Speaker 1: Welcome to Trillions. I'm Joel Webber and I'm Eric Baltunis.
Speaker 1: You've been on this book reading binge, Eric ever since
Speaker 1: you published your book, and we have an author here today,
Speaker 1: who would you bring us? Yeah? When I published my book,
Speaker 1: there's always a cold books like below that says people
Speaker 1: who bought this like this one, you know that thing,
Speaker 1: and this one is always there. And it's somebody I
Speaker 1: know from um Riddholtz and it's Nick Julie and his
Speaker 1: book is called just Keep Buying, which is somehow I
Speaker 1: feel linked to the book I wrote, which was I mean,
Speaker 1: there's no way Jack Bogel would disagree with this premise.
Speaker 1: And what I liked about it is it's very practical.
Speaker 1: It's a really good book. It explains why you want
Speaker 1: to invest, how to invest in. It splits between savings
Speaker 1: and investing, and savings actually is important as well. It's
Speaker 1: half the battle, and I just it's really laid out
Speaker 1: very well. I like some of the anecdotes, and I
Speaker 1: also think I've come My theory is that we're an
Speaker 1: in an investor Enlightenment era and the first phase was
Speaker 1: just to get the friction out of the way. Low costs,
Speaker 1: index funds. The second phase of this era is behavior,
Speaker 1: and there's a lot of behavior in here. You know,
Speaker 1: once you understand why you're investing, how it works, what
Speaker 1: to use, it's very easy to behave. If you don't
Speaker 1: know any of that, your emotions take get the best
Speaker 1: of you. So I think that's a big part of
Speaker 1: this book as well. And um, but this year is
Speaker 1: a crazy year for the market, So I think it's
Speaker 1: a good it's an interesting title just keep buying for
Speaker 1: this year. Maybe it's even more important title this year.
Speaker 1: So yeah, I thought we'd be cool to dig into
Speaker 1: this um and get kind of practical. So joining us
Speaker 1: on trillions this time we've got Nick Mjuli, who's the
Speaker 1: chief operating officer and data scientists that Ridholt's wealth management
Speaker 1: this time on trillions. Just keep buying, Nick, Welcome to Trillians.
Speaker 1: Thanks guys harving me on. Okay, So three word tie
Speaker 1: I said a few times already, just keep buying. Uh,
Speaker 1: what else do I need to know? Because that's what
Speaker 1: I'm doing, man, I'm just I just keep buying. What what?
Speaker 1: What could you possibly feel in a book other than
Speaker 1: those three words? I mean, that's it's saying if I
Speaker 1: can only give you three words, there's are the three
Speaker 1: words I can give you, right, there's the three words
Speaker 1: I would give you, but um to expand on that.
Speaker 1: It's the you know, continual purchase of a diverse set
Speaker 1: of income producing assets, if I could give you a sentence.
Speaker 1: But then beyond that, the books not just about dollar
Speaker 1: cost averaging. Obvious. Some people just like, oh, that's obviously,
Speaker 1: I'm not gonna read it. Like, no, there's a lot
Speaker 1: more to it. There's a lot pieces of savings about
Speaker 1: personal finance, things like how do I save for a house?
Speaker 1: You know, am I saving enough for retirement? How much
Speaker 1: should I say for retirement? You know, why should I invest?
Speaker 1: You know? What should I think about market volatility? Et cetera?
Speaker 1: All those types of things. Okay, so I said your
Speaker 1: job title chief operating officer and data scientists. What did Barry,
Speaker 1: who's a frequent guest, What did Barry say when you
Speaker 1: were like, Hey, I'm gonna write this book. Uh he was.
Speaker 1: I kind of just told him after I was already
Speaker 1: writing it actually, Like it's like I said, get a proval.
Speaker 1: I was like, hey, I was like, yeah, I'm writing
Speaker 1: a book. Barry's like, Okay, great. Yeah, He's like, you
Speaker 1: put out enough stuff now, I think you can probably
Speaker 1: come up with something like Okay, cool, thanks appreciate that Berry.
Speaker 1: So yeah, and I did, basically, But no, he's he's
Speaker 1: always been supportive. I mean, I love Barry. I'm obviously,
Speaker 1: you know, not just because he's like one of my bosses,
Speaker 1: but because you know, Barry is just a great guy
Speaker 1: to be around. And you know, I believe in the
Speaker 1: vision that we're building there. So yeah, um, just how
Speaker 1: did you get the title? I love there's a little
Speaker 1: anecdote in here, and I love that you were able
Speaker 1: to find this title through something you saw. Can you
Speaker 1: go through that story how the title came to you? Yeah,
Speaker 1: So there's this so Casey and I said, it's like
Speaker 1: a YouTuber And you guys may have heard of him
Speaker 1: used to. I think I don't know if he YouTube
Speaker 1: as much now as he used to be used to
Speaker 1: like a daily vlog. And he was in New York
Speaker 1: City and he had a he had a video called
Speaker 1: three words to get to three million subs right, And
Speaker 1: there's another YouTuber named Roman Atwood and gave him this advice.
Speaker 1: He said, if you want to get to you want
Speaker 1: to really grow your audience. You know, I'm just gonna
Speaker 1: give you three three words of advice. Just keep uploading.
Speaker 1: And so his that was his mantra every day and
Speaker 1: need upload a video every day, and need to upload
Speaker 1: a video. He kept doing it, and Casey and I
Speaker 1: sitting now was like one of the biggest YouTube wars ever. UM.
Speaker 1: And actually I used that. UM. I remember hearing that
Speaker 1: right around the same time. I was doing some analysis
Speaker 1: on the stock market and I realized, like, wait, just
Speaker 1: keep up, just keep buying. It kind of fits. It's
Speaker 1: a it's a catchier way of saying dollar cost average
Speaker 1: becahen you say dollar cost averaging, people's eyes glaze over.
