

915
01:00:03,600 --> 01:00:07,560
Speaker 1: could not be any more different as as personalities, and

916
01:00:07,720 --> 01:00:11,080
Speaker 1: yet they're they're fast friends. So Stocks for the Long Run,

917
01:00:11,720 --> 01:00:16,320
Speaker 1: Road to Serfdom. Anything else leap out as significant or

918
01:00:16,440 --> 01:00:22,160
Speaker 1: seminal or of economics or investing. So let me ask

919
01:00:22,200 --> 01:00:24,880
Speaker 1: you about economics, because you you remind me a little

920
01:00:24,920 --> 01:00:28,120
Speaker 1: bit of Larry swedd Row, who says he doesn't care

921
01:00:28,200 --> 01:00:32,280
Speaker 1: about earnings report or economics reports. He just wants his

922
01:00:32,400 --> 01:00:37,400
Speaker 1: clients invested for the long run. How important are are

923
01:00:37,520 --> 01:00:40,800
Speaker 1: the economic data points of the day, week, and month.

924
01:00:41,560 --> 01:00:44,680
Speaker 1: There are no importance to the long term investor at all.

925
01:00:44,960 --> 01:00:48,480
Speaker 1: They can only be distractions. They're only so that that

926
01:00:48,600 --> 01:00:54,040
Speaker 1: makes me wonder why hiak as opposed to Burton, Malkiel

927
01:00:54,480 --> 01:00:57,800
Speaker 1: or Graham and dot or something along those much further

928
01:00:57,960 --> 01:01:03,680
Speaker 1: upstream at a at a theory of how economics works.

929
01:01:05,920 --> 01:01:08,160
Speaker 1: This is not about data points. This is not about it. No,

930
01:01:08,720 --> 01:01:13,760
Speaker 1: this is about broad philosophy, philosophy, free markets, government involvement, etcetera, etcetera.

931
01:01:14,640 --> 01:01:17,960
Speaker 1: That that's um You've you've alluded to that you've quoted

932
01:01:17,960 --> 01:01:20,400
Speaker 1: Hawk and some of your newsletters. But I don't know

933
01:01:20,480 --> 01:01:23,680
Speaker 1: how how seminal and how significant that was. It was

934
01:01:23,760 --> 01:01:34,520
Speaker 1: actually really critical. I'm a a Queen's Irish Catholic from um,

935
01:01:35,920 --> 01:01:39,000
Speaker 1: you know, a family of Roosevelt Democrats, And in my turn,

936
01:01:39,280 --> 01:01:43,320
Speaker 1: I was a Kennedy Democrat. And I got to Columbia

937
01:01:43,640 --> 01:01:47,440
Speaker 1: and was trying to finish at night when the riots

938
01:01:47,520 --> 01:01:51,320
Speaker 1: broke out, and I was coming from the office every

939
01:01:51,400 --> 01:01:54,080
Speaker 1: day in a suit which I had paid for and

940
01:01:54,200 --> 01:01:58,400
Speaker 1: I had paid for my tuition, and Columbia let the

941
01:01:58,560 --> 01:02:02,920
Speaker 1: hooligans take over the campus. And I looked around and said,

942
01:02:03,440 --> 01:02:06,880
Speaker 1: I don't know if I'm a liberal anymore. That's the

943
01:02:06,920 --> 01:02:09,440
Speaker 1: old joke, is a conservative as a liberal who has mugged?

944
01:02:11,040 --> 01:02:13,600
Speaker 1: Is that is? That? Was that your experience? Yeah? Actually

945
01:02:13,680 --> 01:02:16,880
Speaker 1: it was. I mean it's anecdotal, but it's true. It

946
01:02:17,040 --> 01:02:21,120
Speaker 1: sounds like something one is looking for retrospectively, but I'm not.

947
01:02:21,280 --> 01:02:25,120
Speaker 1: It's it's it's the That was the dividing line. I

948
01:02:25,240 --> 01:02:29,720
Speaker 1: walked off the campus in I've never been back. And

949
01:02:29,920 --> 01:02:34,760
Speaker 1: that's why, to quote Bluto, um seven years of college

950
01:02:34,800 --> 01:02:39,680
Speaker 1: down the drain was and I so, you know, then

951
01:02:39,840 --> 01:02:45,320
Speaker 1: then I started looking around for another way to process

952
01:02:45,440 --> 01:02:51,080
Speaker 1: reality and and basically founded in higak. And then you know,

953
01:02:51,240 --> 01:02:56,040
Speaker 1: in the Reagan Revolution, I mean, the the great mystery

954
01:02:57,320 --> 01:03:03,960
Speaker 1: of of America life in my lifetime. The great surprise

955
01:03:04,880 --> 01:03:08,760
Speaker 1: to me is that that we have to go back

956
01:03:08,840 --> 01:03:12,720
Speaker 1: now and fight the Reagan Revolution again because I thought

957
01:03:12,800 --> 01:03:18,280
Speaker 1: that it would have been proven. Isn't the nature of

958
01:03:18,480 --> 01:03:23,560
Speaker 1: politics and economics for that matter. The story of the

959
01:03:23,680 --> 01:03:28,120
Speaker 1: pendulum swinging from this cycle. Hey, look, great society. Hey

960
01:03:28,200 --> 01:03:32,040
Speaker 1: look big tax cuts and reduction of regulation. Hey look up,

961
01:03:32,160 --> 01:03:35,480
Speaker 1: now we're reregulating. Hey, look now are dereguling. Isn't it

962
01:03:35,600 --> 01:03:40,000
Speaker 1: every forty years? It's it's you know, it's it's It's

963
01:03:40,040 --> 01:03:43,280
Speaker 1: funny because I grew up at people always surprised when

964
01:03:43,320 --> 01:03:46,320
Speaker 1: I say this, So you're you have a couple of

965
01:03:46,440 --> 01:03:48,640
Speaker 1: years on me, but not that many. I grew up

