Speaker 1: This is Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. That three times that, three six
Speaker 1: and then no sound. There evidently are three core principles.
Speaker 1: That's why there is a three Things song joining us
Speaker 1: here in our interactive broker studios. Vinny Catalano, chief investment
Speaker 1: officer at Red Mount Capital Partners, also co founder and
Speaker 1: member of Adriatic Capital Partners. So, Vinny, what are these
Speaker 1: three core principles that we need to pay Okay, you
Speaker 1: start with the three core principles. Number one, professional investors
Speaker 1: are the markets. So it's best to know if you're
Speaker 1: going to swim with the sharks shark behavior, Okay, and
Speaker 1: so that's core principle number one. Principal Number two is
Speaker 1: that professional investors actions must be justified. They cannot go rogue.
Speaker 1: Even going rogue and being successful can be problematic for
Speaker 1: a essional investor. Why because there's a defined methodology and
Speaker 1: if they don't follow that defined methodology, management, asset managers,
Speaker 1: management will have a problem with them doing whatever they
Speaker 1: want to do, even if they are successful. And then
Speaker 1: the third core principle is that you as an investor
Speaker 1: want to exploit this behavior as best that you can.
Speaker 1: The expression the quote I like to refer to us
Speaker 1: from enemy of the state, and and that quote is
Speaker 1: if they're big and you're small, then you're a mobile
Speaker 1: and they're slow. You're hidden and they're exposed. So this
Speaker 1: is good for an individual investor if he or she
Speaker 1: knows how to play the game and to exploit the system.
Speaker 1: Those are the three core principles for starters. So what's
Speaker 1: an individual investors really focus on? There's so much information
Speaker 1: out there, and if they're sitting in front of a
Speaker 1: Bloomberg terminal, tremendous amounts of information at their fingertips. Should
Speaker 1: they be focusing on earnings, company management's macro stuff, trade?
Speaker 1: What should they be focusing on? They should be focusing
Speaker 1: on what professional investors focus on, which is going to
Speaker 1: be the inputs into the evaluation models. What are those
Speaker 1: inputs them? Mainly earnings, interest rates, and a degree of risk,
Speaker 1: and risk tends to be somewhat subjective, so that's a
Speaker 1: little bit problematic in that regard, But those are the
Speaker 1: three principles. So when you're looking at, for example, twelve
Speaker 1: months from now, what are earnings look like in the
Speaker 1: third quarter of next year, not bad. They look like
Speaker 1: a growth over So I guess that a key question
Speaker 1: recently has been what your timing is right? And as
Speaker 1: an investor, as an individual investor, it's one thing to
Speaker 1: do day trading. It's the other thing to have a
Speaker 1: six month horizon. It's another thing to do long term.
Speaker 1: How do you sort of advise all of the above,
Speaker 1: I mean, do you have clients that are trying to
Speaker 1: trade on a day to day basis. I have one
Speaker 1: client who does trade on a day to day basis,
Speaker 1: only one, And what he does is he focuses in
Speaker 1: on momentum. Now, if you are a short term trader,
Speaker 1: momentum is king okay because it will give you good
Speaker 1: indications of when you want to flow in and out
Speaker 1: with the money flow. But that really is more technical analysis,
Speaker 1: moving averages, things of that sort. And there are services
Speaker 1: that are out there that do that. But you can
Speaker 1: develop it yourself too, if you if you have the
Speaker 1: tools available. So many there are. There is so much
Speaker 1: noise out there, so much information. What investors actually ignore. Well,
Speaker 1: number one on the list of ignoring is going to
Speaker 1: be hard to quantify highly subjective type of UH metrics.
Speaker 1: For example, valuation that sounds like I'm doing double talking
Speaker 1: because I've referenced before what a professional investors and what
Speaker 1: do you want to concentrate on what they're looking at,
Speaker 1: which is the inputs into the valuation model of Okay,
Speaker 1: but what you need to be aware of is that
Speaker 1: valuation is highly subjective. It's like a rubber band. It
Speaker 1: can stretch and stretch and stretch. To John Maynard Kaine's quote,
Speaker 1: being irrational logan, and you can remain solvent those kinds
Speaker 1: of things, are you know, problematic valuation being one? Another
Speaker 1: one that's highly subjective is going to be investor sentiment.