Speaker 1: I think this is a catchier way and actually is
Speaker 1: a more aggressive investment allocation approach. And really this actually
Speaker 1: that intro chapter kind of came from a blog post
Speaker 1: I wrote literally, you know, uh, five years to the
Speaker 1: day before the book came out. It was just by
Speaker 1: chance that happened. As origin the book supposed to go
Speaker 1: on earlier, but due to supply chain stuff, we had
Speaker 1: to push it a couple two months. In the paper
Speaker 1: Short had the great paper Short once that was sorted out,
Speaker 1: though I realize, like, oh my gosh, that's weird. Like
Speaker 1: literally five years to the day before the book came out,
Speaker 1: like that was when I wrote the blog post just
Speaker 1: keep Buying, which is arguably my first post that really
Speaker 1: kind of like went did well for me as a blogger,
Speaker 1: right when I didn't really have an audience and kind
Speaker 1: of kind of blew up a little bit relative to
Speaker 1: to my audience at the time. People, Yeah, went from
Speaker 1: twelve people like fifty people. I was like, wow, this
Speaker 1: is got here. You've dropped a phrase their dollar cost averaging.
Speaker 1: Break that down because that's not something that we've really
Speaker 1: ever talked about on the on the podcast. But so
Speaker 1: the issue I have an issue with this word because
Speaker 1: there's two different definitions out there, and if you're not careful,
Speaker 1: you'll use both of them without realizing it. So the
Speaker 1: traditional definition, which Benjamin Graham I think came up with,
Speaker 1: was just buying over time. Right, So, if you have
Speaker 1: a four wing K, you're making contributions every two weeks
Speaker 1: every month whatever that's considered dollar cost averaging. You're investing
Speaker 1: as soon as you get the money. That's what it's about.
Speaker 1: There's another definition, this is a definition I do not like,
Speaker 1: and I try not to use this definition, which is,
Speaker 1: let's say you just got an inheritance of a hundred
Speaker 1: thousand dollars and you slowly kind of average that into
Speaker 1: the market, so you don't put it on. You don't
Speaker 1: buy not worth of stocks. Now, now you don't lump
Speaker 1: some you you Dollar cost averaging is what they would say.
Speaker 1: I do not like that definition. I do not use
Speaker 1: that term. I don't use dollar cost averaging for that
Speaker 1: term because I think it's so confusing. You can see,
Speaker 1: those are very different things. Buying as soon as you
Speaker 1: have the money, even in small increments is very different
Speaker 1: than taking a large amount of money and slowly averaging in.
Speaker 1: And they're very different strategies. And that second strategy, the
Speaker 1: averaging in UM, is subpar across the board. I've tested
Speaker 1: it every way to Sunday and it just does not
Speaker 1: outperform relates to lottery winnings. Also that that term is
Speaker 1: just for most normal people. It's it sounds financial and
Speaker 1: it's boring. Yeah, for some reason, dollar cost averaging, but
Speaker 1: it's it is powerful UM. Let's you broke this book
Speaker 1: down into two parts. The first half is on savings.
Speaker 1: And I like the way at the beginning he's like, look,
Speaker 1: if if you have enough money saved, just go to
Speaker 1: the second part. I won't be offended. Um. Yeah, I
Speaker 1: which the second part is investing, which is investing. Yeah,
Speaker 1: but here's a line in here that sounds it stuck
Speaker 1: out to me. It almost sounds harsh, but it's true,
Speaker 1: which is saving is for the poor and investing is
Speaker 1: for the rich. Um. And you go to explain that,
Speaker 1: but I guess, just talk about what that means. You know,
Speaker 1: if you're have if you're young, or don't make a
Speaker 1: lot of money, investing might not be as uh the
Speaker 1: ticket you think it is early on, And I guess
Speaker 1: just explain that that dynamic there. I just think that,
Speaker 1: I mean, we can just do this with a simple example.
Speaker 1: The issue was just like investing is on that impactful
Speaker 1: when you don't have that much money invested, for example,
Speaker 1: And I the story I tell in the first chapter.
Speaker 1: I was twenty three years old, I had a thousand
Speaker 1: dollars to my name. I was analyzing my investments every
Speaker 1: way possible. I was like, you know, oh, what should
Speaker 1: I have five percent bonds? Ten percent bonds? I was
Speaker 1: neurotic basically. But the end of the day, I only
Speaker 1: had a thousand dollars invested, even if I got a
Speaker 1: ten percent return on my portfolio, which is like a
Speaker 1: good year. You know, what is that a hundred bucks?
Speaker 1: Like I was at the same time, I was going
Speaker 1: out with my friends in San Francisco and blowing that
Speaker 1: hundred dollars on dinner, drinks, you know, uber home whatever.
Speaker 1: Like it was very easy to blow that hundred dollars.
Speaker 1: So you can see that my investment returns didn't really matter,
Speaker 1: but my spending in a given day mattered a lot more, right,
Speaker 1: And I'm not not saying that tell you not to
Speaker 1: go out with your friends, And that's not the point
Speaker 1: of that. The point of that story is to say,
Speaker 1: when you don't have a lot of money to invest,
Speaker 1: it doesn't really matter. We should be focusing on is
Speaker 1: your career and how much you can save. And then
Speaker 1: once you have some money saved up and ready to
Speaker 1: invest or you've invested already. That's where let that lever
Speaker 1: matters more so. It's about it's about just like where
Speaker 1: you focus your attention and where you kind of get
Speaker 1: the biggest return for your use of time. And so
Speaker 1: I think for when I say savings for the poor
Speaker 1: investings for the rich, I mean that on a absolute
Speaker 1: and a relative sense, Like I wouldn't consider myself a
Speaker 1: poor person. As a twenty two year old living in
Speaker 1: San Francisco, I was not poor, but I was poor
Speaker 1: relative to my future self. And that's kind of how
Speaker 1: I want you to think about it, Not like I
Speaker 1: was an abject poverty. I'm not trying to say that
Speaker 1: at all, um, but just think about that, like whether
Speaker 1: you're poor on absolute level or on a relative level
Speaker 1: to your future self. That's how I want you to
Speaker 1: think about that problem and how you make decisions. First
Speaker 1: of all, I just love that simplicity of that breakdown, right,
Speaker 1: Like you can't invest until you save, you can't save
Speaker 1: until you actually figure out how to make more money,
Speaker 1: and and actually you know, be diligent in your savings,
Speaker 1: and there is sort of that that transition between your
Speaker 1: younger self and an older self that might be able
Speaker 1: to to get there, but you still have to figure
Speaker 1: out a way to start investing. Right. And so I'm
Speaker 1: curious in the book, like how do you write about
Speaker 1: turning that corner and going from somebody who might not
Speaker 1: be able to save to actually being able to like invest,
Speaker 1: because I think that that's there's a huge financial literacy
Speaker 1: component there where people are just intimidated not in the market,
Speaker 1: not in the market, and speaking very broad terms, because
Speaker 1: the last year has been insane and a lot of
Speaker 1: people did get in and bought high and have witnessed
Speaker 1: the carnage. But how do you talk to how do
Speaker 1: you talk talk to people in general about that switch
Speaker 1: to becoming investors. I mean, I think the main thing
Speaker 1: is obviously you're right once you have some money to invest,
Speaker 1: Like I think actually, if I had written this book
Speaker 1: in tween, I think that question would have been a
Speaker 1: lot more it had been a lot more difficult to
Speaker 1: answer because they're you know, investing wasn't as forefront as
Speaker 1: it is now due to Robin Hood. It just became like, yeah,
Speaker 1: everybody's armchair. Everyone kind of knows. I think not everyone.