966
01:03:48,640 --> 01:03:52,800
Speaker 1: a Jacob Javits Republican in Nassau County, Long Island, and

967
01:03:53,120 --> 01:03:58,560
Speaker 1: that sort of flavor of republicanism, which was small government,

968
01:03:58,840 --> 01:04:04,040
Speaker 1: balanced but ugets, low taxes, but no overseas involvement, right

969
01:04:04,040 --> 01:04:08,400
Speaker 1: because we learned from Vietnam, And no government intervention in

970
01:04:08,480 --> 01:04:11,400
Speaker 1: the bedroom, because you know that's private and the government

971
01:04:11,440 --> 01:04:13,760
Speaker 1: has nothing to do with it. And I've watched each

972
01:04:13,880 --> 01:04:18,120
Speaker 1: of those things over I'm fifty four, I've watched each

973
01:04:18,240 --> 01:04:20,320
Speaker 1: or I will be shortly, each of those things swing

974
01:04:20,440 --> 01:04:23,960
Speaker 1: back and forth over that half century, and it's in

975
01:04:24,280 --> 01:04:26,760
Speaker 1: it's in vogue, it's out of vogue. This is in vogue,

976
01:04:26,800 --> 01:04:30,120
Speaker 1: this is out of even sadly, all of that is true,

977
01:04:30,240 --> 01:04:33,560
Speaker 1: and it's just that I'm taking it badly. Well, but

978
01:04:33,720 --> 01:04:38,320
Speaker 1: you you know that the pendulum is gonna eventually swing

979
01:04:38,480 --> 01:04:42,080
Speaker 1: back from one extreme to another. And it's why I

980
01:04:42,200 --> 01:04:47,040
Speaker 1: always mocked my politically active hedge fund buddies who seem

981
01:04:47,120 --> 01:04:49,720
Speaker 1: to think that the occupant of the White House is

982
01:04:49,760 --> 01:04:53,000
Speaker 1: going to be the final determinant of their portfolio. And

983
01:04:53,080 --> 01:04:55,680
Speaker 1: a presentation I gave, I have these two slides. I

984
01:04:55,880 --> 01:04:59,240
Speaker 1: love to show this. It angers everybody. Anytime you could

985
01:04:59,280 --> 01:05:03,200
Speaker 1: get everybody be angry, you're onto something. So the first

986
01:05:03,240 --> 01:05:07,560
Speaker 1: slide shows two thousand and one George Bush tax cuts,

987
01:05:08,000 --> 01:05:12,240
Speaker 1: and my Democratic buddies will say, giant tax cuts, gonna

988
01:05:12,240 --> 01:05:14,640
Speaker 1: blow out the Deficit's not gonna do anything for the economy.

989
01:05:14,960 --> 01:05:17,479
Speaker 1: Get out of stocks. And then over the ensuing six years,

990
01:05:17,800 --> 01:05:21,919
Speaker 1: the market goes up. Fast forward to March o nine.

991
01:05:22,520 --> 01:05:26,080
Speaker 1: Now it's my Republican buddies and they're saying, this Obama

992
01:05:26,160 --> 01:05:29,800
Speaker 1: guy is a Kenyan Muslim socialist. Get out of the markets.

993
01:05:29,840 --> 01:05:33,160
Speaker 1: And now over the next seven years of markets, it

994
01:05:33,440 --> 01:05:37,160
Speaker 1: almost makes no difference who's in there. If you're making

995
01:05:37,200 --> 01:05:40,280
Speaker 1: your decisions based on the politics. To get out of

996
01:05:40,320 --> 01:05:44,560
Speaker 1: the markets, you're asking for an underperforming portfolio. You're asking

997
01:05:44,640 --> 01:05:49,320
Speaker 1: for a disaster because there's no correlation between the economy

998
01:05:49,440 --> 01:05:54,040
Speaker 1: and the markets over any but the very very longest term.

999
01:05:54,840 --> 01:06:00,919
Speaker 1: And what I will say is, I've never seen two

1000
01:06:01,000 --> 01:06:07,000
Speaker 1: economies like I see two economies now, you meaning being

1001
01:06:07,080 --> 01:06:12,120
Speaker 1: the private economy has basically walled itself off from the

1002
01:06:12,200 --> 01:06:18,400
Speaker 1: corporate economy, has basically walled itself off from the political,

1003
01:06:18,720 --> 01:06:25,080
Speaker 1: the the what I would call the collectivist, redistributionist impulse

1004
01:06:25,320 --> 01:06:29,280
Speaker 1: you in in the crash. I mean, the one of

1005
01:06:29,360 --> 01:06:31,240
Speaker 1: the great things, one of the many great things that

1006
01:06:31,360 --> 01:06:36,360
Speaker 1: came out of the crash for me, was the reliquefication

1007
01:06:36,760 --> 01:06:42,640
Speaker 1: of Corporate America, paying down debt, accumulating gigantic amounts of

1008
01:06:42,800 --> 01:06:46,560
Speaker 1: cash and not letting go of it. Have have Corporate

1009
01:06:46,600 --> 01:06:50,800
Speaker 1: America's balance sheets ever been healthier than they can't have been,

1010
01:06:50,920 --> 01:06:54,080
Speaker 1: but certainly not in my lifetime, right. It's it's amazing.