Speaker 1: And this on my LinkedIn post generated a lot of
Speaker 1: interest and a lot of consternation a number of investors.
Speaker 1: What do you mean, you know, look at this tool,
Speaker 1: but there's a low probability of it of it being
Speaker 1: a decent climbing tool. You know, he was just looking
Speaker 1: at some SMP data showing the active managers have consistently
Speaker 1: underperformed the broader indexes. What a surprise. So, I mean,
Speaker 1: what's your the sort of sarcasm that is that is
Speaker 1: dripping all over your words? I mean, is your takeaway
Speaker 1: that investors should just steer clear of active strategies, not really,
Speaker 1: because you can plug in those active strategies into whatever
Speaker 1: your long time time arison is, whatever your risk tolerance is,
Speaker 1: whatever your goals and objectives are, and then you can
Speaker 1: plug in various different types of active strategies as long
Speaker 1: as if it's within the parameters of your goals and
Speaker 1: your expectations. Understanding of course, that if you have an
Speaker 1: active manager and that active manager is trying to quote
Speaker 1: beat the market or beat their bogies, so to speak, uh,
Speaker 1: don't be surprised if they don't. And that's, by the way,
Speaker 1: a big part of the reason why ETFs have been
Speaker 1: so successful over the years, because a lot of individual
Speaker 1: investors have gotten tired of the underperformance by active managers
Speaker 1: and they've gone to E t F route. In fact,
Speaker 1: now passive strategies in equities outpace the amount of money
Speaker 1: asked the management. In passive equity strategies now outpaces that
Speaker 1: in active strategies. Vinny Cadalina, thank you so much for
Speaker 1: being here with us. An Catlano's chief investment officer at
Speaker 1: Red Mound Capital Partners, also co founder and member of
Speaker 1: Adriatic Capital Partners. Joining us here in our Bloomberg Interactive brokers,
Speaker 1: studios to lives to reality, virtual reality impacting lots of
Speaker 1: businesses across the spectrum. I'm not sure people really understand
Speaker 1: some of the applications for virtual reality and how certain
Speaker 1: businesses and companies and services are are using virtual reality.
Speaker 1: To try and a little learn a little bit more,
Speaker 1: we welcome our next guest, Abbie Altberg, chief executive officer
Speaker 1: of Linden Lab, joining us on our Bloomberg nine sixties
Speaker 1: studio in San Francisco. Abbie, thanks so much for joining us.
Speaker 1: I wonder if you could just give us a little
Speaker 1: background on what your company, linden Lab, is all about. Hey,
Speaker 1: great to be here. Yeah, linden Lab makes it easier
Speaker 1: for people to create the world's they want. Um. We
Speaker 1: build the platforms and tools and ecosystems and financial systems
Speaker 1: to make it possible for people to create worlds in
Speaker 1: vite people into their worlds and have all kinds of
Speaker 1: entertainment or business activities, uh, and make money doing it. So.
Speaker 1: The company linden Lab was founded in lots changed since then.
Speaker 1: I mean, what are what sort of the latest thing
Speaker 1: in virtual reality? Yeah, I mean we've Second Life, our
Speaker 1: first product has not been in the market for over
Speaker 1: sixteen years and it's still going strong. Is this sort
Speaker 1: of the most you know, uh interesting virtual world ever created? UM,
Speaker 1: And the subject matter in there is extremely diverse, from
Speaker 1: healthcare to education, to entertainment and businesses of all kinds.
Speaker 1: And with this new wave of new technologies like virtual
Speaker 1: reality headsets and a lot of investments from bigger players
Speaker 1: entering UM, it's it's advancing rather quickly, although it's still
Speaker 1: feels slow, but it's it's uh. The immersion you can
Speaker 1: have by doing it in virtual reality versus just looking
Speaker 1: at it on a screen is tremendously powerful and will
Speaker 1: ultimately impact almost everything human beings do. It'll just take
Speaker 1: a while, but we can see the signs, so be uh.