Speaker 1: I mean, of course there's still people that don't. There
Speaker 1: are people unbanked, all that stuff, but I think most
Speaker 1: people have heard of Robin would have heard of things.
Speaker 1: So the issue isn't with robin Hood. It's what you're
Speaker 1: buying on robin Hood, right, It's like you can buy
Speaker 1: e t s, you can buy all the stuff that
Speaker 1: a lot of you know, people would say is prudent
Speaker 1: investment management. So it's not the tools necessarily, it's just
Speaker 1: how you're using them. So I would say it's like, oh,
Speaker 1: most you will probably hurt of robin Hood, like, oh,
Speaker 1: have your robin Hood account and instead of buying things
Speaker 1: like GameStop, maybe you buy something like I don't want
Speaker 1: to give a ticker out, but just a index fund
Speaker 1: of something. Okay, I did not say that. I can
Speaker 1: say I can't recommend tickers, but I don't. I don't
Speaker 1: think that's a great ticker. Let's I'll say I can't.
Speaker 1: I can't recommend it or deny it. But that's all
Speaker 1: I'm gonna say is like tickers out there for broad
Speaker 1: based index funds that you can buy that are very
Speaker 1: good and very cheap. Right, And so that's an example.
Speaker 1: Eric just gave an example of one of them that
Speaker 1: you can choose from. So yeah, I agree, I mean
Speaker 1: robin Hood does they are motivated to get you to
Speaker 1: trade more with the confetti dropping and that it's like
Speaker 1: a casino mindset there. But you're right, you can get
Speaker 1: that stuff there. People just tend to go to Robin
Speaker 1: to do other things. But I like the idea of
Speaker 1: the focusing on saving and your income ability when you're young,
Speaker 1: because it's also a motivating factor. There was a sort
Speaker 1: of get rich quick easy way with the Robin hood
Speaker 1: game stop thing that was a big thing. And by
Speaker 1: saying well, look, you should really focus on your earning
Speaker 1: you can control that early on, is a good message.
Speaker 1: Now when it comes to retirement savings, you have this
Speaker 1: really interesting UM case stud or experiment they did which
Speaker 1: I love this. Listen to this um Individuals who saw
Speaker 1: the older versions of themselves right through an age progressed
Speaker 1: rendering like you know when you digitally aid yourself on
Speaker 1: that app, they allocated about two percent more of their
Speaker 1: pay on average to retirement versus people who didn't see
Speaker 1: such photos. I explain that, and I might use that.
Speaker 1: I might put a picture of my seven year old
Speaker 1: self up on my mirror. You know how Rocky had
Speaker 1: that picture of club laying up there. I might. I
Speaker 1: might put my seven year old self up there, just
Speaker 1: to give myself a little extra motivation. Do you have
Speaker 1: an old picture of yourself around? No? No, I do not.
Speaker 1: I do not use that because I mean, there's actually
Speaker 1: other research in that in that chapter where I talked
Speaker 1: about they asked that asked a bunch of people. You
Speaker 1: know what motivates people to say? They found like, is
Speaker 1: it like a vacation? Is your children? All this stuff
Speaker 1: besides emergencies, which people do want to say for once
Speaker 1: that's out of the way, once your emergency funds done,
Speaker 1: the only thing that motivates people to save is themselves. Actually,
Speaker 1: so really like, if you want to say for your future,
Speaker 1: you have to be selfish. And so I think that
Speaker 1: the idea of using that face app or would have
Speaker 1: to see an old version of yourself is you realize
Speaker 1: you're going to be an old person. You want to
Speaker 1: take care of that old person. So that's what investing
Speaker 1: is supposed to do. Right, You're supposed to be replacing
Speaker 1: your income when you can no longer or don't want
Speaker 1: to work anymore, and you replace that income with your
Speaker 1: investment income. Right, it's the kind of the whole idea there.
Speaker 1: And so be selfish. It's okay to be selfish in
Speaker 1: that case, isn't that so true? Like you know, there
Speaker 1: was I've read a book. I think it might have
Speaker 1: been um think and grow rich. Forget it was. You
Speaker 1: put something up where you see it every day. Like
Speaker 1: when I wrote my book, had a whiteboard where I
Speaker 1: just clock time that I've spent writing, and that thing
Speaker 1: in my face every day. I'm telling you it really
Speaker 1: just putting something up there to motivate you. I think
Speaker 1: it really it's interesting. I'm not surprised that works, um,
Speaker 1: but I would. I'm kind of curious to see an
Speaker 1: old version of Joel. I mean he already looks seven. Yeah.
Speaker 1: Remember remember my brother sees me. He's like, hey, you're
Speaker 1: coldest sex in your forehead? Are looking really strong? Power alleys?
Speaker 1: Uh So, So Nick, let's talk a little bit more
Speaker 1: about the dusting aside. Because once you're in the market
Speaker 1: and you you have that exposure, it's common sense just
Speaker 1: to keep buying. So what what added value do have
Speaker 1: for us? For those of us who are active participants
Speaker 1: and are already doing what the title of your book suggests.
Speaker 1: I mean, I think you know, if it for some
Speaker 1: people that it's easy to do, yeah, just keep doing
Speaker 1: what you're doing. I think the the issue is like
Speaker 1: that's not easy for everyone, Like, especially in a year
Speaker 1: like this where we have high inflation, there's geopolitical risk.
Speaker 1: You know, even bonds are declining by a large amount,
Speaker 1: so even things that were considered safe or not as
Speaker 1: safe as they were. Um, so there's a lot of
Speaker 1: things like that going on, where like we have acid declines,
Speaker 1: high inflation, and people are worried. So in those cases,
Speaker 1: like just keep buying. It's it's much harder to do it.