1011
01:06:54,120 --> 01:06:55,600
Speaker 1: And I say that to people and they look at

1012
01:06:55,640 --> 01:06:58,320
Speaker 1: me like I have two heads. You have the cleanest

1013
01:06:58,360 --> 01:07:01,880
Speaker 1: balance sheets, the least amount of short term high price debt,

1014
01:07:02,240 --> 01:07:06,840
Speaker 1: and the most amount of manageable debt relative to equity

1015
01:07:06,880 --> 01:07:09,800
Speaker 1: and cash on hand. And you've also got excess reserves

1016
01:07:09,840 --> 01:07:13,160
Speaker 1: in the banking system like you've never seen before. And

1017
01:07:13,240 --> 01:07:16,560
Speaker 1: we'll never see again. We just implemented the Vulcan rule,

1018
01:07:17,080 --> 01:07:19,960
Speaker 1: which now says, hey, listen, you could you could be

1019
01:07:20,120 --> 01:07:22,080
Speaker 1: a hedge fund if you want. You just can't be

1020
01:07:22,560 --> 01:07:27,520
Speaker 1: taxpayer ensured. The A lot of the rules that were undone,

1021
01:07:28,120 --> 01:07:31,280
Speaker 1: commodity futures, monetization at class Deegal repeal, A lot of

1022
01:07:31,320 --> 01:07:35,480
Speaker 1: those have slowly been put back into place. So the

1023
01:07:35,680 --> 01:07:38,720
Speaker 1: fear that we're setting up for an imminent crash and

1024
01:07:38,840 --> 01:07:41,880
Speaker 1: everything is going to go back to the Stone Age

1025
01:07:42,360 --> 01:07:46,640
Speaker 1: really seems to be fairly on irrational and not guided

1026
01:07:46,680 --> 01:07:49,960
Speaker 1: by any sort of of rationality of fact. I think

1027
01:07:50,040 --> 01:07:55,560
Speaker 1: that it's a basic inbred catastrophism. People to look at

1028
01:07:56,400 --> 01:07:59,640
Speaker 1: corporate America today, the cash positions, the debt positions, the

1029
01:08:00,440 --> 01:08:05,160
Speaker 1: the just almost anything you want to look at, pe

1030
01:08:05,400 --> 01:08:10,000
Speaker 1: s no more than slightly above the twenty five year

1031
01:08:10,080 --> 01:08:14,560
Speaker 1: averages full fully valued, maybe a touch above six fifteen

1032
01:08:14,760 --> 01:08:18,040
Speaker 1: maybe maybe Yeah, that's the most I would give you

1033
01:08:18,200 --> 01:08:21,840
Speaker 1: sixteen versus fifteen. And in the next breath, I would say,

1034
01:08:22,400 --> 01:08:24,600
Speaker 1: what the hell do you expect in a in a

1035
01:08:25,840 --> 01:08:29,320
Speaker 1: market there's no competition for bonds and the um so,

1036
01:08:29,720 --> 01:08:32,320
Speaker 1: so do you you know where do you get a

1037
01:08:32,479 --> 01:08:37,240
Speaker 1: catastrophist worldview out of that. I call that the recency effect.

1038
01:08:37,320 --> 01:08:40,519
Speaker 1: We just lived through and then we just just happened.

1039
01:08:40,560 --> 01:08:43,800
Speaker 1: So my muscle memory is I'm ignoring the huge run

1040
01:08:43,880 --> 01:08:46,600
Speaker 1: ups in O nine because I'm so scarred by what

1041
01:08:46,720 --> 01:08:48,760
Speaker 1: happened in OH seven and O eight, which tells you

1042
01:08:49,200 --> 01:08:53,400
Speaker 1: how early we are in this bullmarket. Which again I

1043
01:08:53,520 --> 01:08:55,439
Speaker 1: say that to people and they look at me like

1044
01:08:55,640 --> 01:08:58,519
Speaker 1: I have two heads. When they stop looking at you

1045
01:08:58,840 --> 01:09:01,360
Speaker 1: like you have two heads, is let me know, because

1046
01:09:01,439 --> 01:09:05,519
Speaker 1: then it's getting late. Okay, It's that's a validation all

1047
01:09:05,600 --> 01:09:08,320
Speaker 1: of the looking when when you when we say things

1048
01:09:08,479 --> 01:09:11,040
Speaker 1: like that and people look at us like we have

1049
01:09:11,200 --> 01:09:14,600
Speaker 1: two heads, that's the best news we got today. You know,

1050
01:09:14,720 --> 01:09:17,479
Speaker 1: we talked about noise and distraction before. I had a

1051
01:09:17,560 --> 01:09:21,200
Speaker 1: really interesting conversation. So for those of you who are listening,

1052
01:09:21,920 --> 01:09:25,320
Speaker 1: a friend, Ben Carlson is in the Engineer's booth. You

1053
01:09:25,400 --> 01:09:28,120
Speaker 1: may know him from a Wealth of Common Sense, is

1054
01:09:28,160 --> 01:09:30,360
Speaker 1: a blog and a book he writes. And we were

1055
01:09:30,520 --> 01:09:34,519
Speaker 1: talking on the way here about you know, ten years ago,

1056
01:09:35,080 --> 01:09:39,120
Speaker 1: pre Twitter, pre Facebook, during the dot com collapse in

1057
01:09:39,200 --> 01:09:42,880
Speaker 1: the late nineties and the early two thousands, the same

1058
01:09:43,280 --> 01:09:48,160
Speaker 1: people who were saying dumb stuff that we now read

1059
01:09:48,240 --> 01:09:51,599
Speaker 1: on Twitter or Facebook or elsewhere. We didn't have access

1060
01:09:51,680 --> 01:09:56,040
Speaker 1: to some of the really ridiculous and I won't mention

1061
01:09:56,160 --> 01:09:59,800
Speaker 1: any names, but some of the stuff that's just a

1062
01:10:00,120 --> 01:10:04,320
Speaker 1: third and ridiculous and insane. You would hear someone would

1063
01:10:04,360 --> 01:10:07,240
Speaker 1: say something at a cocktail party or a barbecue, and

1064
01:10:07,360 --> 01:10:09,360
Speaker 1: you'd roll your eyes walk away and say, God, this

1065
01:10:09,439 --> 01:10:11,960
Speaker 1: guy must be losing so much money he can't get

1066
01:10:12,000 --> 01:10:14,120
Speaker 1: out of his own way. I don't want to be

1067
01:10:14,200 --> 01:10:16,240
Speaker 1: infected by him. I don't want to hear him. Now

1068
01:10:16,680 --> 01:10:18,680
Speaker 1: that's my tweet stream. Now that's what I see on

1069
01:10:18,800 --> 01:10:23,759
Speaker 1: LinkedIn and Facebook and and online and and in various

1070
01:10:23,960 --> 01:10:28,040
Speaker 1: UH media outlets. You can't escape it today, where as

1071
01:10:28,080 --> 01:10:29,519
Speaker 1: you used to be able to walk away from it.