Speaker 1: I know you've done some brand partnerships with companies including Levi's,
Speaker 1: Virgin Records, Spinning Records, and so on. Just give us
Speaker 1: an example of kind of what that looks like. It's
Speaker 1: like a practical example of kind of how you interact
Speaker 1: with certain brands. Yeah, I mean, we help some of
Speaker 1: these brands build entire worlds that are in the spirit
Speaker 1: of their brand, and it gives them a really interesting
Speaker 1: way of engaging with their audiences and their fans or
Speaker 1: their customers. And for some brands, it's about merchandise, and
Speaker 1: we help them sell virtual goods through our marketplace, UH
Speaker 1: and so they can display uh Levi's UH gears. I
Speaker 1: can go by Levi's T shirts with maybe Hello Kitty
Speaker 1: UH branding on it. Um so. And for other partners,
Speaker 1: it's it's music brands where their artists can perform in
Speaker 1: very large stadiums in front of thousands and thousands of people. Um.
Speaker 1: And ultimately, you'll see more of the activities we take
Speaker 1: for granted happening in physical space also happening in virtual space.
Speaker 1: People still want to look good, still want to be entertained,
Speaker 1: still want to do business, and so all of the
Speaker 1: things human beings do will more and more actively being
Speaker 1: done in virtual space as well. So let's talk about
Speaker 1: the business aspect of this. I imagine that there is
Speaker 1: a lot of competition right now. UM, what is the
Speaker 1: competitive landscape like for you? Well, it's still early. Um,
Speaker 1: there's not that many companies that are really enabling people
Speaker 1: to create their own virtual worlds. There's a lot of
Speaker 1: games out there, but enabling people to create their own
Speaker 1: worlds and where they own the content they create and
Speaker 1: and can make a business out of it um without
Speaker 1: having to be a sophisticated engineering company. H is something
Speaker 1: that we're helping create basically democratized ability to express yourself
Speaker 1: in this medium and share it with the world and
Speaker 1: profit from that well. And how do you make money?
Speaker 1: You can create content, so assets that you know, avatars
Speaker 1: and clothing for avatars and or world assets. Like you
Speaker 1: you want to have trees in your garden and you
Speaker 1: want to buy them from the tree guy. So in
Speaker 1: Second Life we have a GDP that's close to half
Speaker 1: a billion dollar US So there's a lot of economic
Speaker 1: activity for products and services within the virtual world. So
Speaker 1: looking forward, what do you think is going to be
Speaker 1: sort of the next big thing in terms of virtuality?
Speaker 1: I mean, one of the fantastic things about your role
Speaker 1: is you get to sort of have a bird's eye
Speaker 1: view of all the different ways that people are developing
Speaker 1: these worlds. Where do you think it's going. Well, there,
Speaker 1: it's going to continue to advance at a rapid rate,
Speaker 1: both with vertical applications that are very specific to specific
Speaker 1: industries or specific use cases, as well as horizontal platforms
Speaker 1: that lower the bar of entry for more people to
Speaker 1: participate in this kind of a medium. Um, you know
Speaker 1: the number of companies today, it's not that hard to
Speaker 1: get a website up and running. By creating a virtual world,
Speaker 1: it's been quite hard for to do and it's been
Speaker 1: sort of in the hands of the experts and specialists.
Speaker 1: And we're lowering the bar for who can participate in
Speaker 1: this new way of creating content and have social interaction
Speaker 1: in the world. Maybe, Alberg, thank you so much for
Speaker 1: spending time with us. Alburg, chief executive officer of Lynden Lab,
Speaker 1: joining us from our Bloomberg nine sixties studio in San Francisco.
Speaker 1: And I have to think, uh that the idea of
Speaker 1: virtual reality is changing so dramatically in terms of how
Speaker 1: different UH industries are looking at it. In terms of
Speaker 1: I remember once I was speaking with one entrepreneur who
Speaker 1: is trying to create a robot the virtual reality to
Speaker 1: help seniors who lived alone feel like they were part
Speaker 1: of a community, basically a mobile you know, mobile individuals.
Speaker 1: So many cool applications. Yeah, you go to the Consumer
Speaker 1: Electronics Show in January and Las Vegas and there is
Speaker 1: virtual reality applications all over the place. So that the
Speaker 1: technology is really advancing quickly. Yeah, and the key is
Speaker 1: how do you democratize it? How do you sort of
Speaker 1: make it bleed into the mainstream in a way, uh
Speaker 1: that is palatable for the individual.