Speaker 1: And so, like I know, people a lot of people
Speaker 1: joked like, of course this book will come out at
Speaker 1: the end of a bolt marker. I just keep buying
Speaker 1: at the top. But actually by the time it came out,
Speaker 1: you know, in April of this year, like the market
Speaker 1: was down, like pretty good timing. Yeah, yeah, so it's
Speaker 1: like I actually wrote it more for a bear market
Speaker 1: than the bowl market. And so that's my favorite chapter
Speaker 1: in the books, chapter seventeen, which is about like how
Speaker 1: to think about buying during a market crash, which is
Speaker 1: a much much different. I have a different framework for
Speaker 1: looking at that because I think it's the only way
Speaker 1: to really kind of get through these dark times. We'll
Speaker 1: walk us through that because like we are we are
Speaker 1: there or so it feels like, yeah, well I would
Speaker 1: say this is a more minor of mark. I mean
Speaker 1: that happened much more regularly. I think what I'm talking
Speaker 1: about is a much worse crash. But either way, like
Speaker 1: is the same. Yeah. Yeah, So for example, I'll give
Speaker 1: you the math and what happened in COVID nineteen in March.
Speaker 1: So at the time, I think at the bottom, we
Speaker 1: were down thirty three percent going into that Monday, which
Speaker 1: is March, and so being down roughly thirty you know,
Speaker 1: this is just simple math. To get back to even
Speaker 1: you have to go up fifty percent. And I'll just
Speaker 1: run the numbers for you. Let's say you know Indexes
Speaker 1: at hundred goes down to sixty six. To from sixty
Speaker 1: six back to a hundred, you have to go up
Speaker 1: roughly thirty three, which is half of six six fifty
Speaker 1: percent gain, right, And so you just do that math.
Speaker 1: The larger the decline, the bigger they gain to get
Speaker 1: back to even. So now once you know that, right,
Speaker 1: that's just simple math. Once you know that, you can
Speaker 1: actually kind of back out. You can say, okay, how
Speaker 1: long do I think the markets don't take to recover?
Speaker 1: You come up with a fair estimate. You know, you
Speaker 1: can ask other people as well, and then you can
Speaker 1: back out the markets expected return from this point back
Speaker 1: to the high. Right, And so at the time I think,
Speaker 1: I asked Twitter, and you know the media answers two
Speaker 1: to three years. So if we're down fifty percent, Remember
Speaker 1: this is not exact math. You have to do compounding,
Speaker 1: and I'm just gonna make this linear. So let's say
Speaker 1: you know, you know, divided by two, that would be
Speaker 1: about tent a year. Divided by three, you're looking at
Speaker 1: seventeen eighteen percent a year, like annualized returns to get
Speaker 1: back to the Like, those are great returns, Like who
Speaker 1: wouldn't want to buy it? Then? Like, when you look
Speaker 1: at it from that perspective, you're like, wait, this is
Speaker 1: a huge deal, right, Like if I buy right now,
Speaker 1: I'm gonna be You're gonna give me seventeen percent returns
Speaker 1: to get back to even, like just to get back
Speaker 1: to even, Like that's amazing. And so of course there's
Speaker 1: always the case where it takes longer. But my point is,
Speaker 1: let's say you're getting those seventent anialize returns to get
Speaker 1: back to even. That's a huge return. And that's why
Speaker 1: when you reframe it, you're like, wow, Like why wouldn't
Speaker 1: I be buying right now? It's clearly a bargain. And
Speaker 1: what actually happened within six months here at all time
Speaker 1: highs and it was like a hundred and six percent
Speaker 1: annualized return or something so absolutely absurd what happened? No one,
Speaker 1: I think expected that, not even even as optimistic as
Speaker 1: I was. I thought I was gonna take like maybe
Speaker 1: two years to recover. But that's kind of how I
Speaker 1: look at it. So right now, if we're down what
Speaker 1: our fourteen percent, and that's not a big enough amount
Speaker 1: for me to like, you know, think about all we
Speaker 1: can do the math. Okay, what is it to get
Speaker 1: back to even maybe fifteen percent? Let's say it takes
Speaker 1: two years, you're still looking at like what seven percent
Speaker 1: returns roughly, So like that's like an average year, right
Speaker 1: if you were by right now, you're basically gonna expect
Speaker 1: average returns if it takes two years to get back
Speaker 1: to a high. So that's not bad, right considering all else.
Speaker 1: So as you're talking and you talked about people, Oh,
Speaker 1: of course this book comes out after a little market,
Speaker 1: like there's this this the Bears on Twitter there, I
Speaker 1: can see this title kind of just pissing them off
Speaker 1: a little like, oh, you're just easy. The FED was there,
Speaker 1: YadA YadA, or the be the best one. Now do Japan.
Speaker 1: That's when everybody puts out charts of like how great
Speaker 1: stocks are overtime, like, well, now do Japan, because Japan
Speaker 1: has done nothing right. In your book, you pointed out
Speaker 1: since the market has been basically flat, what would you
Speaker 1: say to somebody who's like, what if we are Japan
Speaker 1: for the next thirty years. I mean, that's, of course
Speaker 1: it's plausible. No one knows if that's going to happen
Speaker 1: or not. But I I addressed this in that chapter.
Speaker 1: In chapter seventeen, I address this. I say, let's say
Speaker 1: you'd put a dollar to the Japanese stock market every
Speaker 1: day starting and yes, there are times when you're underwater,
Speaker 1: But if you look because your dollar cost average and
Speaker 1: you're buying over time, it's very different. You're saying this,
Speaker 1: the market has done nothing for thirty years. That's true
Speaker 1: if you put in a lump sum right at the peak,
Speaker 1: But how many people are investing like that? Maybe there's
Speaker 1: a Japanese businessman that sold his business and eight said, oh,
Speaker 1: I'm not worried, and then someone commits okay, you just
Speaker 1: put it all on the market, and then he puts
Speaker 1: a hundred percent of Japanese equities and eight nine. Okay,
Speaker 1: think about how crazy it is does that and then
Speaker 1: is yeah, that person underwater. But how many investors put
Speaker 1: all of their wealth into one asset, one purchase, one time.