1072
01:10:29,680 --> 01:10:32,559
Speaker 1: Long may it wave, because that basically tells you there's

1073
01:10:32,560 --> 01:10:35,880
Speaker 1: a lot more. If you saw, I mean you, if

1074
01:10:35,960 --> 01:10:43,920
Speaker 1: you saw, of course, you saw uh J where Greece

1075
01:10:44,000 --> 01:10:51,160
Speaker 1: was circling toilet China. China blew up and amid all

1076
01:10:51,280 --> 01:10:56,120
Speaker 1: this worldwide chaos for reasons they couldn't begin to explain.

1077
01:10:56,800 --> 01:10:59,400
Speaker 1: The New York Stock Exchange shut down for four hours.

1078
01:11:00,080 --> 01:11:06,240
Speaker 1: There was nothing, nothing on TV. That day, but that

1079
01:11:06,560 --> 01:11:10,240
Speaker 1: it was the Titanic and Pearl Harbor and and the

1080
01:11:10,320 --> 01:11:14,200
Speaker 1: Twin Towers. It was every disaster in history it was.

1081
01:11:14,400 --> 01:11:18,160
Speaker 1: It was the Black Plague. I mean, I haven't seen

1082
01:11:18,439 --> 01:11:23,560
Speaker 1: figures for um, you know, mutual fund on et F withdrawals,

1083
01:11:23,640 --> 01:11:27,800
Speaker 1: but I imagine they spiked like they have rarely done

1084
01:11:27,800 --> 01:11:32,160
Speaker 1: a one day spike in our time. And my son

1085
01:11:32,360 --> 01:11:35,839
Speaker 1: actually is in the real estate business in in Brooklyn

1086
01:11:35,920 --> 01:11:40,960
Speaker 1: Heights and he emailed me and he said, am I

1087
01:11:41,000 --> 01:11:44,519
Speaker 1: supposed to be taking this seriously? And I said, no,

1088
01:11:44,600 --> 01:11:47,479
Speaker 1: of course not. What why and yeah? And he said,

1089
01:11:47,520 --> 01:11:53,120
Speaker 1: because everyone in my office is crowded around the TV set.

1090
01:11:53,240 --> 01:11:58,640
Speaker 1: The phones are not being answered. Everybody's watching this like

1091
01:11:58,800 --> 01:12:03,080
Speaker 1: the Handenburg. And I said, you know, I thank you

1092
01:12:03,160 --> 01:12:06,160
Speaker 1: so much for telling me this, because it tells me

1093
01:12:06,520 --> 01:12:10,040
Speaker 1: how early we are still, how early we are in

1094
01:12:10,120 --> 01:12:12,960
Speaker 1: this bull market. I don't think we have any idea

1095
01:12:13,920 --> 01:12:17,960
Speaker 1: candidly how early this could be the third or fourth inning.

1096
01:12:18,080 --> 01:12:20,479
Speaker 1: People talking about it like it's the eleventh like it's

1097
01:12:20,520 --> 01:12:22,599
Speaker 1: the eleventh thing. By the way, my favorite data point

1098
01:12:22,600 --> 01:12:27,960
Speaker 1: about Greece is it has the GDP of Alabama. Sounds

1099
01:12:28,000 --> 01:12:31,080
Speaker 1: about right that I heard Houston, But I guess it's

1100
01:12:31,120 --> 01:12:33,680
Speaker 1: the same difference. Yeah, No, Houston is a decent, big,

1101
01:12:34,120 --> 01:12:36,120
Speaker 1: decent sized city. I know I only have you for

1102
01:12:36,160 --> 01:12:39,280
Speaker 1: a few more minutes, so let me get to my

1103
01:12:39,600 --> 01:12:43,400
Speaker 1: my last few favorite questions before we put you on

1104
01:12:43,520 --> 01:12:49,080
Speaker 1: a plane. Um so you talked about Hiak and Siegel.

1105
01:12:49,320 --> 01:12:53,799
Speaker 1: What other investors might have impacted your your thinking? Not authors,

1106
01:12:53,880 --> 01:12:58,519
Speaker 1: but investors of course. Um So, wait, you have a

1107
01:12:58,640 --> 01:13:01,560
Speaker 1: thing for value and mart long term thinking? Is that?

1108
01:13:03,560 --> 01:13:08,320
Speaker 1: Those are among my many biases, you know. But um

1109
01:13:09,760 --> 01:13:17,840
Speaker 1: the relentless bullishness on the American economy, the realization, you know,

1110
01:13:17,960 --> 01:13:21,320
Speaker 1: which is so characteristic of him, and also just the

1111
01:13:21,439 --> 01:13:28,600
Speaker 1: plane down to earth countercyclicality of him. The opportunism in

1112
01:13:29,040 --> 01:13:35,160
Speaker 1: in terrible markets, you know, the the whole our favorite

1113
01:13:35,240 --> 01:13:41,160
Speaker 1: holding period is forever thing I find so attractive, refreshing

1114
01:13:41,240 --> 01:13:44,599
Speaker 1: even Yeah, don't you remember in the late nineties he's

1115
01:13:44,600 --> 01:13:49,240
Speaker 1: a dinosaur. He's done. Yes, absolutely, and and and I

1116
01:13:49,880 --> 01:13:54,360
Speaker 1: remember also, although I was not there his annual meeting

1117
01:13:55,920 --> 01:14:00,720
Speaker 1: in either, it must have been in were people were

1118
01:14:00,720 --> 01:14:04,719
Speaker 1: getting up and begging him to start a separate tech fund.