Speaker 1: It's very rare. So I'm saying if you had been
Speaker 1: owning other asset classes you've been if if you're a
Speaker 1: Japanese mister, you're diversified all those things, that would have
Speaker 1: completely changed the conclusion. So I the saying that Japanese
Speaker 1: market has done nothing for thirty years. That's using snap
Speaker 1: you know, snapshot judgments, and really you're really kind of
Speaker 1: cherry I think I agree it's correct, but also at
Speaker 1: the same time, it's cherry picked. If you're buying over time.
Speaker 1: The Japanese market has not done nothing for thirty years.
Speaker 1: That hasn't been great, don't get me wrong, but it's
Speaker 1: not zero. And I think that's the takeaway here. And
Speaker 1: I will say, you know, um, this kind of reminds me. Obviously,
Speaker 1: I just spent two years in plan at Bogel and
Speaker 1: he was not a fan of international investing. Or he
Speaker 1: just said you don't need it because US has enough
Speaker 1: overseas um connection that you're going to get some of
Speaker 1: that anyway. And in addition, a lot of American companies
Speaker 1: seem to be really the drivers across the world, the Apples,
Speaker 1: the Microsoft, etcetera. So I guess, do you even need
Speaker 1: international and is this just keep buying? Actually, obviously now
Speaker 1: do Japan wouldn't it will now do. Europe isn't going
Speaker 1: to be as applicable because the companies in America tend
Speaker 1: to be really massive leaders relative to other companies in
Speaker 1: the world. I mean, that's that looks true now. But
Speaker 1: I mean, like, so from two thousand ten to twenty nine,
Speaker 1: you want to look at it, like the US clearly
Speaker 1: outperformed international, emerging whatever. But look at the decade before,
Speaker 1: look at two thousands thousand nine. I mean it's a
Speaker 1: very different story. Emerging crushed the US. So I'm not
Speaker 1: saying that's going to happen again. We don't know the future,
Speaker 1: but to only bet on American companies, I don't necessarily
Speaker 1: agree with that because I think things can mean revert,
Speaker 1: things can change, and so while the US is on top, now,
Speaker 1: who knows what's going to happen. And I think the
Speaker 1: best example of this is imagine a Russian investor, you know,
Speaker 1: at the beginning of two right, they're like, oh, look,
Speaker 1: I most of my stuff in Russia. Russia's great, all
Speaker 1: this the market drops a month. Now, I don't think
Speaker 1: that's going to happen in the United States. We would
Speaker 1: have much bigger problems than our investment portfolios. But my
Speaker 1: point is someone who's not diversified out of their domestic
Speaker 1: market is probably going to see some sort of pain
Speaker 1: at some point. And so I'm willing to take a
Speaker 1: little bit of under performance now by owning international stocks,
Speaker 1: if that means in periods where the US is struggling,
Speaker 1: I have a little bit more of you know, outperformance
Speaker 1: relative to the US market. So I'm curious just to
Speaker 1: bring it back to sort of the here and now,
Speaker 1: what do you think changed in how you wrote the
Speaker 1: book or what you put in the book if it
Speaker 1: was before time, before times book like before the pandemic,
Speaker 1: versus what actually wrote? What what changed during COVID that
Speaker 1: you brought into the book. I don't actually think the
Speaker 1: best thing that helped the book for COVID was that
Speaker 1: we had the COVID crash. That was something I could
Speaker 1: just use. Hey, it's in everyone's memory. It's otherwise to
Speaker 1: talk about, Like like myself, I was, you know, eighteen
Speaker 1: years old. I was, you know, entering college at the time.
Speaker 1: Like I didn't have a job, I didn't have to
Speaker 1: worry about income. I literally started school in oh eight,
Speaker 1: so I remember like starting, you know, going my first
Speaker 1: week of class right before classes started, and I remember
Speaker 1: like seeing the market drop and everything. In economics one
Speaker 1: on one was really popular at the time because of that.
Speaker 1: But I think like because it was so old, it
Speaker 1: wasn't in recent memory, but because we had that crash,
Speaker 1: it really helped the book. I could talk about something
Speaker 1: that's really recent. Everyone everyone investing now remembers that, right,
Speaker 1: It's unless you're like sixteen and you kind of just
Speaker 1: started investing like today, like everyone remembers COVID and kind
Speaker 1: of the effects that had. So I think that's what
Speaker 1: helped the book. Other outside of that, I haven't changed much.
Speaker 1: The only thing if I could have re you know,
Speaker 1: re written the book or done something differently, I think
Speaker 1: I would have emphasized inflation a little bit more because
Speaker 1: you have to realize at the time. Remember all my
Speaker 1: data is to the end of inflation was lower and
Speaker 1: was going lower in twenty I'm like, I talked about inflation.
Speaker 1: I do discussed in the book, but I didn't realize
Speaker 1: I had no clue that, Okay, by the time this
Speaker 1: thing comes out, which is going to be you know,
Speaker 1: a year and a half later after writing and everything,
Speaker 1: that the inflation data was going to come in termines,
Speaker 1: We're going to be all over the house. Yeah, I didn't.
Speaker 1: I had no idea that was going to happen. And
Speaker 1: so a lot of people like, he doesn't even discuss inflation, like,
Speaker 1: look at the data I had coming into this, like
Speaker 1: inflation was going lower when I had the data, I'm
Speaker 1: like finishing this up, like inflation was not. You read
Speaker 1: the comments so well, of course you got read comment.
Speaker 1: What would you what would you be saying or how
Speaker 1: do you respond to that? That's that's a that's a
Speaker 1: double edged sword. Yeah, we can get into that. But
Speaker 1: how would you how would you respond and what would
Speaker 1: you have put in? How would you have expanded your
Speaker 1: your inflation wisdom. I just would have included more inflation
Speaker 1: stuff like I've done analyzes since I've just been a
Speaker 1: lot more folks on inflation. It's just because like you know,
Speaker 1: at the time, like you know, we haven't had it really,
Speaker 1: I mean since the really seventies eighties last time we
Speaker 1: had and so we haven't had such a long time.
Speaker 1: I could talk about it, but it's like people like,
Speaker 1: why did you spend so much time talking about something
Speaker 1: that doesn't really happen anymore. And it's not that I
Speaker 1: never expect inflation to happen ever again, but I address it.