1119
01:14:04,800 --> 01:14:08,840
Speaker 1: They accepted his saying that he can't do tech that

1120
01:14:08,920 --> 01:14:12,320
Speaker 1: he doesn't understand it in the next breath begging him

1121
01:14:13,280 --> 01:14:17,599
Speaker 1: to to start a tech fund, and you know him saying,

1122
01:14:18,280 --> 01:14:22,760
Speaker 1: this is not gonna have lights out here. Um, so,

1123
01:14:23,160 --> 01:14:26,479
Speaker 1: what is some of the most significant changes that you

1124
01:14:26,720 --> 01:14:30,640
Speaker 1: see that's impacted the industry since you joined it, the

1125
01:14:30,760 --> 01:14:36,840
Speaker 1: financial services industry, Well, the rise of women certainly is

1126
01:14:37,240 --> 01:14:42,880
Speaker 1: I mean, since that's fascinating, is the single most um

1127
01:14:43,680 --> 01:14:48,640
Speaker 1: important and positive development in your You have to be

1128
01:14:48,720 --> 01:14:52,200
Speaker 1: familiar with the studies and data that essentially says women

1129
01:14:53,040 --> 01:14:56,920
Speaker 1: tend to outperfore men, that they don't suffer from testosterone

1130
01:14:56,960 --> 01:15:02,639
Speaker 1: poisoning or many of the same bravado that men stuffer from,

1131
01:15:02,880 --> 01:15:06,639
Speaker 1: and it ends up helping them do better in their

1132
01:15:06,680 --> 01:15:10,480
Speaker 1: portfolio management. I'm not familiar with any studies, but it's intuitive.

1133
01:15:10,560 --> 01:15:14,160
Speaker 1: And the other thing is from the financial stand financial

1134
01:15:14,240 --> 01:15:19,719
Speaker 1: planning standpoint, women relate to people and there and their

1135
01:15:20,680 --> 01:15:24,280
Speaker 1: hopes and their fears and their family concerns. I think

1136
01:15:24,400 --> 01:15:28,120
Speaker 1: somewhat better, if not much better than then men advisers

1137
01:15:28,200 --> 01:15:30,680
Speaker 1: tend to do. The man will focus on the portfolio

1138
01:15:30,840 --> 01:15:33,639
Speaker 1: and the woman will We'll focus on the family first,

1139
01:15:33,680 --> 01:15:37,040
Speaker 1: and the woman is always right, So you know, just

1140
01:15:37,200 --> 01:15:42,120
Speaker 1: the release of of all of that energy and and

1141
01:15:42,400 --> 01:15:48,040
Speaker 1: empathy and brain power. Uh you know you you in

1142
01:15:48,160 --> 01:15:55,559
Speaker 1: n you walked into Harry's at Hanover Square. No, there

1143
01:15:55,640 --> 01:15:58,080
Speaker 1: wasn't a woman in the place. There weren't even waitresses,

1144
01:15:59,280 --> 01:16:02,000
Speaker 1: you know what I'm saying. Sort and and you know

1145
01:16:02,160 --> 01:16:05,720
Speaker 1: to turn around now and and see the way it is.

1146
01:16:05,880 --> 01:16:12,519
Speaker 1: I mean, I can't imagine even technology has to take

1147
01:16:12,680 --> 01:16:17,760
Speaker 1: in my mind, uh second place to really that. That's fascinating.

1148
01:16:17,880 --> 01:16:21,120
Speaker 1: And I could tell you from personal experience trying to

1149
01:16:21,400 --> 01:16:28,440
Speaker 1: book women guests. The this industry still remains tremendously male dominated.

1150
01:16:28,760 --> 01:16:33,160
Speaker 1: And we've had huge, wonderful guests Sheila Bear and liz

1151
01:16:33,280 --> 01:16:36,840
Speaker 1: Anne Saunders and last week was Danbisa Moya, when we've

1152
01:16:36,840 --> 01:16:40,639
Speaker 1: had Michelle Myers from from Marrow Lynch. But you look

1153
01:16:40,680 --> 01:16:45,759
Speaker 1: around and you try and book high profile female guests

1154
01:16:45,800 --> 01:16:49,400
Speaker 1: to come in and speak, it's still a tremendously male

1155
01:16:49,479 --> 01:16:53,920
Speaker 1: dominated business. I would love, for the reasons you described,

1156
01:16:54,520 --> 01:16:58,200
Speaker 1: to hire a female CFP for our office. We put

1157
01:16:58,240 --> 01:17:00,920
Speaker 1: out the last time we advertised, and it was on LinkedIn,

1158
01:17:01,439 --> 01:17:07,920
Speaker 1: we advertised for wanted Certified Financial Planner, Competitive salary four

1159
01:17:07,960 --> 01:17:10,840
Speaker 1: oh one k healthcare blah, blah blah. We got over

1160
01:17:10,960 --> 01:17:17,519
Speaker 1: a hundred responses, not one female. It's amazing how skewed.

1161
01:17:17,640 --> 01:17:22,080
Speaker 1: The industry remains well, but it's changing and it's getting

1162
01:17:22,080 --> 01:17:26,000
Speaker 1: a little bit better. But it's my frame of reference. Well,

1163
01:17:26,040 --> 01:17:28,760
Speaker 1: when you started, so you have a few years I've

1164
01:17:28,800 --> 01:17:31,720
Speaker 1: been doing this. You've been doing this, what forties in

1165
01:17:33,080 --> 01:17:35,360
Speaker 1: coming up on fifty years, so you got me by

1166
01:17:35,920 --> 01:17:40,240
Speaker 1: just a couple of decades. I've watched it start to change,

1167
01:17:40,760 --> 01:17:43,639
Speaker 1: but it's been very slow and it's been been modest.