Speaker 1: I just would have put more emphasis on because people
Speaker 1: would have cared more, they would have thinken, they would
Speaker 1: have thought that, um, you know, I had, you know,
Speaker 1: thought through it more. And so that was the only
Speaker 1: thing I just didn't know that was gonna happen because
Speaker 1: people are I mean, everything is recently by, so inflation
Speaker 1: is crushing everything. And I'm not talking on inflation learning
Speaker 1: to think I'm an idiot and I'm gonna and I'll admit, like, yeah,
Speaker 1: I didn't try to write a ton about it. So
Speaker 1: that was kind of the only thing I think I
Speaker 1: could have. It's just hard to anticipate the future. I
Speaker 1: had no idea We're gonna see a percent inflation. I
Speaker 1: was completely shocked by that, you know, so, yeah, I
Speaker 1: mean I think everybody was. Um. You know, you have
Speaker 1: a section here where you talk about in the investing
Speaker 1: part about income producing assets, and this is clearly in
Speaker 1: the Bogel buffet mindset. You want to invest in things
Speaker 1: that produce income. Right, makes sense, money that works for you.
Speaker 1: The crypto crowd, obviously you don't have cryptosn't here. You
Speaker 1: have stocks, bonds, investment, property, reads, farmland, and small businesses.
Speaker 1: No crypto. Um, this was this is a big debate. Right,
Speaker 1: Crypto doesn't produce anything. You are basically hoping somebody buys
Speaker 1: it from you from more than you pay. That's pretty
Speaker 1: much the deal. The crypto crowd. Sometimes they'll go after
Speaker 1: the SMP five index fund, and I don't understand that.
Speaker 1: I mean, that is an interesting gap. I wonder how
Speaker 1: many young people actually understand the difference between an income
Speaker 1: producing asset and and one that doesn't like crypto, because
Speaker 1: it does seem the young crowd the message in the
Speaker 1: narrative of crypto it seems even more seductive and interesting
Speaker 1: to them than the message of a boring SMP five
Speaker 1: index fund. Yeah, I mean, what's the question is, do
Speaker 1: you know do you want to do something fun or
Speaker 1: do you want to get rich? I mean that's kind
Speaker 1: another question. And like I have like one of the
Speaker 1: most boring asset allocations out there, but it's working right,
Speaker 1: and it's like that's the key. Now. I'm not saying
Speaker 1: not to own any crypto. I actually own some crypto.
Speaker 1: But like I say, incomptucing acts your portfolio, the other
Speaker 1: ten percent is safe for things like crypto, gold, art wine.
Speaker 1: I go through the you know, uh, through the gamut
Speaker 1: of those type of assets. I'm not saying they don't
Speaker 1: hold any place in a portfolio. I just keep them
Speaker 1: as a smaller proportion of my portfolio. That was my point.
Speaker 1: I was in a debate with somebody from that world
Speaker 1: and I was like, you guys should just pitch yourself
Speaker 1: as a compliment to the boring vanilla. Let us be
Speaker 1: some exciting hot sauce to your boring meal rather than
Speaker 1: your meal sucks. Yeah. Yeah, I agree, but that's not
Speaker 1: that's not going to gain you followers to think like, oh,
Speaker 1: we're in bed with the traditional finance. Yeah we're you know,
Speaker 1: we were in with the old world. Like, no, you
Speaker 1: want to sound like you're against that old world. There's
Speaker 1: a new world World World. It just has it more.
Speaker 1: It's more appeal to do that. But I mean the
Speaker 1: rational approach is like, no, there is a place for crypto.
Speaker 1: Like I believe that, you know, people should generally get
Speaker 1: off zero. I don't think everyone should be at zero
Speaker 1: on crypto. But at the same time, I don't think
Speaker 1: you should have anything more than five percent. Even then
Speaker 1: that's a lot because how volatile it is. That's so
Speaker 1: I have two percent and I even then, like, you know,
Speaker 1: some people wouldn't be comfortable with that, so I'd say,
Speaker 1: like just put a very very small percentage and kind
Speaker 1: of just wait and let's wait and see what happens
Speaker 1: with this thing. So so just keep buying. Related question,
Speaker 1: what should you not buy? And that's a very personal question.
Speaker 1: That's like whatever you can't sleep at night with. That's it,
Speaker 1: Like I can't. There's certain assets I won't buy, Like
Speaker 1: I don't generally buy gold, But don't think that I
Speaker 1: should say that no one should buy gold. I think
Speaker 1: for certain people there's definitely cases to be made for gold.
Speaker 1: I think gold is more of a trade than a
Speaker 1: long term hold. There's just I mean, there's a period
Speaker 1: of you know, twenties something years of negative real return
Speaker 1: on gold, and it's really tough to kind of hold
Speaker 1: that for me, So you know, I can't. It's hard
Speaker 1: for me to hold an Aska for twenty years and
Speaker 1: see it go absolutely nowhere. You know, there are exceptions
Speaker 1: to that. Maybe I could do that with you know,
Speaker 1: equities and an emerging market or something, but for like
Speaker 1: something like gold, where there's no intrinsic cash flows, no income,
Speaker 1: it's really tough for me to believe like, oh, the
Speaker 1: story is gonna flip and everything's gonna be okay. You know.
Speaker 1: I think that's why it's tough for This is an
Speaker 1: ETF podcast. We've got a long time and we have
Speaker 1: not talked about et F specifically. What are you gonna
Speaker 1: what are you gonna ask? Sure, Yeah, I'll go there.
Speaker 1: So yeah, this is definitely sort of I think a
Speaker 1: lot of in your book, you say I like index
Speaker 1: funds and ETF. You basically are flat out he you know,
Speaker 1: just Um says what he does and you don't have
Speaker 1: to do that. You know, you can go active. I'm
Speaker 1: not I'm not trying to be overly rigid with this,
Speaker 1: but Um, in the book I wrote I write a
Speaker 1: little section about behavior, and I think the index fund
Speaker 1: that the idea of a cheap index fund or on
Speaker 1: ETF that traps tracks the broad market for three or
Speaker 1: four basis points is one of the most underrated UM
Speaker 1: contributors to good behavior because you read this book and
Speaker 1: you're like, I wonder how this would all play out
Speaker 1: if there was no such thing as a cheap index
Speaker 1: fund and all you had was like a eight basis
Speaker 1: point blend manager versus a small cap growth manager. UM,
Speaker 1: it's a little harder to behave sometimes, especially if that
Speaker 1: manager starts under performing. And I think that mess people
Speaker 1: up in the eighties and nineties a little bit because
Speaker 1: their fun all of a sudden was underperforming. They panic
Speaker 1: and just keep buying. Is a lot easier when you
Speaker 1: know you're locking into that market beta and there's a
Speaker 1: nice resignation to that. So I guess i'd like to
Speaker 1: get your thoughts on the impact that just having a
Speaker 1: near free beta exposure product has done for this concept.