1168
01:17:44,120 --> 01:17:46,240
Speaker 1: When I began, most of the women were working in

1169
01:17:46,320 --> 01:17:50,400
Speaker 1: the back office and they started coming out either onto

1170
01:17:50,479 --> 01:17:53,559
Speaker 1: the sales desk. Right now, when you look at investment

1171
01:17:53,600 --> 01:17:58,360
Speaker 1: banking and research, there's many many women in the research division.

1172
01:17:58,400 --> 01:18:01,400
Speaker 1: That seems to be the the area that opens up

1173
01:18:02,000 --> 01:18:05,360
Speaker 1: most aggressively in first but when you look on the

1174
01:18:05,439 --> 01:18:10,639
Speaker 1: planning side there there are still a disproportionate number of men,

1175
01:18:11,200 --> 01:18:13,960
Speaker 1: and it seems to be changing really slowly. No argument.

1176
01:18:14,560 --> 01:18:17,400
Speaker 1: It's a that's fascinating you. The first person who's use

1177
01:18:17,520 --> 01:18:21,120
Speaker 1: that example as as um one of the things you've

1178
01:18:21,200 --> 01:18:25,840
Speaker 1: noticed changing. I'm fascinated by that. Um So now you

1179
01:18:25,960 --> 01:18:29,120
Speaker 1: mentioned that as a pass shift what's the next major

1180
01:18:29,200 --> 01:18:32,280
Speaker 1: shift you see coming. I don't. My mind doesn't work

1181
01:18:32,360 --> 01:18:34,600
Speaker 1: like that. You're not looking forward in terms of what

1182
01:18:35,160 --> 01:18:37,880
Speaker 1: might happen. You're looking at what. Actually, I mostly don't

1183
01:18:37,880 --> 01:18:42,240
Speaker 1: think about the industry. Really, Yeah, you're thinking about the

1184
01:18:42,360 --> 01:18:46,120
Speaker 1: client based my my client, the advisor and his clients

1185
01:18:46,280 --> 01:18:49,080
Speaker 1: the Americans. Do. Do I even need to ask you

1186
01:18:49,240 --> 01:18:52,519
Speaker 1: about the advantages of the fiduciary standard or is that

1187
01:18:52,720 --> 01:18:56,280
Speaker 1: just a no brainer? Well? I think I don't think

1188
01:18:56,320 --> 01:18:59,519
Speaker 1: it's a no brainer, depending on how you you define

1189
01:18:59,560 --> 01:19:03,360
Speaker 1: the fidu a sary standard. I don't know that. First

1190
01:19:03,400 --> 01:19:06,400
Speaker 1: of all, we're all supposed to be have been acting

1191
01:19:06,479 --> 01:19:12,040
Speaker 1: as acting like fiduciaries all along in the sense of

1192
01:19:12,160 --> 01:19:14,759
Speaker 1: what you and I know to be the fiduciary standard,

1193
01:19:14,800 --> 01:19:17,640
Speaker 1: which is that you that you you do what a

1194
01:19:18,360 --> 01:19:21,120
Speaker 1: reasonable person would do, and you you put your client's

1195
01:19:21,200 --> 01:19:29,280
Speaker 1: interest ahead of yours. Um, a federally mandated fiduciary standard

1196
01:19:29,479 --> 01:19:34,800
Speaker 1: can't possibly be that clean or that sane. If we

1197
01:19:35,000 --> 01:19:44,200
Speaker 1: get deep into a federally mandated regulatory fiduciary standard, you're

1198
01:19:44,240 --> 01:19:48,240
Speaker 1: going to get them saying things like you you have

1199
01:19:48,560 --> 01:19:52,240
Speaker 1: to provide the lowest cost product, or you have to

1200
01:19:52,840 --> 01:19:57,920
Speaker 1: provide the lowest cost um and sometimes it's not just

1201
01:19:58,160 --> 01:20:00,200
Speaker 1: the dollars, and it's got nothing to do with the

1202
01:20:00,280 --> 01:20:05,639
Speaker 1: fiduciary standard. Where where is it written the lowest cost

1203
01:20:05,760 --> 01:20:08,439
Speaker 1: product is the best for the client, or the lowest

1204
01:20:08,479 --> 01:20:11,880
Speaker 1: cost advice is the best for the client. The only

1205
01:20:11,960 --> 01:20:20,280
Speaker 1: thing that bothers me about the impending fiduciary standard, if

1206
01:20:20,320 --> 01:20:25,600
Speaker 1: indeed it is a impending, is the tendency of a

1207
01:20:26,080 --> 01:20:34,120
Speaker 1: nanny state, a really viciously anti capital, anti wealthy people,

1208
01:20:34,280 --> 01:20:38,280
Speaker 1: anti advisor state, which is the which is the state

1209
01:20:38,400 --> 01:20:45,200
Speaker 1: that we live in today, um from defining fiduciary in

1210
01:20:45,240 --> 01:20:47,439
Speaker 1: a way that none of us have ever heard of before.

1211
01:20:47,680 --> 01:20:51,000
Speaker 1: That's a valid criticism. When I look at fiduciary I'm

1212
01:20:51,040 --> 01:20:52,760
Speaker 1: looking at it from the other side of the coin,

1213
01:20:53,439 --> 01:20:57,800
Speaker 1: which is suitability is such a silly standard. Don't sell

1214
01:20:57,840 --> 01:21:01,280
Speaker 1: Grandma Facebook. I p o s at something that moves

1215
01:21:01,360 --> 01:21:05,280
Speaker 1: people towards. We all know that putting the client's interest

1216
01:21:05,360 --> 01:21:07,760
Speaker 1: first is the right thing to do, but when the

1217
01:21:07,960 --> 01:21:12,320
Speaker 1: vast majority of people in the industry don't have that standard,

1218
01:21:13,040 --> 01:21:15,800
Speaker 1: it creates all sorts of problems. And my concern is

1219
01:21:16,200 --> 01:21:18,800
Speaker 1: who's going to take care of these people, if they

1220
01:21:18,880 --> 01:21:22,479
Speaker 1: don't have money safe for retirement, or they've given up

1221
01:21:22,560 --> 01:21:26,280
Speaker 1: too much to high priced advice and I don't mean

1222
01:21:26,360 --> 01:21:30,600
Speaker 1: one percent, I mean suitability advice, They're not going to

1223
01:21:30,640 --> 01:21:33,920
Speaker 1: be left with enough money to retire on um. And

1224
01:21:34,120 --> 01:21:37,240
Speaker 1: I a sphere that ultimately it's going to come out

1225
01:21:37,240 --> 01:21:41,280
Speaker 1: of the taxpayers pocket left. Well, I don't think that's

1226
01:21:41,640 --> 01:21:43,800
Speaker 1: I think that's a reasonable concern. But I don't think

1227
01:21:43,840 --> 01:21:47,120
Speaker 1: that the presence or absence of the fiduciary standard has

1228
01:21:47,160 --> 01:21:49,960
Speaker 1: anything can do with the human nature has everything. Of course,

1229
01:21:51,880 --> 01:21:57,920
Speaker 1: uh one half of Americans and over when the sun

1230
01:21:58,040 --> 01:22:00,240
Speaker 1: came up this morning, we're living a hundred or sent

1231
01:22:00,320 --> 01:22:03,960
Speaker 1: on social Security and you ain't gonna fix that with

1232
01:22:04,080 --> 01:22:08,640
Speaker 1: a fiduciary standard. You ain't gonna fix that with anything regulatory.

1233
01:22:09,080 --> 01:22:14,320
Speaker 1: That's that's human nature. And are those as you know,

1234
01:22:14,479 --> 01:22:19,160
Speaker 1: social security tanks and and medicaid tanks are the are

1235
01:22:19,240 --> 01:22:24,400
Speaker 1: the taxpayer is going to end up um carrying a

1236
01:22:24,439 --> 01:22:27,080
Speaker 1: lot of that water. Sure they are. And that's and

1237
01:22:27,280 --> 01:22:30,120
Speaker 1: and and by the way, that will be back to

1238
01:22:30,200 --> 01:22:33,160
Speaker 1: your point about the pendulum. That will be a thing

1239
01:22:33,240 --> 01:22:38,120
Speaker 1: that sends the pendulum to the opposite streaming all right,

1240
01:22:38,160 --> 01:22:39,880
Speaker 1: so I know I only have you for the five

1241
01:22:39,920 --> 01:22:43,840
Speaker 1: more minutes. Let me get to the last two questions. Um,

1242
01:22:45,680 --> 01:22:48,400
Speaker 1: what sort of advice would you give to a millennial

1243
01:22:49,080 --> 01:22:52,680
Speaker 1: or someone just starting out their career today, whether it's

1244
01:22:52,680 --> 01:22:57,599
Speaker 1: in finance or elsewhere. Well, no, it's that's two different questions.

1245
01:22:58,160 --> 01:23:02,839
Speaker 1: A civilian miln neal, I would say, save ten percent

1246
01:23:03,120 --> 01:23:10,599
Speaker 1: of your pre tax earnings, inequity inequities and open your

1247
01:23:10,640 --> 01:23:13,080
Speaker 1: statement when you're seventy one years old, so just don't

1248
01:23:13,080 --> 01:23:16,439
Speaker 1: even know. Give it fifty years and you'll do okay.

1249
01:23:17,120 --> 01:23:19,360
Speaker 1: And now the second half of the question, what advice

1250
01:23:19,439 --> 01:23:22,320
Speaker 1: would you give to someone going into finance right out

1251
01:23:22,320 --> 01:23:24,680
Speaker 1: of school today? When again it depends on what you

1252
01:23:24,760 --> 01:23:29,040
Speaker 1: mean by finance if you if you mean what what

1253
01:23:29,320 --> 01:23:35,559
Speaker 1: my guys do personal financial advice? I would say, because

1254
01:23:35,640 --> 01:23:41,320
Speaker 1: the the this profession has aged terribly. It's almost like

1255
01:23:42,240 --> 01:23:45,760
Speaker 1: the thirties and forties where no young people came into

1256
01:23:45,800 --> 01:23:53,599
Speaker 1: the business after the thermonuclear and so what you ended

1257
01:23:53,680 --> 01:23:57,000
Speaker 1: up with in the nineteen fifties and early nineteen sixties

1258
01:23:57,120 --> 01:24:00,920
Speaker 1: was a very old profession and eating today it is

1259
01:24:01,000 --> 01:24:03,960
Speaker 1: repeating today. And what I would say to somebody who

1260
01:24:04,040 --> 01:24:06,320
Speaker 1: had the who was smart enough to come into the

1261
01:24:06,400 --> 01:24:10,639
Speaker 1: business now when it's deeply unfashionable to come into the business,

1262
01:24:11,520 --> 01:24:13,519
Speaker 1: or at least I hope it still is. Is go

1263
01:24:13,680 --> 01:24:18,719
Speaker 1: apprentice yourself to somebody, you know, sixty years old, somebody

1264
01:24:18,760 --> 01:24:21,839
Speaker 1: who's seen all the wars, who has fought all the wars,

1265
01:24:22,680 --> 01:24:25,639
Speaker 1: and just sit at his feet for ten years, and hey,

1266
01:24:25,760 --> 01:24:28,960
Speaker 1: you'll learn everything that that there is to learn, and

1267
01:24:29,160 --> 01:24:32,760
Speaker 1: be you'll inherit the business on some some basis or other.