Speaker 1: I think the main takeaway here is like that, you know,
Speaker 1: passive vehicles have benefited investors because as they're cheap and
Speaker 1: because it's easy to stick with them, and more importantly,
Speaker 1: it's like the default choice now, right, Like if you
Speaker 1: if you talk to anyone says, yeah, the default is
Speaker 1: like you buy a passive index from like the Spire
Speaker 1: or something, and so every deviation from that and this
Speaker 1: this kind of goes back to what we're discussing with
Speaker 1: the crypto people and why don't why don't they just
Speaker 1: okay with like saying, hey, you know, we can be
Speaker 1: a compliment to you guys, because no, it's an identity argument,
Speaker 1: and so a lot of active investors it's an identity
Speaker 1: I'm not a passive person. I'm I'm not. I don't
Speaker 1: want to be average, even though it puts through the
Speaker 1: eighth percentil we can put that aside from it. But
Speaker 1: I don't want to be average. I'm gonna pick my
Speaker 1: own stocks and I'm gonna set my own destiny, and
Speaker 1: there's all that kind of piece to it. I think
Speaker 1: what passive has done is saying, like, here's the default option.
Speaker 1: And so when the market declines, it's not your fault.
Speaker 1: You didn't make a bad decision, that's just the market
Speaker 1: rights outside of your control. Right. It's like a hurricane
Speaker 1: came financial hurricane. There's nothing you can do but once
Speaker 1: you start deviating from you know, market cap passive way
Speaker 1: to portfolios. That's when you're making active choices, and that's
Speaker 1: when you start to get in your head of like,
Speaker 1: oh man, maybe I shouldn't have only went in on
Speaker 1: tech stocks, or maybe I shouldn't have, you know, went
Speaker 1: in on these biotechs or whatever it is, or energy
Speaker 1: stocks or so that's the whole point. I think. Another
Speaker 1: big so this is identity, and so what passive has
Speaker 1: done it has removed the identity piece from investing, which
Speaker 1: allows you to kind of not worry about That's why
Speaker 1: I went markets down twenty Even when the market was down,
Speaker 1: I wasn't panicking. I really wasn't like, oh my gosh,
Speaker 1: my my portfolio is like I'm not going to be
Speaker 1: using that money for a long time. This is going
Speaker 1: to happen. It will recover eventually. It might take a
Speaker 1: couple of years, but that's the nature of the world
Speaker 1: and we've gotta we'll roll with the punches. And it
Speaker 1: recovered way more quickly than I expected, right, But that's
Speaker 1: kind of the idea, is that you're going to see
Speaker 1: this stuff happen. You're going to see more crashes, We're
Speaker 1: gonna see I almost guarantee my lifetime we'll see a
Speaker 1: ten year period of sp is you know, has not
Speaker 1: performed as you know, flat or below where it was
Speaker 1: ten years prior. Yeah, I don't know, but I do
Speaker 1: think there it is nice to have that resignation that
Speaker 1: I've got, I've got a great deal. There's no reason
Speaker 1: to shift to switch it around because if let's say
Speaker 1: that market cap it wasn't it was an active fund
Speaker 1: and it's underperforming that I think that's that makes you
Speaker 1: think should I be in something else? And then you
Speaker 1: jump ship go there, and I think there's a resignation.
Speaker 1: What am I gonna do? I'm I gonna just I'm
Speaker 1: gonna switch all these investments every two years, screw it um.
Speaker 1: And that is I think when we talk with Gino
Speaker 1: Martin Adams last two weeks ago, that she talked about capitulation,
Speaker 1: and I'm like, I don't think those investors are ever
Speaker 1: going to compitulate. The passive people are really strong. They're
Speaker 1: the strong hands. They are not the weekends that people say.
Speaker 1: And I think once that you haven't here, which is
Speaker 1: fascinating is the best performing four percent of companies explained
Speaker 1: the net gain for the entire U S stock market.
Speaker 1: Since so if you pick those four percent, I mean
Speaker 1: your love and life, But which four I mean which
Speaker 1: four percent? So I think that's another one is you
Speaker 1: get your your hands on everything and you get those
Speaker 1: at least you know you lock in those four percent.
Speaker 1: You don't get all of it though. Um, this this
Speaker 1: is why I embarrassed E. S G a little bit
Speaker 1: because the on the four percent includes x on Mobile, Apple, Microsoft,
Speaker 1: General Electric, IBM, etcetera. E. S G. What do you
Speaker 1: think of this? Like this is you wouldn't get x
Speaker 1: on you probably you know, so there are an tesla
Speaker 1: is now not in the SMP S G. Um, Is that,
Speaker 1: in your eyes just another active active management in disguise
Speaker 1: or do you really think this is a better way
Speaker 1: to invest in your just keep buying premise? I mean
Speaker 1: I think so. I think what the industry is gonna
Speaker 1: eventually move towards something like, you know, a direct indexing
Speaker 1: or someone we'd call custom indexing where you get to
Speaker 1: pick and choose kind of based on your personal beliefs.
Speaker 1: And so I understand why people would do that. At
Speaker 1: the end of the day. The counter argument is, okay, well,
Speaker 1: if you're doing these E s G type moves. What
Speaker 1: if all the companies you don't buy end up outperforming
Speaker 1: because no one else is buying them. So in theory,
Speaker 1: you're under allocating capital for some reason relatives of the
Speaker 1: market portfolio. So someone else is gonna overallocate and they're
Speaker 1: gonna outperform you. And so the question is do you
Speaker 1: want to take that money and grow it to as
Speaker 1: much as possible and then donate to cause you care about,
Speaker 1: you know, or do you want to just not invest
Speaker 1: in the underlying companies? And those are the two ways
Speaker 1: you can do it, and I think they're both valid.
Speaker 1: And it's a question of some people like, oh, I
Speaker 1: don't want to give my money to a gun manufacturer.