1268
01:24:33,120 --> 01:24:36,000
Speaker 1: This has come up several times in our office, and

1269
01:24:36,160 --> 01:24:40,519
Speaker 1: that what what is your succession plan? Well, it's my

1270
01:24:40,720 --> 01:24:43,679
Speaker 1: name is on the door, but my partners fifteen years

1271
01:24:43,720 --> 01:24:47,600
Speaker 1: younger than me, and the next guy in line is

1272
01:24:47,680 --> 01:24:50,400
Speaker 1: five years younger than him, and everybody's capable of stepping

1273
01:24:50,479 --> 01:24:53,800
Speaker 1: into these roles. You don't really think about that under

1274
01:24:53,880 --> 01:24:59,200
Speaker 1: normal circumstances, but it's something that's significant because people want

1275
01:24:59,240 --> 01:25:01,160
Speaker 1: to know, Hey, if you are hit by a bus,

1276
01:25:01,760 --> 01:25:03,640
Speaker 1: is the farm going to continue? I think that's going

1277
01:25:03,680 --> 01:25:06,679
Speaker 1: to be an ongoing issue for these guys who don't

1278
01:25:06,800 --> 01:25:09,840
Speaker 1: have a junior at their feet who could pick up

1279
01:25:09,880 --> 01:25:12,120
Speaker 1: the ball and run with it. So it's already becoming

1280
01:25:12,160 --> 01:25:15,360
Speaker 1: a huge issue. That's amazing last question, because I know

1281
01:25:15,439 --> 01:25:18,280
Speaker 1: we've got to get you out to an airport. What

1282
01:25:18,400 --> 01:25:21,560
Speaker 1: do you know today that you wish you knew? And

1283
01:25:21,600 --> 01:25:24,880
Speaker 1: I'm going to change the question forty nine years ago

1284
01:25:25,280 --> 01:25:29,960
Speaker 1: when you began in this industry, well, not in a

1285
01:25:30,040 --> 01:25:32,800
Speaker 1: minute and a half, I mean the short answers. Ever,

1286
01:25:32,880 --> 01:25:36,639
Speaker 1: you take the next next plan with the short answers everything,

1287
01:25:38,080 --> 01:25:43,680
Speaker 1: but the long answer is the rationality of capital and

1288
01:25:43,800 --> 01:25:47,560
Speaker 1: the efficiency of markets in the long run. If you

1289
01:25:49,000 --> 01:25:53,799
Speaker 1: what I wish I had known as a beardless stock

1290
01:25:53,880 --> 01:26:00,200
Speaker 1: picker in a in a performance mad age, was that

1291
01:26:00,400 --> 01:26:03,519
Speaker 1: you didn't have to be a hero. I love that sentence.

1292
01:26:03,600 --> 01:26:07,160
Speaker 1: What I wish I knew as a beardless stock picker

1293
01:26:07,320 --> 01:26:11,280
Speaker 1: in a performance mad age, which is exactly what I was.

1294
01:26:11,520 --> 01:26:14,360
Speaker 1: You did not have to be a hero. How long

1295
01:26:14,400 --> 01:26:16,360
Speaker 1: did it take you to figure out that you were

1296
01:26:16,400 --> 01:26:20,400
Speaker 1: on the wrong path, Well, it was a series of epiphanies,

1297
01:26:20,520 --> 01:26:26,080
Speaker 1: and it took the total The total time was fifteen

1298
01:26:26,160 --> 01:26:31,479
Speaker 1: years and so fifth. That means for thirty thirty five years,

1299
01:26:32,200 --> 01:26:37,839
Speaker 1: you've been preaching pretty much the same story in books

1300
01:26:38,120 --> 01:26:44,120
Speaker 1: and newsletters and appearances and conferences and all sorts of

1301
01:26:44,240 --> 01:26:52,280
Speaker 1: other events. You're shaping a big swath of the investor community,

1302
01:26:52,720 --> 01:26:57,360
Speaker 1: who in turn are helping the investing public achieve long

1303
01:26:57,479 --> 01:27:02,200
Speaker 1: term success. Well, Nick, I can't thank you enough for

1304
01:27:02,360 --> 01:27:06,519
Speaker 1: your UM. I can't thank you enough for your time

1305
01:27:06,880 --> 01:27:11,479
Speaker 1: and and being so willing to sit here and answer

1306
01:27:11,560 --> 01:27:15,519
Speaker 1: my silly questions. It's been a pleasure. And I know

1307
01:27:16,240 --> 01:27:18,280
Speaker 1: for those of you who are still with us at

1308
01:27:18,320 --> 01:27:21,400
Speaker 1: the end, this is a little inside baseball if you're

1309
01:27:21,400 --> 01:27:24,960
Speaker 1: an investor, but I hope you learned something fascinating about

1310
01:27:25,439 --> 01:27:28,080
Speaker 1: how money has managed managed and how the business of

1311
01:27:28,160 --> 01:27:31,800
Speaker 1: asset management progresses. And for people who want to find

1312
01:27:31,880 --> 01:27:35,680
Speaker 1: more of your stuff, Nick Murray dot com and then

1313
01:27:35,800 --> 01:27:40,880
Speaker 1: Nick Murray newsletters dot com. Nick Murray dot com. Uh,

1314
01:27:41,080 --> 01:27:44,599
Speaker 1: thank you. UM. Mike Bannick is our head of research,

1315
01:27:44,760 --> 01:27:51,400
Speaker 1: Charlie Volmer is our producer, and Marx and Scalchi is

1316
01:27:51,479 --> 01:27:54,479
Speaker 1: our engineer. UH. Be sure and check out all our

1317
01:27:54,560 --> 01:27:57,040
Speaker 1: other interviews. You could look Up an Inch or Down

1318
01:27:57,080 --> 01:28:01,160
Speaker 1: an Inch on iTunes and see the other fifty two interviews.

1319
01:28:01,720 --> 01:28:05,360
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio

1320
01:28:11,560 --> 01:28:12,040
Speaker 1: m HM