Speaker 1: It's like it's not technically going to them. But in
Speaker 1: theory they could buy backstock, they can sell stock, and
Speaker 1: so the equity could be used for that purpose. So yeah,
Speaker 1: I don't I don't have a great answer there, but
Speaker 1: I think we're gonna see this area evolved as like
Speaker 1: kind of custom indexing comes in, where people are gonna
Speaker 1: be able to allow their choices to be dictated in
Speaker 1: their pols. So I will say customer indexing embarrassed on it.
Speaker 1: I'll just get on the record. I think anything you
Speaker 1: trying to dislodge the three basis point in X fund
Speaker 1: has it to it's a very tall hill to climb.
Speaker 1: I think for very wealthy individuals it might work, or
Speaker 1: hardcore hippie s G types, But that's not E s
Speaker 1: G investing because a lot of these companies that you
Speaker 1: would think in your perception are not good, like Xon,
Speaker 1: they actually score pretty well on E s G scores.
Speaker 1: Um It, perception of people. People's perception is not really
Speaker 1: the same as an E s G scoring system. Um
Speaker 1: but I agree with you. At least it's customed to
Speaker 1: your liking. I just think in ten years, if that
Speaker 1: custom portfolio and it performs, you're gonna have a seller's
Speaker 1: buyer's remorse. Um Plus. I just think dislodging three basis
Speaker 1: point beta is just people love that stuff, man. I mean,
Speaker 1: it's it's like such a good deal. So but anyway,
Speaker 1: I debated this with Josh and Michael vat Nick on
Speaker 1: an episode of The Compounding Friends Van Wants to Listen to.
Speaker 1: We had a nice, long, lengthy debate on direct index
Speaker 1: thing We've gotta get, Uh, we have to do an
Speaker 1: episode on that soon, Joel, that's gonna be a good
Speaker 1: one out of two lists. Okay, so earlier he said
Speaker 1: you can't recommend a ticker, but that doesn't mean that
Speaker 1: we can't ask you for your favorite et F ticker um,
Speaker 1: which is a question that we always ask. I guess, okay,
Speaker 1: if I have to, my favorite is v O of
Speaker 1: the Woo. Of course. My dad, my dad is this
Speaker 1: funny thing. He says, I'm hedging my my video exposure
Speaker 1: with s p y And I'm like, I was like,
Speaker 1: I couldn't hand. I was like, what is Like, I
Speaker 1: didn't know that was possible. I know, it's just wait
Speaker 1: a second, my head hurts. He says, I'm hedging my
Speaker 1: vieoo exposure with sp y. Right, it's like that that's
Speaker 1: basically like issue we're hedging. Yeah, it's it was a
Speaker 1: joke more than anything. Yeah, he's like, oh, I just
Speaker 1: hedged my viewo with us. Yeah, like you're all in, Yeah,
Speaker 1: I would say to yeah, of course. Yeah. He's just
Speaker 1: he's on the just did he do? Does he do? That?
Speaker 1: Is a year ord you get that from him? No,
Speaker 1: he does it because you know I obviously wrote about
Speaker 1: and stuff, but he like edits my blogs every week
Speaker 1: he reads, Yeah, you didn't edit the book. We actually
Speaker 1: got a professional, but he's edited a lot of the
Speaker 1: posts on the material that went in there, roughly half
Speaker 1: of its old material. Halfs knew I would say. So
Speaker 1: I gotta say I felt like when I read this,
Speaker 1: I was sitting with rid holes advisors and almost like
Speaker 1: getting some of the secret sauce on how you talk
Speaker 1: to clients. Is that is that fair? I mean a
Speaker 1: lot of the ideas that you know I have and
Speaker 1: they have are very s already aligned already. That's why
Speaker 1: it works so well. I didn't have to come in
Speaker 1: and like rethink everything. Oh I don't agree with this,
Speaker 1: And I'm saying we're not a hund percent line on everything,
Speaker 1: but a lot of the core ideas are there, and
Speaker 1: like that's we would agree on on a lot of
Speaker 1: the stuff there, doesn't Does that mean we agree on everything? No,
Speaker 1: there are certain things where we may not agree perfectly
Speaker 1: on um and I and I've I've gone back and
Speaker 1: forth on some of these things, you know, whether that
Speaker 1: means stuff like trend following, whether it's how we allocate
Speaker 1: the crypto all sorts of stuff like that where I can.
Speaker 1: I don't think our firms do anything incorrect or bad
Speaker 1: or anything like that. But where we may not be
Speaker 1: in a hundred percent agreement, that's fine. Like not everyone agrees.
Speaker 1: Like for example, I have a whole chapter on don't
Speaker 1: buy individual stocks, right, and I know they're people in
Speaker 1: my UM at my firm that own individual stocks, not
Speaker 1: the it's not the bulk of their money. It's a
Speaker 1: small percentage, but still it's like something that I generally
Speaker 1: don't do. And once again, you know, that's kind of
Speaker 1: how I think about. It's like, let's think about the
Speaker 1: overall picture and are we do we agree on the
Speaker 1: core tenants and we do, and then so that's where
Speaker 1: if you feel like that, that's because we generally agree
Speaker 1: on a lot of Like if someone goes to red
Speaker 1: Holtz and they're sitting down, you kind of go over like, well,
Speaker 1: let's say, first let's look at that. You know, you've
Speaker 1: got to go over that. What depends where they are, right,
Speaker 1: if you're if you're if you're seventy five years old
Speaker 1: and retired, saving he's not gonna out. It's oh, you
Speaker 1: have a huge nestake. Let's figure out how to protect that.
Speaker 1: So it's once again the ideas here can be applied generally.
Speaker 1: But yes, I kind of agree with what you're saying.
Speaker 1: So Nick Majuli, thanks for joining us and Trillians. Appreciate, appreciate,
Speaker 1: thank thanks for listening to Trillions until next time. You
Speaker 1: can find us on the Bloomberg terminal, Bloomberg dot com,
Speaker 1: Apple Podcast, Spotify, and wherever else you'd like to listen.
Speaker 1: We'd love to hear from you. We're on Twitter, I'm
Speaker 1: at Joel Webber Show. He's at Eric Faltunas. This episode
Speaker 1: of Trillions is produced by Magnus Hendrickson. Francesca Levie is
Speaker 1: the head of Bloomberg podcast Fibers. M m m m
Speaker 1: hm hm